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Kakao continues to expand business portfolio

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(Globalpost/GlobalPost)

By Kang Yoon-seung

SEOUL, Aug. 5 (Yonhap) -- Awaiting a major merger and market listing later this year, South Korea's leading mobile messenger service provider Kakao Corp. has been trying to diversify its business portfolio as its conventional sources of profit weaken, and the rumor is that it is looking into the taxi business.

"Although it is hard to reveal detailed businesses, we have established a task force to find new models for profits," Kane Lee, a communications official from Kakao, said Tuesday over the phone. The goal, Lee said, is for Kakao to become an information platform for everyday lives.

"It is true that we are also considering tapping the call-taxi sector. But there is nothing much to comment on that," Lee said, adding the project is just one of numerous business models which the task force is conducting initial studies on.

The taxi service app, according to insiders, will connect a customer with the closest cab. Kakao will partner with officially registered taxi drivers for the service.

While Kakao Talk, the free messenger service that commands 37 million local users in the country of 50 million people, is firmly rooted in the market, its lack of new sources of profit has been cited as a major drag on its outlook.

Although the venture firm managed to earn small profits from "stickers" used in the messenger, full-fledged efforts to explore new sources of revenue started only in 2012 with the launch of the Kakao Game service.

Starting with 10 games, the service now provides users with more than 500 choices of games, with a monthly net user base of 20 million, according to the company. Sources said the business took up 76 percent of its combined sales in 2013, and 60 percent in the second quarter of 2014.

This year, the company has turned to financial services. It plans to launch Bank Wallet Kakao, a mobile platform than supports small-sum financial transactions and mobile payments, in the second half.

The mobile wallet service will enable users to transfer up to 100,000 won (US$97) or pay up to 300,000 won at designated stores using their Kakao accounts. This is markedly different from bank apps that operate based on phone numbers.

"We also plan to tap deeper into the financial market through a simpler payment system, which will be similar to Paypal," Lee added. The service is tentatively named "Kakao Simple Payment."

Such platform could help circumvent the complex authentication system in the country's online shopping, cited as a major hurdle and inconvenience for overseas shoppers wanting to make direct purchases from South Korea.

"Kakao is currently in talks with LG CNS Co. to adopt their transaction system, and most local credit card firms, except for Lotte Card Co., are reacting positively to the move," Lee said. Sources said, however, Lotte has also recently made a decision to join its rivals' move.

As of this month, the messenger service holds 152 million users worldwide through 15 languages, including Korean, English, Japanese, Spanish, German, Arabic and Russian.

The company is planning to merge with Daum Communications Corp., the country's No. 2 portal operator, creating a new entity with a market capitalization of more than 3 trillion won.

As Daum is listed on South Korea's secondary KOSDAQ market, the merger will allow Kakao a back-door listing. The process is scheduled to be completed in October once the shareholders approve the plan on Aug. 27.

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