KaKao

The rule of the game that breaks away from typicality

 

'What would be the best way to express one's gratitude in a chat room?'

 

The concept of KakaoTalk Gifts originated from this simple thought. For the past decade, this e-commerce platform successfully opened a new prospect in the field of mobile commerce by putting 'gifts' and 'emotional conveyances' within the 'product.'

 

We met with Dwain and Riana to better understand the service's infancy and growth stages, and retrace its steps together.

  # Incubation Period

KakaoTalk Gifts made its debut on December 23, 2010. With 7.1 million smart phone users in Korea at that time, KakaoTalk recorded 5 million active users. Back then, there were no mobile payment service like Kakao Pay, no e-commerce platform and no 'More' tab as well. Innovation and convenience were the only weapons KakaoTalk held - the concept of presenting gifts in a chat room to better portray one's gratitude emerged.

 

 

In the early days, its possibility as Kakao's first revenue model was in the glare of the public spotlight. But within Kakao, Gifts was perceived as “Not a Big Impact," or likely to yield less profit than expected.

  #Your beginnings will seem humble

Gifts fell far short of Kakao's expectations in regards to a quantum jump forward. One year after its launch, it was gradually pushed back on the priority list. Dwain, then in charge of planning and strategy, reminisced about how things used to be.

 

"In October 2011, I joined the Kakao Business Team, an organization developing new business pipelines with KakaoTalk. Back then, Kakao was a startup that concentrated on a few selected projects. The opinion generally prevailed that we must invest our finite resources in other services, not Gifts. Only a few Krews held fast to their views, ‘Gifts is too good to throw away as it has something unique that other e-commerce business models do not. We must revive the service.’ So we found an area of compromise. The company focused on projects that it could strategically put forward while continuously operating the Gifts service on the side."

However, the resource was always in short supply as Gifts was not given wholehearted support. Developers would transfer to other departments when they were just beginning to be familiar with the service. The Gifts team didn't dare to dream of budget appropriation. Kakao was then deeply absorbed in discovering new burgeoning items like KakaoTalk. Whenever presenting semi-annual or annual reports, the Gifts team implored management to wait another 6 months.

 

#Transforming experience, the rule of the game

Back then, people had a hard time transacting on mobile. After the service launch, many competitors rolled out similar products, but they, too, were confronted with limitations in applying leverage on mobile messaging platforms. Riana, who was in charge of forging initial sales networks and merchandising, admitted that KakaoTalk, an interactive platform, played the role of a booster at every strategic point.

 

"Remember a time when you gave someone a physical gift. You had to meet in person, make a call, ask for the address, and describe reasons. No doubt, a sender had to check if the gift was well-delivered. KakaoTalk Gifts got rid of all the fuss and hassle. All you need to do is to select a recipient and make payment. It was a genuine transformational experience. We buy gifts purely for others, so rarely compare prices between retailers. As long as you intend to present a gift, you will probably be eager to impress the recipient with a likable brand product."

 

Kakao was able to frame a new set of game rules and shape the landscape, breaking free from accepted ways of thinking. As the service grew, many popular brands streamed to the Gifts platform. Kakao and its partners were able to grow together, which eventually enhanced user value. A virtuous cycle if ever there was one.

# Refund? Extension of availability period? No problem!

In the early days, small products like cakes or coffees seemed to drive service growth. One coffee franchise experienced a strange phenomenon after entering the Gifts platform: the sales of cakes approached that of beverages. 

 

Seemingly, the service was performing smoothly, but things were very different inside. Let's put it this way, it took 2 years to streamline complicated payment procedures and 3 years to formulate the commerce platform so that it properly coped with customer reactions and efficiently managed product lines. Dwain recalls a specific inflection point:

 

 "By 2014, Kakao had continuously rendered mega-hit services, including KakaoTalk, Emoticons, KakaoStory, KakaoGames and free calling. Gifts was in pretty good hands, but still held a small market foothold compared to other Kakao services boasting more than tens of millions of users. Once again, Krews converged to give it a boost to enhance user value."

 

Back then, it was very difficult to receive a refund on unused coupons. Extension of availability periods was allowed only once. On July 1, 2014, Kakao radically revised the rule once again: from a supply-side refund/extension policy to a user-rights oriented one.

 

You can easily get a refund even if a coupon has expired. Moreover, you can extend the availability period anytime by merely clicking the Extend button on KakaoTalk.

 

The Gifts service, cut from a different cloth to most of the other services, has now become much more potent in solving inconveniences. Kakao did what customers deserved and started changing age-old practices in the market.

 

#Blue Ocean

No more cutthroat competition. Growth by finding potential markets and pursuing both product differentiation and cost leadership.

 

All these phrases explain the Blue Ocean Strategy. KakaoTalk Gifts couldn't help but rule out the Red Ocean of the e-commerce industry that endured losses from a dumping war, half-willingly or half not.

 

Pondering 'how to express a thankful heart in a chatroom has opened up new mobile territory to 'shop for others.' Repeated transformation of user experiences has become spirally potent when combined with the KakaoTalk messenger platform. With 500,000 daily users and 38 million active users, the Gifts service is now an essential communication tool that 7 out of 10 Koreans have already experienced. Its remarkable growth drove Kakao's spin-off of its e-commerce unit in December, 2018.

 

"Gifts shed the long-held logic of 'sales volume' or 'traffic.' Instead, it focused on service value to balance users and the company. What we found was that Gifts became the impetus that established good rapport between people. I felt really rewarded when I was told that Gifts was the 'Kakao-style' business model." _ Dwain.

 

"I'm proud that I could be the part of the efforts to go beyond the usual, especially when mobile shopping seemed alien and unfamiliar. 'What if Kakao assumes...' was the basic premise of all our endeavors. The moments when we ponder over business fundamentals matter to me. As a user, I am anticipating what will be the next new value advocate for Kakao." _ Riana.

 

Emotional conveyances over transactions. This new mobile service, focusing on relationships and emotions, grew slowly and gradually but is now firmly planted on solid ground. Also, Kakao, accustomed to growth spurts, has learned the underlying meaning of steady expansion.