Korea’s platform economy is entering a moment of quiet reckoning. As legacy internet assets lose strategic gravity, artificial intelligence and proprietary data are becoming the new centers of value. Against this backdrop, a possible separation between Kakao and Daum offers more than just a corporate transaction. It provides a clear signal of how Korean tech leaders are recalibrating growth, relevance, and competitiveness in the AI era.

Kakao Confirms Daum Divestment Talks with AI Startup Upstage

Kakao is reportedly finalizing negotiations to sell AXZ, the operating company of its portal site Daum, to Upstage, a Seoul-based generative AI startup. The move marks a potential end to Kakao’s 11-year ownership of one of Korea’s most recognized legacy portals and signals a sharp pivot toward artificial intelligence and core platform consolidation.

According to multiple Korean financial and ICT industry reports, Kakao has reached a broad agreement with Upstage and is currently coordinating valuation and equity terms. The transaction is expected to take the form of a share-swap, transferring Kakao’s 100 percent stake in AXZ in exchange for a minority equity position in Upstage.

If completed, the deal will formally separate Daum from Kakao for the first time since the two companies merged in 2014.

Daum’s Divestment: A Structural Shift in Korea’s Platform Economy

Kakao spun off Daum as AXZ in May 2025, following a gradual restructuring that began in 2023 when the Daum division became a content-focused in-house company (CIC). As of December 1, AXZ officially assumed Daum’s core services — news, search, shopping, café, email, and Tistory — consolidating the platform into a standalone entity with annual revenue of approximately KRW 332 billion (~ USD 246 million).

Despite Daum’s historic presence, its domestic portal share has fallen below 3 percent, reflecting Korea’s broader market shift toward mobile-first and AI-integrated ecosystems. The planned sale fits Kakao’s strategy under CEO Jeong Shin-a to streamline non-core businesses and focus on AI and KakaoTalk, the company’s primary growth engines. Kakao has already reduced its number of affiliates from 132 to 98, with a goal of around 80 by year-end.

The Daum divestment is not a retreat for Kakao but a realignment — offloading legacy operations while freeing capital and focus for new AI-driven ventures.

Strategic Motivations on Kakao and Upstage

Industry sources familiar with the talks described the transaction as nearing completion. One ICT-sector insider told The Electronic Times that

“The two parties have essentially completed discussions and are preparing for an announcement.”

For Upstage, which plans an IPO by late 2026, acquiring Daum offers both immediate data infrastructure and steady revenue — assets that are critical for a fast-scaling AI firm. An investment banking official explained,

“Upstage wants to secure Daum’s accumulated data — particularly its Café and Tistory communities — to train large language models (LLMs) and strengthen product-market applications.”

Upstage, founded in 2020, is best known for its Solar LLM series, including the Solar Pro 2 model with 31 billion parameters. The company is one of only five participants in Korea’s “National Representative AI” project and the only startup alongside giants such as Naver and SK Telecom. Recent bridge funding valued Upstage at KRW 740 billion (US$550 million), with Amazon and AMD participating, while its IPO valuation is projected to exceed KRW 2 trillion.

Neither Kakao nor Upstage has confirmed the sale, maintaining that discussions are ongoing.

AI Firms Eye Legacy Platforms for Data Edge

The potential Kakao – Upstage deal highlights a new phase in Korea’s platform restructuring: established tech conglomerates are unloading legacy web operations, while AI startups are acquiring them as data-rich training grounds for large models.

Daum’s vast archive of search logs, forums, and blog content represents one of Korea’s most extensive pools of user-generated data — a valuable resource for training AI systems with nuanced Korean-language comprehension. If Upstage integrates Daum’s assets into its LLM development pipeline, it could gain a localized advantage over foreign AI competitors.

At the same time, Kakao’s divestment reflects an industry-wide correction: major Korean internet players are refocusing on profitability, AI scalability, and strategic coherence rather than maintaining sprawling business portfolios. Similar trends have appeared at Naver and SK Telecom, both of which are channeling capital into AI infrastructure and global partnerships.

Kakao – Upstage Deal: Reshaping the Logic of Korean Tech Growth

If completed, the sale of Daum will mark the symbolic end of Korea’s first-generation portal era and the start of a new data-driven one. For Kakao, it reinforces a disciplined shift toward AI platforms and core monetization layers. For Upstage, it could transform the company into a unicorn-level contender capable of competing in the global LLM race with a distinct Korean data advantage.

The outcome will signal how Korea’s digital economy is evolving — where legacy internet assets are no longer liabilities, but the raw material for AI’s next leap.

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