(Update: A Google spokesperson has reached out to us and pointed out that “it hasn’t done or offered any of the things described in this post.” Apologies for the inaccuracies). Korea has long been a brand-obsessed shopping nation. Now Google aims to assist up-and-coming app developers gain brand presence in the burgeoning Korean market, lending their brand clout to new entries in the highly competitive app landscape in Korea, the world’s most wired nation.
Competing with dominant local players, such as Kakao, Line, Naver, and SK Telecom is not an easy task for smaller app developers. These large corporations achieve the best revenue figures because they command impressive brand power.
Korean mobile start-ups are eagerly looking for new ways to promote their games without going through companies like Kakao. While Kakao is a sound distribution platform, it also takes 21 percent of the app’s revenue. In addition, Google and the mobile carriers also receive their additional cut of 30 percent through the app stores. Under these conditions, it is difficult for smaller developers to get noticed, and even reasonable success often does not translate to strong revenue as so much is siphoned off before the developers get their cut.
How Google can change it all
In order to fight back against the ‘Kakao tax’, Google is offering to lend its own brand to local Korean app developers. This will allow for the smaller companies to gain direct brand recognition from Google, and so increase their own exposure and build reputation. The power of the Google name will also enable local Korean players to more effectively engage in overseas markets.
The deal does come with a contingency though. Should developers choose to become a Google affiliate, the app must be exclusively offered in the play store, hindering the opportunity to expand onto other platforms later on. Overall, however, it is an appealing option for Korean Start-ups who want to avoid the Kakao Tax and expand more quickly both in Korea and overseas. Considering the importance of brand power in Korea, this may be best option for Korean startups to avoid the Kakao tax and begin controlling a larger proportion of revenue from their apps.
Brand recognition is power
Kakao, the biggest mobile messenger in the Korean market, recently filled 19 of the 20 top grossing mobile apps in Korea. Unlike in Japan and China where local apps compete on a more level playing field, with breakaway success stories regularly occurring, Korean consumers rarely download games developed by local Korean entrepreneurs unless they have an affiliation (brand connection) with a major distributor, such as the Kakao Games platform.
(Editing by Paul Bischoff)