Clock Tic Toc-king for Kakao?

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Clock Tic Toc-king for Kakao?

SK Planet, the mobile platform arm of SK Group, has acquired Mad Smart, the developer of Tic Toc, raising speculation that the mobile messenger service may gather enough strength to dislodge the No. 1 domestic player KakaoTalk.

The SK subsidiary said on Monday it bought a 100 percent stake in the venture firm, which is estimated to be worth between 15 billion ($13.4 million) to 20 billion won.

Mad Smart was established in March of last year by developers who had graduated from the Korea Advanced Institute of Science and Technology (Kaist).

Under the terms of the deal, SK Planet vowed to run Mad Smart in the form of an independent entity, meaning the current CEO and workforce would retain their jobs.

As SK Planet has a number of mobile services at its disposal, it will “gain a competitive edge in the global market by combining the creative spirit and excellent technologies of a local venture with SK’s experience in diverse services through the acquisition,” said its Chief Executive So Jin-woo in a statement.

SK Planet, which was spun off from its mother company SK Telecom last October, already owned a wealth of online and mobile services: 11 Street, an online shopping mall; T Map, a navigation service provider; T Store, a mobile application shop; SK Communications, which operates the social networking site Cyworld and search engine Nate; and Loen Entertainment, which operates the digital music service Melon.

Cyworld users total 25.98 million, while those who have registered with Nate and the online and mobile messenger service Nateon stand at 33 million.

Although not as internationally prominent as the two-year-old KakaoTalk, which had 42 million subscribers as of early March, Tic Toc has amassed nine million users since its launch eight months ago.

In terms of subscriber numbers, Tic Toc ranks as the fifth player among domestic mobile instant messaging services, following KakaoTalk, NHN’s Line, MyPeople by Daum Communications and Nateon UC by SK Communications.

However, despite its relative success in attracting subscribers so quickly, Tic Toc has not yet produced any revenue as it lacks a profit-making business model. SK Planet aims to link Tic Toc to its existing services to turn a profit and help the messenger expand its foothold in the market, it said.

Meanwhile, a report entitled “Mobile Instant Messengers’ Dilemma” released on Sunday by the LG Economic Research Institute highlighted some of the potential pitfalls of such messenger services.

The report noted that, despite its huge popularity, Kakao posted a 40.5 billion won loss in 2010, the latest period for which data is available.

“Although mobile instant messengers have succeeded in replacing text messages, they suffer from a shortage of maintenance fees required to boost servers due to the lack of sustainable income sources,” said the report.

“KakaoTalk is the only one to have developed profit sources, such as mobile advertisements and commissions from brokering gift certificate sales on mobiles, but the majority of profits earned go toward maintenance costs.”

The institute recommended that mobile messengers including KakaoTalk join hands with more powerful mobile service providers such as portal sites and social networking games.

By Seo Ji-eun [spring@joongang.co.kr]

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