Kakao Corp. (A035720) Earnings Call Transcript & Summary

Good morning. This is Eleanor from Kakao's IR team. Let's begin Kakao's Q4 and Full Year 2021 Earnings Conference Call. With me today are CEO, Mason Yeo; and Chief Investment Officer, Jae Bae. Please note that the earnings results are consolidated estimates under the K-IFRS basis and are subject to change upon the auditor's review. Also, forward-looking estimates are based on assumptions, so actual results may differ from figures included in today's presentation. With that, let me invite Mason to run through key business highlights.

Good morning. I'm Mason. While preparing for this last presentation, I remember the first official press conference in March 2018. I went together with Sean, our co-CEO, we announced Kakao 3.0. It was time when we were bringing KakaoTalk, which has grown into the nation's messenger into different service domains such as content, mobility, tech space through acquisitions and formation of new companies. With the announcement of Kakao 3.0, thanks to the efforts of our crew working under the goal to strengthen synergies through convergence and to go global, KakaoTalk evolved into a platform that expands our business horizon across on and off-line going beyond a simple messenger. First, through business tools such as Bizboard and Talk Channel, we enabled the connection between small merchants and the people. We also introduced Kakao Digital Wallet, enabling simple authentication, bridging a connection between digital ID and the world. Starting with COVID vaccination reservations and certification to a simplified tax returns, Kakao Digital Wallet saw its subscribers surpassed 35 million early February. And in November, we launched Talk Business Card Service, which is a digitized version of business card and qualification certificates that can be kept inside the wallet. Users can now connect with other users whose credentials are certified via the open chatting. With the coming of the gig economy, where individual talents are up for a trade, we expect Digital Wallet and Talk Biz Card to be an essential mode for digital ID. We made great strides in global expansion as well. Kakao Entertainment developed capabilities for planning and producing case content loved by the world and secured solid bases in North America, Southeast Asia and Europe to expand our store business across the platform. Kakao Piccoma is also pioneering a new content market in Japan using Kakao Entertainment's original IP while ranking world's top 6 apps in terms of highest consumer spending by mobile users. Also, the Klaytn blockchain led by Krust, we plan to kick-start changes towards building a metaverse platform. We've entered [indiscernible] partnership with many companies in the blockchain ecosystem, including partners with P2E, NFT and [indiscernible]. Through collaborations with not only domestic but also global companies, we've laid the basis to grow into a top tier global main net. Looking back past 4 years of Kakao's journey, with the support of the whole nation, we achieved outstanding growth, but there were growing pains as well, and I feel a great responsibility for having lost the trust we've gained. I would like to extend my heartfelt apologies regarding the recent controversies that surrounded the company. Kakao will take thorough steps to make sure they don't happen again under the new CEO, [indiscernible], and promise you that we will bring forward-looking innovations that the society expects of us. With that, let me run through some of our key service and business results. Last January, to expand the ecosystem for subscription, we launched Emoticon Plus and Talk Drive Plus. As of December end, there was 1.75 million paying subscribers for Emoticon Plus; and Talk Drive Plus, 700,000, which were meaningful results. Kakao View, which is the content curation service as of January end, had a total of 160,000 channels and 3 million curation boards growing into a platform of choice for creators in a short span of time. We will closely follow user feedback, refine and upgrade services to drive up user satisfaction and time spent. Next is platform business update. Supported by virtual cycle of Kakao business, spanning Bizboard Talk Channel and Info Talk, Q4 top-base ad revenue was up 36% year-over-year. Driven by growing advertiser pool and positive seasonality, Bizboard's revenue was up 33% on year, reporting record-high quarterly performance. Kakao Talk channel saw a number of advertisers adopting sync, the business solution rise by sixfold year-over-year leading to rise in Talk Channel Friends and active message marketing, resulting in revenue increase of 75% year-over-year. As