Kakao’s deal to cut costs for designated drivers

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Kakao’s deal to cut costs for designated drivers

Kakao has signed partnerships with Socar and Green Car, the nation’s two leading car-sharing companies, to let drivers for its designated driver service use rental cars at discount prices when returning from a customer’s destination.

For a month starting this Saturday, designated drivers registered with the Kakao Driver app may use rental cars from either Socar or Green Car at a 100 percent discount on the hourly rental cost from midnight till dawn. Drivers only have to pay an insurance fee and for the gasoline used the cover the distance. The two companies will provide 90 percent discounts on those expenses too.

The event is a win-win for both Kakao and the two companies. It will help drivers save a sizable portion of the cost of returning home when no public transportation is available. The mobile-based car-sharing companies won’t need to keep their cars idling in garages after midnight.

Following the one-month trial, Kakao and the two on-demand car rental companies will discuss whether to continue the service and how to improve it, according to the operator of KakaoTalk mobile messenger on Monday.

“Through collaboration with various on-demand service partners, we aim to offer even more convenient services to both our customers and those devoted to our services,” said Chung Joo-hwan, vice president of Kakao.

The deal is an attempt to turn around the Kakao Driver service, which has had a disappointing performance since its ambitious launch on June 1. Many investors and analysts initially had an upbeat outlook for the designated driver service and thought Kakao would rake in commissions from linking drivers and customers. Kakao Taxi, despite being highly popular, is not earning any money.

But Kakao Driver ended up grabbing a mere 8 percent of the designated driver market, falling short of the 30 percent forecast, said Deutsche Bank in an Aug. 11 report on Kakao’s second-quarter earnings results.

“Kakao management claims the company is still in the middle of establishing infrastructure for the future but there are too many ambiguous aspects to gauge when the company will reach that stage,” the report said.

On Aug. 23, Kakao announced a change in the charging system for Kakao Driver.

Users were previously charged a base fee of 15,000 won ($13) and then extra costs based on the time and distance of the journey. The new system allows customers to enter a price they wish to pay. After the success of ride-hailing service Kakao Taxi, which was launched in March 2015, Kakao proclaimed that its next growth engine would lie in connecting mobile users with existing offline services. Kakao Hairshop debuted on July 12.

Kakao Home Clean, a housekeeper-booking service, and Kakao Parking, which connects drivers with vacant parking spaces, are scheduled for release by year’s end.

But Kakao shares plunged 31.2 percent from 115,300 won at the beginning of the year to 79,300 won on Monday. By contrast, shares in search engine and mobile messenger app rival Naver shares shot up 23.1 percent from 658,000 won to 810,000 won over the same period after its strategy to ramp up mobile shopping services and mobile advertising was more successful than expected.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]
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