KaKao

piccoma's basic fundamentals and small victories culminated in its potentials

 

'Korean webtoon platform becomes a sensation in the country of manga.' 'Top-selling comic app in the world.' 'Sales doubled only in a single year.' All these headlines describe a recent phenomenal growth achieved by Kakao Japan  ⟪piccoma(ピッコマ)⟫. (Kakao Japan changed its name to 'Kakao piccoma' on November 11, 2021. In this article, it is referred to as 'Kakao Japan')

 

How could this late-mover achieve such a spectacular result in Japan, the content superpower? Take a look at piccoma's path, from challenge and failure to pivoting and innovation to encountering a new market.

 

#Kakao needed an 'alternative’ to KakaoTalk

The Japanese were forced to get out of dependence upon the 'feature-phone mail' in the wake of the Great East Japan Earthquake that occurred in March 2011. In a disaster situation where the mobile network didn't work correctly, KakaoTalk-like mobile messengers using a data network effectively functioned as an emergency contact method. In July of that year, Kakao Japan was established. It was when KakaoTalk was growing to acquire as many as 20 million domestic and foreign users.

 

In October 2012, Kakao Japan set up a joint venture with Yahoo! Japan to invigorate KakaoTalk in Japan. The company executed more than KRW 50 billion in advertising the following year. However, it broke up with Yahoo! Japan in November 2014, failing to bridge the gap with its competing messenger that had entered the market two months earlier. The organization lost its vitality and was in pent-up frustration.

 

In January 2015, Jay (currently the CEO of Kakao Japan), who was working as the head of Creative Center of a Korean Internet Company in Japan, received an e-mail from an utter stranger. The sender was John, then Strategic Management Office Leader (currently, the Kakao Investment CEO). He said that he wanted to have a breakfast meeting at a hotel in Tokyo for a matter of consequence to discuss privately. That weekend morning, there was one more person in the hotel restaurant. It was Brian.

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At the request of the two to become the new representative of Kakao Japan, Jay tossed back a question, "What does Kakao want to do in Japan?" "We will start thinking from now on," replied Brian. John, sitting next to him, asked, "What do you think we can do?" It was an open proposal leaving everything up to Jay, a regional expert.

 

#Preparation for Reconstruction

"It was kind of struggling. We judged that it would be difficult to bid for victory with a messenger platform in Japan. After the winding-up, local personnel, who accounted for about 70% of the joint venture, returned to Yahoo! Japan. The then CEO expressed his intention to resign. Kakao Japan's Meguro Office was literally left empty. The new representative had to freshen up the corporate atmosphere by pivoting business. Jay was a Korean who was well up in Japanese cultures and had proven his marketing and planning expertise in the Japanese IT industry. He was the right person Kakao sought for." It was John's memory of the meeting where they offered him the position of representative.

 

Jay's then company was located in a Tokyo landmark. Fancy office space, 250 colleagues, and thriving business -- many other reasons made him hold back from leaving the company. Meanwhile, Kakao Japan was full of shortcomings such as small, shabby office, less than a tenth of the previous workforce, one big failure, and a business area where nothing was set.

 

Here's Jay's explanation. "I met John again a month after the first meeting. I continue to think about the offer for almost three months before joining Kakao Japan. I wondered why I kept hesitating to make the decision. It was due to stable and favorable conditions at the then workplace. Kakao Japan was a small company but offered me a great opportunity to spearhead its business as CEO. I wanted to seize the chance. Also, the fact that it was a member of the Kakao community led by Brian, a highly-respected leader and venture entrepreneur in the Korean IT industry, had a huge impact on my decision."

 

Jay remembers that the vibe at Kakao Japan on May 1, 2015, when he first clocked in, was much worse than expected. Service planners had all left the company, and only five junior designers, five developers, and about ten business partnership managers remained at the firm. It was a four-year-old company with few institutional strategies. The company adopted Kakao's horizontal culture and autonomy, but its employees could not even expect incentives or salary increases due to the lack of an appropriate evaluation system. Those who worked hard thought they would eventually take a hit, and those behind easily rode free. A flexible workhour system only got the withered organization into an awful muddle. Nothing seemed to go right, but someone clocked in at 8 AM and others at 11 AM. Even though it was a small organization, there was little time to see all the workers together face-to-face.

 

At the time, many Japanese companies were raising staff wages in a lump sum in the aftermath of the consumption tax increase carried out in the previous year. Jay refused to pay for a lump sum wage increase and announced that the company would make a graded approach at the end of the year, based on the newly introduced evaluation system. He put off the plan to provide additional summer holidays apart from annual leave as Japanese companies did. The timeclock for all employees was set to '10 to 7.' Instead, he promised that there would be no such thing as any other Japanese company that would unconditionally give a mid-level rating regardless of performance. Two words, 'diligence' and 'hardworking,' which might be class precepts in the 1980s, were the directions suggested by the new CEO of the IT service company. After his declaration to tighten the belts and share profits only when efforts paid off, half of the few remaining members left the company.

 

#Issuing a challenge to the Japanese manga content business as a late-mover

There was no money left in the company. It needed to increase its capital stock to develop new business pipelines. Jay came to the Pangyo office to propose a cartoon content business. Krews in Pangyo began to stir, saying, 'Was Kakao Japan not dissolved?' 'What happened to the new CEO appointment?'

 

Kakao CXO Team, the top decision-making body (the council of chief executives composed of CEOs and heads of departments in the Kakao community), argued pros and cons. The principal opinion was that it was unreasonable for a late-mover to pursue comic content business in Japan. However, Jay's clear determination put an end to the two hours of fierce argument, "I've fully analyzed the local market for a new undertaking. I believe there's no need to devote time to a business that seems never to work."

