UPTN Project: SK Planet's Arc Reactor

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Ponyo
Research Analyst/
Xangle
Nov 16, 2023

UPTN Project: SK Planet's Arc Reactor

Table of Contents

1. Introduction

2. SK Planet

2-1. Corporate Overview

2-2. OK Cashbag Revenue Model

3. Why Blockchain and What’s Expected

3-1. Success and Limits of OK Cashbag’s “Versatility”

3-2. SK Planet Attempts to Secure New Growth Momentum and Improve Profitability via Avalanche Blockchain

4. UPTN Project’s Current Status

4-1. SK Planet's UPTN Subnet temporarily outpaces Axie Infinity’s on-chain activity following the release of TEM NFTs

4-2. While there is an immediate cost burden, the framework is designed to yield both revenue and profitability in the long run

5. Closing Thoughts

 

 

 

 

1. Introduction

Let’s talk the MCU for a second. In “Iron Man 1”, Tony Stark is attacked by terrorists and nearly killed by the shrapnel lodged in his heart. While he is unconscious, Ho Yinsen, who was also held captive, plants an electromagnet in his heart to keep the shards away. Then with Yinsen’s help, Tony forges the Arc Reactor as a replacement for the electromagnet in his chest, extending his life by decades. And thus Iron Man was born. So, why are we talking about this famous superhero? We need to talk about UPTN project and whether it could be the arc reactor for SK Planet.

This report is organized into two parts. First, we’ll provide a brief corporate analysis for SK Planet, exploring the background, business direction, and expected effects of the UPTN project. In the second part, we analyze the current state of the business based on on-chain data and consider UPTN projects’ potential in the long-term.

MCU’s “Iron Man”

Source: MCU’s “Iron Man”

2. SK Planet

2-1. Corporate Overview

SK Planet is a data business solution and O2O marketing platform under the SK Group, created in October 2011 when the platform business was spun off from SK Telecom. Currently, SK Planet is 98.65% owned by SK Square and 1.35% by treasury shares, but in September 2023, WEMADE will acquire a 12% stake in SK Planet as a means of strategic alliance.

SK Planet is mainly composed of two divisions. The Business Solution division provides B2B business solutions in various fields such as IoT (RB Insight), Media (RB Cloud), AI (RB Dialog), and MNO. And the Marketing Platform division operates marketing services such as OK Cashbag and Syrup Wallet, which we will focus on in this report.

sk planet Corporate Overview

Source: SK Planet

OK Cashbag is a mileage-based marketing solution that enables users to earn points for participating in events and paying for services and unlock various benefits. OK Cashbag has over 93,000 affiliate stores covering food and beverage, cosmetics, fashion, stationery, film, and culture, making it the largest of its kind in Korea. The total number of its users is 21 million, of which approximately 7 million are monthly users. Meanwhile, Syrup is a service that can manage and store debit cards, various membership cards, coupons, and public transit cards, with a total of 15 million users and 6 million MAUs.

2-2. OK Cashbag Revenue Model

The basic revenue model of OK Cashbag is based on the point fees collected from users and affiliate stores by operating a marketing platform that connects them.

Affiliate Stores: When users engage in consumption activities at OK Cashbag affiliated stores and accumulate OCB points, the store pays SK Planet a commission equivalent to 25% of the accumulated amount and points earned by consumers. The affiliated commission becomes revenue for SK Planet, which also holds the points accumulated by consumers. And SK Planet transfers the points to the respective stores when customers use these points at other affiliated store,. The interest earned during the holding period is recognized as revenue, and in case customers do not use the points, the unclaimed revenue also belongs to SK Planet. Previously, besides the per-transaction commission, stores had to pay membership and annual fees, but this policy has been abolished.

Users: Users pay a service fee to SK Planet each time they use OCB points accumulated at one affiliated store at another one (10% of the accumulated amount). While there used to be an annual fee, it has now been replaced by a service usage fee.

