Emily Tan
Jul 30, 2012

Korea's KakaoTalk likely to profit from move into mobile games: Ovum

SEOUL - Mobile messaging service KakaoTalk's launch of its Game Center today is likely to be a profitable move for the company, according to Ovum analyst Mark Ranson.

Thanks to strong userbase, Kakao's Game Center is likely to succeed
Thanks to strong userbase, Kakao's Game Center is likely to succeed

Since its launch on March 2010, the company has acquired a user base of 55 million through its 'WeChat-like' mobile messaging service. 

Based on the launch of a virtual currency, 'Choco', Ovum expects KakaoTalk to pursue a free-to-play business model in which digital item sales will be the main revenue stream.
 
Although the Game Center's launch is in a competitive space with iOS, Android app stores and existing game portals, Kakao will find it relatively easy to bring it to users' attention thanks to its existing service. 
 
Ovum compared Kakao to China's Tencent, which has had success with this strategy in gaining scale and loyalty through a core messaging service, WeChat, and using that messaging service to promote new services that generate higher revenues. 
 
Kakao has a further advantage in that its users have already demonstrated that they will spend money within the service, as sales of premium emoticons generate revenues of up to USD$87,000 (KRW100 million) per day. "Emoticons may remain a significant revenue stream, but mobile gaming’s broader appeal and larger monetization potential should soon dwarf emoticon sales", commented Ranson.
 
Of the Korean mobile network operators (MNOs), LG U+ has so far taken the most innovative approach to gaming on a 4G LTE (long-term evolution) network, and on 18 July it launched the C-games cloud gaming service. The company sees cloud gaming as an effective way to bring high-quality, processing-intensive gaming experiences to almost any mobile device without the need for large initial game downloads, as the game content is streamed from the nearest server to the user’s device.
 
Rival MNOs SK Telecom and KT will no doubt be watching LG U+’s cloud service very closely. If the initial signs for LG U+ are positive, Ovum believes all three carriers could be operating cloud gaming services in the near future. Although the potential to launch cloud gaming services is not limited to MNOs, superior network expertise and the ability to offer special data allowance plans catering to cloud gamers could help carriers to differentiate themselves from their OTT competitors.
 

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