Kakao Talk Channel advances into a platform that can support wide-ranging businesses, we expect it to become a critical ad platform defining success of our business partners. Next is on Talk Biz. Kakao Commerce Q4 GMV, which includes Gift, Talk Store and Makers, was up 29% year-over-year with financial year '21 GMV up 43% year-over-year. Despite the high base effect, Kakao Talk Gift Q4 GMV was up 29% on year. And full year GMV, up 42%. As gifting started as a culture within a search and generation and expanded to other age groups, we saw a rise in seasonal events for gifts. And purchased frequency per shopper increased as well as ticket size with the onboarding of older population who have higher spending capacity. On the back of popularity of Talk Deal, Talk Store GMV was up 32% year-over-year. Annual GMV for ZigZag was up by more than 30% a year, reaching above 1 trillion for the first time. We also made inroads into global markets for fashion and beauty and expect to bring bigger growth versus last year. Also, with the acquisition of live commerce company called Grip Company, we are evolving into a platform that can be used by sellers of all types from large retail brands to micro SMBs. Grip Company has a track record of successfully collaborating with Q10 in entering Japan. And we are, hence, looking forward to a greater visibility and global expansion. Next is mobility. Despite many constraints brought on by the COVID pandemic, Kakao Mobility's innovation in technology and services expanded users' choice drawing a sizable growth in 2021 top line revenue. Just yesterday, Kakao Mobility hosted its first tech conference, Next Mobility 2022, sharing the vision of future of mobility. While the focus was on mobility for the people, Kakao Mobility announced the development of navigation for AI or digital twin, which is a digitalized spatial information of the real world to lead the transformation in mobility for products and services powered by AI. Also to provide essential technologies to partners planning such digital innovation, we plan to provide Kakao Mobility's core technology infrastructure in the form of SaaS. Kakao Mobility will continue to advance its services to help our partners enjoy secure income source from the Kakao Mobility platform and create good jobs for those with disabilities or socially vulnerable population or women and support deployment of EVs, all with the view towards ESG management. Next is Biz Story business. First off, Kakao Piccoma's Q4 GMV was up 42% on-year to KRW 199.5 billion won and FY '21 GMV was up 74% on-year to KRW 722.7 billion. Taking out the currency impact, GMV for Q4 was up by 46%; and full year '21 up 85%. As Korean Webtoon using Kakao Entertainment's original IP games popularity beyond the hardcore manga fans to a broader user base, Kakao Piccoma is defining a new content market in Japan. While Japanese manga requires the readers to be deeply immersed, we also see users wanting Webtoon, which is a short-form content that can be read casually even during short breaks. These trends are supporting the growth of a robust user base. This year by growing mobile web services through original content, personalized recommendation algorithms and aggressive marketing, we will increase market share of Kakao Piccoma and, starting with France, enter the European market to solidify its positioning as a global #1 story platform. Kakao Entertainment's combined Q4 GMV of store platform and IP distribution was up 22% year-over-year to KRW 192.5 million while FY '21 GMV was up 47% on-year to KRW 776.7 billion. During Q4, we completed the acquisition of Wuxiaworld following Tapas and Radish, expanding our content library to include martial art fiction zone, which has a highly loyal male fan segment. By leveraging high-quality content, Kakao Entertainment will take its original IPs to many more regions, creating an impact in different language-speaking markets, which we expect will drive volume growth. Also, looking at the global story platform across North America, Japan, Thailand, Taiwan, FY '21 GMV was up 51% on-year to KRW 1,159.5 trillion. For the media business, over the past year, we took part in planning and producing content that want global attention. And as our artists worked very actively, we were able to bring top line growth and strengthen the fundamentals of the media business. SK content is receiving limelight on the global market [indiscernible] , a creator group and movie studio Zip Cinema, to beef up our internal capabilities for global distribution of content, and we'll be showcasing a total of 15 different dramas and motion picture for both global and the domestic platform.

