[The Next Crisis] ① "No Impact Even If It Disappears"... The Fall of the No.1 Portal

Daum Life Record as a National Portal
'Gyeruk' Status Amid Declining Market Share and Sales
Business Strategy and Investment Ranking Dropped
"Even if Daum Disappears... No Change in Consumer Behavior"

"General Yi Sun-sin, Yahoo will be defeated by 'Daum'." This was the advertising slogan of the portal Daum in 1999. At that time, Yahoo held the number one position in the domestic portal market with a higher market share than the combined shares of Naver and Daum. True to its provocative slogan, Daum defeated Yahoo in the early 2000s and rose to the top spot among portals.

Once the nation's portal, Daum now stands at a crossroads between life and death. As the number of visitors to Daum has decreased every year, its presence as a portal has faded. Its revenue scale has also shrunk, making it a longstanding headache for Kakao. Kakao itself is facing its biggest challenge since its founding, so Daum, which was separated as a company-in-company (CIC) within Kakao, is now like an "orphan duckling" left behind. Kim Beom-su, Kakao’s founder and head of the Future Initiative Center, is under investigation for allegations of market manipulation during the acquisition process of SM Entertainment’s management rights. In this situation, it is uncertain whether Kakao can continue to carry a portal service that only adds political burdens.

Daum’s Disappearing Presence

According to website analysis data from Internet Trend on the 20th, Daum’s market share in September was 4.1%. Compared to May, when Kakao made the decision to separate Daum as a CIC (5.1%), it dropped by 1.0 percentage point. From the 1st to the 3rd of this month, the share was 3.9%, threatening to fall below the 4% mark. There is no guarantee that Daum will maintain its third-place position. Microsoft (MS) Bing, ranked fourth with 2.38%, has been on the rise, boosted by ChatGPT.

The free email service provider 'Hanmailnet' changed its name to Daum in 1999 and took its first step as a portal. Its mail service and online community Daum Cafe received great responses, competing with Naver for first and second place. In 2014, when the center of internet services shifted to mobile, Daum merged with the number one messenger company Kakao to create synergy. However, Daum’s market share, which was around 20% before the merger, plummeted without wings.

Revenue has been on a downward spiral. Daum’s 'Portal Biz' sales, including advertising, decreased from 523.6 billion KRW in 2019 to 424.1 billion KRW last year. This year, it has shown double-digit sales declines for two consecutive quarters in the first and second quarters. As of the second quarter, the proportion of Portal Biz sales in the entire company is only 4.4%. Annual sales are expected to fall below 400 billion KRW this year, remaining in the mid-300 billion KRW range.

There are concerns that Daum may repeat the fate of portals like Yahoo Korea and Lycos, which disappeared into history. Yoo Byung-jun, a professor at Seoul National University’s College of Business Administration, said, "Once the flow shifts in the internet market, it is uncontrollable," adding, "Frankly speaking, even if Daum disappears, there will be little change from the consumer’s perspective."

Three Reasons for the Fall

The reason for Daum’s fall can be summed up as its failure to adapt to change. Whenever there were major changes in the internet industry, such as the mobile transition and the rise of artificial intelligence (AI), Daum lagged behind with delayed responses. Although the merger with Kakao presented an opportunity for change, Daum failed to demonstrate innovations that could catch up with the delayed pace.

Daum began its downward path in the 2000s. In 2002, it partially monetized the free service 'Hanmail.' Users massively moved to other services. In 2004, the acquisition of the American internet company Lycos became a burden. Betting on internet search portals as the PC era was ending shook Daum’s existing position. Eventually, Lycos was sold after six years. From the 2010s, the mobile market opened in earnest, but Daum failed to adapt. Despite launching mobile messenger 'MyPeople' and mobile community 'Camp,' it was overshadowed by similar services like Naver’s Line and Band.

To overcome this situation, Daum chose to merge with Kakao in 2014. The plan was to create synergy by combining Daum’s portal content with Kakao’s mobile base. Daum’s services gradually disappeared or were merged into Kakao’s services. Although this was a decision for selection and concentration, it remained at the level of organizing overlapping services. It is said that Daum failed to properly utilize its accumulated content and service capabilities. From the user’s perspective, the need to use Daum gradually diminished. KakaoTalk absorbed most of the portal’s functions, and Daum’s unique color faded.

This trend continues recently. With the rapid rise of generative AI, the portal industry is facing another turning point. There is even a sense of crisis that portals may disappear as AI chatbots like ChatGPT can provide the necessary information alone. The industry is busy facing this new turning point. MS Bing integrated ChatGPT, and Naver and Google also applied generative AI to their search functions. In comparison, Kakao is focusing on developing AI services that can be linked to KakaoTalk rather than Daum’s search services. Internally, since it is not a core service, it appears to be deprioritized in business strategy and investment. Choi Jin-bong, a professor in the Department of Journalism and Broadcasting at Sungkonghoe University, analyzed, "Daum failed to embrace changes whenever trends shifted," adding, "Even after falling behind as a latecomer, it only followed competitors without strong speed or direction in reform."