Controversy Over Kakao's Overexpansion: Reduced 11 Affiliates This Year Alone

[Asia Economy Reporter Kang Nahum] Kakao is reducing the number of its domestic affiliates through methods such as mergers by absorption. This is interpreted as an effort to consolidate business capabilities and target the global market.

According to Kakao's 2021 business report on the 23rd, as of December 31 last year, Kakao had a total of 194 domestic and overseas affiliates. However, after the disclosure preparation date, the total number decreased by 11, confirming that the actual number of affiliates is 183.

The 11 reduced affiliates were companies that were either merged by absorption or liquidated. Specifically, they are ▲Toonnori ▲Partner ▲Epic Studio ▲N Friends Games ▲Jiwoo Games ▲Felix Lab ▲Shenzhen Jingtong Electronics Co., Ltd. ▲K Venture Group ▲Badal ▲U Camp ▲Ad Page. Except for Shenzhen Jingtong Electronics Co., Ltd., all are domestic affiliates.

Affiliates closely related to daily life, such as designated driver services, have decreased. Badal and U Camp were merged into K Drive, established by Kakao Mobility. These companies operate quick service and designated driver businesses, respectively.

Mergers of game companies are also prominent. Jiwoo Games, Felix Lab, Epic Studio, and N Friends Games were merged into H&C Games, a subsidiary of Kakao Games. These game companies are all specialized in 'social casino games.' This appears to be an effort to consolidate capabilities to target the rapidly growing global social casino market.

Kakao's reduction in the number of affiliates seems to follow a new management strategy aimed at preparing for overseas market entry through a centralized approach. Last year, Kakao faced much criticism due to infringement on local businesses and the scattered business expansion of its affiliates. There were calls for a control tower to coordinate these efforts, leading to the establishment of the 'Community Alignment Center (CAC),' a control tower for affiliates, earlier this year.

Namgoong Hoon, the appointed CEO of Kakao, also previously emphasized, "A significant number of Kakao's affiliates are overseas corporations, indicating considerable overseas expansion, and we are achieving results in content areas such as games and webtoons," adding, "This is an important turning point to implement a centralized overseas strategy focusing on the sectors that are delivering results."