South Korean internet giant Kakao is facing multiple investigations over antitrust and securities violations, prompting the company to appoint a new CEO in an effort to turn the ship around.
Shina Chung, previously in charge of the company’s venture arm, will assume the top role at Kakao starting next year after the next board and shareholders’ meeting in March.
I will carry out active and responsible management to meet the expectations and standards of society.
I will not miss this opportunity for change because Kakao does not have much time.
This appointment makes Chung the first female CEO at Kakao, and it is seen as a signal that the company is now in urgent reform mode.
The company’s founder, Beom-soo Kim, had hinted at changes in leadership during an internal meeting on Monday, stating, “Kakao has come to the point where we must try fundamental changes. We will establish leadership to lead a new Kakao.”
Ongoing legal risks at Kakao
Kakao, the company behind the popular super app of the same name, holds a dominant position in services such as messaging and ride-hailing in South Korea. However, this position has come at a cost.
In October, Kakao’s chief investment officer (CIO), Jae-Hyun Bae, was arrested and charged with stock price manipulation after the company’s acquisition of K-pop agency SM Entertainment in August. If Kakao’s CIO and other executives are convicted, the company may be required to sell at least 10% of its stake in its online banking unit, Kakao Bank, as per the country’s financial regulator.
Furthermore, South Korean President Yoon Suk Yeol recently called for a review of Kakao’s taxi-hailing unit, Kakao Mobility, over allegations of monopolistic practices. The claim is that the company is manipulating its algorithms to prioritize assigning rides to Kakao-franchised taxi drivers, who subscribe to Kakao’s paid membership, over non-Kakao taxi drivers.
The country’s antitrust regulator had previously fined Kakao Mobility about $20.3 million for unfair service in February. In an effort to address these issues, Kakao Mobility has announced plans to lower commission fees for taxi drivers and revise its membership scheme next year.
From search engine to super app
Founded in 1995 in Jeju, South Korea, Kakao first started as an internet search engine under the name Daum. However, it has since evolved into a super app, offering a range of services such as KakaoTalk (the country’s most popular messaging app), Kakao Mobility, Kakao Bank, music streaming app Melon, and webtoon platforms Tapas Media and Radish.
Kakao has also been expanding its reach through aggressive M&A deals in South Korea and has set its sights on global markets as well. As of October, the company has over 140 subsidiaries.
Chung, who previously worked at Boston Consulting Group, eBay Asia, and Naver, joined Kakao Ventures in 2014 to invest in local startups. She will now have her work cut out for her as she takes on the role of CEO at Kakao in the midst of various challenges.