Upstage Acquires Daum… Target Was Data, Not Portal Business

Upstage has finalized its acquisition of AXZ, the operator of portal site Daum. On the surface, the deal is framed as a move to advance an AI-powered portal. But some industry observers say the real objective is different. Rather than trying to grow Daum, which trails even Microsoft’s Bing in the domestic search market, Upstage is seen as seeking data to train its large language model (LLM) “Solar.”

Upstage finalized its acquisition of AXZ, the operator of portal site Daum, on May 7. / Upstage

According to industry sources, Upstage signed a contract with Kakao on May 7 to acquire AXZ, the operator of portal site Daum. In January, Upstage and Kakao, AXZ’s parent company, signed a memorandum of understanding (MOU) under a share swap structure. Under the agreement, Kakao would transfer its entire stake in AXZ to Upstage, while Kakao would acquire part of Upstage’s shares. The two companies signed the definitive agreement after roughly four months of due diligence.

The question is how Daum will be used. A portal generates revenue through a structure in which users visit the site, search, stay on the platform and view advertisements. Search market share is not merely a ranking. It is the advertising foundation of a portal site, leading to visitor numbers, time spent, ad impressions, clicks and purchase conversions.

InternetTrend’s tally of domestic search market share from April last year to April this year showed Naver in first place with 62.35%, followed by Google with 30.3%. Daum recorded 2.96%, lower than Microsoft Bing’s 3.32%. Globally, Google’s search market share stands at 90.04%, according to StatCounter. Daum is expected to face an uphill battle not only globally, but also in Korea.

It is also difficult to assume that adding AI to portal search will increase Daum’s user base. Users tend not to change the services they already use because of the lock-in effect of search portals and web browsers. Google has operated AI Mode since last year, while Naver has offered its AI Tab to Naver Plus Membership users since April. Both AI Mode and AI Tab are conversational search services. But search market shares have shown little change.

There is also precedent showing that even useful AI services can struggle to win user adoption. Perplexity, regarded as a generative AI service specialized in search, ranks second in the global AI chatbot market with a 9.72% share. However, its AI web browser “Comet,” launched in July last year, has yet to produce notable results.

Perplexity CEO Aravind Srinivas told Reuters that getting users to switch their default browser from Chrome to Comet is not easy. TechCrunch assessed that persuading users to change browsers may be harder than getting them to search somewhere other than Google.

This is why Upstage appears unlikely to generate meaningful revenue from Daum itself. Instead, Upstage can obtain Daum’s data. Daum, Korea’s first portal site, has accumulated data over a long period across search, news, cafes and blogs. Upstage can use this data to train its LLM Solar. This is the basis for the view that Upstage acquired Daum not to grow Daum, but to secure material for growing Solar.

Upstage says it plans to upgrade Daum into an AI portal. An Upstage official said, “We will combine our in-house LLM Solar with Daum’s search engine and content data to advance Daum into a next-generation AI portal,” adding, “We will differentiate the service through ‘Context AI,’ which understands users’ intent and context and provides answers.”