Seizing Opportunities in Asia’s ‘Attention Economy’ | Intelligence, BoF Professional

SEOUL, South Korea – Just as pop music is increasingly indebted to the star factories that created Blackpink and BTS, the future of online behaviour can often be inferred from what’s happening now in one of the most connected countries in the world. One of the biggest players in South […]

SEOUL, South Korea – Just as pop music is increasingly indebted to the star factories that created Blackpink and BTS, the future of online behaviour can often be inferred from what’s happening now in one of the most connected countries in the world. One of the biggest players in South Korea’s tech ecosystem, KakaoTalk, is a messaging app that has rapidly become an essential marketing channel for a growing number of global fashion brands.

“There are too many brands that have accounts with KakaoTalk to even mention,” says Kim Sook-Kyung, editor-in-chief of South Korean fashion business magazine Fashionbiz.

Commonly referred to as “KaTalk” by locals, KakaoTalk is the country’s most used app. Forty-five million South Koreans — some 90 percent of the country’s population — use it regularly, and a lot. On average, they spend 12 hours a month on the app, second only to YouTube. Factor in parent company Kakao Corp’s myriad other services and affiliate companies and it soon becomes clear that KakaoTalk has a powerful hold on consumers’ attentions — and their wallets.

“KakaoTalk’s biggest strength is that it’s being used by almost the entire nation, including people of all ages,” says Julia Kang, trend division chief executive at broadcaster JTBC and the publisher and chief executive of Hearst Korea, which publishes local editions of fashion magazines Harper’s Bazaar, Elle, Cosmopolitan and Esquire. In the future, she says, “it will play an even bigger than expected role in increasing sales in the fashion and beauty industries.”

Kakao Corp, which raked in revenues of US $2.6 billion last year, has expanded into almost every aspect of life in South Korea.

As well as messaging, there’s social feed KakaoStory, apps for gaming, music, videos, cartoons and novels, KakaoPay for mobile payments and taxi app KakaoT among others. Connecting individuals, organisations and companies with each other through numerous different services, it is the dominant “everything app” in South Korea, similar to the role WeChat plays in China and Line plays in Japan (though the latter is owned by Korean rival tech giant Naver).

App analytics data firm App Annie now lists a total of 220 apps under Kakao Corp’s 33 developer accounts. A number of their services have proven invaluable to fashion brands in an apparel and footwear market that, according to Euromonitor, was worth US $29 billion in South Korea in 2019.

Understanding how to leverage platforms like KakaoTalk and Naver is not only important for brands hoping to access the South Korean market. More broadly, the country often sets the pace when it comes to digital technology — 5G service there already averages 336 MB per second, almost seven times faster than the US, according to mobile insights agency Open Signal —  and that makes it not only a lucrative fashion market in its own right but an important bellwether for online behaviour globally.

The Marketing, Branding and CRM Channel

Kakao was founded in 2010 by Kim Beom-su. Its core offering, KakaoTalk is used to chat with friends, family and co-workers, to share files, and to take part in chat rooms called Talk Bang (“bang” is Korean for “room”). Globally, KakaoTalk’s 52 million users send an average of 11 billion messages on the app each day.

Brand accounts are ubiquitous on KakaoTalk’s channels, a service launched in October 2011 that’s also available to individuals. As of 2019, Kakao Corp says there were over 1.67 million channels with over 560 million total subscribers.

The trade volume of luxury goods in KakaoTalk gifts more than doubled compared to the same period last year.

These channels allow brands to communicate with followers, announcing new products, events, promotions, and so on. They can also be used with the firm’s business services such as Info-Talk, which sends automated messages such as orders, payments and deliveries, and Support-Talk, which connects users with customer service staff. According to Kakao Corp, 39,000 companies were using Info-Talk as of 2019 because they can link it with their logistics and payment systems.

“We absolutely believe that Kakao is the most local relevant social tool not only from a sales point of view but also for close communication with our key customers,” said Swarovski Korea’s Chloe Ok. “Our Kakao Shop is the number one third-party online shop for us in terms of sales,” she said.

On October 12 this year Kakao also launched Kakao Shopping Live, a service embedded in the app that allows sellers to promote products via livestreams. Fashion brands experimenting in this space include Tory Burch, Vans and Guess.

Despite its status as a giant in the Korean app universe, Kakao has a rival of almost equal stature in the form of portal Naver, which owns messaging app Line and selfie app Snow. According to Kim, Naver is outperforming Kakao when it comes to e-commerce with its Naver Shopping Window platform. Naver also offers its own live shopping service, which partnered with the latest edition of Seoul Fashion Week to offer see now buy now purchases on dozens of items by brands such as Big Park, Cahier and Dew E Dew E.

Nevertheless, the overwhelming amount of user attention devoured by KakaoTalk means the company’s myriad offerings cannot be ignored.

“Kakao shopping is used less than Naver,” she said, “but it is more dominant in marketing, branding and CRM as it is operated via KakaoTalk.”

