Kakao
September 2016 | Investor Relations

Table of Contents

1. Milestone
2. Company Vision & Business Area
3. Communications
4. Advertising
5. Content
6. O2O
7. Commerce
8. Fintech[Appendix] 2Q 2016 Earnings Results

Milestone

Feb 1995 Jan 2000
Established Daum
DaumSearchCommunications

Merger on Oct. 1, 2014

Dec 2006
Sep 2010
Established
ChangedIWILAB name to Kakao

Jul 12, 2016
Mar 2016
Kakao Hairshop
Acquired
Loen Entertainment

Mar 2015
Kakao Taxi

Jun 2015
Kakao Sharp(#) Search
Kakao Talk Channel
Kakao TV

May 31, 2016
Kakao DriverMobile
LifestylePlatform

2H2016

Kakao Parking

Jul 2012
Mar 2010Kakao Talk Kakao Game

Kakao Cleanhome2Company Vision & Business Area

VisionConnect Everything
Kakao

Business Area & Strategy
 Secure innovative advertisingmonetization models for mobile Successfully launch O2O platform asservice and business Create user value through the content(games, music, etc.)

Advertising

Game

ContentO2O

Commerce

FintechDaum Ads

Kakao Game

뮤직
Music

Kakao Taxi

Gift Shop

Kakao Pay

Kakao Ads

PC GameWebtoon/
웹툰/웹소설

Kakao Driver

Kakao Friends

Kakao BankVideo

Kakao Hairshop

Makers with Kakao

Novel

Kakao Parking
Kakao Cleanhome3Communications• Continue to grow Kakao Talk domestic active users: +314K QoQ (Total 49mn MAU including 41mn domestic users)• Talk Channel, a service offered through Kakao Talk’s 3rd Tab is expanding on the user experience for consumption of content,
now has more than 26mn MAU

KakaoTalk 3rd Tab(Talk Channel)

Monthly Active Users(000)41,174

41,488[Kakao Talk Features]

40,055
38,15837,212

38,660“3rd Tab”

39,209

1st Tab : Friends list
2nd Tab : Chatting list

37,417

3rd Tab : Talk Channel

36,489

4th Tab : More (Game,Giftshop and etc.)

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

Korea

36,48937,21237,41738,15838,66039,20940,055

41,174

41,488Global

48,76948,411

48,254

48,20748,07348,464

48,321

49,31849,100

Average of monthly MAUs. Global includes domestic MAUs.
4

Advertising• Advertising revenue consists of 78% Daum Portal(PC 54%, mobile 24%) and 22% Kakao platforms• Improved features such as #(Sharp) Search and Talk Channel on Kakao Talk to expand advertising tools on mobilemessenger platform• Microtargeting for advertisers to engage with users in creative and innovative ways via high-quality content advertising

Revenue Breakdown by Platforms

Ads Product Line-ups

Portals

63%

61%

60%

58%

55%

54%

19%

22%

23%

25%

Kakao Talk Plus Friend/Yellow ID Brand Emoticon
Talk PC Talk Reward Friend Talk

SNS

Kakao StoryShopping

Kakao Style

Video

Kakao TV

24%

Kakao 22%
19%

20%

18%

19%

20%

22%

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

Daum Mobile

Daum PC

Kakao

Ad Network(Native Ads, DDN, Ad@m) Shopping How

Daum 78%
Messenger18%

Search Ads Display Ads

5Advertising_Daum(Portal) Ads• PC ads revenue was down due to ongoing restructuring of the internal and external networks and decreased PC traffic• Start showing Native ads on Daum mobile portal and Talk Channel on Kakao Talk from March 2016
• Plan to launch Ad exchange product in 3Q 2016 for Daum portals’ ads space optimization

Native Ads

Daum PC/ Mobile Ads Products[www.daum.net][m.daum][m.daum]

SearchPC Top Banner

Mobile Top Banner

Shopping Banner

6[Talk Channel]

Advertising_Kakao Ads• Kakao ads accounts for 22% of total advertising revenue in 2Q 2016 (Kakao Talk, Kakao Story and Kakao Style account for43%, 38% and 19% respectively)• Good revenue growth in reward advertising, Kakao Talk Reward on the 4th Tab, launched in February 2016
• Launching new version of Plus Friend, enabling a wider array of mobile messenger ads options for business partners tochoose from
Kakao Ads Products[Talk Plus Friend][Talk Reward]

New Plus Friend[Kakao Story][Talk Channel]◀

Publish Content(by partners)

Expose Content
to Talk Channel◀

[Example]◀

Subscribe Content(by users)ex) Messenger Adsex) Talk Reward CPIex) Performance Ads

7(To-be) Order,Reservation,Payment etc.

