[Reporter’s Notebook] The Limits and Burden of Kakao’s Growth Model

From Icon of Innovation and Role Model to a Cautionary Tale
Kakao Must Confront Root Causes and Pursue Bold Management Reform

[Image source=Yonhap News]

On the 26th, the plaza in front of Kakao's headquarters 'Ajit' in Pangyo, Gyeonggi Province, was dyed black instead of the company's symbolic yellow. Despite the perceived temperature of 32 degrees Celsius, about 300 Kakao employees wearing matching black T-shirts gathered to raise their voices in unison. They took collective action as some subsidiaries running deficits proceeded with voluntary retirements. The union stated that the intensified management difficulties this year are "not a temporary financial crisis but the result of reckless business expansion," and warned that "without a change in direction, the crisis will repeat."

On-site, unions from IT companies such as Naver, Nexon, NCSoft, Smilegate, and Hancom were fully mobilized. This was to share the growing sense of employment crisis amid worsening performance. Even some HR staff from other companies were noticeable. They see Kakao's voluntary retirement as a signal of industry-wide restructuring. Although hiring has been closed, even large platforms that were previously distant from layoffs have started voluntary retirements. A game company union member hinted, "Kakao, as a large company, has such a significant influence on hiring policies and welfare that its cases are included in collective bargaining language," adding, "Others came to gauge the atmosphere as well."

Until a few years ago, Kakao was regarded as an icon of innovation. KakaoTalk, which debuted in 2010, accelerated the mobile era by connecting everyone through a single app. Subsequently, Kakao built an empire by spinning off its headquarters' business divisions. The model was to leverage the competitive advantage of the powerful KakaoTalk platform to grow businesses and then go public (IPO). Many of the spun-off companies even achieved 'ttasang' (doubling the IPO price and hitting the upper limit on the first day). Employee benefits such as stock options and 'Nolgeum' (Friday off system) were envied. There was a time when companies competed to hire Kakao alumni.

However, Kakao has fallen from being a role model to a cautionary tale. It is now accompanied by words like conflict and noise. There is also a perception that it symbolizes sprawling business expansion and management confusion. All problems began because the leadership, which originated from a startup group, failed to evolve to suit a large conglomerate. A 15-year veteran employee from a small to medium IT company met on-site said, "The management always says Kakao is the role model," but added, "What remains is that when a new business is spun off and it doesn't go well, those people quietly disappear." Kakao has already become a disliked company due to controversies over split IPOs and stock price declines. When combined with cold views from internal employees and the industry, even if the financial crisis is resolved, recovering from damage such as corporate image decline will not be easy. Kakao's headquarters has provided financial support to save its subsidiaries, but that is not all that needs to be done. The root causes must be faced directly, and bold management reforms must be introduced.

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