Kakao says it has no plan to change news system

Amid mounting controversy over portal websites serving as news distribution platforms, Kakao, the country’s second-largest portal and news provider, said on Thursday that it has no plan to change its current hosting system.

In a conference call with analysts as Kakao unveiled its first-quarter earnings, CEO Yeo min-soo said the company isn’t considering changing the way it edits news. He replied “no” to an inquiry over whether Kakao is considering following in the footsteps of Naver, which announced on Wednesday it will accept a demand from some politicians and civic groups to stop hosting and curating new stories and comments in its news section, and instead direct users to the respective news outlet’s home pages for each story.

In Korea the system where portal websites host news stories and comments on their own site is known as an “inlink system.” Providing links to the original news service is called an “outlink system.”

“We are not thinking about a detailed overhaul with news editing and exposure of real-time keywords,” Yeo said. “We will make a decision after monitoring user convenience and the impact on the overall ecosystem, when it comes to the adoption of an outlink system.”

He went on to say that the company has run an outlink system in the past, but it did not work out. He added that the conversion of a news system is a matter that needs to be “strategically decided depending on the purpose and situation with each company.”

The KakaoTalk operator said its revenue in the first quarter increased 25.2 percent year on year to 555.4 billion won ($517.6 million), but operating profit tumbled 72.9 percent over the same period to 10.4 billion won due to aggressive spending on marketing and advertising as well as new hires.

Revenue from content - games, music streaming and webtoons - shot up 28 percent on-year during the January-March period to 285.6 billion won, while the introduction of a new advertising platform helped Kakao’s advertising unit post 16 percent more revenue during the first quarter compared to a year earlier at 154.6 billion won.

Choi Yong-suk, head of investor relations, said during the conference that the company will continue expanding its expenditure on new businesses focused on blockchain and artificial intelligence this year, with profits from the different businesses set to materialize from the end of this year.

He also mentioned the recently launched paid taxi-hailing service. The 1,000 won “smart call” service has been used by 500,000 customers since it launched on April 10. About half of those passengers are assumed to have taken advantage of a promotion that let users hail their first taxi for free, but the company still thinks the number of passengers has “definitely confirmed the need.”

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