Kakao linking online with offline

Korean IT companies are no longer confining themselves to doing business online and are increasingly connecting with actual businesses in a trend known as online to offline, or O2O.

Daum Kakao has become one of the latest IT companies to make the move, signing an agreement on Wednesday with the Seoul Taxi Association and Smart Card Korea, a public transportation payment service provider, to launch Kakao Taxi.

Although Daum Kakao did not give a specific date for starting the Kakao Taxi service, it is expected to be sometime in the first quarter of next year.

Similar to Uber, Daum Kakao’s taxi service will help customers easily find a nearby cab using the mobile messenger app.

This is a huge step for Daum Kakao because until now, its businesses have been limited to the virtual world. Daum is the nation’s second-largest Web portal company and Kakao is the nation’s leading mobile messenger provider.

But when the two companies merged in October, co-CEO Lee Sirgoo promised to expand the business scope of the newly formed Daum Kakao to include O2O, with the goal of connecting everything and everyone.

When it starts, Kakao Taxi will be the first new service by the company since the merger on Oct. 1.

“When monitoring how new value is created on the Internet, it all starts with new connections,” Lee said at a press conference marking the union of the two companies. “When a connection that didn’t exist earlier is made, a new service is created and through this new service, users feel new value.”

Before the merger, Kakao dabbled in O2O. In August, the IT company launched a service called Yellow ID that promoted small businesses through its messenger app KakaoTalk.

Yellow ID publicizes the products and services of small entrepreneurs by sending customized messages to KakaoTalk subscribers.

But the service was considered limited because it didn’t have a function that allowed subscribers to place orders immediately after seeing a promotion on the messenger.

Naver took a similar step this week, announcing on Wednesday its new O2O service Shop Window, the first O2O business by the nation’s No. 1 Web portal.

Shop Window introduces products manufactured by small offline stores selected by Naver. The product or services from the small businesses can be purchased through a mobile device.

Products are placed in three major categories - fashion, agricultural and fishery goods, and home decorations.

“If 2014 was the year when the Internet of Things [IoT] became publicly recognizable, 2015 will be the year when the realization of IoT services such as O2O will rise,” said Seong Min-hyeon, a KT Economics and Management Research Lab (Digieco) researcher.

Currently, the Korean O2O market is estimated to be worth 15 trillion won ($13.6 billion), including delivery services where orders are placed via mobile apps.

The delivery O2O market, worth about 2 trillion won, is considered the most successful example of O2O in Korea.

KT’s research lab estimates that the market could soon be worth 300 trillion won.

The recent increase in mobile payment services including Kakao Pay is expected to help boost the O2O market. According to a recent study by the Bank of Korea, mobile payments as of the third quarter are estimated to have grown 5.5 percent year-on-year to 20 trillion won.

BY LEE HO-JEONG [ojlee82@joongang.co.kr]