Merger and Spin-Off of Hangame: Implications for Internet Portal and Web Game Industry

Abstract

NHN Corp. is a top Internet portal operator in Korea. The Internet giant was created by merging Naver, the search engine company, with, Hangame, the game portal company, in early 2000s. The merger was evaluated as one of the most successful M&A s in Korea. Large user base and good cash flow of Hangame helped the creation of the various services for Naver. Then the portal site secured the market leader position not long after the merger and has held a market share of over 70% since 2011.As the smartphone ecosystem is becoming an important business platform after the advent of iPhone in 2009, the giant portal came to face the challenges for both Internet portal and game businesses. Many cast doubt on the growth of the company’s Internet advertising as the people’s eyeballs move from PC screens to mobiles. Furthermore, new types of mobile games have emerged such as the games that are integrated with Kakao Talk, a free messenger service for mobile devices. Moreover, the negative social perception on the addiction to games drives the game company to deal with the issues of social responsibilities and restrictions by government regulations. Considering these challenges, the current case study discusses the driving forces for the merger and spinoff of the game company. Through this case study, we hope to provide readers with the opportunity to understand the web game and Internet portal industry and have a prospective on the influence of technology and regulation on business.