Bo-eun leads the digital content team. She has covered foreign affairs, North Korea, tech, economy and gender issues at The Korea Times. She did a short stint at the South China Morning Post in Hong Kong, where she obtained a new perspective on news production and life. Small sources of joy for her are lounging in the sun, having a good latte and swimming.
Why did Kakao back out of eBay acquisition race?
By Kim Bo-eun
By Kim Bo-eun
Questions are being raised over why tech giant Kakao decided to pull out of the race to acquire eBay Korea, after applications for the preliminary bid were filed on March 16.
As Kakao has been seeking to scale up its e-commerce businesses, thoughts were that it would join the race, with company officials acknowledging its intent to participate in the bidding process. Against earlier expectations, Shinsegae, Lotte, SK Telecom and private equity fund (PEF) firm MBK Partners made the cut in the preliminary bid.
Regarding Kakao's “departure,” sources said the decision was aimed at focusing on its KakaoTalk-based commerce model. Simply put, it has its own strengths to successfully manage digitally driven business models.
The mobile messenger-based model has immense growth potential with over 45 million monthly active users. Gift services on Kakao have become widely popular, securing 20 million users as of the end of last year.
Kakao is also offering live commerce services and services under which KakaoTalk users can purchase certain products at discounted prices in the case they gather more buyers.
Annual transactions under Kakao's commerce business was amounting to 4.6 trillion won, but this falls largely short of its competitors given it is a late entrant into the e-commerce market. EBay Korea operates open market platforms Gmarket, Auction and G9.
Kakao also has previous experience of partnering with an open market, which did not see much success. It swapped shares worth 300 billion won with SK Telecom in 2019, and enabled KakaoTalk users to access SKT's open market 11 Street in June the same year. But the service was scrapped shortly, after it failed to attract attention.
Means of access to open markets are also seen to have swayed Kakao's decision. Naver, as the dominant portal site on which most online shoppers search for items, serves as the platform that connects consumers to vendors on various open markets.
This means if an online shopper purchases an item on one of eBay Korea's open market platforms, they pay a commission fee to Naver. Acquiring platforms that entail paying a commission to its rival portal would not be in Kakao's interest.
Kakao would likely have taken into account the costs and effects of acquiring eBay. The company has presented its worth at 5 trillion won. Kakao said it could not comment on the preliminary bidding for eBay Korea.
“Kakao operates its own platform when it comes to e-commerce. Given it has taken recent measures such as opening a separate shopping tab on KakaoTalk, Kakao is set to implement a differentiated model,” an industry official said.
Data from Statistics Korea showed eBay accounted for 12 percent of the total e-commerce transactions worth 161 trillion won here last year, while generating sales of 1.3 trillion won and an operating profit of 85 billion won from commissions collected from items sold on its open market platforms.
EBay Korea's sales account for 11 percent of eBay's overall revenue, and eBay Korea's performance has shown steady growth since 2015. Sales surpassed 1 trillion won for the first time in 2019, up from 799.4 billion won in 2015. EBay's Korean unit is owned 100 percent by eBay KTA ― the U.K. subsidiary of the e-commerce company, which in turn is wholly owned by eBay.
SK Telecom could become the No. 1 player in the e-commerce market if 11STREET takes over eBay Korea. With the acquisition, SK Telecom is estimated to take up 18 percent of the market, with 30 trillion won in annual transactions.
MBK Partners acquired offline discount chain Homeplus in July 2015. The private equity firm appears to be seeking an online shopping channel to create synergy with Homeplus.
Shinsegae is seen as less likely to carry out the deal, given its recent partnership with Naver, under which the entities swapped 250 billion won in shares. They are seeking to work together in online and offline retail and sales. Lotte is seeking ways to boost its online shopping channel, as it existing e-commerce unit Lotte On has been struggling, but chances are low for Lotte to end up with the bid as the group's overall financial soundness isn't that strong or stable.