South Korea’s Megacorp and super app: Kakao’s paths to market dominance

Abstract

This paper traces Kakao’s corporate strategies—with a focus on conglomeration and valuation—in order to trace how the company’s trajectory led to its current status as a near-monopoly. Starting as a chat app which now has 43 million active users in South Korea, Kakao became a conglomerate by expanding its operations across different business sectors such as transportation, entertainment, fintech, etc. Kakao’s diversification of businesses and conglomeration should be understood in relation to its corporate strategies and forms, not as the natural outcome of technological innovation. Aspiring to become an entertainment conglomerate, not just a platform company, Kakao has expanded the scope of its business by acquiring start-ups and competitors, spinning off in-house startups as subsidiaries, and making strategic mergers between subsidiaries. Kakao has also placed greater focus on boosting valuation rather than profitability, a crucial strategy for leveraging high valuations to consolidate its market dominance. Tracing Kakao’s affinities to chaebol, I further propose a framework for thinking about the relationship between the state, tech, and finance. Collusion between the state and tech has occurred through deregulation, which has allowed tech companies to become financial capital.