Kakao's Daum spin-off: Strategy for growth or path to sale?
South Korean internet giant Kakao is spinning off Daum, its in-house independent company that operates the country's second-largest portal site, reigniting speculation about a potential sale of the service.
According to industry sources Friday, Kakao revealed the spin-off plan during an internal town hall meeting on Thursday, explaining that the move is part of its strategy to address intensifying competition in the portal, search and content sectors.
'By becoming a fully independent entity, Daum will gain autonomy, foster innovation and establish a more independent decision-making structure to enhance service competitiveness,' said a Kakao official.
Yang Joo-il, the current head of Daum, is expected to retain his leadership role after the spin-off is completed. For the approximately 500 employees currently working at Daum, Kakao plans to offer the option to either remain with Kakao or transfer to the newly independent company.
Details regarding the spin-off structure are still in the early stages and require board approval, the official explained. Kakao expects to complete the process, including board approval, within the first half of this year.
'Daum has been on a continuous decline, and the overall future of the portal and search engine businesses remains uncertain. Portals need a more independent and agile structure to stay competitive,' the official added. 'The spin-off is aimed at finding a breakthrough.'
Once Korea's leading portal, Daum has seen a steady decrease in market presence over the years. According to web analytics site Internet Trend, Daum's average domestic search market share stood at only 2.74 percent from March 2-8, compared to Naver's 65.3 percent and Google's 27.6 percent.
Industry experts believe Kakao's latest move could be setting up Daum for a potential sale.
Kakao CEO Chung Sin-a has emphasized the need for a fundamental restructuring of Kakao's business operations to improve efficiency, including streamlining non-core businesses that lack direct connections to KakaoTalk and artificial intelligence.
Daum, which was a dominant force in Korea's internet market in the late 1990s, merged with Kakao in 2014. In 2023, Kakao restructured Daum as an independent in-house company, stating that the move aimed to 'enhance Daum's value as a search engine and content distribution platform in a more agile manner.'
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