Content_Game• Mobile game to develop marketing capabilities through AD+ and game tab(2H), and enhance game content through publishing• 3Q line-ups: Anipang Poker(channeling, July 5), Miracle Nikki(publishing, July 5), My Home (publishing, August 7), Friends
Sachunsung(pre-registration)• PC game revenue continues to grow due to Black Desert’s success in overseas. Low seasonality impact in 3Q and turnaround in4Q.
Revenue Trend by Platforms

Top Grossing Games (As of Aug. 18)(Source: Google Play Store)NoRank

1

1

Seven Knights

Netmarble

22

Everybody’s Marble

Netmarble

33

Dragon Blaze

Gamevil45

Anipang 2

SundayToz

57

Friends Pop

NHN Pixelcube

68

Magic & Sword

Lungtu Korea

79

Monster taming

Netmarble

810

Miracle Nikki

Kakao

New

912

Anipang Poker

SundayToz

New

1013

Title

My Home

Publisher

Kakao

78,293(KRW mn)New

70,31570,016
10,64953,95910,26357,01951,383

16,27033,629

8,206

7,596
Note 1)

59,368New

1Q15

43,69543,7882Q15

3Q15

48,81354,045

4Q15

Note1) Disposal of OnnetNewMobile Game
8PC Game

44,665

1Q16

2Q16

Content_Music• Acquired 76.4% stake in LOEN Entertainment, which runs No.1 digital music service platform MelOn, in March 2016
• Continue to make synergies by combining core competencies of Kakao and LOEN in 2H

Synergy with Kakao
Loen Buisness Overview▶ Digital music service(B2C): Korea’s No.1 digital music platform MelOn

User

User increase and user experience enhancement
by utilizing two companies’ assets▶ Music distribution/Content aggregation(B2B): Korea’s No.1 K-Pop content distributor→ ex. Apply Kakao ID, Kakao Pay▶ Labels & artist management(Production): Korea’s Top #5 production company

Service improvement by adopting high-leveltechnology

Technology→ ex. Recommendation tech, music recognitiontech, big data processing tech

Loen Key MetricsMarketing▶ 2Q 2016 Revenue 110.4bn KRW, OP 20.6bn KRW

Marketing/promotion based on Kakao platform→ ex. Kakao Friends emoticon marketing▶ 7.2mn MelOn MAU in July, 2016
▶ No.1 in digital music service with 60% market share

Content

Content distribution expansion→ ex. Talk Channel, Daum Search and etc.

9Content_Others• Kakao Page, No.1 distribution platform of web novels/comics, achieved 18% of quarterly average growth over the past year
• Plan to adopt advertising model and introduce variety of usage model to expand users’ content buying experience in 2H,targeting 100bn KRW annual transaction volume for 2016
• Daum Webtoon will accelerate its growth through the introduction of Kakao Page’s proven monetization models, enhancementof advertising models, and enlargement of global IP

Kakao Page
▶ 17,749 Titles available as of Aug, 2016
( 5,360 cartoons, 9,165 novels, 3,224
other titles)

Kakao Page Transaction Volume Trend

Other Content Revenue Trend(KRW mn)(KRW mn)

22,756

21,611

19,036

17,895

16,91914,623Note 2)

10,614

10,167Note 1)

7,031

3Q15

4Q15

3,797

2Q15

3Q15

4Q15
10

1Q16

2Q16

2Q15

1Q16

2Q16

Note1) Accounting changes of Kakao Music and Kakao Page
Note2) Consolidation of Podo TreeO2O• Kakao Taxi has secured more than 10mn users, 150mn cumulative calls and 250K drivers. Start monetizing with test drive
event, while reviewing other various opportunities• Kakao Taxi Black’s daily call number has increased more than 5 times since the adoption of offline payment in March. Plans
to increase vehicles and expand coverage into Seongnam city and Busan city in 2H• Plan to launch new O2O services for transportation, home in 2H

Accumulated Kakao Taxi Calls

150.0(mn)Kakao Taxi Test-drive Marketing

New O2O Initiatives▶ Volkswagen test-drive marketing on Kakao Taxi
platform from 5th of July (free ride of Volkswagen
vehicles for randomly selected Kakao Taxi users)▶ Discussing test-drive marketing withdomestic/foreign motor companies

Kakao Driver: Designated driver service
launched on May 31

Kakao Hairshop: Reservation and payment
service for hair shops
launched on July 12

