S. Korea's Kakao eyes Philippines for growth

Posted at 06/11/2014 6:57 PM

SHANGHAI - Kakao Corp, the home of South Korea's biggest messaging application, plans to expand in Indonesia, the Philippines and Malaysia as it seeks to close the gap with the overseas success of local rival Naver Corp's Line service.

Kakao co-Chief Executive Lee Sir-goo told Reuters on Wednesday that increasing sales in other markets with rising smartphone usage is a priority as the company steps up expansion.

Last month Kakao bought Internet portal firm Daum Communications in a $3.3 billion stock deal, demonstrating its ambitions in a global industry that's attracted a flurry of big-money acquisitions. (Full Story)

"I don't think we can become number one in the world but in designated markets, we believe we have a chance. Right now for us it's Indonesia, the Philippines and Malaysia," Lee said in an interview in Shanghai, where he is attending a global mobile technology conference.

Kakao, whose shareholders include Chinese Internet firm Tencent Holdings Ltd, reported a near eight-fold increase in 2013 net profit to 55.6 billion won ($55 million) as it increased sales from games and "stickers" - large emoticons used in messaging apps.

Despite its dominant position in South Korea, Kakao trails Naver in foreign markets. Line - the leading messaging app in Japan - has 450 million users globally, while KakaoTalk has only 145 million.

"Rather than doing the full-scale volume act...in other advanced countries, we thought those are the countries that we believe we can penetrate," he said, referring to the three Southeast Asian countries. Lee worked at NHN Corp - later split into Naver and game-focused NHN Entertainment Corp - before joining Kakao in 2011.

Lee said the three countries are prime targets because of the rising usage of smartphones, popularity of Korean content there, and a lack of dominant players in the market. Kakao said it already has around 17 million users in Indonesia, but did not provide figures for the Philippines or Malaysia.

The Kakao-Daum deal, circumventing a potentially time-consuming share sale process with a backdoor listing, is scheduled to close in October. Lee said one of Daum's attractions was its experience in areas like making money out of Internet services, as well as access to talent in Daum's pool of 2,500 employees.