Kakao Game Had a Difficult Q1 2017

South Korean internet company Kakao has recently published the profits for Q1 2017.  The company recorded a forecast beating performance in the first quarter, helped by robust revenues from its music content business, Yonhap News Agency reports.

In the first quarter of 2017, Kakao recorded a record KRW 443.8 billion in revenue, KRW 38.3 billion in operating profit, and KRW 80.3 billion in game content sales. The operating profit represented a staggering 81,8 % YoY (annual growth). The company’s stock price is on the rise.

However, its mobile game content revenue fell from 42% in Q4 2016 to 36%, as shown in the chart below:

Despite Kakao Music led YoY 142% up, QoQ Was Flat Due To Mobile Game Decline (Image Credit: Kakao)

Kakao has explained that game content sales fell 14% in QoQ (Quarterly Growth) due to the lack of new game launches of the Kakao platform, as well as the competition intensified in the South Korean mobile game market. However, sales of PC games ‘Black Desert’ increased 14% YoY.

Kakao Game Revenue Declined Due To Intensifying Competition In New Mobile Games (Image Credit: Kakao)

The company has announced its aspirations to launch the game market in the second half of the year with a new mobile RPG ‘Yin Yang company’, showing sales of 80.3 billion won in game content in Q1 compared to the previous quarter.

Kakao has over 500 games, and while developers had to integrate their games into Kakao in previous years, many companies have moved away from Kakao. However, some of the top grossing games are still connected to it.

Kakao aims to turn around in the second half by serving a very large new work directly, Won He Lee reports from a local channel. In the second half of this year, the mobile game ‘Yin Yang-sha’ and Kakao Friends IP game, which is the top player in the Chinese, Taiwanese and Hong Kong game markets and has recorded 200 million downloads worldwide, will be shown. Kakao channelling is a new way to find a breakthrough with its own publishing game amid new releases.

During a conference call on the 11th The CFO of Kakao – Choi Se-Hoon mentioned that although the revenue for game contents dropped during the first half of the year, they will raise during the second half of the year, because ‘’ Onmyoji ‘’ title and Kakao friends contents are already gaining big popularity in China, Vietnam and Hong Kong, therefore he has high expectations for them.

Choi Yong-Seok, Director of Kakao believes that even while ignoring the popularity of‘’ Black Desert ‘’, the challenging revenue and the revenue for games has dropped during the first quarter, but in contrast to this the amount of games published has seen a trend of growth.
During the difficult period the marketing activity should be expanded and as for the good quality games they should be maintained well.

Sources: Won Hee Lee  for Daily Game 

Yonhap News Agency

Kakao Financial Info

Kakao Q1 2017 Results, Investor Relations

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