Korean Messaging Service Kakao Gets Ready For A $2 Billion IPO

Korean messaging leader Kakao is negotiating with Morgan Stanley and Samsung Securities Co. to file for an IPO in Koea, according to the WSJ. The seven-year-old company is mostly known for its dominant messaging app, KakaoTalk. 133 million people are using the app. It is also the primary platform for mobile games.

KakaoTalk is the undisputable winner in South Korea. But with a population of 50 million people, the company needs to find new areas to grow. Similarly, Kakao is launching new products to improve engagement from its existing user base.

The company’s revenue mostly comes from its mobile gaming platform. Many Korean developers use Kakao as a platform to launch their games. The company is now profitable thanks to this revenue stream.

With an IPO priced at $2 billion, the company could raise as much as $1 billion. The company has raised $63 million. It could use this money to be more aggressive when it comes to international expansion, with potential acquisitions. The idea is to go faster than Kakao’s competitors.

Japanese competitor Line has at least 300 million users and Chinese competitor Tencent’s WeChat has 272 million users. In other words, Kakao won’t be able to compete against those heavyweight local competitors. But soon, these three companies will fight for the same user base in other countries in South East Asia. It’s unclear who is going to win.

But the company also tries to create new products. For example, Kakao recently announced a news service. It also provides a music service, an Instagram-like app, a Path-like social network and more. But for now, it’s still a two-legged company. The messaging platform is the growth driver while the gaming platform is the revenue generator.

The news comes after a week filled with important acquisitions in the space. Facebook acquired Whatsapp for a staggering price of $19 billion. Japanese company Rakuten acquired Viber for $900 million.

Image credit: Kakao, edited by Bryce Durbin