 

At last, Kakao Japan made its first step forward as a content company. In mid-2015, Japan had nearly 100 digital manga services. LINE, COMICO, and other IT companies led the comic content market in 2013, followed by major local publishers that started to drive the digital content market from 2014. Supply and demand, the most critical factor, was determined by the supplier-oriented order in the content market. Kakao Japan decided that there would be a chance to win only by creating a new market that could provide optimized user experiences on smartphones. At that time, the mainstream market was selling ePub (Electronic Publication; an open e-book standard) that scanned published comics in volume unit.

 

Jay put importance on the supplier network management and set out to lead publishing sales activities. However, every publishing company he visited responded that it was too late for Kakao to enter the market. After the twists and turns, Kakao Japan could contract with two small publishers and supply 80 works.

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After a year of hard work, piccoma was able to start service on April 20, 2016. However, even a month after the launch, piccoma's sales were a mere 200 Yen, all from iOS and zeroed from Android OS. The number of concurrent users recorded only 13 people. Extreme situations continued, and the company needed to overcome unrelenting adversities to get out of the long tunnel.

 

piccoma set direction to localize the 'Wait-or-Pay' business model that had led the growth of KakaoPage from the service planning stage. Many Japanese publishers disagreed with this business model since paid contents were unhinderedly accepted in Japan, unlike Korea. Kakao could win a work called and published it on its platform for the first 'Wait-or-Pay' product. The indicators, which seemed stuck fast, began to wriggle. The number of viewers per day rose to 3,000.

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#Snowball Effect

A small success experience that Kakao Japan had lacked for a long time put them in a good mood. However, no one readily consented to Jay's goal to increase the number of daily readers to 10,000 in two months by the end of July. It may just sound like a lie -- but the number of daily readers exceeded the 10,000 marks as of July 27. After that, it took only ten days for indicators to double. 'Work is fun!' 'Hilarious!' A buoyant mood prevailed in the office. The experience of challenge and achievement started to create the snowball effect.

 

"piccoma may hit 100,000 DAU (Daily Active User)." Eventually, rosy predictions came out from the Pangyo office where Krews had been suspicious of piccoma's success until its daily users reached 10,000 and 20,000. In October, 'skepticism' turned to 'enchantment.' After that, piccoma has grown more than 2.5 times the annual average growth rate, and its annual sales exceeded KRW 400 billion in 2020. As of March 2021, the highest number of daily viewers exceeded the 3.9 million level. Everyone was amazed that the latecomer comic app with 90 service personnel rose to the top for itself in the manga kingdom without the help of a synergetic messenger platform. Nowadays, almost every digital manga platform in Japan imitates piccoma's business model in various areas, big or small. It was challenging to find one 'Wait-or-Pay' work in the early days, but its number now exceeds 14,000.

 

"As piccoma is on the rise, we are frequently interviewed by the media. Every time, we're asked for the secret of success. They were expecting an answer that our business model or specific content played an important role. They played quite a role, but I think the success experiences the organization has built together matter most. How could employees who surf the web to idle about feel comfortable? We were able to come all the way here while enthusiastically making and achieving a task to challenge together." Here is Jay's answer to the question: what was the most crucial factor that made the current piccoma possible?

 

#Now, it begins

Considering the qualifier 'No.1 attached to piccoma in terms of sales amount of electronic comics in Japan', you may wonder where the company would issue a challenge to in the future. Looking at the vast Japanese content market and ecosystem created by piccoma, you may imagine a boy who's about to dive from a springboard. However, if you look at piccoma a bit closer, it's more like being as follows:

 

First, the company targeted different user bases and created a new market, unlike its competitors. When everyone aimed at manga lovers, piccoma approached "people who lightly consume content on their smartphones." From Korean webtoons to ePub, a scanned form of published comics, piccoma attempted to sell segmented episodes by positioning them as 'snack content' anyone can enjoy. That means it has become a cartoon app that anyone can simply access as if he/she enjoys YouTube or social media.

 

Second, what has yet been digitized is much more significant. The base and scale of the Japanese manga market are global to the extent that even those Koreans who are least interested in manga know one or two Japanese titles. For example, KakaoPage's is considered an example of great success with over 1.1 million daily views only on the piccoma platform. However, many other works have recorded ten times more than this in sales. As KODANSHA, Kadokawa, and other mainstream publishers partnering with piccoma have been awakened by digitization; the mobile manga market seems to have excellent growth potential. The continuous influx of Generation-Z with high mobile content acceptance and generalization of non-face-to-face experiences caused by the COVID-19 pandemic is only accelerating such a trend.

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Finally, piccoma's management principle prioritizes artists, which is well represented by its “Product First" philosophy. In Japan, some services offer many free works and use platform advertisements as the main cash cow. In contrast, bestsellers on the piccoma platform are swiftly developed into animated films or paper books, serving as 'One Source Multi Use.' Thanks to this, creators got to perceive piccoma as a platform that 'sells their works at a reasonable price' and 'has multiple possibilities,' while feeling a strong sense of solidarity. That is the background of a virtuous cycle where high-quality works are continuously introduced, and users get satisfied with a pleasant viewing environment, free of interfering advertisements.

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Jay says that he often comes up with the Japanese proverb, "Yokozuna should wrestle with Yokozuna" while conducting business in Japan. It means that Yokozuna, the Sumo champion that corresponds to Korea's best Ssireum wrestler, should never cheat. This ethic had served as the basis for piccoma to move forward as a content company and a pioneer, consistently from the beginning of its business when everyone was suspicious, until now when it has produced excellent results. 

 

"If you successfully harmonize the speed of Koreans and the details of Japanese, you can create a powerful company that has never existed before in the world. We want to present something new on the global stage by integrating Korean and Japanese people and content. We're about to walk the road altogether with many creators." _ Jay