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News  22, Apr 2013

The Kakao story: Rising from the ashes of failure and being lean

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Kakao Revenue BreakdownSirgoo Lee, CEO of Kakao Corporation, shared what made KakaoTalk a hit messaging platform in Korea and its rapid expansion.

Born from two failures, KakaoTalk was created by Brian Kim and his founding team as their “killer application.” Having built two web applications that have failed, Buru.com (social bookmarking serice, 2009) and Wisia.com (social ranking service, 2008), the appearance of the smartphone came at the right time for the company, then named iWILAB, to revive its efforts in the application space. According to CEO Sirgoo Lee, the team threw away all the code for the web service and decided to do something called “application service.”

With just four people, KakaoTalk was created in two months. Sirgoo shared that they have since tried to keep to the “4 by 2” spirit where they aim to create something with the least amount of resources in the shortest amount of time. The reason was, when they were building web services, the team focused on creating products that had no flaws, and that is why they failed. KakaoTalk taught them to release products as quickly as possible and to continuously improve the product.

Read also: Chat wars continue: KakaoTalk hits 10M downloads in Japan

KakaoTalk currently has 86 million registered users, with 70 percent of them in Korea, 29 million daily users and send 4.8 billion messages daily. In 2012, the company reported revenues of US$42 million and had its first profitable year in six years, pulling in US$6.5 million in profits. The company’s main revenue stream is its platform and ads.

Kakao currently has 360 employees. Sirgoo explained that when KakaoTalk began to distribute games through its platform, no one believed that it would work because they did not understand why people messaging each other would want to play games together. Today, KakaoTalk has proven the model with eight of the Top 10 Google Play games being Kakao games. Using the case study of the Anipang Game, Sirgoo shared that it had 20 million downloads, 10 million daily active users and a maximum concurrent users of three million, all because of the power of the social graph.

Sirgoo said that that is the power of the KakaoTalk platform, using the power of the social graph. He said, “Games are just the beginning. With the social graph, with the social function, you can also stimulate growth in digital content like books, musics and movies. You can also stimulate growth in e-commerce by allowing users to show their friends what they have bought.” Sirgoo also mentioned that Kakao is in the process of creating a music service.

During his session, Sirgoo also revealed a more “community” side of Kakao where it is looking to build up the technology community. He mentioned that the company has a target to hit one million profit-making partners within three years. As KakaoTalk is a service, Sirgoo knows the importance of understanding the local businesses and culture in order to provide what users want. Like its partnership with Yahoo! Japan, Kakao is looking to work with local players and content providers in other countries.

As Akira Morikawa, CEO of LINE was also present, moderator Gen Miyazawa of Yahoo! Japan managed to get the two rivals talking. An interesting comment from Akira was that LINE’s timeline is not as heavily used as KakaoTalk’s. Sirgoo also admits that Kakao, being a smaller company, had lots to learn especially in global strategy from LINE.

Read also: Bringing the global market on LINE

Kakao accelerating the adoption of games

Joash Wee

Joash Wee

Joash is passionate about tech startups and building the technopreneur community. While completing his undergraduate business degree, he decided to take a programming class just for kicks. Fortunately for him, he managed to scrap a pass and it now helps him get by with the geek talk. When he is not discussing about startups or the latest technologies, you can find him reading off his Kindle or taking photos with silver halide salts, old school.

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