97.7

New
59.5

24.6

New

4.3
2Q15

3Q15

4Q15

1Q16

2Q1611

Kakao Parking: Reservation and payment
service for car parking,to be launched in 4Q
Kakao Cleanhome: Housekeeping service, apps tobe launched in 4Q for supplierside, and 1Q17 for user side

O2O_Kakao Driver• Kakao Driver is showing good growth trend, recording 1mn users, 2.7mn cumulative calls and 110K drivers as of August 10.
• Proactive incorporation of feedbacks from drivers and users, the completion rate is continuously increasing, which is now
over 60%• Continued marketing effort to maximize growth during the peak season (4Q)
New Features of Kakao Driver▶ Differentiated basic fares byregions (Jul 1)▶ Launched list view
(Aug 4)▶ Launched preferential
allocation feature (Jul 21)▶ Launched fixed fare set by
the user (Aug 19)

Tier 1Seoul / Gyeonggi / Incheon
KRW 15,000 + @Tier 2
Daejeon / Daegu / BusanKRW 12,000 + @Tier 3
Other areasKRW 10,000 + @..

 Applying differentiated basic
fares depending on regional
supply and demand
 @ Additional fare dependingon time and distance12Commerce_Gift Shop
• Successfully entered the mobile commerce market leveraging our strong user base built on Kakao Talk, offering 100K products
from 2,000 brands• Increase in gifting frequency, category expansion, and addition of payment options led to strong 9% quarterly revenue growth• Self-gifting feature is becoming an integral part of the Gift Shop

Kakao Talk Gift Shop

Gift Shop Revenue Trend▶ Embedded menu to Kakao
Talk which facilitates usersgifting

1Q15 2Q15 3Q15 4Q15 1Q16 2Q1613▶ Gifts range from coffee
vouchers, to electronics
for package delivery▶ Allows users to send gifts
and coupons to Kakao Talkfriends

Commerce_Kakao Friends• Kakao Friends Corp. is a company that spun off of Kakao in May 2015 in effort to strengthen specialty in the character business• Operates 18 Kakao Friends stores in 15 cities around the country• Expansion of product line, IP licensing and collaboration with multiple brands including LG Care, Coca Cola, Friends Game series,
Samsung Publishing, etc.

Revenue Trend of Kakao Friends▶ Kakao Friends are the most popularcharacters in Korea that have beenused as a means of communication
during Kakao Talk chats

Kakao Friends Offline Stores▶ 18 Kakao Friends stores in 15 cities▶ Open First flagship retail store in GangNam,
drawing more than 15,000 visitors every day▶ Plan to open a second flagship store in Seoul

3Q15

4Q15

1Q16

2Q16

[Kakao Friends Corp.]▶ Spun off of Kakao in May 2015
▶ Specialty in brand stores, collaborations,licensing, IP games and more.

14

Fintech• Kakao pay continues to grow its transaction volume with major merchants and satisfies users by expanding its service
features into other verticals such as money transfer• Kakao Bank is in the process of building online banking systems before getting the final approval within 2016
• Kakao plans to take the leadership and increase the stake beyond current level (10%) when a revision to the current Banking
Act (Article 16-2) passes

Kakao Pay Usage Examples

Kakao Pay Key Metrics▶ More than 11 mn users▶ Kakao Talk 4th Tab▶ Compatible with 1,100 merchants▶ 60% of Kakao Talk Gift Shoptransaction(As of Aug. 2016)

Kakao Pay Service List
▶ Online purchases with preregistered credit/debit cards andphone bill
▶ Automatic credit card billing▶ Membership management▶ Public bill payment(Feb. 2016)▶ Money transfer feature (Apr. 2016)15▶ Kakao Pay Main Page

▶ Kakao Money

[Appendix] Earnings Results - Revenue
Quarterly Revenue Breakdown (KRW mn)
AdvertisingContentOthers

10,885
5,975

5,362

68,55371,814

150,643

144,628

2Q14

3Q14

73,679169,482

49,911

12,168

11,112

13,84020,74676,76460,40469,06367,391

145,459

154,966

146,677

153,560

1Q15

2Q15

3Q15

4Q15

4Q14

21,50991,588129,385

136,203

1Q16

2Q16

Categories

Services

BrandsAdvertising

Portals
Messenger
SNSShopping
VideoDaum PC Daum Mobile
Kakao Talk Plus Friend/Yellow ID Brand Emoticon Talk PC Talk Reward Friend Talk
Kakao Story
Kakao Style
Kakao TV

ContentGame
MusicWebtoon  novel
Emoticon

Kakao Game Kakao Games
Melon Kakao Music
PodoTree Kakao Page Daum Webtoon
Talk B2C Emoticon