Good morning. This is Jae. I will begin with our mid- to long-term shareholder return policy. Over the years, Kakao, through its business investments, equipped with competitiveness developed into a big company, generating robust cash flow underpinned by its strong top line and bottom line. As such, to live up to our social responsibilities and to enhance shareholder value, we decided on a mid- to long-term shareholder return policy. To start off, for the upcoming 3 years, we will be -- we will use 15% to 30% of stand-alone basis free cash flow of Kakao as resources for shareholder distribution. 5% will be for cash dividend, and 10% to 25% will be used for a share buyback or cancellation. We will maintain the EPS above the floor and increase the payout amount in alignment with the growth of the business so as to enhance our shareholder value. Also, in light of recent fluctuations in share price, we made a decision to do share cancellation. So on top of the cancellation as part of the aforementioned return policy,, there will also be extraordinary cancellations, all amounting to around KRW 300 billion. We will truly focus our endeavors to enhance shareholder return as we go forward. And with that, I will move on to Q4 results. Q4 consolidated operating revenue was KRW 1,785.2 trillion, up 3% on quarter and 45% on-year. And FY '21 consolidated operating revenue reported KRW 6,136.1 trillion, up 48% year-over-year. Platform revenue was up 29% on quarter and 48% on year to KRW 1,400.8 trillion. Talk Biz revenue was up 17% on quarter and 30% on year to KRW 475 billion. While advertisement revenue reported a growth driven by synergies between Biz Voice, Talk Channel and Info Talk and large increase in Emoticon Plus users on the back of price discount promotions. Commerce revenue growth was driven by increase in Gift and Talk Store users and expanded product lineup. Portal Biz revenue was impacted by high seasonality and better ad efficiency, which drove display ad revenue, reporting 10% increase Q-on-Q and 7% year-over-year coming in at KRW 130.7 billion. On the back of solid growth of mobility and good performance from Pay and rise in revenues from blockchain business and Kakao Enterprise's cloud revenue, platform and other revenue was up 57% on quarter and 107% on year to KRW 399.1 billion. Content revenue fell 19% on quarter but was up 41% on year, reporting KRW 780.3 billion. Due to the base effect from the release of Odin, the mobile game, game revenue was down 40% Q-over-Q to KRW 276.8 billion, while it was up 97% year-over-year. On top of robust paying subscriber base of MelOn as the company's [indiscernible] gained popularity and with expanded distribution lineup, music revenue was up 3% Q-on-Q and 9% Y-o-Y, reporting KRW 202.7 billion. On the back of base effect from marketing, Kakao Webtoon's domestic launch and temporary increase in outdoor activities with the easing of social distancing in Japan, content consumption fell 3% Q-on-Q and up 29% year-over-year to KRW 211.3 billion. Lastly, media revenue came in at KRW 89.5 billion on higher production revenue and talent management revenue as company's artists are engaged more for jobs. Revenue rise was 8% Q-on-Q and 39% Y-o-Y. Next is consolidated operating expense and profit. Q4 consolidated operating expense was up 7% Q-on-Q and 54% Y-o-Y to KRW 1,676.6 trillion. Annual operating expense for '21 was up 50% on year, reporting KRW 5,539.2 trillion. In terms of key expense items. On the back of bonuses, stock-based compensation and rise in one-off expenses as well as higher headcount from new hires and inclusion of consolidated subsidiary, liable cost was up 67% Q-on-Q and 93% Y-o-Y to KRW 512.7 billion. In Q4, according to the association rules on liquidation of Kakao Ventures Fund #1, there were KRW 61.7 billion in bonuses paid. In the liquidation process, 3.4% of [indiscernible] shares were allowed to Kakao in kind, and we are thinking of different options for the proceeds following the sale, either for use as resources for new business investments or shareholder return. And when the sale is affected, the value will be booked in the accounts, the size of which will be quite big. As Lionheart Studio was consolidated into Kakao Games, commissions paid fell driving revenue-linked expense down 20% Q-on-Q to KRW 648 billion. On a Y-o-Y basis, on the back of growing revenue from story game content, which led to higher market fees and costs linked to Kakao VX business, there was a 32% increase. Outsource and infrastructure expense was impacted by rise in commissions in relation to growing fleet of affiliated taxes for Kakao Mobility, reporting a rise of 18% Q-on-Q and 61% Y-o-Y to KRW 233.8 billion. Despite Kakao Piccoma's aggressive promotions in Q4, on the base effect from game and domestic story business marketing, marketing expense was down 13% Q-on-Q to KRW 128.6 billion. With global expansion of Kakao Entertainment, which entailed marketing spend, Y-o-Y, there was a 47% increase. Marketing spend against revenue in Q4 was 7.2% and 7.1% for the full year. In conclusion, Q4 operating profit reported KRW 108.5 billion. And excluding one-off expense related to the liquidation of the ventures fund, OP reported KRW 170.2 billion, Annual operating profit for '21 was up 31% Y-o-Y to KRW 596.9 billion with OP margin of 9.7%. Next is nonoperating revenue and expense. With the consolidation of Lionheart, there were disposition gains from equity message shares and sale of [indiscernible] shares all in all, amounted to a total of KRW 813.2 billion of other revenues. On goodwill amortization of Kakao Entertainment and impairment losses of intangibles, other expense booked KRW 360.9 billion. [indiscernible] and Kakao Bank, which are subject to equity method treatment, generated profit driving equity method gain of KRW 59.5 billion, while there were equity method loss of KRW 45.4 billion attributable to losses from equity method companies. Online and valuation gains from financial assets and higher interest income, financial revenue reported KRW 67.1 billion with conversion of subsidiaries, RCPCs to common stock, which incurred valuation loss from derivatives. Financial expense reported KRW 89.9 billion, flat Q-on-Q. Q4 corporate income tax was KRW 332.4 billion. Consolidated net profit, KRW 219.8 billion. And FY '21 annual consolidated net profit came in at KRW 1,641.9 trillion. Lastly, Q4 CapEx investment comprises of server and tangible asset CapEx of KRW 67 billion, IP and intangibles at KRW 62.7 billion, amounting to a total of KRW 129.7 billion of capital expenditure. This ends the highlights for Q4 '21, and we will now take questions. Please limit your questions to no more than 2 per person.

