Kakao posts record Q2 revenue, but operating profit down 38%

Kakao, operator of South Korea’s top-used mobile messenger KakaoTalk, said Thursday it posted record-high revenue in the second quarter, but its operating profit dropped 38 percent due to heightened marketing and investment costs.

During the April-June period, Kakao’s revenue reached 588.9 billion won ($526 million), up 25.7 percent from the previous year. Operating profit in the quarter came to 588.9 billion won, down 38.2 percent on-year, the company said in its earnings report.

Kakao attributed its record-high revenue to double-digit growth across all of its main business segments.

Second-quarter revenue from Kakao’s advertising sector jumped 10 percent to 166.4 billion won on-year due to seasonal demands, as well as the success of the firm’s ad products such as the targeted add platform Kakao Moment as well as Cash Friends.

Quarterly revenue from the contents business that includes sales from game publishing, the music platform and web comics, also grew 29 percent on-year to 302.8 billion won.

Growth in the contents area was pushed by game sales, which rose 42 percent to a record 111.6 billion won, thanks to the popularity of “PlayerUnknown’s Battlegrounds Mobile,” published in Korea by Kakao Games.

Music sales also grew 11 percent on-year to 130.5 billion won, with the addition of around 130,000 paid subscribers to Melon, the country’s top music streaming service. Additional content sales, including from web novels and comic hosting services, rose 57 percent on-year to 60.7 billion won.

Other business segments’ quarterly sales rose 45 percent on-year to 119.8 billion won, as a result of increasing sales contributions from the commerce business and subsidiaries including Kakao Mobility and Kakao Pay.

Meanwhile, Kakao attributed the decline in operating profit to marketing costs linked to aggressive investments in new businesses, a surge in commission fees for Kakao Page and Melon and an increase in labor costs.

Operating expenses during the second quarter stood at 561.3 billion, up 137.5 billion won year-on-year, setting an operating profit margin of 4.7 percent for the quarter.

Looking ahead, Kakao cited plans to further accelerate the sales of its advertisement business, seek new growth in game publishing and successfully wrap up the scheduled merger of Kakao and Kakao M on Sept. 1.

By Sohn Ji-young (jys@heraldcorp.com)