Naver Cacao showed a steadfast ness in corona 19. Both companies outperformed non-face-to-face services such as commerce, content, and techfin, surpassing market expectations in the first quarter.
Naver’s operating profit exceeded KRW 200 billion, contrary to market expectations, and Kakao recorded the largest performance in both sales and operating profit.
Naver unveiled its strategy to respond by launching a new mobile advertising product, although the budget cuts for large advertisers have darkened its second quarter outlook. Kakao expressed confidence in its advertising products based on KakaoTalk and expressed its ambition to perform better in the second quarter.
Naver Cacao Logo
■ Naver, crisis from now on… Increase d&/shopping and maintain revenue
Naver’s first quarter revenue was KRW 1.7321 billion, up 14.6% year-over-year. Operating profit increased 7.4% year-over-year and 27.7% yoy to KRW 221.5 billion. Naver released its first-quarter results on 23 March.
Naver’s operating profit was expected to fall below KRW 200 billion, including Corona 19. However, it exceeded expectations in the untapped sector.
Sales by business segment are KRW 749.7 billion for business platforms, KRW 148.2 billion for IT platforms, KRW 144 billion for advertising, KRW 55.4 billion for content services, and KRW 634.8 billion for lines and other platforms.
On a business platform dominated by shopping and general search, the overall budget reduction was expected to be a classic. However, shopping-related sales were growing, and they were able to defend their performance to some extent. “We expect corona 19 to hit more in q2 than q1,” Han said in a conference call, “and we’re trying to change the advertising product system.”
In preparation for the crisis, Naver will launch a new mobile advertising product, “Smart Channel”, in beta in May. Smart channel is an advertisement that is exposed to the mobile app main, the size is the same as the advertisement currently placed on the mobile app home screen. It will be revealed at the top of news, sports and entertainment articles, and will be expanded to other topics in the future. There are two types of products: guaranteed and performance.
The introduction of live commerce features and the strengthening of the brand store will also help naver commerce sales. Naver Smart Store transactions increased 56% year-over-year in the first quarter, and NaverPay transactions increased by 46% to 5 trillion won.
Han said, “We have seen the crisis offline lead to online start-ups, and we will also expand the application and exposure of live commerce capabilities that have been introduced to respond to non-face-to-face environments.”
Techfin businesses such as NaverPay, which is growing mainly in Naver Commerce, are also on the verge of making a big leap forward after spraying. Naver Financial, a financial subsidiary, will provide comprehensive financial services, including the unveiling of naver bankbooks in May.
“Naver has a sound financial structure to deal with these big crises,” said Park Sang-jin, Naver’s Chief Financial Officer, “We will continue to invest in growth by examining risks and business opportunities.”
■ High-speed growth with cacao and talkboard… There is no guidance change
Kakao announced its first quarter results on July 7, saying that sales increased 23% year-over-year to KRW 868.4 billion and operating profit increased 219% to KRW 88.2 billion. Operating profit margin slumped to 10.2%, restoring double digits.
New businesses such as Talkbiz and KakaoPei, including commerce, and content sectors led the way. KakaoTalk traffic and non-face-to-face service, based on more than 45 million domestic subscribers, attracted attention in the Corona 19 situation.
Users’ communication through KakaoTalk was active, and at the end of February, chat tab usage reached a weekly high. The amount of outgoing messages has also been greatly expanded.
In a conference call, Co-Ceo Yeo Min-so Kakao explained the solid growth of TalkBiz. Talkbiz refers to the business that is conducted in KakaoTalk. This includes talkboard products that are placed at the top of the KakaoTalk chat list.
Mr. Yeo said, “The demand for efficiency-conscious advertisers has continued to increase, and the number of cumulative executive advertisers has expanded to more than 5,400 to date, and although talkboard sales decreased slightly in January and February, we expect to see a recovery in March and higher than q1 in q1.”
KakaoTalk-specialized commerce business is also growing at a rapid rate. Cacao Commerce’s total transactions in the first quarter, including futures, talkstores and makers, increased 55% year-over-year. Futures transactions grew 46% year-over-year as they expanded into delivery gifts as well as simple exchange futures. TalkStore is growing five-fold year-over-year and is becoming a new growth engine for Kakao Commerce.
“Kakao Commerce will provide a loyal customer base for sellers with its unique strategy, and will give consumers the feeling of subscribing to new and useful content,” said Bae Jae-hyun, Senior Vice President of Kakao, “We will continue to evolve to focus more on the user’s qualitative shopping experience and to become a platform of choice, not an alternative from a seller’s perspective.”
In the paid content business, global platform transactions in the first quarter grew 51% year-over-year to KRW 139.3 billion. In the second half of this year, the company predicted that the proportion of foreign transactions, including Japan and Indonesia, will be higher than in Korea.
Mr. Yeo said, “If the real economic recovery becomes visible in the second half of the year, we expect demand for advertising to rebound as well.”
“Overall annual sales growth is also aimed at better growth than the previous year, and we are not considering changing our target for guidance,” said Bae.
Ahn Hee-jung (email@example.com)