[Foreign Language] The first question will be provided by Stanley Yang from JPMorgan.

Before asking my question, I would first like to thank Mason and the management team for improving the corporate value of Kakao over the past 3 years under your tenure. Moving on to my 2 questions. First question, we've seen your Q4 Talk Biz performance quite solid. Can you also provide your guidance and outlook for 2022? And what would be the new drivers behind growth? Second question, with respect to the listing of your subsidiaries, in the past, there were high anticipation or positive expectations. But recently, we also see some concerns, especially the NAV discount that the company is experiencing. So in regards to the IPO plans of your subsidiaries, Mobility and Kakao Entertainment, what are some of your thoughts? And after the subsidiaries are listed, what impact in terms of the value of the Kakao Company do you think it will have?

This is Mason. I will respond to your first question about Talk Biz, and I will then turn it over to Jae to respond to your second question. Looking at our Talk Biz business, there has been some new product introductions and changes in the revamping of the services. But in terms of the growth rate, we expect there to be a similar level of growth in 2022 at around 43%. Looking at '21, the growth rate was 43%. So it would be quite flat on a year-over-year basis. As we've seen, advertisement efficiencies from Talk Channel improved, we are seeing brand companies communicating with their customer base through Talk Channel and the information talk. And through the Bizboard, they are promoting their brand. So we are seeing a very virtual cycle that is being formed from the perspective of the advertisers. And from a mid- to long-term perspective, we see that the growth of the Kakao Advertisement business is going to be underpinned by Talk Channel, Information Talk and the messaging category. We expect this segment of the business is going to grow into a very big revenue source and revenue stream of the company. With regards to the potential expansion of growth of Talk Biz and Talk Channel message, basically, messages are being sent based off of the Talk Channel. And when we do a comparison study in terms of the ROAS measure and compare that to other types of advertisements, such as search ads and other SNS platforms, we see that in regards to the commerce transaction, our messaging approach on an ROAA basis compared to other types of advertisement really is effective and it is at least on par. So we think that supported by Kakao's Talk channel, we will be able to expand our commerce platform towards the small and medium businesses as these messaging tools are a very clear and proven tool for these companies. So as we try to expand our commerce business to include and expand into the off-line SMBs, we are actually giving them a good tool and good ammunition for them to run their digital advertisement.

