Daums Lycos venture turns out to be ill-fated

Daum founder Lee Jae-woong

By Kang Seung-woo

The dream of overseas expansion for Daum Communications has faltered, as Korea’s second largest portal sold off its U.S. subsidiary.

Daum announced Monday that it has sold Lycos to Ybrant Media Acquisition at $36 million (42.6 billion won).

Lycos is a U.S.-based search engine and draws 16 million visitors on a monthly average, according to Daum.

With the sale of the U.S. search engine and web portal, Daum has finished clearing up its key overseas operations.

DAUM CEO Choi Se-hun

Both sides reached the agreement on Saturday that will see Daum yield its ownership of Lycos which includes the website, online games, free web publishing service and free home page service, to the American media firm.

It was a bitter end to Daum’s overture made despite negative outlooks from analysts. Daum and its founder Lee Jae-woong acquired the troubled Lycos for $95 million in 2004 from Terra Networks of Spain, hoping to leverage the large online advertising market and the increasing broadband population in North America.

Analysts had warned Daum that its U.S. venture would not be successful, pointing out the company’s lack of products to penetrate the U.S. market and Lyco’s demise in popularity.

At that time Lycos was the seventh-largest portal in the United States on a visitor basis but controlled just 0.2 percent of all search traffic.

The advice fell on the deaf ears of Lee, who pressed ahead to buy the U.S. Internet company, vowing to bring it back to black within two years on the basis of Korean-style Internet community services and an upgraded search engine.

However, Lycos, which had already seen its popularity falling behind other search sites and portals such as Google, Yahoo and MSN, proved to be a failed reclamation project and Lee’s bailout attempt fell flat.

In related moves to reduce losses from overseas operations, Daum, which was once in negotiations with telecommunications giant KT to sell the affiliated company, sold its subsidiaries: Quote.com and Wired News to Interactive Data Corporation (IDC) for $30 million in 2005 and Conde Nast for $25 million in 2006, respectively.

Daum plans to invest in mobile services, map and geographic information programs and a social network service (SNS) in the near future.

The web portal firm was established in 1999 and took off fast, taking a lead in the Internet market with the success of its e-mail and online community services.

With the focus of competition shifting to search marketing and online games, Daum has struggled to keep up and since then, it has conceded the top-dog spot to Naver, operated by NHN.