3. Why Blockchain and What’s Expected

3-1. Success and Limits of OK Cashbag’s “Versatility”

OK Cashbag, operated by SK Planet's Marketing Platform Division for the past 25 years, initially achieved industry-leading success based on the 'versatility' of points but has recently hit a business-growth wall. Specifically, OK Cashbag initially secured a customer base of 20 million through a strategy of integrating fragmented points into a universal point system through affiliations with over 90,000 stores. Over time, challenges emerged as 1) users and stores started leaving, leading to a reduction in universality, and 2) limitations in the existing point system became apparent in terms of scalability.

For instance, in 2020, Homeplus discontinued the affiliations with OK Cashbag in terms of point accumulation and conversation, maintaining only the point usage part. This was due to the increase in “cherry-picking” customers that convert points earned at Homeplus for use at other stores, undermining the expected marketing and revenue expansion effects. Also, as Homeplus’s own membership exceeded 6 million, the need for spending marketing costs to partner with OK Cashbag lessened.

Moreover, the decreasing number of OK Cashbag’s partnerships is also due to the inability to track data on points, for which affiliated stores cannot assess OK Cashbag’s marketing impact. Stores were paying fees and distributing points to customers but had no way to analyze where the said points were going and how they were being used. So what’s really the merit in partnering with OK Cashbag? Over time, OK Cashbag fell into a negative cycle of 'store departure → diminished point universality → diminished customer lock-in effect → deteriorating attractiveness and profitability of OK Cashbag's service.'

the surfacing of ok cashbag's vicious cycle

Furthermore, with 25 years of operation, loyal users are aging (OK Cashbag's customers are mainly in their 30s to 50s), and there is relatively less influx of younger users that find appeal in OK Cashbag service with changing needs and preferences. The existing rigid system fails to provide new experience that meet the needs of younger users, and the affiliations tend older, less popular brands rather than the latest brands and trendy shops that the younger generations flock to.

Essentially, SK Planet has been successful in controlling costs in various aspects, including R&D, depreciation, and service costs, centered on the 2018 divestiture of 11STREET, and has been able to improve profitability, but has been struggling to grow sales (see figure below).

sk planet growth trends

Thus, SK Planet aims to establish a virtuous cycle of 1) improving service utility → attracting new users and increasing service activity → preventing store departures → enhancing point universality and 2) maximize revenue by expanding the value chain using blockchain technology, to achieve qualitative and quantitative growth simultaneously.

expected effect of ok cashbag's blockchain adoption

3-2. SK Planet Attempts to Secure New Growth Momentum and Improve Profitability via Avalanche Blockchain

From a broader perspective, the value of blockchain that SK Planet is focusing on is as follows:

  • Improved Versatility: The emergence of NFTs, tokenized data, allows for the “on-chainization” of data, making data available to own and trade through a trustworthy network. If this concept is applied to the OK Cashbag service, users can not only earn and consume points, coupons, tickets, and memberships on the app, but freely trade these benefits according to their preferences and lifestyles. This creates a market where users can easily exchange points/benefits that are less appealing to them, fostering more active user participation in events. For SK Planet, this results in increased user utility and service activity, which leads to more affiliated stores, point universality, and advertising revenue. Also, it is made possible to generate revenue through transaction fees from the secondary market.
  • Data Analysis for the Secondary Market: The advent of NFTs and FTs (fungible token) enables on-chain data tracking for the previously inaccessible secondary market, allowing for a more detailed analysis of consumer preferences and needs. This facilitates a sharper enhancement of services.
  • Expansion of the Value Chain: Pursuing the NFT business requires supporting blockchain (transaction execution, settlement, consensus, DA), wallets (storage), marketplace (trading), communities (communication among holders), and publishing solutions (onboarding other NFT projects). In other words, sufficient capital and talent allows for extensive expansion of the value chain based on NFT technology, creating synergy among each component The UPTN project has already launched the services mentioned above or are in preparation (see figure below).