Kakao's Operating Profit Jumps 92% on Platform and Content Growth... "Accelerating AI Development" (Comprehensive)

Operating Profit Reaches 120.3 Billion Won in Q1
Accelerating AI Service Development and Strengthening the KakaoTalk Platform

Kakao's operating profit in the first quarter surged by more than 90% year-on-year, driven by growth in its platform and content divisions. Kakao also announced plans to accelerate service development by acquiring AI-related business operations.

On May 9, Kakao reported that its consolidated operating profit for the first quarter reached 120.3 billion won, a 92% increase compared to the same period last year. Revenue rose 22% to 1.9884 trillion won. Although these results fell short of market expectations (revenue of 1.9994 trillion won and operating profit of 127.1 billion won), the company was still seen as performing well despite aggressive competition from Chinese e-commerce platforms.

By business segment, both the platform and content divisions showed growth. Platform revenue reached 954.8 billion won, up 13% from the previous year. Revenue from 'Talk Biz', which includes advertising and commerce businesses via KakaoTalk, increased by 8% year-on-year to 522.1 billion won. Revenue from portal businesses such as Daum grew by 1% to 84.7 billion won. Although the advertising market is expected to remain sluggish this year, the number of advertisers on Talk Biz increased, and monetization through traffic continued. In addition, new advertising campaigns by Chinese e-commerce platforms had a positive impact. Other platform revenue, including mobility and payment services, jumped 24% to 348 billion won over the same period.

Content division revenue rose 33% to 1.0336 trillion won. The increase was largely due to higher music and media sales. In contrast, revenue from the story segment, which is targeting global market expansion, declined by about 1%.

The growth in music revenue appears to have been influenced by last year's acquisition of SM Entertainment and the release of new music by IU. Previously, the Fair Trade Commission conditionally approved the merger of Kakao, Kakao Entertainment, and SM, on the condition that they do not give preferential treatment to the latest songs of affiliated artists.

Immediately after announcing its results, Kakao outlined its plans for future AI service development during a conference call. On May 2, Kakao decided to acquire the business operations of its AI research and development subsidiary, Kakao Brain, including its large-scale AI-based language model and image generation model. Kakao Brain owns the large-scale AI language model 'KoGPT', the text-based image generation model 'Karlo', and lightweight language models, among others.

Shin-Ah Chung, CEO of Kakao, stated, "Big tech companies face the complex challenge of continuing to invest in technological capabilities to keep up with AI trends, while also adjusting investment amounts to match financial conditions and delivering visible results quickly. It is true that the release of our own foundation model and commercially viable services in the AI era has been slower than expected."

She added, "We will work to make related services more visible through close and rapid collaboration between our AI research and development team and the business commercialization team. With the acquisition of the AI business division, Kakao will now possess generative AI models ranging from small language models (sLLM) to large language models (LLM), and we will strengthen development in directions that meet service needs."

Kakao is also working to enhance the assets of its KakaoTalk platform and the user experience as a messaging service. CEO Shin-Ah Chung stated, "We plan to sequentially introduce features such as social graphs, multi-profiles, and multi-accounts, so that users can expand their friend networks and use KakaoTalk more frequently. Even amid the aggressive expansion of overseas online commerce companies, we believe that Kakao can create cases of improved profitability within its own ecosystem through relationship- and context-based services like 'Gift Giving', which only Kakao can offer."