Upstage Acquires Daum Portal, Aiming for a "Korean Perplexity" (Comprehensive)

Pursuing an AI-Based Conversational Platform
Synergy Expected with Government's "Dokpamo" Project

Sunghoon Kim, CEO of Upstage

Artificial intelligence (AI) startup Upstage is set to acquire Daum, the portal site, with the aim of creating a "Korean-style Perplexity." Upstage, which is expanding its business with its large language model (LLM) "Solar," plans to combine Solar with Daum's services to launch a next-generation search platform specialized in AI.

According to Upstage on January 30, both Kakao and Upstage held board meetings the previous day and approved the signing of a memorandum of understanding (MOU) for a stock swap deal involving AXZ, the operator of Daum. AXZ is a wholly owned subsidiary of Kakao. Kakao established AXZ in May last year to spin off the Daum business. Upstage, which owns the LLM Solar, sought opportunities for business expansion and proposed a partnership to AXZ, which has a broad user base and extensive content data.

Upstage plans to leverage the vast data accumulated by Daum, which once rivaled Naver as one of Korea's two major internet portals, to introduce a platform specialized in AI. Rather than competing with Naver as a portal, the new platform is expected to focus on search engine and AI functionalities. In particular, given that Sunghoon Kim, CEO of Upstage, is a former key developer responsible for AI development at Naver, there is speculation that an AI platform tailored to the Korean user environment will emerge.

This partnership between the two companies is also expected to create synergies and serve as a differentiating factor in the government's "Independent AI Foundation Model (Dokpamo)" project. Currently, the Dokpamo project has completed its first-stage evaluation, and three consortiums have been selected: LG AI Research, SK Telecom, and Upstage. Upstage intends to leverage Daum's B2C (business-to-consumer) strengths to make a strong case in the second round of selections.

An Upstage representative stated, "We are envisioning a model focused on search engine and AI functionalities like Google, rather than a portal like Naver," adding, "With a next-generation platform that significantly enhances AI capabilities, users will have a more accessible foundation for utilizing AI." Referring to the Dokpamo project, the representative also emphasized, "A platform is needed to spread AI nationwide, and this partnership will provide significant momentum for expanding to general users."

Upstage has now begun due diligence for the acquisition of Daum. The companies are discussing a "share swap" in which Upstage will acquire all of Kakao's shares in AXZ, while Kakao will receive a stake in Upstage. The financial investment industry believes that this acquisition will allow Upstage to scale up as a platform company and achieve a higher valuation in its upcoming initial public offering (IPO).