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Daum Becomes New Owner of Lycos
In a $95m deal, the successful Korean portal hopes to gain a foothold in the U.S.
Jean K. Min (jean)     Print Article 
Published 2004-08-02 17:15 (KST)   
©2004 Lycos
Daum Communications, the leading Korean portal announced today its acquisition of Lycos from Terra Networks S.A.

According to the company statement, Daum and Terra Networks signed a contract on July 31 worth US$95 million or 112.2 billion won. Daum plans to finance the deal by tapping into 70 billion won (US$60 million) of its cash reserve and additional 90 billion won it will raise by issuing corporate bonds.

By combining its proven business model in Korean market with the brand power of Lycos, Daum hopes to successfully secure its foothold in the rapidly growing U.S. market, it said.

Industry observers doubt the wisdom of acquiring the ailing American portal when its main business in the fiercely competitive Korean market falters behind other strong competitors. While Daum rested on its laurels for several years as the largest portal in Korea, Naver and Nate.com have rapidly caught up with Daum with their focused strategy on keyword advertising and the phenomenally popular personal homepage service, Cyworld respectively.

Daum Communications still boasts handsome profits with more than 23 billion won for the first half of this year alone but even this number fails to impress the investors when Naver and Nate.com came up with even more brisk sales and increased web site traffic.

Considering the frisky nature of Korea's young Netizens, many warn that even the largest portal such as Daum can be quickly put aside as the most favored site of their choice. Daum Communications could not find the next cash-cow while it heavily relied on the relatively lackluster sales of banner ads and slim margin it earns from the sales of its shopping malls.

Several Korean dotcoms including NHN and NC Soft have ventured into the overseas market but their target countries have been largely confined to Asia such as Japan, China and some South East Asian countries. Daum's acquisition of Lycos is the first attempt of its kind to go outside of Asia.

Daum's spokeswoman explains that it plans to introduce blog-based social software service with more bells and whistles using Lycos platform and its user base. Personal homepage service such as Cyworld that enables users to connect with each other using various web tools and cyber items was proven hugely popular among young Koreans.

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Since Nate.com acquired Cyworld last August, it saw its subscribers exploded from 3.5 million to over 8 million in less than a year and earns 130 million won everyday with the sales of cyber items called "acorns."

If Daum could replicate the similar success in American market remains an open question. There is no personal homepage service as massive as Cyworld yet in the United States. If the level of demand and enthusiasm for social software many saw in Korea could be found among American users and Daum can successfully position Lycos as a place of cyber networking, Daum might come forward as a strong contender.

If instead it simply tries to follow the path of other major portals such as Yahoo and MSN, its chance of survival in American market might be slim to say nothing of decent success since the U.S portal market is already heavily crowded.

Questioned if Daum has a plan to go any global market other than America, Lee Jae Woong, CEO and President of Daum Communications said it might test the water in China soon but has no plan to go Europe.

For now, investors as well as millions of Daum subscribers are looking at Daum's bold American adventure with scepticism.
©2004 OhmyNews

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