Taking a Stab at Mobile Advertising the Kakao Way

During the chat with Kakao co-CEO Sirgoo Lee on Thursday at Startup Asia, he also discussed about the popularity and direction of mobile advertising, specifically about Plus Friend, the premium branded channel that the company created to attract businesses to reach mobile consumers in a more effective way. Lee also dismissed the rumors that Kakao is going to IPO anytime soon as mentioned by Business Korea earlier this month.

According to Lee, Kakao has over 500 businesses listed on Plus Friend in Korea and around 30 in Indonesia. The difference in numbers is significant but he believes that while Plus Friend is not for every business, it is a viable way for companies to market their products and get in touch directly to customers in a more engaging and more meaningful way compared to the traditional banner ads which simply don't work on mobile.

Mobile requires new ad models Lee said, "Banner ads don't work on the small device so you need a very targeted, focused advertisement platform". Premium accounts for brands have been one of the more successful ways that mobile platform companies have approached mobile advertising.

Twitter for example has implemented a number of brand oriented methods to push its own advertising model within its network. Enriching each tweet with embedded images, videos, and content previews on its own mobile apps make the platform more enticing to advertisers and allows them to be more confident in being able to reach their audience.

Lee says the market can expect to see the number of Plus Friend accounts rise significantly in the coming months as the number of KakaoTalk users increase. "Plus Friend is not the ultimate platform but it's definitely a step ahead of the traditional banner ad kind of advertisement", Lee said on Thursday. "Businesses where they can offer coupons or gifts through Plus Friends work better".

Lee gave an example of Uniqlo in Korea where it has 2.8 million followers on its Plus Friend account. The company offers $10 coupons exclusively through Kakao which were snapped up very quickly. Locally, companies like Lotteria and blitzmegaplex are among the ones offering deals or discounts to their customers directly through Plus Friend.

"We really don't have a tailored advertisement model yet available through mobile and [Plus Friend] is a world first stab at coming up with a customized model for the mobile device which is a very personalized device", Lee said. Mobile advertisement is still in its early days and many other companies are either adopting similar methods or coming up with their own to offer something that is non-intrusive, valuable, and attractive.

Letting consumers decide Whereas companies like Twitter and Facebook serve consumer profiles for advertisers to which they can direct their promoted posts, Kakao's premium account model allows the consumers to decide which brands they would like to connect with. This avoids the situation in which consumers are served unwanted promotions.

Being in a relatively early stage, the new form of mobile ads are not for everyone, according to Lee. The advertising model that Kakao pursues work for certain companies, "ones that can offer various benefits and can offer that incentive to add those products as your KakaoTalk Friends".

"I think we're at the beginning of discovering new ways to advertise through [mobile] devices".

No IPO plans for now With regards to the IPO rumor, Lee dismissed it as something that was based on vague statements by a financial company although the company does hope to go public one day. "We don't have immediate plans for IPO. Eventually we are going to but we don't think that doing that early on is very favorable because once you IPO there's all kinds of IPO that will slow us down".

"We were incorporated seven years ago so now a lot of employees are shareholders who want to sell their shares on the market but since we haven't IPO we don't have an open market to sell to", Lee said. He explained that the company worked out a deal with a financial institution to set up a trust account for the shares sold by the early employees to avoid having a large number of outside owners which would lead to all sorts of other issues.

"This financial institution then kind of made statements that vaguely suggested that we were going IPO very soon because they were selling the ownership of this trust fund to other investors saying that "you can cash out very soon", which is not true", Lee said, quashing the rumors.