Indonesia, InspirAsiaApril 22, 2015April 27, 2015

Path in Talks to Sell Social Networking App to South Korea’s KakaoTalk

RE/CODE: Path is in serious talks to sell its original social networking app, known as Path Classic, to the makers of South Korean messaging app KakaoTalk, according to multiple sources familiar with the deal.

The potential acquisition — the terms of which are still unknown — would give KakaoTalk’s parent company Daum Kakao a major foothold in Indonesia, where Path is a leading social app. The company has 30 million active users, the majority of whom live in Indonesia.

Selling off Path Classic would extract San Francisco-based Path from its somewhat strange position of making an app that never gained traction at home in the United States, and is primarily used in a country halfway around the world by an audience that has proven hard to monetize.

Nearly five years after it first released its private small-group social network app, Path has now reoriented itself as a sort of app studio, adding a messaging spinoff called Path Talk (that also allows people to message businesses), and a selfie GIF app called Kong, which was released just last week. Tellingly, perhaps, it’s only available to users in the United States.

Sources familiar with the conversations say Path, which has raised more than $75 million in funding, would continue to operate independently after selling off the social networking app.

Path has been a frequent target of rumor speculation, and it has been widely reported that Google had made a $100 million offer for the company within its first few months of launching. This, however, appears to be the real deal.

Path declined to comment. Daum Kakao did not immediately respond to a request for comment. (Update: A Daum Kakao spokesperson also declined to comment.)

In the global fight for messaging apps, competitors tend to dominate on a country-by-country basis: KakaoTalk in its home base of South Korea; Line in Japan and much of Southeast Asia; WeChat in China; and WhatsApp in many other places around the world.

According to sources, KakaoTalk and Line have both been spending enormous amounts of money on marketing — thought to be tens of millions of dollars — on trying to acquire market share in Indonesia, the largest country in Southeast Asia with a population of 250 million, many of whom are exceedingly active on mobile and social apps.

An acquisition would help bring a return to Path’s investors, which include First Round Capital, Shasta Ventures, Greylock Partners, Index Ventures, Kleiner Perkins Caufield & Byers — and, most recently, Indonesia’s Bakrie Global Group.