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Kakao’s Aggressive Expansion Worries Many

kakao’s-aggressive-expansion-worries-many

Kakao Corp – which operates South Korea’s most popular mobile messenger Kakao Talk – is diversifying in a wide variety of industries.

Recently, the tech giant has turned to chauffeur services, flower deliveries and even hair salons, driven largely by consumer demand.

Kakao’s strategy is to enter the taxi and banking industries, as well as other sectors lacking mobile services to introduce simple and intuitive apps to innovate the market.

However, Kakao’s aggressive expansion is taking a toll on small firms and self-employed workers.

Kakao’s expansion strategy begins first with market infiltration led by free services, with the company gradually introducing fees and commissions after it surpasses competitors.

Kakao Taxi is a classic example. Kakao initially offered Kakao Taxi as a free service, and only recently introduced a paid membership for taxi drivers after grabbing over 80 per cent of the cab-hailing market.

Kakao Hairshop, a hair salon/nail shop reservation app released in 2016, is also embroiled in controversy over excessive commissions.

According to the Fair Trade Commission, there are currently 118 Kakao subsidiaries, the second-largest number in the country after SK Group.

Only seven years ago, Kakao had 26 subsidiaries when it merged with portal operator Daum Communications Corp. Now, the number has quadrupled.

Kakao garners capital by listing subsidiaries on the stock market, using it to venture into new business fields.

Since there are remaining subsidiaries awaiting listings including Kakao Bank, Kakao Pay and Kakao Webtoon, experts argue that Kakao’s expansion will continue.

The financial and IT business sectors are critical of Kakao’s aggressive expansion, arguing that the corporation, now one of the business giants in the country, lacks consideration for society.

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