This is Jae, I will respond to your question about the IPOs of our subsidiaries. Kakao started its business as a messenger. And as it was evolving into a mobile platform, it started to acquire new businesses or have started new businesses from scratch. If you look at our Kakao affiliates, Bank and Pay, which are already been listed as [indiscernible] including Mobility, these were cases where we actually set up the businesses from scratch. Kakao Games and Kakao Entertainment, we acquired other entities and further developed on those entities. So Kakao with no capital base or with no profitable business model, at initial points, we identified some of the areas where we have seen business opportunities and was very aggressive in entering into those businesses. And so in order to really focus on growth and provide motivation, it was essential for us to actually split those entities so that we can attract outside investment. So situation for Kakao was different from other companies. It wasn't that we already had a big business to start with. We've acquired these new entities or we've started our business from scratch. So -- and it is from that point on, we were able to grow these businesses. So together with the growth of the affiliates, the shareholder value of the Kakao had actually improved quite significantly. So I believe that the recent controversy over the issue of split and list for the company subsidiaries, that issue is a bit different from the circumstances that Kakao is in. Currently, Kakao mother company is making a very sustainable and steady revenue supported by its Talk Biz. And going forward, we do not have plans to split any other business units. Going forward, we will make sure that we continue to have a mid- to long-term growth driver, and we will come up with ways to maximize our corporate value as much as possible. That will be our priority. We will think hard as to what the best business architecture is for us to really grow our new businesses. And in line with -- in connection with the shareholder return policy that we have mentioned today, we will do our utmost to make sure that the shareholder value is maximized. In terms of the timeline for potential IPs of our subsidiaries, aside from Piccoma, which have gone under preparations to get listed in the Japanese Tokyo stock market, which started in December of last year, we do not have yet made any additional decisions with regards to the IPOs of other entities. Currently, we are in discussions with the shareholders.

The following question will be presented by Jong Hwa Sung from eBest Investment & Securities.

Can you provide some color and elaboration as to how the R&R is going to be divided between your different affiliates in the areas of blockchain, including P2E, NFT exchange as well as Metaverse platform and how you are planning to actually bring about synergies? Also, my -- because I understand in July, you launched Klip Drops -- you launched Klip Drops for digital transactions. And I understand Kakao Games is also planning to launch an exchange for NFT. So aside from also game titles, how are you planning to utilize NFT in the areas of media and entertainment?

This is Jae. I will respond to your question about blockchain, NFT and metaverse. First, in 2021, the plan for Klaytn blockchain is to evolve into a platform so that we may actually build a solid metaverse and grow into a global top-tier platform. To that end, Klaytn platform, we want to make sure that it is geared towards the metaverse, and we are receiving investment and through collaboration and cooperation, we plan to achieve that objective. If you look at the components that make up in metaverse, it's very much similar to games. So in the first half of the year, we will first focus on having large game studios enter into the Klaytn platform, including P2E, play to earn and [indiscernible],, and so we expect that ecosystem to grow very rapidly. Also, Kakao Games had made the announcement and had renewed the Bora net. It is the layer 2 of the Klaytn Main Net, and this Bora net has been renewed into a most optimized platform for both games and content project. And we think that really is going to contribute to activating the overall Klaytn ecosystem. Currently, on the globe stage, there is no blockchain that is most befitting the game or the creator economy or the metaverse. And so under this situation, we are really going to accelerate the advancement of Klaytn's vision. Also, Klaytn has been cooperating and receiving many investments recently with other partners in NFT and for [indiscernible] projects. Klaytn wishes to establish itself as a very core and critical blockchain platform and is continuing on with cooperations with other participants of the ecosystem and has entered into many strategic partnerships in countries like U.S., Singapore, Indonesia and Thailand and is making full preparations for global expansion. As Quest will be the entity for blockchain, we also have ground X. And starting this year, we are going to be playing a very pivotal role in expanding into the global NFT market. Last July, we launched Klip Drops, and it went through a significant upgrade and advancement in December. We've accordingly launched 1 day, 1 drop. Basically, this is where digital art pieces are being curated. And also the market -- it has a market feature where digital arts could be sold and bought, and we also launched the factory where the many different types of creator NFTs can be collected. So Klip Drop's 1 day, 1 drop product after it was released reached a KRW 10 billion of top line revenue by -- after its launch, and it took its very solid place in Korea's premium NFT market. And also in January, Kakao Entertainment's global IP, Solo Leveling NFT was issued. And just as soon as we issued 300 NFTs, it was sold out, really attesting to the value that the IPs would create in line with the ground X's NFT platform. This was a good example of that. And also, if you look at the performances that we are seeing from the marketplace, where there's a lot of secondary transactions, there has been more than 1 million Klay coins worth of transactions, and we see there is a gradual activation of such transactions. At the same time, we have a wallet service, and it is dubbed Klip. This is where one can store one's digital assets and send those digital assets. We have a total of 1.67 million subscribers to digital Klip. And in light of the fact that the cryptocurrency-related regulations are becoming more stringent, the type of digital wallets that have anonymity is displaying limitations. But in the case of our wallet, which is Klip, it's a custodial type of a wallet where the private key is actually controlled at the wallet level, and this is well in line with the overall regulatory direction. And so we believe that this year, we will be able to further solidify the positioning of our digital wallet and also do our best to enter into the global virtual asset wallet market. Now regarding our metaverse-related strategies, internally, what our thoughts are regarding this is that for next Kakao, for Kakao's future, we believe that new opportunities have to be at the very center, new opportunities in terms of new industry and global market. It's more than just taking existing technologies and taking existing businesses, but we need to challenge ourselves to new industries and new frontiers. I think that's what Kakao needs to do as we go forward. And Metaverse in that aspect is the area that we feel that Kakao can excel in. Already, Kakao and its affiliates have key assets such as Klaytn, Kakao Games as well as the connectivity that we offer to the people. And we feel that underpinned by these characteristics, we will be able to create a metaverse. And we are, at this point, thinking of ways to do that, although it's too early for us to share with you all the specifics. But once we have more details, we will come back to you and communicate that to you.

