Daum Kakao Corp., the operator of South Korea's top mobile messenger KakaoTalk, said Thursday its first-quarter profit dipped 40.4 percent in the first quarter from three months earlier, dented by falling advertisement revenue.

Consolidated net profit came to 30.8 billion won ($28.1 million) in the January-March period, compared with the 51.7 billion won posted a quarter earlier, the company said in a regulatory filing.

Operating profit also dropped 38.3 percent on-quarter to 40.3 billion won, with sales falling 7.7 percent to 234 billion won.

Daum Kakao did not reveal on-year comparisons in its regulatory filing as the company was set up following a merger between Daum Communications Corp. and Kakao in October.

The first-quarter net profit hovered far below the median estimate of 45 billion won in a poll conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency. Sales and operating profits were estimated at 246.3 billion won and 54.4 billion won, respectively.

The decline in first-quarter profits came as Daum Kakao suffered a drop in advertisement revenues, while its marketing costs increased.

Daum Kakao saw its first-quarter revenue from advertisements drop 14 percent on-quarter to 141.7 billion won. It expenditures in marketing, however, moved up 3 percent to 194 billion won following the launch of new services.

KakaoTalk, South Korea's most popular free mobile messenger, has 35 million local users in the country with a population of 50 million.

Daum Kakao said the mobile-related revenue accounted for 55 percent of its entire sales during the first quarter, lending credence to its vision of becoming what it calls a "mobile life platform."

The company added that it has rolled out various services in recent months to solidify its revenue base, including KakaoTaxi, a cab-hailing mobile application, which was released in March.

The company said the number of KakaoTaxi users is increasing, adding that it has about 70,000 registered drivers, with the combined downloads of the app hovering above 1 million. The growth is set to continue in the second quarter on the back of marketing efforts, it added.

Daum Kakao said it will tap deeper into its mobile payment service, KakaoPay, over the April-June period as well.

On a conference call, Daum Kakao said it will hive off its business division of licensing and promoting "Kakao Friends," a popular group of characters that are used as emoticons on KakaoTalk, and set up an independent outfit.

"The board of directors decided to build a new entity to bolster growth of the character business," said Choi Se-hun, co-chief of Daum Kakao. "It will join forces with partners from around the globe to roll out various products."

The earnings results were released before the opening of the stock market. Shares of Daum Kakao, which are listed on the secondary bourse, closed 5.48 percent higher at 105,900 won Thursday, far outperforming the benchmark index's 1.02 percent gain. (Yonhap)