By Sunny Um WIRED Korea

Ten years ago, Goo Na-hee used to send her friends messages through short message service (SMS), a mobile network service that sends a short text directly from one mobile phone to another, or sometimes even to a home phone.

Goo would quickly press keys on her phone to type jokes and stories she knew in a palm-sized screen. Sometimes Goo used all of her monthly text message allowances and topped up extra credit.

Today, the 24-year-old rarely sends SMS messages to others. Instead, Goo uses the most widely used messenger app: Kakao Talk.

Kakao Talk of Kakao Corp. is an instant messenger app launched in March 2010. On the first day of release, it ranked as the best-selling app for social networking in the Apple App Store.

Almost 10 years have since passed, but Kakao Talk still keeps its throne in Korea. In 2016, 98 percent of Korean smartphone users had the Kakao Talk app installed on their mobile phones, according to a WiseApp survey. It also was the messenger app on which people spent more time than on any other. It was followed by Messenger of Facebook and LINE from NHN Entertainment. The number of Kakao Talk monthly users worldwide exceeded 50 million in the third quarter of 2019.

This app frenzy is also changing lifestyle in Korea. Lee Sang-hee, a resident in Gumi, North Gyeongsang Province, tells her friends to “KaTalk (short for Kakao Talk) me later,” instead of “text me later.” She spends much time chatting with friends, both individually or in groups. She also sends and receives gift vouchers and emoticons on the Kakao Talk app.

How could have Kakao Talk beaten its rivalries and be a great hit in a tech-savvy country like South Korea? Some say it’s because the app was released “just in time.” The launch of Kakao Talk took place soon after the 3G network services for iPhone and other smartphones became available in Korea, says Park Soo-hwang, a Ph.D. candidate at the Business School of Hankuk University of Foreign Studies, who wrote a thesis on the success of Kakao Talk.

“When the iPhone was first released, we saw it as our business opportunity to sell smartphone apps,” says Lee Seok-woo, a former CEO of Kakao Corp. at a startup conference in 2014. “No service can be impeccably perfect from the start. We first wanted to test our service out in the market and update it to meet consumer needs. That’s how Kakao Talk has been developing.”

The app was also seen more competitive against other messaging apps because it was free of charge. WhatsApp, a U.S. app released in the Korean market before Kakao Talk, was priced at $0.99 back in 2010.

Winning the hearts of customers is difficult, but fostering their loyalty should be even more difficult. To keep them on its app, Kakao Corp. continued to update its service by incorporating technological advances into its service, says Eunice Lee, a Kakao Talk official.

It also diversified its service by debuting a sticker series, Kakao Friends, on the messaging app to project a friendlier image. It also updated a new function to make phone calls over Wi-Fi and internet network services in the same year.

In addition, Kakao Talk was one of the first messaging apps that started its service on personal computers. It officially started running its PC version app in June 2013, while its counterparts Facebook Messenger and WhatsApp followed its footsteps one or two years later.

That strategy of diversifying the service and staying ahead of the curve helped the app survive the rapidly changing market and maintain its status as the dominant leader in the Korean market.

Still better, Park says, a “networking effect” played a role in making Kakao Talk going mainstream. Once people start to use a new social networking app, they tend to invite their friends to join and to establish in-app networks. As they would like to keep in touch within the networks, it becomes harder for them to jump ship to another instant messenger app.

What About in Other Countries?

To the chagrin of Kakao Corp., the success story couldn’t be replicated in other countries. Of the 50 million Kakao Talk monthly users worldwide, more than 80 percent are Koreans. Its overseas branches like Kakao JP, Pass Mobile, and Beijing Kakao, which have small client bases, reported losses in 2016 and 2017, according to the Financial Supervisory Service.

In contrast, its biggest rival LINE, a messaging app run by a Korean portal, Naver, has users from a wide range of countries in Asia. The app has over 160 million monthly users, most of them from Japan, Taiwan, Thailand and Indonesia.

More than a half of Android phone users in the world used WhatsApp the most in the world, and it is followed by Facebook Messenger, says a market intelligence blog SimilarWeb in 2016.

It’s not that Kakao Talk didn’t try hard to make a foray into overseas markets. One of Kakao Talk’s targets was Japan. Kakao Talk and LINE both were launched in the Japanese market in 2011, after the Tōhoku earthquake and tsunami. With landline phones failing to work because of frequent power outages, Kakao Talk and LINE were suggested as an alternative means of communication among family members and friends.

LINE emerged as the winner of the two because of a small base of smartphone users.

“Kakao Talk only worked on smart devices like the iPod touch and the iPad, but only 23 percent of Japanese people used smartphones as of March 2012,” says Park. “LINE could meet with Japanese consumer demands, as it was available on phones using 2G network services through a URL address.”

For Kakao Talk to win big in other countries, the company should approach each country with a strategy of meeting local needs. “It may sound like a textbook answer, but understanding local markets, cultures, and social norms is essential,” says Park.

From Messenger to Blockchain Platform

Kakao Corp. is currently in transition. Its business focus is being shifted from the instant messaging app to its expanding social platform. The company has neither a plan to messenger business nor a plan to sell its overseas messaging apps, says Lee of Kakao Talk.

Instead, Kakao Corp. is diversifying its business lines. It offers tens of different apps, which are linked to Kakao Talk, for mobile devices. For instance, it has several mobility apps like Kakao Navi, Kakao Metro, and Kakao Bus. People can hail taxis with Kakao Taxi and order foods or fashion items with Daum Kakao. Daum Café, also a Kakao Corp. app, is a nest of online forums and communities where over 10 million users share opinions.

“Sometimes it feels like the list of categories of business Kakao Corp. doesn’t operate is shorter than the list of ones it does,” says a Seoul-based app developer Alive Studios.

One new business of particular concern is blockchain. Kakao Corp. founded a subsidiary company Ground X, which develops blockchain platforms similar to Ethereum. “Blockchain is the only business that we believe will make our presence felt in the global market,” says Jason Han, the CEO of Ground X, a subsidiary company of Kakao Corp. at a press conference in 2018.