Asia’s messaging apps have a history of becoming huge in their home market before struggling to gain traction overseas. South Korea’s Kakao Corp is counting on the Japanese love of manga to break that trend.
Amassing 43 million users at home has driven Kakao’s market value to 8.3 trillion won (US$7.4 billion), but it is little known outside South Korea, a factor that has contributed to a 31 percent share price slump from a peak in August 2014.
Earlier efforts to add customers in Southeast Asia and Japan have foundered as it ran head-first into dominant apps such as WeChat and Line.
To attract customers in Japan, and compete against a host of rivals in the US$4 billion manga market, Kakao’s Piccoma app has adopted a new business model. Instead of charging per book, it sliced them into chapters to provide smaller and cheaper offerings, winning over casual readers rather than just hardcore fans.
Not only has that added users and boosted revenue, but it is helping Kakao develop a platform in the nation as it actively considers a Tokyo stock listing in 2020.
“Kakao hasn’t seen this kind of growth before outside [South] Korea,” Kakao Japan Corp chief executive Kim Jae-yong said in an interview at the company’s Tokyo headquarters. “We have a chance here.”
The Japanese unit, an office of less than 35 people, first introduced Piccoma in April offering a few dozen comics series. The service now features more than 1,000 items, with themes spanning from romance to fantasy.
The number of daily readers, a key metric for manga apps, reached 900,000 for the fledgling service last month and monthly users have exceeded 2 million. Downloads topped those operated by Japan’s largest publishers and Line Corp for the three months since May.
It made other innovations as well, including taking inspiration from its popular Anipang game in South Korea.
While the home version gives users extra chances to win with a day of waiting, for Piccoma it allowed readers to access free chapters after 24 hours.
Kakao’s ultimate aim is to take the success of Piccoma and build a stronger business in Japan like it already has in South Korea. For analysts, that is the key to success for instant messaging apps, especially as they morph into other services that generate revenue, such as games, for an otherwise free app.
“Any overseas business is going to be very difficult,” Seoul-based Eugene Investment & Securities analyst Jung Ho-yoon said.
“It has to be based on a platform and they are pretty much fixed by now, globally, like how it’s Line for Japan,” Jung added.
Jung recommends buying the stock on Kakao’s potential to branch out into mobile services, including banking, with its firm grip in South Korea.
While Eugene Investment & Securities is one of more than a dozen brokers with a buy rating, none cite potential overseas expansion as a reason.
After solidifying Kakao’s presence in Japan, Kim hopes to tap the Chinese market by leveraging its relationship with Internet giant, and WeChat owner, Tencent Holdings Ltd (騰訊).
Tencent holds more than 8 percent of Kakao through its affiliate Maximo Pte.
The two companies have cooperated on previous occasions on banking and comics services.
Last month, Kakao announced that an online comics service, operated by Tencent, would adopt its model of providing content for free after a certain time.
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