Kakao's Kim Beom-su Hampered by '100 CEO Development' Program

Aggressive Investment and M&A Drive Octopus-like Expansion
57 Affiliates Added in 9 Months

[Asia Economy Reporter Kang Nahum] "If we can grow 100 Chief Executive Officers (CEOs), that is success."

This is the management philosophy emphasized by Kim Beom-su, the first-generation founder and chairman of Kakao's board, since establishing Kakao's predecessor, i-Welab. This management philosophy, which received applause from younger entrepreneurs, has now encountered the contemporary spirit of the times called ‘co-prosperity.’ It has faced public criticism over its ‘monopolistic position’ and the harsh blade of regulation.

According to the related industry on the 4th, the current criticism of Kakao's ‘octopus-like expansion’ is interpreted as a result of Chairman Kim's management philosophy. The number of Kakao's domestic affiliates, which was 101 at the end of the third quarter last year, increased to 158 by the end of June, just nine months later. Since the number of affiliates exceeded 100, the original management goal of ‘nurturing 100 CEOs’ has also been achieved.

Representative figures who have grown as CEOs through spin-offs include Ryu Young-jun, CEO of Kakao Pay, and Yoon Ho-young, CEO of Kakao Bank. Kim Jung-soo, co-CEO of Yanadoo, Lee Seung-yoon, CEO of Radish, and Kim Chang-won, CEO of Tapas Media, are considered individuals who have grown with Kakao's investment.

Kakao's effective strategy for expanding its business was aggressive investment and mergers and acquisitions (M&A). After acquiring companies, those with high growth potential are spun off from the headquarters and made independent. The spun-off affiliates have also pursued M&A to grow further.

Kakao had the highest increase in affiliates among large business groups in the first half of this year. It newly incorporated 13 companies as affiliates, including Yewon Books, Three Y Corporation, Studio 8, Pi Digital Healthcare, Pretty TVG, Studio Havana, AdX, N-Play Studio, Nexelon, N-Croquis, Code Dog, S-Camp, and Antenna. The fields were diverse, including game software development, film and broadcasting program production, and publishing.

Concerns about Kakao's octopus-like expansion have been raised for several years. Each time, Chairman Kim argued, "The common essence of what Kakao is doing is ‘making it convenient for users,’" adding, "Various communities are growing according to their own strategies while maintaining this essence, and Kakao's business essence and growth engine is to find points where technology can change the world and implement them one by one."

However, just as profit generation is the reason for a company's existence and its essence, Kakao has been thorough in the ‘platform company's monetization formula.’ A representative example is Kakao Mobility. Kakao T, operated by this company, was noted as a ‘free app’ that conveniently called taxis in its early days. Later, it raised its market share to 80%. Recently, Kakao Mobility tried to raise taxi smart call fees based on this market share but faced backlash and eventually restored the original rates.

The ‘national messenger’ KakaoTalk is experimenting with video advertising services. It has been conducting beta tests of ‘expandable video ads’ targeted at small advertisers since recently. This is a strategy to maximize advertising revenue. This is also possible because KakaoTalk holds a monopolistic position with 46 million users.

Kakao's growth method has now faced a crisis. The Fair Trade Commission has begun reviewing revisions to M&A screening standards reflecting the characteristics of platform companies. The commission pointed out, "Each corporate merger case does not have competitive restrictions under current screening standards, but it leads to complex dominance across multiple markets, so preparation for this is necessary."

Professor Yoo Byung-jun of Seoul National University Business School said, "It is natural for authorities to impose regulations when signs of monopoly and oligopoly appear," adding, "Especially in setting service prices, it should be at a reasonable level that the public can accept, and I think Kakao was somewhat inexperienced in adjusting prices."

This content was produced with the assistance of AI translation services.