The company is shedding noncore businesses and refocusing on KakaoTalk and AI
KakaoTalk is moving beyond messaging toward content, commerce and agent-style AI
Kakao confirmed the reappointment of CEO Chung Shin-a at its 31st annual general meeting of shareholders held on the 26th at Space.1, its headquarters in Jeju.
[Insight Korea = Shin Kwang-ryeol]
Kakao is gaining momentum in its turnaround after posting its strongest first-quarter results ever. The improvement is being attributed to the restructuring of noncore businesses and the platformization of KakaoTalk pursued since Chief Executive Chung Shin-a took office.
According to Korea’s electronic disclosure system on May 8, Kakao reported consolidated revenue of 1.9421 trillion won and operating profit of 211.4 billion won for the first quarter. Revenue rose 11 percent from a year earlier, while operating profit increased 66 percent. Both figures marked record highs for a first quarter. It was also the first time in about eight quarters that operating profit posted double-digit growth.
Industry observers say the results show that strategic changes under Ms. Chung are beginning to translate into tangible performance.
Selling Kakao Games and Cutting Back on Sprawling Expansion
Since taking office, Ms. Chung has accelerated the cleanup of noncore businesses and the streamlining of affiliates. Over the past year, Kakao has reduced its size by disposing of noncore subsidiaries. In March, it even sold its stake in Kakao Games. As part of the governance simplification process that has continued since last year, the number of consolidated subsidiaries has fallen to about 93 and is expected to decline into the 80s once additional restructuring is completed.
Ms. Chung has explained that by removing businesses with low earnings contributions, Kakao is building a structure in which the competitiveness of core businesses such as KakaoTalk and AI is reflected more directly in results. During the first-quarter earnings conference call, she said, “Through portfolio restructuring, we are establishing a foundation that allows us to focus resources more on core businesses.”
“As businesses with low earnings contributions are excluded from consolidation, the effects of growth and profitability improvement centered on the core business are becoming clearer,” she said.
The KakaoTalk revamp that began last year is also seen as one of the pillars of the earnings improvement. Kakao has been accelerating efforts to transform KakaoTalk from a messenger-centered service into a content platform by redesigning the Friends and Updates tabs, expanding short-form content and strengthening recommendation-based content. The strategy was designed to increase user time spent in the app and combine advertising, commerce and AI functions.
The changes, however, have also drawn user backlash. Some users complained that “KakaoTalk is becoming too much like social media,” that “advertising and content exposure are excessive,” and that “the original simplicity of the messenger is disappearing.” Online communities and social media have also seen continued fatigue over the exposure structure of the Friends tab and short-form content.
Still, industry observers say the KakaoTalk revamp, despite the controversy, has partly proved its effectiveness through the latest results. As users spend more time consuming content inside KakaoTalk, advertising and commerce businesses have shown notable growth.
In fact, the Talk Biz division, which handles KakaoTalk’s transaction and advertising businesses, posted double-digit growth from a year earlier. The average daily effective views of short-form content introduced in the Now tab more than doubled in April compared with last September. As content consumption within KakaoTalk increases, use of transaction-based services such as Gift and Talk Deal has also expanded, along with improvements in advertising products. KakaoTalk is shifting from a simple messaging app into a stay-in platform that combines content, shopping and advertising.
KakaoTalk Moves Beyond Messaging Into AI
Kakao’s AI strategy is also being reorganized around KakaoTalk. In the recent earnings call, Ms. Chung laid out a plan to turn KakaoTalk into an “agent-style AI platform.” The core is to connect everyday conversation, search, shopping and reservations through AI functions.
She also outlined a plan to expand AI services beyond simple AI search or chatbots into “agent commerce,” which helps users make practical decisions such as shopping, reservations and content recommendations. The idea is to allow users to move naturally from product discovery to purchase within the flow of conversation.
“In the medium to long term, we plan to gradually incorporate various business models suited to AI search,” Ms. Chung said. “As users are able to make needed decisions quickly within conversations and as we secure traffic with high purchase intent, partnership expansion will also accelerate.”
The latest results are expected to add momentum to Ms. Chung’s efficiency-centered management approach. Analysts say Kakao is likely to focus resources more clearly on core platforms that are directly tied to profitability rather than on external expansion.
Because the KakaoTalk revamp and AI integration strategy were both attempts to combine advertising, commerce and AI functions inside KakaoTalk to strengthen the revenue structure, industry observers expect the company to continue redesigning the platform around KakaoTalk and streamlining its business structure.
“The efficiency-centered direction pursued under CEO Chung Shin-a, including the cleanup of noncore businesses and KakaoTalk-centered monetization, has been partly validated by these results,” an industry official said. “That direction is likely to be strengthened further going forward.”
- This article was translated by ChatGPT. (이 기사는 챗GPT가 번역했습니다.)
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