[INTERVIEW] Evolving from platform operator to facilitator

Danggeun Market Co-Founder and Co-CEO Kim Jae-hyun poses during a recent interview with The Korea Times at its head office in Seocho-dong, southern Seoul. Korea Times photo by Choi Won-suk

Softbank-backed unicorn startup says it's in no rush to go public

By Kim Yoo-chul

The way consumers purchase products has changed drastically over the past few decades, from door-to-door salesmen and billboard ads to digital advertisements.

One noticeable trend seen both in the e-commerce and retail industries during the COVID-19 pandemic is the meteoric growth of online consumer-to-consumer (C2C) platforms. As a marketing term, C2C e-commerce is considered a model in which one consumer sells goods or services to other consumers online. It has become one of the four mainstream e-commerce business models today.

Despite the pandemic, business-to-consumer (B2C) marketplaces were displaying sound financial performance with Amazon and other top-tier B2C platform operators enjoying revenue and profit growth. However, a lesser known development has been the spectacular rise of C2C marketplaces as the amount of transaction volume, largely involving secondhand products, has soared.

"I am a true believer in the power of in-person interactions. Location-based in-person communities offer a chance for people to share their preferred habits, to learn new things, to meet and connect with others who have the same objectives. Danggeun Market is aiming to evolve from a platform for secondhand goods to a trusted facilitator connecting people according to location and communities," its co-founder and co-CEO Kim Jae-hyun said in a recent interview at the company's head office in Seocho-dong, southern Seoul.

The key responsibility of a facilitator is to build up relevant processes and to create conditions in which parties involved could be satisfied to help them achieve their desired output. Simply put, what a facilitator does is to come up with a plan, then guide and handle various group events to make sure that a group's common purposes are met satisfactorily with a high level of participation, said Kim.

By stressing that in-person communities are the core factor behind an improved awareness of brand advocacy, the executive said Danggeun Market is on track to expand its business scope to ensure that its users are functioning well on its mobile platform.

Currently, unlike Coupang and Woowa Brothers, which are engaged in commerce and operate a quick-delivery service, Danggeun Market offers accessibility for consumers to fresh local produce delivery and daily-necessity services including cleaning, education and real estate brokerage, all within a four to six-kilometer, cutting costs in the process.

"Danggeun Market is still viewed as an effective tool for secondhand goods. But we are expandable and stretchable as we have a very solid user base. When a company spends continuously in the growth of their community members, their relationship with that company will get much stronger," the co-CEO said.

Facebook Marketplace, for example, which Danggeun Market believes is its bigggest competitor, has put a higher priority on targeting transactions among people in the same local communities without charging sellers commission fees, because it is dependent upon the profit generated from third-party advertisers attracted to heavy-traffic sites.

The co-CEO said he also plans to expand ad-based revenue stream models that will be in sync with its mobile payment transaction service, also known as Danggeun Pay.

Danggeun Market, the publisher of South Korea's hyperlocal community application, Karrot, has 30 million cumulative users as of August this year and 18 million monthly active users. It is one of the most preferred apps in terms of daily frequency and visits, followed by its chief peers Naver Cafe and Band, the company said in a statement to The Korea Times.

"As the COVID-19 pandemic is nearing the end, I would say a new order will prevail in the tech startup industry. That means the industry itself will display rationalization with a few qualified market players having more opportunities and receiving investors' attention. We are positioned to claim our spot as one of the top beneficiaries in the sector in the post-COVID era given our strengths in brand awareness and unique but competitive market positioning," said the co-CEO.

In no rush to go public

Kim said Danggeun Market is not in hurry to go public and added it has no plans to launch extra fundraising campaigns after it succeeded in raising $162 million in a Series D round of funding with a valuation of $2.7 billion. So far, Danggeun Market, categorized as a unicorn startup, raised a total of $205 million.

A captured image of Danggeun Pay / Courtesy of Danggeun Market

"We have enough cash holdings. Danggeun Market has no plans to launch additional cash-raising campaigns, because there is no need to do so. Regarding investors' attention over the company's possible initial public offering (IPO) plan, I would say we have to pick the best IPO timing. An IPO will come later," Kim responded.

Money raised from the series of fundraising campaigns will be used for service improvement, business diversification, research projects and investments in machine-learning technology, AI and hiring software developers.

"Once again, we have to convince investors that money raised is being spent properly and strategically for the growth of the company," Kim added.

Investors that participated in the recent fundraising campaign include Yuri Milner's outfit and Aspect Management. Other investors that participated include Altos Ventures and Goodwater Capital. Danggeun Market has become the latest Korean unicorn backed by the venture arm of SoftBank.

Now, the company is focusing more on profitability as it recently decided to collect commissions from companies _ not small merchants and/or users _ for the promotion of their service offerings via Danggeun's web platform. It reported 35.2 billion won in operating losses last year after generating 25.7 billion in revenue.

"Danggeun Market's local ad sales business is on a growth trajectory. Specifically, the company has a greater interest in strengthening its online commerce-driven revenue structure," Kim said.

Just like representative South Korean startups such Coupang and Krafton, Danggeun Market is ready to expand internationally, further, because of its needs for a bigger market. Its service is currently available in four countries including U.K., the U.S., Canada and Japan.

"We are seeing active monetary transactions in some populated cities of Canada and United Kingdom. Canada is viewed as a good starting point before expanding to the U.S. We don't place much value in the size of a country, because we offer more value to cities when deciding to expand, internationally," he said, adding Toronto, one of the most populated cities in North America, is an ideal place for Korean startups.

Danggeun's distinctive feature is that it only shows people listings from sellers located within a six-kilometer radius in Korea and 10 miles (about 16 km) in the United Kingdom to provide hyperlocalized community services.

When asked about the next foreign market, Kim said the company is eyeing ASEAN. However, he stressed that Danggeun Market's current priority is to achieve meaningful results in North America and Japan.

"Yes, the ASEAN market is looking attractive as there is a lot of demand for Korean culture. Danggeun could serve as a facilitator connecting people to their neighbors and communities with those who have similar appetites and tastes. We hope to advance there in the near future. But right now, we do want to achieve meaningful success in the most-competitive North American market," Kim said.

It is testing its app in New Jersey and Manhattan. Similar apps are being tested by Facebook and Nextdoor.