[Photo] Daum Kakao announces Merger

Sae-Hoon Choi, CEO of Daum Communications (left) with Sirgoo Lee, co-CEO of Kakao

Two leading South Korean tech companies, mobile messaging and service provider Kakao Corp. and Web portal Daum Communications Corp., announced today to merge into a joint corporation, Daum KaKao. The two companies said they wanted to integrate their core capabilities in order to build a global platform.

KaKao operates the most popular mobile messaging app, KaKao Talk, in South Korea. With the first version of KaKao Talk launched in 2010, the company reported $203 million in total revenue in 2013, with $59 million in net profits. It’s revenue sources include revenue shares from third-party mobile games on the platform, emoticon sales, revenue shares from mobile music service KaKao Music and m-commerce platform KaKao Style, among others.

Although it began international expansion as early as in 2011 by establishing a branch in Japan, it would be beat by South Korean Internet giant Naver Corp., the South Korean Google, in Japan with a similar mobile messaging app LINE and the same business model with KaKao Talk. LINE made $338 million in revenue in 2013, 67% higher than KaKao’s in the same year.

KaKao Talk, available in 14 languages, has had 145 million registered users from 230 countries, according to the company. LINE claimed it had had over 350 million registered users earlier this year.

Both LINE and KaKao Talk currently are exploring Southeastern Asia. LINE is also actively promoting its services in China while KaKao seems to want to avoid the market which is dominated by mobile messaging app WeChat, whose parent company is Chinese Internet giant Tencent who acquired about 14% stake in KaKao in 2012.

The deal values KaKao Corp. at 2.3 trillion won ($2.2 billion), according to Bloomberg. KaKao Corp. previously had a plan to go public in 2015. Daum Communications Corp., established in 1995, got listed on KOSDAQ in 1999. The deal will be completed by October 1st.

The joint corporation will have a total of 3200 employees with 2600 from Daum and 600 from KaKao.