The deal centers on Upstage’s plan to turn Daum’s long-running blogs and online communities into large-scale Korean-language training data for its AI models

Attendees gather at the Upstage booth during the first presentation event for South Korea’s independent AI foundation model project at Coex in southern Seoul on Dec. 30, 2025. (Yonhap)
Attendees gather at the Upstage booth during the first presentation event for South Korea’s independent AI foundation model project at Coex in southern Seoul on Dec. 30, 2025. (Yonhap)

Korean AI startup Upstage has signed a preliminary agreement to acquire AXZ, the operator of the nation's once-dominant internet portal Daum, from Kakao in a share swap deal aimed at converting decades of user-generated content into raw material to train large language models.

The nonbinding memorandum of understanding, approved by both boards Thursday, values the deal at approximately 200 billion won ($140 million), according to investment banking sources. While full terms are still under negotiation, the proposed structure would give Upstage full ownership of AXZ in exchange for Kakao receiving a minority stake in the artificial intelligence firm.

For Kakao, the transaction is the clearest signal yet of its shift away from sprawling legacy operations. Since taking the top post in 2023, CEO Chung Shin-a has cut the company's affiliate count from a peak of 147 to 94 as of this month, with a target of 80. Selling AXZ marks a formal exit from the portal business Kakao entered through its 2014 merger with Daum Communications.

Daum's share of the domestic search market fell to 2.94 percent last year, according to InternetTrend, trailing behind Naver, Google and even Microsoft's Bing.

Upstage, by contrast, is betting on the future value of that legacy. By acquiring Daum, the company gains access to a trove of Korean-language data accumulated over nearly three decades, including Tistory blogs and Daum Cafe communities. The data, once de-identified, is expected to significantly strengthen Upstage's proprietary large language model, Solar, which is being developed as part of a national AI foundation model initiative.

Upstage CEO Kim Sung-hoon said the integration would create an environment where "more users can naturally and easily experience AI." AXZ CEO Yang Ju-il added that the two companies would be able to roll out new AI services "at speed" through their combined platforms.

Upstage is planning an initial public offering as early as the second half of this year. During its last funding round, Upstage was valued at 740 billion won, with IPO targets reportedly ranging from 2 trillion to 4 trillion won.

Kakao's separation of Daum into AXZ was completed in December, ending an 11-year integration. Once the deal closes, it will mark the full departure of one of South Korea's first-generation portals from its corporate parent.

By Moon Joon-hyun (mjh@heraldcorp.com)