Kakao to separate Daum as 'company-in-company'

Kakao will separate its portal business Daum on May 15 as the search engine struggles to compete with dominant competitor Naver. Daum will be run as a "company in company," or CIC, in which a company allows a certain business unit, in this case...

Kakao will separate its portal business Daum on May 15 as the search engine struggles to compete with dominant competitor Naver.

Daum will be run as a "company in company," or CIC, in which a company allows a certain business unit, in this case, Daum, to independently run its business within the mother company, much like a corporate venture.

The system will allow Daum to have a separate chief executive, employees, benefits and finance system from Kakao. However, it does not mean Daum is becoming a subsidiary of Kakao.

The decision comes nine years after Kakao and Daum merged in 2014.

Before Kakao's announcement on Thursday, there were rumors that Kakao will sell the portal as the merger failed to create synergy. Sources say that Kakao may sell Daum if it fails to create tangible profits after making it a CIC.

"Kakao decided to run Daum under the CIC system to promote the values of Daum's services as a search engine and content distribution platform," Kakao said in a statement. "By securing an independent organizational structure, efficient and quick decision-making process can be established and increase the service's competitiveness by setting clear goals."

Daum CIC will accelerate the promotion of its main businesses in search engines, media and online communities. It will also release new services related to artificial intelligence to keep up with changing trends.

Hwang Yu-ji, the current head of Daum's business division, is appointed as Daum CIC's CEO.

Kakao also implemented the CIC system for its commerce business unit last August to promote its services in the e-commerce market.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]