'Earnings Surprise' Kakao to Lead KakaoTalk Overhaul and AI Popularization in Second Half

Record-High Revenue and Operating Profit in Q2 Thanks to Commerce and Mobility
KakaoTalk Friends and Short-form Tabs to Be Overhauled in Second Half, Boosting Profitability
AI Ecosystem Expansion... On-Device Services with OpenAI

Kakao recorded an earnings surprise in the second quarter. Both revenue and operating profit reached record highs for a single quarter. In particular, revenue from the platform segment rose to over 1 trillion won, marking a 10% year-on-year increase and significantly contributing to the strong performance.

Jung Sinah, CEO of Kakao, is giving a presentation at the 'Kakao Media Day' held at the Plaza Hotel in Jung-gu, Seoul, last February. Photo by Kang Jinhyung

Starting next month, Kakao plans to overhaul KakaoTalk and establish a "national AI touchpoint" through its dedicated artificial intelligence (AI) brand "Kanana." The company will unveil detailed plans at its developer conference, "if(kakao)."

On August 7, CEO Jung Sinah stated during the earnings conference call, "Based on the solid growth of our Talk Biz, our affiliates also delivered visible results, leading to the highest quarterly revenue ever. From the third quarter, we will sequentially launch a variety of services in KakaoTalk and AI, once again demonstrating revenue growth befitting our status as a growth stock."

In the second quarter, Kakao posted revenue of 2.0283 trillion won, up 1% year-on-year, and operating profit of 185.9 billion won, up 39% over the same period. Both figures represent all-time quarterly highs.

Kakao has been pursuing the restructuring of its affiliates amid various legal risks, strengthening core areas such as artificial intelligence (AI), and implementing intensive organizational reforms. The company stated, "This was thanks to balanced performance improvements across platform-related businesses such as advertising, commerce, payments, and mobility," adding, "Most importantly, it is encouraging that Kakao has succeeded in improving its operational efficiency."

By business segment, platform revenue reached 1.0552 trillion won, up 10% year-on-year. Within the platform segment, Talk Biz revenue increased by 7% to 542.1 billion won, and Talk Biz advertising revenue rose by 4% to 321 billion won.

Notably, revenue from business messages, a recent focus area, jumped 16%. Talk Biz commerce revenue, including services such as gifting and Talk Deal, reached 221.2 billion won, a 10% increase compared to the same period last year. The company explained that this was due to an increase in self-purchases through the "Gift to Myself" feature. The total integrated transaction volume for commerce in the second quarter of this year was 2.5 trillion won, up 6% year-on-year.

Provided by Kakao

Kakao has announced a major overhaul of the KakaoTalk service for the second half of the year. The company will first revamp the Friends and Short-form tabs, introducing short-form content to the third tab of KakaoTalk. Kakao will diversify channels to secure content, while also producing exclusive and original content and establishing a studio where creators can be rewarded for their creative work.

The Friends tab will be transformed from a simple friends list into a feed-based service for sharing daily life. The structure will be designed so that information about friends' birthdays, as well as media content shared in chat rooms, is automatically displayed in the feed to encourage communication among users.

CEO Jung explained, "With the upcoming KakaoTalk overhaul, we will establish a virtuous cycle where platform traffic growth naturally translates into revenue."

Regarding AI, she emphasized that the company is laying the foundation for ecosystem expansion, from infrastructure to language models, and will sequentially introduce services that allow all citizens to easily access AI. Next month, at the developer conference "if(kakao)," the company will present a concrete vision for the AI agent being co-developed with OpenAI. The official launch is scheduled for before mid-November.

Jung added, "We are focusing on enhancing the existing ChatGPT user experience with Kakao's assets and our deep understanding of Korean users. With the launch date approaching, we are preparing at a rapid pace. At the latest, users will be able to access the product before the next earnings announcement." Kakao and OpenAI formed a strategic partnership and announced plans for joint agent development in February.

Additionally, Kakao will unify the names of its AI technologies and services under the brand Kanana. Jung stated, "When people hear Kanana, they may think of the application recently introduced in closed beta testing (CBT), but all elements of Kakao AI will be rebranded as Kanana." She continued, "Kakao's AI strategy is aligned with the concept of 'AI for everyone,' making AI easily accessible to the public. Ultimately, the government's and Kakao's AI strategies are in alignment."