Korean AI Startup Upstage Acquires Search Engine Daum in Kakao Deal

When was the last time you used a search engine that truly understood what you meant, not just what you typed? South Korean AI startup Upstage is betting it can answer that question by acquiring Daum, the country's second-largest search engine, through a stake-swap deal with internet giant Kakao.

The Strategic Exchange

The deal, announced Thursday, represents more than a simple acquisition—it's a strategic alliance between old-school internet infrastructure and cutting-edge AI capabilities. Kakao will transfer its stake in AXZ Corp., Daum's operator, to Upstage in exchange for acquiring shares in the AI company.

AXZ was spun off from Kakao in May 2024 as part of a broader effort to revitalize Daum's competitiveness amid declining market share. While neither company disclosed financial terms, industry observers estimate the deal involves hundreds of millions of dollars in value.

"The combination of Upstage's AI technology and Daum's wide user base is expected to pave the way for users to access AI more easily and conveniently," said Sung Kim, co-founder and CEO of Upstage.

Beyond Traditional Search

This acquisition signals a fundamental shift in how we might interact with information online. Upstage plans to leverage its large language model (LLM) Solar to develop AI-powered services that could transform Daum from a traditional keyword-based search engine into something more conversational and intuitive.

The move mirrors global trends where tech giants are racing to integrate AI into search. Google has rolled out its Search Generative Experience, while Microsoft has embedded ChatGPT into Bing. Now South Korea's search landscape is poised for its own AI-driven transformation.

Daum once commanded over 30% of Korea's search market but has since fallen far behind dominant player Naver. The question is whether Upstage's AI expertise can breathe new life into the aging platform.

Government Competition Implications

The timing isn't coincidental. Upstage is competing in a government-led contest to develop a homegrown AI foundation model, having passed the first round alongside SK Telecom and LG AI Research. The government is investing 2 trillion won (approximately $1.4 billion) to support domestic AI development.

Access to Daum's user data and search infrastructure could significantly strengthen Upstage's position in this competition. Korean-language search data accumulated over decades could prove invaluable for training AI models specifically optimized for Korean users—a potential competitive advantage against global players like OpenAI and Google.

Industry Reshuffling Begins

This deal symbolizes a generational shift in Korea's tech landscape. A portal-era company (Kakao) is partnering with an AI-era startup (Upstage), suggesting that established players recognize they need fresh capabilities to remain relevant.

Naver has already launched its own AI model HyperCLOVA X and is strengthening AI search services. The Upstage-Daum combination could challenge Naver's dominance, potentially creating a more competitive search market.

Investment analysts predict this transaction could trigger more M&A activity as AI startups seek to acquire user bases and data assets. The race isn't just about having the best AI technology—it's about combining that technology with real-world applications and user relationships.

The Data Advantage

What makes this deal particularly interesting is the data dimension. While many AI companies focus on developing better models, Upstage is securing access to decades of Korean search queries, user behavior patterns, and content preferences. This real-world data could be crucial for training AI models that actually understand what Korean users want.

The collaboration also addresses a common AI startup challenge: distribution. Building great technology is one thing; getting millions of people to use it is another. Daum's existing user base provides Upstage with an immediate testing ground and distribution channel for its AI innovations.