OthersCommerce
O2O
FintechMiscellaneous

Kakao Talk Gift Shop Kakao Friends Makers with Kakao Kakao Farmer
Kakao Taxi  Black Kakao Driver Kakao Hairshop Park Here
Kakao Pay
Notification Talk Loen Entertainment (content, production, etc.)
16190,405

[Appendix] Earnings Results – Revenue Breakdown(Unit: KRW mn)
Advertising- PC

Advertising- Mobile

Game

Music

Other Content
90,501
78,29342,21959,66042,70054,23760,17858,953 64,164

53,984 51,383

58,454 62,721

108,424 101,928 109,822

2Q14

3Q14

4Q14

91,222 94,788 87,724 89,396

1Q15

2Q15

3Q15

4Q15

70,31567,464 68,289 69,991
62,57457,01917,89570,931 73,482

10,614
7,031
4,854 2,874 3,267 4,406 3,797 7,066
3,378
3,341
2,623
2,367
1,125 1,476 2,123

1Q16

2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

2Q16

Other revenue

Game- PC49,911

Game- Mobile*New in 2Q16:
Loen 46%

44,66520,746 21,509
10,885 12,168 11,112
5,975

2Q14

55,571

59,619 60,579

4Q14

1Q15

2Q15

53,62158,64043,139 43,227 48,234

13,84033,629

5,362

3Q14

21,611

3Q15

4Q15

1Q16

2Q16
177,003 7,8457,710 11,351 10,845 8,1568,785

2Q14

4Q14

4Q15

3Q14

1Q15

2Q15

3Q15

16,694
1Q16

2Q16

[Appendix] Consolidated Financial Statements
Consolidated Statements of Financial Position

Consolidated Statements of Income(in million KRW)

2Q15

3Q15

4Q15

1Q16

2Q16

(in million KRW)

2014.12.31

2015.12.31

2016.06.30

226,482229,580

241,698

242,483

376,519

Current Assets

798,291970,067

998,303

Advertising

154,966

146,677

153,560

129,385

136,203

Cash and Cash Equivalents

451,228

397,177

473,466

ContentGame
Music
Webtoon/Novel/Emoticon
Others60,40453,984
2,623
3,797
11,112

69,06351,383
7,066
10,614
13,84067,39157,0193,341
7,031
20,746

91,58870,315
3,378
17,89521,509190,405
78,29390,501
21,611
49,911

S-TFinancialInstruments

184,548

373,389

208,740

Accounts Receivable

108,43188,822

149,051

Other Current Assets

54,084

110,679

167,046

1,969,734

2,218,411

4,216,525,,221,394

349,900

Revenues

Operating Expenses

215,049

213,396

221,079

Non-Current Assets
Equity Method Investments

18,712

68,704

81,403

Tangible Assets

196,894

219,052

250,108

1,688,974

1,855,604

3,752,056

65,15475,051

132,957

Labor Costs

54,59056,45555,58863,66575,563Fringe Benefits

17,337

12,813

10,934

10,44816,001Intangible Assets

Depreciation

12,333

12,375

12,937

13,005

14,460

Other Non-current Assets

Rental Fees

4,491

5,340

7,408

Total Assets

2,768,025

3,188,478

5,214,829

Liabilities

227,488

316,078715,677

Trade and N-T Payables

109,126

89,506

186,158

Income Taxes Payable

20,68029,44820,877

4,363

4,666

Commissions

57,78065,49466,00164,923142,980

Advertising

19,662

6,843

13,113

7,709

15,967

394

8

1,123

814

-1,332

Amortization

5,911

7,099

7,346

8,487

16,718Content Fees

11,39815,626

12,695

17,36919,655Ad Agency Fees

25,17724,45026,327

20,58020,937

312

148

560

116

374

5,794

7,420

9,964

8,940

21,17011,434

16,184

20,61921,09026,619Other Revenues

9,822

6,706

7,331

3,438

Other Expenses

12,925

4,611

5,727

5,839

Bad Debt Expenses

Event Fees
OthersOperating Profit

50

22,055

231,845

Other Current Liabilities

97,632

175,069

276,797

22,06

Non-Current Liabilities
Bonds
Bonds- CB/EB
Deferred Income Tax Liab.
Other Non-Current Liab.

77,30950,08327,226286,925
199,383
48,63638,905

987,714319,114475,674
145,359
47,567

5,179

Total Liabilities

304,797

603,003

1,703,391

Paid-in Capital

29,12130,09833,8052,258,974

2,274,186

3,024,611-26,268-9,032-11,050

2,114

829

1,619

190,678

256,313268,289

8,609

33,081

194,165

Short-Term Debt

Financial Income

18,240

3,543

4,870

3,756

9,081

Financial Expenses

951

325

2,090

3,276

9,351

Equity-method, Net-756

284-3,448-2,513-2,237

Income Tax Expenses
Net Profit from Continued Oper.

