SEOUL, May 20 (Korea Bizwire) — For Yang Jun-mo, a 26-year-old graduate student in Seoul, visiting a neighborhood convenience store for light snacks is a daily routine.
“It kind of reminds me of my younger days when I used to collect stickers from other animations,” Yang said, who keeps a few of them. “It is interesting to see how emojis from mobile messengers are now being collected by children or even adults.”
Such collectibles with emojis, originally a Japanese term referring to animated icons used during chatting, have emerged as a new business opportunity for Daum Kakao and Naver, the operators of South Korea’s top two free messengers — KakaoTalk and Line.
Armed with an array of flagship characters that can be used during a chat called “Kakao Friends” and “Line Friends,” Daum Kakao and Naver have set their sights on the emoji franchise business to find a new source of profit amid unfavorable market conditions.
Daum Kakao, the current market leader, announced last week it will set a new separate company in charge of its franchise business. In March, Naver opened its own version, Line Friends, under its affiliate Line.
Daum Kakao, with 35 million local users in a country of 50 million people, said during its latest conference call that it will spin off its emoji franchise as an independent business entity. It will be fully owned by Daum Kakao and will manage copyrights and other businesses related to its emojis.
The company’s move came as its emojis, which managed to turn a profit by selling stickers used during chats, emerged as a potential cash cow after its first offline shop in central Seoul reportedly raked in 400 million won (US$367,000) in the first month after its launch in October 2014.
Although the company did not reveal further details on earnings, Daum Kakao continued to expand the number of shops. Now, there are five offline Kakao Friends shops selling dolls and various stationery items.
Daum Kakao said more products will come down the road, including air fresheners and facial care goods.
“We plan to provide more chances for the users of KakaoTalk to meet Kakao Friends in their everyday lives,” an official from Daum Kakao said. “We will foster characters into something more than a means of communication.”
Naver, which has also joined forces with various companies to roll out t-shirts and coffee cans imprinted with Line emojis, is making more aggressive moves abroad. The messenger depends more on its overseas markets with the number of active monthly users reaching 205 million as of end-March.
The company has seven regular stores in South Korea, Japan and Taiwan. Temporary stores opened in other countries, including the United States, Hong Kong and Malaysia.
“We will continue to expand collaboration with other firms. Over the next three years, we hope to open up 100 stores around the globe,” a Naver official said.
Naver said its efforts to promote Line Friends are focused more on spreading its messenger service rather than generating a profit. But still, sales from Line’s emoji franchise business came to 221.7 billion won in the fourth quarter of 2014.
Although the emoji franchise business has yet to prove something of a money-spinner, market watchers say, it could come as a silver lining for the messenger operators struggling with slumping earnings or undershooting them.
Daum Kakao said its first-quarter profit dipped 40.4 percent from three months earlier, dented by falling advertisement revenue. Naver saw its first-quarter earnings edge up 4.3 percent from a year earlier, but it still failed to meet market expectations.
Still, analysts caution it is too early to say the mobile messenger operators will get a big boost from their new business in the short term.
“It is too aggressive to say that the new business (Kakao Friends) will help improve earnings for Daum Kakao,” said Hwang Seung-taek, an analyst at Hana Daetoo Securities. “The business itself will focus more on promoting (the KakaoTalk messenger).”
Chung Yong-je, an analyst from Mirae Asset Securities, had a similar view.
“Still, Line’s profits come more from mobile advertisements and games. The return from the new business is not yet significant,” he said. “However, Naver is expected to benefit from it over the long haul.”