Daum and KakaoTalk merge: Getting the message; The latest tie-up between messaging apps and broader online firms

Daum and KakaoTalk merge: Getting the message; The latest tie-up between messaging apps and broader online firms

May 31st 2014 | From the print edition

IN THEORY Daum, an internet portal in South Korea, is acquiring Kakao, a startup whose messaging app, KakaoTalk, is on most of the country’s smartphones. In practice, it is the other way around: the merger unveiled on May 26th gives Kakao’s shareholders the lion’s share of the new company, although Daum has more revenue, profits and staff, plus a stockmarket listing. The deal, valuing Kakao at $3 billion-odd, shows that messaging apps are still hot property.

Hottest of all is WhatsApp, a Silicon Valley startup with 500m users, which Facebook bought in February for a staggering $19 billion in cash and shares. (This week Facebook asked the European Commission to review the takeover, rather than risk antitrust inquiries in several countries.) The same month Rakuten, a Japanese internet firm, paid $900m for Viber, founded by Israelis but based in Cyprus. Alibaba, a Chinese online giant, paid $215m for a slice of Tango, another Silicon Valley firm, in March. Tencent, Alibaba’s rival, owns WeChat, which has almost 400m users. It also runs QQ, an older messaging service, and has a stake in Kakao.

The South Korean deal means yet another pairing of a broader internet company and a messaging startup. The youngsters seek extra heft—for instance, like Kakao, in marketing. The oldies (if you can call internet firms that) get a trendy mobile product. Daum doubtless hopes that KakaoTalk, which is installed and registered on 145m devices, will help it combat Naver, South Korea’s leading portal. South Koreans do not just use the app to chat: it is also a popular platform for mobile games, from which Kakao makes most of its money, and for sending both digital and physical gifts. Naver, too, owns a messaging app, Line, with 400m users, but it is based in Japan.

The market is highly regionalised: most friendships are local, after all. Kakao has been trying to break out of South Korea, where it is running out of room. It is concentrating on Indonesia, Malaysia and the Philippines, but it faces stiff competition from Line and WeChat. Which app if any will conquer the globe is an open question—though WhatsApp, with most users and Facebook’s billions, looks the most powerful. Perhaps none will. People may end up using several—as they did with desktop messaging services in the internet’s first wave.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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