Digitising Luxury Gifting Culture

KakaoTalk’s reach and convenience also helped an embedded service called KakaoTalk Gift take off, made all the more convenient by mobile payments service KakaoPay, which has 20 million users and recorded KRW 29 trillion (USD $25.6 billion) in transactions in the first half of 2020.

While the gifts users could give were initially limited to low cost items such as emojis and coupons for drinks and snacks, high-end cosmetics were made available from August 2019, and luxury fashion items are becoming more and more popular.

“Gift sending functions that express congratulations or gratitude are very popular recently,” Kang said. And due to Covid-19, “liquid soaps and hand creams such as L’Occitane, Byredo and Jo Malone are among the most popular products in KakaoTalk’s gifting ranks.”

“Although the price of the products is quite expensive compared to coffee coupons or other existing gifts, there was an increase in both users and purchase volume so we are expanding to other luxury product categories from bags, wallets, jewellery, and watches,” said a spokesperson for KakaoTalk. “In the first half of 2020, the trade volume of luxury goods in KakaoTalk gifts more than doubled compared to the same period last year.”

According to the KakaoTalk spokesperson, Chanel began offering gifts using KakaoTalk in July, making it their first online sales channel outside of department stores’ web shops in the Korean market. More than 30 Chanel beauty products including lipsticks, perfumes and hand lotions are currently available through the store. Other premium brands available on KakaoTalk’s gift shop — mostly in the cosmetics categories – include Christian Dior, Estée Lauder, Gucci, Bottega Veneta, Fendi, Valentino, Prada and Ferragamo.

Leveraging the “Attention Economy”

For tech companies that compete by convenience and make money through targeted advertising based on an intimate understanding of their users and services, fortunes are made by holding onto consumers’ attention. Indeed, according to theoretical physicist Michael Goldhaber, while we live in an information age, we do business in an “attention economy,” because it is our mental energies, not information, that is scarce.

Creating an ecosystem of services that users never have to leave is one strategy for doing so. Kakao Corp’s offerings snowballed after merging with internet portal Daum in 2014, and it has continued adding new consumer-facing and B2B services at a rapid rate. In recent years the tech giant has made especially significant moves in entertainment, an area where Korea already has outsized influence.

Kakao shopping is used less than Naver but it is more dominant in marketing, branding and CRM.

The Chinese term Hanliu, or Korean wave, was originally coined to describe the craze for Korean soap operas and pop music in the world’s largest fashion and luxury market, and the subsequent global success of bands like BTS and Blackpink proves the Hallyu phenomenon is no longer confined to China or even the wider Asian region.

Kakao subsidiary Kakao M already runs one of Korea’s leading music streaming services, Melon, and it has just launched a mobile-first video platform called Kakao TV that harbours serious and realistic ambitions to compete with the likes of Netflix. Another video app, Piccoma TV, is being launched off the back of digital comics app Piccoma, which is the highest grossing non-gaming app in Japan. And Kakao Games went public on the Kosdaq stock exchange on September 10 this year, with frenzied demand from investors.

“The big picture drawn by Kakao Corp is a huge entertainment content platform based on mobile and technology,” Kang said. Given the company’s reach, she said, “it would not be surprising to see great achievements in the near future.”

Make no mistake, the firm’s content business is no side-hustle — it comprised 48 percent of Kakao Corp’s sales in the second quarter of 2020 — but it does play a role in Kakao’s broader ambition of owning Koreans’ attention in between games, songs and shows.

A spokesperson for KakaoTalk said services such as Kakao TV are attempting to create a “lock-in effect” to keep users active on KakaoTalk. In turn, they hope to make its business services such as advertising on the platform, KakaoTalk channels and so on “more essential” for brands.

To capitalise on user attention, KakaoTalk launched Bizboard, the app’s advertising platform which has since spilled over into other Kakao platforms such as Daum, Daum Webtoon, and Kakao Page. Into this relentlessly Kakao-branded universe, a service called Kakao Moment uses the company’s near omniscient knowledge of user behaviour across different applications to continuously improve advertising algorithms so that they “find the right user and deliver ads at the right moment.”

Furthermore, Kang believes, “we can expect [Kakao] to activate live commerce through Kakao TV, which has recently been upgraded by competing with YouTube or Instagram TV.”

Even in the context of Silicon Valley’s tech giants and China’s mega-apps, Kakao Corp’s offer is massively diversified, in keeping with the South Korea’s history of diversified offline chaebol conglomerates such as Lotte and Samsung. However, for now at least, the consensus is that outside of messaging, Kakao isn’t especially dominant.

The company’s “gaming and TV are not competitive enough yet,” says Kim Sook-Kyung of Fashionbiz, while its brand and product search functions “lag behind Naver, YouTube and Instagram,” according to Kang.

But judging Kakao only by the size of its existing audience for entertainment or by the ease of use for shoppers alone would be to neglect its real strength, which lies not only in messaging, but the sum knowledge of consumer behaviour across every adjacent app and service. Like Google, Kakao Corp is facing scrutiny from government antitrust watchdogs. And, unless or until something is done to break up Kakao, like Google, it is a company that global fashion brands can’t easily ignore.

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