[The Next Crisis]② Kim Beom-su Surrounded on All Sides, Will He Sell 'Gyeryuk' Next?

Separated into Daum CIC last May
9 years after Daum-Kakao merger in 2014
Management risks and political burdens increase
Daum sale expected next step

Kim Beom-su, former chairman of Kakao, is appearing at the Financial Supervisory Service on the 23rd to be investigated regarding allegations of stock price manipulation in the acquisition of SM Entertainment. Photo by Kang Jin-hyung aymsdream@

Kim Beom-su, the founder of Kakao and head of the Future Initiative Center, is facing increasing difficulties as he finds himself surrounded on all sides. He must decide the fate of Daum, which has become a 'gyeryuk' (a burdensome asset). The market largely believes that the decision has already tilted towards selling. It is said that when Kakao spun off the portal Daum as a company-in-company (CIC), the process of sale had already begun.

Kim Beom-su in Crisis, Only Political Burden from Daum Service

In May, Kakao separated Daum into a CIC. Legally, it remains part of Kakao, but it has a structure that allows independent decisions on business strategy, personnel, and finance. Kakao explained at the time that the goal was to create an organization capable of swift decision-making to enhance Daum's competitiveness.

However, the industry views the introduction of the CIC system as a move to prepare Daum for sale. It is interpreted as reorganizing the structure to make it easy to separate at any time. Looking at Kakao's previous CIC cases, many have led to spin-offs. If successful after CIC establishment, the company may be spun off and grown into a valuable affiliate, but if not, it could become a target for liquidation. Moreover, Kakao is currently tightening its belt due to poor performance.

Daum is already a gyeryuk within Kakao. It accounts for only 4% of Kakao's revenue, meaning it is not a major service. The bigger problem is that no breakthrough is in sight. Jung Eui-hoon, a researcher at Eugene Investment & Securities, said, "If portal market share can be defended, the CIC conversion could be effective, but the share is declining," adding, "With the online advertising market in decline, Daum's sluggishness is expected to continue in the mid to long term."

On the other hand, the political burden from operating the portal is growing day by day. The news exposure algorithm and comment policies have been plagued by accusations of left-leaning bias. During every election season, the portal's monopoly has been under scrutiny. This year, ahead of the general election, it was criticized over fake news controversies. Legal risks have also increased. Recently, during the acquisition process of SM Entertainment, Kim's close aide, Bae Jae-hyun, Kakao's Chief Investment Officer, was arrested on suspicion of market manipulation. Kim himself appeared for investigation at the Financial Supervisory Service on the 23rd, putting Kakao's overall management at risk of judicial issues.

Signs of Sale Already Revealed

Signs of a sale are evident in many places. There are constant issues in service operations. Some voices even suggest that news and comment policies have been neglected. A representative example is the overwhelming support for China on Daum during the quarterfinals of the football event at the Hangzhou Asian Games. This was revealed to be manipulation using macro (repetitive automated) programs. Unlike Naver, Daum's sports service allowed non-members to participate and did not limit the number of clicks. It has been criticized for poor management and being vulnerable to macro manipulation from the start.

Staff departures are not a recent phenomenon. Before merging with Kakao, Daum had over 1,500 employees, but now it is reported to be around 300 to 400. A former Daum employee said, "A significant number of personnel from key services, including news, have moved to Naver or other IT companies," adding, "Since there is no investment in content or services, entire teams are leaving."

There is no visible control tower to overcome the crisis. Hwang Yu-ji, former head of Daum's business division, took over as Daum CIC CEO, but expectations inside and outside are low. Hwang joined NHN in 2008, working in the news service team and as a user experience (UX) lead researcher. He moved to Kakao in 2014, serving as head of social services, UX team leader, and head of the service platform office. Among employees, there is talk that "appointing a UX expert as Daum's CEO shows the current standing of Daum."

In the investment banking (IB) industry, Daum's value in the mergers and acquisitions (M&A) market is still considered alive. Although its capabilities have significantly diminished, it remains a legitimate platform. An IB industry insider said, "If companies like Coupang or Qoo10 acquire Daum, synergy effects could be expected." Another insider mentioned, "If Daum is put on the market, media companies needing a news exposure platform might show interest."

Internal employees are anxious about the possibility of a sale. One employee said, "There is no revenue model, and Kakao is not supporting it, so employees are shaken," adding, "Concerns about downsizing have existed, but anxiety has increased since the CIC conversion." An industry insider interpreted, "Selling Daum could be another burden for founder Kim, but through the CIC conversion, they are trying to gradually resolve this." However, Kakao maintains that there is no possibility of selling Daum.