Idea 1 - Idea on platform business, and profit model (business model) of Kakao Talk (1/3)- English ver
Idea on platform business, and profit model (business model) of Kakao Talk' (1/3)
Category: <Business>
<Thoughts>
“Recently
Kakao’s profit on its growth is slowing down. Many platform businesses that
brings innovation suffer from the problem of insufficient profit model. What
should Kakao do to become a leading (and ‘high profit making’) innovative
company, like Google and Facebook?”
This is what came up to my
mind. I imagined as if I have become an executive member of Kakao, and thought
of many ideas: “How about doing this? Or that? What is deficient right now?”. I
have gone through some researches and analysis, and finally decided to sum
everything up into an article.
<Image source: Google Play Store>
It is difficult NOT to use Kakao Talk in Korea. Also, it is
difficult to find anyone not using Kakao Talk. Ever since majority of
population has Kakao ID in Korea, (42 million people using Kakao Talk, and this
is about 80 per cent of South Korean populaion) Kakao platform services had provided
a great convenience for customers. From O2O mobile payment, banks, mobile
gifts, it’s now stretching toward life convenience - like transportation, or
taxi.
Kakao is expected to be a leading company who could generate
synergy between its broad platform, database and upcoming AI technology, and
many even expects Kakao to become a leading IT platform of Korea like Google, or
Facebook.
It is true. More a company reaches broad platform, big database
and technology, easier for it to obtain ascendancy and grow as a giant - life
without Kakao platform would be unconceivable, like it is difficult to conceive
‘future without
Google’ right now.
However, Kakao must get over one great problem in order to
become a giant - or, if I give a little acerbic comment, not to leave its name
behind the good-old-days history of Toshiba, or Yahoo. – that is, ‘weak
business model’ (or profit model.)
Kakao had expanded its platform very fast, and some even
criticize it focused too much and hastily on ‘expansion’. However, Kakao could not sidestep from the common
initial problems of platform business - ‘how to make profit’. Even it took
quite long time for Youtube and Google to turn in to profit. However they
succeeded, and now making a huge profit every year. Business model of platform
business is much more flexible than traditional industries.
From small (but never trivial at all) menu costs to production/distribution
cost, cost of producing marginal product is approaching zero. So, well-made
business model would bring a company exponentially growing profit. On the other
hand, it is also true that coming up with firm business model (profit model) by
providing ‘services’, ‘online’ is not a simple
thing. Right now, in a ‘return on investment’ perspective, Kakao is having hard
time making ‘profit’.
So, how is Facebook and Google making so much profit, and
Kakao is not? My analysis is: 1). Platform structure of Google and Facebook (or
even Naver which is in-frontier competitor of Kakao) has much greater strength
in ‘Advertisement Business Model’, which
is contributing to great proportion of the firms’ aggregate
profit. 2). Kakao’s range of ‘web based platform service’ is not broad
enough to infiltrate into customers’ online activity and generate profit.
Shortly I would say: limitation of 1:1 messenger based platform, not a ‘portal’
or ‘web service’.
I
would like to continue this theme in the following post, focusing more on
analysis of Kakao and several other platform businesses’ profit models. And in
the last post, I would like to discuss a little about my ideas regarding to the
solutions.
---
References
(You may also be interested in):
-Kakao Talk market dominance in Korea (2017. Oct)
- Concerns on Kakao platform expansion (2012)
- Profit model (business model)concerns on Google and Youtube
(2009)
Thanks for the great post on your blog, it really gives me an insight on this topic.
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