The following question will be presented by Soyun Shin from Credit Suisse.

I have 2 questions. First, I think you've mentioned your blockchain-related revenue is reflected in Q4 top line revenue. Is this mostly the commission income that you're making from the transaction that's taking place? Is there any other monetization approach that you're currently thinking about? And end of January, you introduced Klaytn 2 as well. So can that also accelerate your monetization from this business? And second, can you also share with us your outlook for revenue and operating profit for 2022?

Yes. Regarding the revenue from blockchain, aside from the Bank of Korea CBDC projects that we were engaged in, there are largely 4 types of revenues we are making. First is the business revenue, which is the B2B solutions-related, which helps people do development on Klaytn platform quite easily. Second has to do with the compensation for the mining of the Klays as part of the Klaytn governance. And third is the booking commissions relating to Klips Drop, the NFT exchange. Fourth has to do with some other revenues. Starting this year, we expect there's going to be an expansion in the ecosystem at the global business as well as the enhancement of the Klay value. We are really going to focus on both the growth potential as well as profitability of this business. And later on, once the revenue size or the sell side becomes of a certain size, we will be able to, at that point in time, separate out these numbers and communicate that to you. Responding to your next question about our revenue and operating profit guidance for '22, let me break that down into each of the line of business. First, looking at the Talk Biz as part of our platform business. By providing tools to our partners, we plan to make this platform an essential platform to our partners. Through the Talk Channel, we will be onboarding more partner companies and provide better purchase experience to our users, which we believe is going to bring bigger growth this year. And despite high base effect, Talk Biz, we expect we're continuing to show a steep growth rate as we've seen in year 2021. In terms of Kakao Pay and Mobility, there were some regulatory issues and coexistence-related issues that we experienced in 2021. We've thought long and hard about the business structure. And once again, this year, we will be gearing up for another leap forward. Looking at blockchain and cloud, these were areas where they entailed quite a bit of investment. And I think in 2022, we will be able to have more visibility on the performances from these businesses. So in light of these factors, we think for the platform, other revenue continuing on with last year's high growth, we can expect growth and profitability to come through this year as well. For content and story, we will focus more on gaining competitiveness on the global stage. Kakao Piccoma is going to solidify its position as Japanese #1 platform. And also, we are planning for global expansion, of course, including France. Kakao Entertainment, we will continue on to bring about more meaningful performance in areas such as North America, Southeast Asia to become a global platform, utilizing the IPs of Kakao Entertainment's webtoon and web novel. For media business, we want to continuously come up with high-quality content that will cater to the taste of our global consumers and contribute more to our top line. Moving on to the Game business. With the current game titles, we will continue on with a sustainable revenue, and there will be new title line-up through which we want to expand our share in the global market. And also in the segment of beyond games, which includes sports, blockchain and P2E, we will also try to build on our new business. So from an operating profit perspective, we expect there to be a very positive top line growth to come as our growth speed actually accelerates. But at the same time, we also need investment in order to strengthen our positioning on the global stage. So internally, we have our OP margin target at double digit, and our objective is to bring about a balanced growth between growth and investment.

