Daum-Kakao's uneasy task

By Kim Yoo-chul

Markets see the merger between Daum Communications and Kakao as a marriage of necessity by two weak players to fight the dominant Naver.

So can the double team dethrone Naver's indisputable leadership?

By size, the answer is a definite no. In market capitalization, Naver is 10 times larger than the two combined.

The key point lies in subtlety on two points.

First, the Daum-Kakao team is trying to redefine the rules of engagement in media content and software.

Kakao's role is important because it has been successful in impressing users and markets by releasing competitive and customized mobile messaging services.

Second, it is looking for a larger playing field outside the domestic market.

"Some people say the Daum Kakao team wants to play against Naver on the domestic market," said a Daum official by telephone. "That's not it. We are going global."

The official cited the success of Naver's Line service and the failure of CyWorld.

"We want to take on Naver in this new environment where new rules are applied," he said.

Naver didn't appear to be taking the two very seriously.

"Competition is always good," a Naver official said.

He said that Daum Kakao team will give Naver a challenge it needs, adding the deal could help advertise Naver's Line.

The official turned serious, saying the mobile messaging application business is now a winner-take-all market.

Of course, here is the catch.

Kakao has yet to prove its viability because its' not doing well in its key gaming and music service businesses.

Then, the size also may act as a hurdle.

Kakao has 130 million users, while WhatsApp, WeChat and Line have 400 million, 600 million and 420 million, respectively.

"The new Daum Kakao management will focus on increasing its user base," said an official at Daum.

Last year, Kakao advanced in countries in the Southeast Asian region such as Vietnam, Malaysia, Indonesia and the Philippines but it has been struggling lately.

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