Kakao's e-commerce business to operate independently

Tech

Published: 05 Aug. 2022, 17:55

Kakao's e-commerce business to operate independently

Kakao CEO Namkoong Whon [KAKAO]

Kakao's e-commerce business will operate more independently as the company seeks to get the unit back on track.

The move is just the latest in a series, as the technology company has been experimenting with various structures to manage and oversee its e-commerce operations.

Kakao's e-commerce business was spun off three years ago as an independent subsidiary. Seven months ago, it was absorbed by the parent company.

In the latest iteration, it will operate under its own management as a "company in a company."

The new structure will be effective Monday. A notification was sent out to employees on Thursday.

Kakao's e-commerce business will have an independent strategy, personnel management and finances.

While Kakao CEO Namkoong Whon will also be heading the e-commerce business, Kakao plans to name a chief operating office, who will manage the overall business.

Kakao's e-commerce business was spun off in 2018 as a subsidiary then absorbed again last year, though run independently.

In January, the e-commerce business was merged completely with the headquarters after the IT company concluded that it would be more efficient if the e-commerce business was managed together with the Kakao Talk messenger.

The Kakao e-commerce operations have been allowing users to shop or send gifts to friends and family via the messenger app.

During a conference call on Kakao's second quarter performance, Namkoong stressed that the essence of the company's business is advertising and commerce.

To strengthen e-commerce, Kakao purchased ZigZag, the No. 1 women's fashion e-commerce site in Korea, in April last year for 1 trillion won, and in December, it bought Grip, a live commerce streaming provider, for 180 billion won.

While the company reported record-breaking sales in the second quarter of 1.82 trillion won, up 35 percent year-on-year, it suffered a 68 percent net profit drop to 101.2 billion won.

Year-on-year, advertising revenue rose 28 percent while commerce revenue increased 2 percent.

When compared to the previous quarter, commerce revenue declined 13.6 percent. During Thursday's conference call, Kakao CEO Namkoong presented a bleak forecast.

"The market situation is not favorable as concerns about a global economic slowdown continue from the beginning of this year," Namkoong said. "The pandemic-driven high base effect from the last two years has taxed the first half of this year in terms of the growth rate, and this is expected to continue into the latter half as well."

Kakao's stock surged 7.5 percent on Thursday, although it ended the week with a slight drop of 0.61 percent. The market capitalization of Kakao and related companies is down by about 50 percent on year.

The increased independence of the e-commerce business may give the business a freer hand in its affairs that will allow it to make faster decisions.

BY YOUN SANG-UN, LEE HO-JEONG [lee.hojeong@joongang.co.kr]