Naver and Kakao's earnings are expected to diverge in the fourth quarter of last year. Naver is expected to drive overall revenue growth with double-digit increases in its commerce and institutional sector revenues compared to the previous year. Analysts suggest that Kakao will face negative impacts on its overall performance due to declining revenues in games, stories, music, and other institutional sectors.
According to Samsung Securities and others in the securities industry on the 3rd, Naver's projected revenue for the fourth quarter of last year is 2.8323 trillion won, an increase of 11.6% compared to the previous year, with operating profit expected to rise by 32.6% to 537.7 billion won. In comparison, Kakao's anticipated revenue for the same period is 1.9468 trillion won, reflecting a 2.6% decrease year-on-year, while operating profit is projected to decrease by 33.4% to 107.1 billion won.
Naver's institutional sector growth has been driven by its portal sector. Naver's portal business, known as 'Search Platform,' is projected to see revenue of 1.0436 trillion won, an increase of 12.4% year-on-year, while commerce revenue is expected to rise by 14.6% to 756.9 billion won. Following the announcement of martial law last month, Naver saw an increase in portal traffic due to a rise in news users. According to Internet Trend, Naver's search market share was 64.7% as of December last year, up 6.8 percentage points from September. In contrast, during the same period, Daum's search market share decreased to 3%, down 0.2 percentage points from September. This is due to an intensified phenomenon of users gravitating toward Naver's platform.
Naver's institutional sector growth is attributed to the launch of 'Naver Plus Store,' introduced in October. Naver Plus Store is a service that recommends not only products but also benefits, promotions, and related content by analyzing individual preferences and interests.
For the fourth quarter of last year, Kakao's institutional sector, centered on Daum, is expected to generate 84.5 billion won in revenue, a 4.1% decrease compared to the same period last year. During this period, the content sector is projected to experience a revenue drop, with game sales expected to fall by 24% to 176 billion won, and music revenue, including Melon, expected to decrease by 8% to 458.1 billion won. The fourth-quarter revenue for the story sector, including Piccoma, is forecasted to be 205.1 billion won, a reduction of 3.9% compared to the same period last year. The decline in content revenue is attributed to the absence of new game releases and decreased album sales. However, revenue from TalkBiz, which includes KakaoTalk, is projected to rise by 6.6% to 572.8 billion won, while revenues from other platforms, including mobility, are expected to increase by 13.7% to 376.5 billion won.
Kakao's portal service, Daum, has yet to implement artificial intelligence (AI) search capabilities. This is due to the underperformance of its in-house independent company (CIC) responsible for the Daum portal business. Although it unveiled a new AI conversational service, Kanana, in October, Kakao decided not to implement it within KakaoTalk or Daum but to launch it as a separate service within the year. Currently, only some features, like AI summarization, have been applied to KakaoTalk. Meanwhile, its competitor, Naver, launched its AI search service, Cue, in September 2023, which understands complex user inquiries and presents results. Nevertheless, revenues from business messages via KakaoTalk seem to be steadily increasing, especially among financial clients.
Kakao is expected to focus on its core business, KakaoTalk, to recover its revenues. On the 13th of last month, Kakao introduced a beta version of 'AI Shopping Mate' to KakaoTalk gift services. This service suggests gifts that are frequently mentioned on social media (SNS) and clearly presents the sources of content or recommendations. Kakao plans to officially launch the AI Shopping Mate within the year. Naver also intends to expand its revenues by launching the Naver Plus Store service as a separate application (app) in the first half of this year.
Kim Dong-woo, an analyst at Kyobo Securities, noted that 'Kakao has begun to show efforts to streamline its non-core businesses, including its portal services,' adding that 'Naver is likely to continue to experience accelerated growth in its Search Platform.'