24,863
3,494
21,36921,782
7,015
14,767

21,554
9,771
11,782

16,656
5,715
10,941

21,1397,900
13,239Net Profit

21,36914,767

11,782

10,941

13,239Net Profit of Controlling Interests

20,556

13,004

11,00913,168

8,831

Total Equity

2,463,228

2,585,475

3,511,438

Net Profit of Non-controlling Int.

814

1,762

773-2,227

4,408

Total Liabilities & Equity

2,768,025

3,188,478

5,214,829

Profit before Income Tax Expenses

18

Capital Surplus
Capital Adjustments
Accum. Other Compre. Inc.
Retained Earnings
Non-controlling Interests

[Appendix] Financial Statements (Kakao Only)
Statements of Financial Position

Statements of Income(in million KRW)

Revenues

2Q15

3Q15

4Q15

1Q16

2Q16

(in million KRW)

2014.12.31

2015.12.31

2016.06.30

210,648

211,516

219,619

203,027

206,774

Current Assets

720,011

718,533

425,410Advertising146,163

140,376

148,492

124,481130,580

Cash and Cash Equivalents

392,871

190,785

204,013

Content

50,11560,91757,43563,95856,644

S-TFinancialInstruments

172,796

361,809

57,090Accounts Receivable

106,018

87,162

78,672Other Current Assets

48,32678,77885,636

Non-Current Assets

GameMusic
Webtoon/Novel/Emoticon

43,6952,623
3,797

43,238
7,066
10,61447,0633,341
7,031

51,562
3,378
9,018

42,726
2,991
10,928

12,958

8,655

12,268

13,163

19,550,,

194,802

185,369

185,416

173,069

Labor Costs

43,86546,36942,455Fringe Benefits

15,226

10,642

Depreciation

11,969Rental Fees

1,916

Commissions
Advertising

OthersOperating Expenses

Bad Debt Expenses2,036,753

2,398,531

4,320,305

Equity Method Investments

148,110474,327

2,340,016

191,670

Tangible Assets

193,359

210,393

207,762

45,34948,830Intangible Assets

1,651,658

1,652,605

1,705,271

8,550

7,927

11,693

Other Non-current Assets

43,626

61,20567,256

12,012

12,21912,354

12,793

Total Assets

2,756,764

3,117,064

4,745,715

1,977

1,816

2,205

2,525

Liabilities

218,353

265,747

541,632

55,04558,01857,93055,59557,520Trade and N-T Payables

107,084

91,748112,297

18,813

4,954

10,716

3,885

8,418

Income Taxes Payable

20,26824,581

9,785

408

-23

1,034

908

116

--

230,942

Other Current Liabilities

91,000149,419

188,608

Non-Current Liabilities

76,662

276,435

846,564-

199,383

319,114--448,012

51,114

44,39445,704

Amortization

5,129

5,378

5,338

5,800

5,906

Content Fees

11,266

15,476

12,48910,863

11,722Ad Agency Fees

24,687

23,67625,76720,012

21,152

Event Fees
OthersOperating Profit

304

134

492

110

359

6,173

6,756

6,611

8,061

10,635

15,84626,147

34,20329,958

15,105

Short-Term Debt

Bonds
Bonds- CB/EB
Deferred Income Tax Liab.
Other Non-Current Liab.

25,54832,65833,736

295,014542,182

1,388,196

Other Revenues

1,333

1,109

3,632

1,660

960

Total Liabilities

Other Expenses

4,909

21,425

5,418

2,980

6,197

Paid-in Capital

29,12130,09833,8052,258,975

2,291,486

3,056,102-23,507-9,032-11,050

Financial Income

2,759

3,842

1,780

3,557

6,427

Capital Surplus

Financial Expenses

929

178

1,696

1,788

8,510

Capital Adjustments

Profit before Income Tax Expenses

14,1019,495

32,50030,407

7,784

Accum. Other Compre. Inc.
Retained Earnings

-342

244

101

197,502

262,086

278,560

Income Tax Expenses-1,1488,251

11,346

7,054

4,628

Net Profit from Continued Oper.

15,2491,244

21,15423,353

3,157

Total Equity

2,461,749

2,574,882

3,357,519

Net Profit

15,2491,244

21,15423,353

3,157

Total Liabilities & Equity

2,756,764

3,117,064

4,745,715

19