#1. Daum/Kakao Merger

Viewpoints from local insiders

By far the biggest tech news from Seoul this week. Below are the some articles in English from global media you could refer to:

• Bloomberg: http://goo.gl/mzszF5
• WSJ: http://goo.gl/hsafDZ

Some approximate numbers for new “DaumKakao”:

• Head count: Daum 1600 + Kakao 550 = 2150
• Revenues: Daum $500M + Kakao $200M = $700M
• Profits: Daum $80M + Kakao $60M = $140M
• Market cap: Daum $1.0B + Kakao $2.2B > $3.03B

Various local insights on this deal. Here are some intersting viewpoints:

• Kakao didn’t think they had chance in the global messaging app marketing wars between LINE, Wechat and Facebook. Decided to rather focus on the local market.
• Daum has 20% search market share, and 2nd-largest online portal with close to 90% reach. Kakao has 90% user share among Korean smartphone users. This could be a huge synergy in domestic market.
• Kakao’s user growth has stagnated and LINE is gaining users in even Korean market. IPO wouldn’t have gone smoothly despite growing revenue mainly from game platform business.
• Tencent’s intention is a mystery. There’s a rumor that Tencent wants to compete with Baidu in China as a search engine + portal. Last year’s investment in Sogou backs up this viewpoint.

Finally, some trivial notes:

• Daumkakao’s new revenue goal is $1B.
• Kakao’s chairman Kim Bum-soo is former co-founder of Naver (which owns LINE).
• Naver stock dropped 4% today.

We’re really excited about this news because:

1. It is probably the 1st time in the world that a “mobile company” is actually acquiring an “internet company”
2. Having dominant footprint in both mobile and desktop leads to an huge opportunity in advertising, local, content and commerce business. This could be a preview of Facebook + Whatsapp.