Kakao Games has changed its investment approach. In the past, it identified developers with high growth potential at an early stage, invested in their equity, and nurtured them through publishing. Recently, however, it has broadened its scope to include directly acquiring game companies whose profitability has already been proven, as well as making strategic investments in technology firms that can enhance game development efficiency. In essence, the company has expanded its role from an investor that selected and cultivated "promising seedlings" to one that directly secures business assets and technology through acquisitions and investments.
In November 2016, Kakao Games invested 5 billion won in Bluehole, the predecessor of Krafton. The following January, it invested 5 billion won in Neptune, which at the time also invested 5 billion won in Bluehole Studio, then developing "PUBG."
As "PUBG" achieved global success in 2017, Bluehole's corporate valuation surged significantly. In August of the same year, Kakao Games signed a domestic publishing contract for "PUBG," expanding its relationship from simple financial investment to business collaboration.
Lionheart Studio followed a similar path. Kakao Games invested 5 billion won in Lionheart in August 2018, the month it was established. At the time, Lionheart was a newly founded developer set up in May of that year by Kim Jae-yeong (CEO), known as the developer of "Blade."
Kakao Games subsequently expanded its investment and took on publishing duties for "Odin: Valhalla Rising," developed by Lionheart. Following the game's success, it acquired additional shares to bring Lionheart under its umbrella as a subsidiary.
The flow continued from investment to publishing, then business expansion, and finally equity increase. The approach involved first identifying a developer's growth potential, combining publishing capabilities such as game operations, marketing, and server management to enhance the value of the IP, and deepening the relationship once results were confirmed.
On the 15th of last month, Kakao Games agreed to acquire a 39.56% stake in global gaming company Mitoom for approximately 98 billion won. The transaction will make it the largest shareholder, securing control over management.
Mitoom operates primarily in social casino and casual games, as well as mind sports, across Asia, North America, and Europe. Last year's revenue was approximately 120.9 billion won, with an operating profit of about 12.6 billion won. Overseas sales account for more than 80% of its total. For Kakao Games, the move secures a new genre while also bringing in an already profitable business foundation.
Another pillar is technology investment. Kakao Games has also made strategic investments in Backend X, an AI-based development and operations automation firm. Unlike investments aimed at securing proprietary games, this approach involves funding technologies that enhance the efficiency of the development ecosystem itself.
Backend X's technology can be utilized to reduce the development and operational burdens on indie and small-scale developers with whom Kakao Games has signed publishing contracts. The company aims to use this to lower entry barriers for small developers, identify competitive studios early, and create a structure that leads to future publishing deals or additional investments.
This is not an abandonment of the "seedling discovery" strategy, but rather an expansion into a structure where technology can be used to find even more seedlings. Kakao Games' investment capacity has also grown since welcoming LINE Yahoo as a new strategic partner and major shareholder in June. It is assessed that the secured resources have laid the foundation for continuing to pursue M&A of domestic and overseas game companies, equity investments, and investments in technology firms going forward.
in TECH
