[DigitalToday reporter Ho-jung Lee] Naver and Kakao delivered contrasting third-quarter report cards this year. Naver’s operating profit fell on higher investment costs, while Kakao increased profit on the back of growth in advertising and commerce.

Naver’s third-quarter consolidated revenue rose 10.7 percent from a year earlier to 3.4724 trillion won, the companies’ earnings release data on Nov. 12 showed. Operating profit fell 20.9 percent to 451.3 billion won. Operating margin was 13 percent.

Kakao posted third-quarter consolidated revenue of 2.0867 trillion won and operating profit of 240.3 billion won. That was up 6 percent and 7 percent, respectively, from a year earlier. Operating margin rose 0.1 percentage point from a year earlier to 11.5 percent.

Naver: Profitability falls despite top-line growth; steps up infrastructure and commerce investment

Naver maintained growth across key businesses including advertising, commerce and finance. Revenue from its platform segment rose 7.3 percent from a year earlier to 1.9484 trillion won. Revenue from its financial platform grew 14.1 percent to 487.7 billion won, while the global challenge segment increased 15.9 percent to 1.0364 trillion won.

In commerce, growth was supported by the Naver Plus Store app and efforts to strengthen delivery competitiveness. Third-quarter Smart Store transaction value rose 6.4 percent from a year earlier, while N Delivery transaction value climbed 38 percent. Naver Pay payments also increased 15.6 percent to 26.2 trillion won.

Costs rose with business expansion. Depreciation and operating costs increased due to computing infrastructure investment, while sports broadcast rights fees and commerce marketing spending also rose. As a result, operating profit fell from a year earlier despite revenue growth.

Naver expected the pace of profitability decline in its platform segment to ease from the fourth quarter. It said it would be difficult for the segment’s operating margin to return to the previous level of around 30 percent in the short term, and set a goal of keeping it stable at around 25 percent going forward.

Kakao: Profit rises on Talk Biz growth; weak content weighs

Kakao increased operating profit on the back of growth in Talk Biz, its core platform business. Third-quarter revenue from its platform segment rose 17 percent from a year earlier to 1.2350 trillion won, while Talk Biz revenue increased 13 percent to 632.9 billion won.

Advertising and commerce led the growth. Talk Biz advertising and subscription revenue rose 11 percent from a year earlier to 391.5 billion won. KakaoTalk display ad revenue, in particular, grew 35 percent as new advertisers came in and products diversified.

Kakao’s third-quarter Talk Biz commerce transaction value rose 13 percent from a year earlier to 2.3 trillion won. With Chuseok holiday demand and growth in self-purchases combining, its gift service posted its highest-ever monthly transaction value in September. The share of self-purchases in total commerce transaction value also expanded to around 30 percent.

The content segment, however, was weak. Revenue fell 6 percent from a year earlier to 851.7 billion won. Music and story revenue fell 10 percent and 17 percent, respectively, while media revenue rose 49 percent.

Kakao increased operating profit on the back of advertising and commerce growth despite weakness in its content business. Third-quarter operating costs rose 6 percent from a year earlier, but marketing costs fell 2 percent and amortisation costs declined 3 percent.

Competition in execution-based AI heats up; monetisation paths differ

Both companies are putting forward execution-based AI as a future growth engine. The strategy is to expand the role of AI services beyond answering users’ questions to carrying out real tasks such as product purchases, reservations and payments.

Naver plans to launch a separate personal AI agent app within the year. It is preparing to link its own services such as search, shopping, Place and Naver Pay, and to allow AI to perform tasks in external services at users’ requests.

It is also expanding business that directly monetises AI infrastructure. Naver signed a computing service supply contract worth about 2 trillion won with a U.S. AI inference company, and plans to begin commercial services in the first half of next year. The contract value represents revenue that will be generated over about 5 years, and the company forecast operating profit from its AI factory business from 2027.

Kakao is focusing on expanding AI users centred on KakaoTalk. It plans to start a pilot service for 'Kanana Space' in December and to increase tasks AI can perform from internal KakaoTalk functions such as gifting and remittances to external services.

Kakao set a goal of securing 10 million monthly active AI users within the year. It plans to link broader AI service use to growth in advertising and commerce revenue, while improving operating cost efficiency to push to reach break-even in its AI business in 2028.

Both companies are positioning AI as a growth engine, but the challenges to solve in the monetisation process differ. Naver must prove whether expanded infrastructure investment leads to new revenue and profit, while Kakao must generate new revenue from AI services while maintaining profitability in its existing platform.