The following question will be presented by Eric Cha from Goldman Sachs.

Since the outside environment is changing very fast, I guess we tend to ask you questions about your guidance for the future. I would like to gain some insight on what your outlook is for your commerce business. Can you share with us not just the revenue, but if you could also share with us any other measures? That will be quite helpful. And in light of the current commerce backdrop and the competitive landscape, what do you think is going to be Kakao's positioning within the commerce segment?

This is Mason. Responding to your question. If you look at Kakao Commerce, it's comprised of different elements like Gifting, Talk Store, Makers and ZigZag. And looking at the total GMV for all of these services, we're expecting to go over KRW 10 trillion mark and really grow into a sizable commerce platform. Because of the special circumstances that we were in due to social distancing, in Q4, there was a very high space effect. But despite that, Q4 -- this year's Q4 GMV was up 29%. And compared to the previous year-over-year, the growth was 42%. Especially the deliverable products, the delivery-based products out of the total Gift, GMV, basically its growth rates surpassed that of the average growth rate. And on a Q-on-Q basis, it now accounts for more than 40% of the total GMV. Also from a mid- to long-term perspective, if you look at the trend, Kakao Talk Gift in recent 2 to 3 years' time period have shown a very steep growth, and this was driven by the fact that there were new customer segments that were onboarding, who in the past did not make use of such gift features. So it was based off of the net increment and the number of people who've made purchase on Kakao Talk Gift. But going forward, we think that the 2 important drivers for growth is going to be increased frequency of purchase and higher ticket size, and it will be based off of these 2 elements that we will be able to outperform the market growth rate. Now on commerce, our strategy to expand this business, one of the key drivers will be live shopping. If you look at the existing Kakao Shopping Live, we actually encompass large brands and very smaller SMBs as well. We will continue to expand that SMB based from a top-down perspective. We've also acquired a company called Grip Company. And with this acquisition, now anyone can actually very easily start a live commerce session in just 10 seconds. It is an open platform, open to anyone. And we currently have 20,000 sellers who have onboarded this platform. And as of end of last year, cumulative GMV had surpassed KRW 100 billion. Because Grip Company. is an open platform from a long-term perspective compared to existing Kakao Shopping Life, it will be a bottom-up approach. We will continuously expand the user base from micro SMBs to some other types of SMBs going forward.

The last question will be presented by Dong Hwan Oh from Samsung Securities.

My question relates to your labor cost for Q4. It's risen by KRW 200 billion. Setting aside the ventures-related incentive fee or bonus pay, what are some of the other items that comprise labor cost? And for this year, including such bonus of incentives, what is your outlook for labor cost?

This is Jae. Responding to your labor cost question. Q4 labor cost because of the bonus pay for Kakao Ventures and stock-based compensation for Kakao and Kakao Pay and a higher number of headcount, which led to higher salaries. So overall, there was a labor cost increase, which was also -- which also impacted severance pay as well as insurance premium leading to an overall year-over-year rise of 93%, reporting KRW 512.7 billion. Out of this, if you look at Q4, some of the big cost items were KRW 61.7 billion of ventures-related bonus and cash settled stock compensation expense of KRW 12.8 billion for Kakao and Kakao Pay and ensuing increase in the relevant insurance premiums that needed to be paid and the amount of KRW 16.6 billion. So all in all, it amounted to KRW 19.1 billion for Q4. Our guidance going forward in Q4, with the higher labor costs with the inclusion of other consolidated entities, we think that there will be an year-over-year increase in labor cost. But on a Q-on-Q basis, because of the high base effect from the ventures fund, we expect there to be a decline. In year 2022, there will also be the impact from the inclusion of Tapas, Radish Lionheart and Sena Technologies, and that impact is going to be reflected to the full year number. So in 2022, we expect there to be more than 30% labor cost increase.

And that brings us to the end of Kakao's Q4 and Full Year 2021 Earnings Presentation. Thank you very much to investors and analysts for joining us. Bye-bye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]