Naver, Kakao to boost 2023 earnings as digital ad sales expected to recover

[Sources : Naver, Kakao]

Naver Corp. and Kakao Corp. are expected to show improvement in earnings next year as the two Korean internet giants accelerate efforts to bump up revenue from digital advertising and e-commerce operations at home and abroad.

The consensus estimates on 2023 earnings published by local financial data tracker FnGuide on Wednesday showed that analysts forecast Naver‘s operating profit to rise 10.6 percent to 1.5 trillion won ($1.2 billion) and revenue to climb 17.5 percent to 9.6 trillion won. Kakao is expected to show greater improvement with operating profit up 29.8 percent to 808.4 billion won and revenue 17.5 percent higher at 8.6 trillion won.

The rosy earnings outlook is based on the projection that the digital ad and e-commerce markets, where the two internet giants make the majority of their earnings, would recover sharply.

The digital ad market in Korea grew 31.5 percent year on year to reach 7.5 trillion won in 2021, driven by sharp rise in use of digital services from consumers homebound due to Covid. But the market growth slowed to 13.4 percent to 8.5 trillion won this year as economic slowdown worsened, according to data from ad agency Cheil Worldwide.

Both Naver and Kakao are accelerating efforts to improve their revenue and profitability in digital ad operations by actively adopting changes.

Naver is said to expand the advertisement in mobile platforms and performance-based advertising using artificial intelligence technology.

Kakao is expected to restart its hour-based advertising service at its Kakao Talk chat app, which was suspended due to a fire at its data center, in the first quarter as well as add more ad spaces through new features within the chat app, such as short-form video and open chat.