Kakao's expansion raises anxieties over potential monopolization

Kakao founder Kim Beom-su looks at the company's iconic character Ryan, at its headquarters in Seongnam, Gyeonggi Province, in this 2019 file photo. Courtesy of Kakao

By Kim Jae-heun

Kakao started as a small startup, making only 34 million won ($28,923) in annual revenue in 2010. In only 10 years, this figure has skyrocketed to record the company's all-time high of 3.08 trillion won ($2.62 billion).

Its mobile messaging application, Kakao Talk, is used by 50 million people, or 96 percent of Korea's population. In other words, the entire country uses the messaging app.

Taking advantage of its vast user base, Kakao has aggressively expanded its information technology services into various other fields, such as making reservations at hair salons, signing up for language classes and sending payments online. It is almost harder to find a field that the IT giant isn't providing services in.

However, people are starting to feel uncomfortable about Kakao, as it is slowly raising the prices of its services in the markets that it dominates.

Recently, Kakao Mobility decided to increase the fee for a “smart call” from a maximum 2,000 won ($1.70) to 5,000 won ($4.26). Smart call is Kakao Mobility's service that hails a taxi for an app user more quickly at busy times. Kakao Mobility is an affiliate of Kakao Group that provides various local transportation services via nearly a dozen different smartphone apps, including Kakao T Taxi. Kakao said the smart call feature motivates taxi drivers to respond to customers' calls faster.

However, both Kakao Mobility users and taxi drivers are upset that the smart call fee change amounts to a price hike. Four taxi unions here took immediate action to protest Kakao Mobility, convincing the company to back away from the new fee system.

Kakao also changed its fee system for bicycle rentals via the Kakao T Bike app. Instead of charging a standard fee for the first 15 minutes of use, it decided to charge 140 won to 150 won per minute. The company explained that the new fee system is designed to lower costs for short-distance riders, but customers complained that the system only benefits those riding Kakao bicycles for less than 10 minutes.

Industry sources say that these rising costs are only the beginning of Kakao's upcoming monopolization of nearly all commercial services in everyday life.

Kakao pulled a trick with its taxi-hailing service, which already holds an 80 percent market share, and once it starts dominating other fields of the transportation business, they claim it will do the same.

This kind of monopoly-oriented business strategy is what global firms like Google and Amazon adopted, to the consternation of U.S. users, lawmakers and the Biden administration. After making users dependent and coming to dominate the market through a new IT service, they then start charging the users more and maximizing their profits.

Amazon has been raising the annual fees for its combined membership service Amazon Prime, which started at $79 and is now up to $119. The membership gives users access to services such as free shipping for online orders and the content on its OTT platform.

However, last October, in the U.S. Congress, the House subcommittee on antitrust, commercial and administrative law started a 16-month investigation and released a major report criticizing the monopolistic practices of Amazon, Google, Facebook and Apple. Then in June of this year, five bipartisan bills were introduced in the Congress to limit the monopoly power of the tech giants.