Traditional small businesses still unsatisfied with Kakao - Korea Times
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Traditional small businesses still unsatisfied with Kakao

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A screenshot from Kakao Mobility's website
A screenshot from Kakao Mobility's website

51% of survey respondents agree with gov't regulations of Kakao

By Kim Jae-heun

Kakao has decided to halt its aggressive business expansion and withdraw some of its controversial marketing plans, which were feared to affect traditional, independent mom-and-pop stores and local services, but the criticisms remain.

According to local pollster Realmeter's survey, 51 percent of 500 respondents agreed with the government's new regulations for big tech firms Kakao and Naver. Only a little over 35 percent of respondents said that they see the new regulations to be excessive.

IT giant Kakao fell out of public favor last month as its mobility business had introduced a "smart call" service intended to help customers hail a taxi faster if they pay more. Many people argued that implementing this service would end up making taxi drivers slow down their regular non-premium service for customers trying to hail taxis, leading to a de facto increase in fares.

Still, many existing independent mom-and-pop retail stores and local transportation and delivery services seem to think that the government's regulations don't go far enough.

"It is only an ad hoc measure to cover up for how the company's ways of doing business had provoked public ire. Kakao Mobility has decided to discontinue its food and flower delivery services, not because it cares about actual people in those local industries, but because they don't make a profit," a source in the transportation service industry said. "Its new marketing strategy to take less fees from designated drivers will end up taking away workers from other small and medium-sized companies and again lead to Kakao dominating the local designated driver service market."

Other voices are making a larger argument that Kakao should seek more fundamental changes to its business model. Kakao grew explosively based on its free instant messaging app service, and many people want the IT giant to go back to pursuing such innovative business ideas as it did at that time.

"The main reason that Kakao is coming under harsh criticism is that it is biting into the market share of independent, local small businesses and services with its platform dominance. If it continues to seek profit through this model, Kakao will clash with all of the business sectors it enters," an IT industry source said.

Kakao owned 158 affiliates around the world as of last June. It is almost harder to find a market that the IT firm has not entered into. People have been using the term "Kakao-ization" here, making reference to "Amazonization," which refers to the massive disruption in the economic, affecting small independent retail shops, local delivery and other services and even media content, as a result of Amazon's monopolization of these sectors.

Kakao Mobility aims to go public next year. Meanwhile, an investigation of Kakao Mobility over allegations that it manipulated the taxi hailing system in favor of its in-house taxi subsidiary, Kakao T, is still ongoing. Kakao needs to make a breakthrough to repair its tainted public image and change its ways of doing business.

Kim Jae-heun

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