Kakao Preparing for Head-to-head Battle with Naver in IoT Market

Kakao has signed a contract to acquire Kiwi Plus, a smart watch manufacturer for children. It is a move that follows its acquisition of Acciio, a start-up for heating and cooling control system using smartphones, in February. It shows Kakao’s aggressive step towards the Internet of Things (IoT) business.

Kakao is to acquire a 51% stake in Kiwi Plus by purchasing new shares to be issued by the company for a capital increase. The purchase price of new stocks is known to be around 20 billion won.

Kiwi Plus is an IoT device manufacturing and platform service company founded by CEO Seo Sang-won in December 2013. Major products include Kakao Kids Watch and Line Kids Phone, which are a kind of wrist watch. You can use your smartphone application to check your child's location or use the phone and messenger services. The company has been acknowledged for its technology and attracted investment from major domestic venture capital and securities companies and concluded export contracts with Chinese distributors. The company reported sales of 13.4 billion won and operating loss of 1.5 billion won last year.

Kakao’s acquisition of Kiwi Plus is to strengthen its competitiveness in the IoT device and platform market, which is expected to grow to US$1 trillion by 2020. Last month, Kakao announced that it plans to launch Kakao Home, the AI-based IoT service platform, in the third quarter. Kakao Home will provide services to easily connect and control various devices with smartphones in living spaces such as apartments, houses, and cars. In order to achieve this, Kakao has established partnerships with Samsung Electronics, COMMAX, POSCO E&C, Hyundai Motor, and GS E&C.

In February, Kakao bought 50.5% of IoT start-up Acciio, for 4.6 billion won. Established in 2016, Acciio is producing devices such as Acciio Air and Acciio Home, which check indoor temperature and control heating and cooling system using smartphones. It will play a key role in the development and operation of smart home service of Kakao.

The aggressive move of Kakao is expected to stoke up the competition for the IoT market dominance with Naver, Korea's largest internet portal. Naver is providing services to control IoT devices using the app Clova, its AI platform. In partnership with LG Electronics, Philips Hue, Coway, HK Networks, and Brunt, the app can be connected with about 40 devices.