Kakao's Profitability Declines, Plans 'Counterattack' This Year with KakaoTalk Revamp and AI Services (Comprehensive)

Record High Sales Last Year Despite Profit Decline
Major KakaoTalk Overhaul This Year Including New Open Chat
AI Assistant and Copywriter Using KoGPT Announced

[Asia Economy Reporter Yuri Choi] Kakao, which experienced a decline in profitability last year, has announced a comeback this year. The major overhaul of KakaoTalk and various artificial intelligence (AI) services are its weapons. In particular, multiple AI services utilizing 'KoGPT,' specialized in the Korean language, such as personal assistants, advertising copywriters, and health monitoring services, will be launched within the year.

Last year, sales surpassed 7 trillion won... Operating profit declined for the first time in 4 years

On the 10th, Kakao announced that its annual sales for 2022 reached 7.1071 trillion won, an increase of 15.8% compared to the previous year. This is the first time annual sales have exceeded 7 trillion won. On the other hand, operating profit decreased by 2.4% to 580.5 billion won. This marks the first decline in operating profit in four years since 2018.

Profitability worsened due to a slowdown in advertising revenue growth amid economic uncertainty and increased cost burdens. Last year, the platform segment's annual sales recorded 3.7704 trillion won, up 16% year-on-year. However, the growth rate shrank compared to the 44% annual growth rate in 2021.

Content sales surpassed 3 trillion won, maintaining steady growth. Last year, content sales increased by 15% year-on-year to 3.3368 trillion won. All sectors showed double-digit growth: ▲Games 1.1095 trillion won ▲Music 894.4 billion won ▲Story 920.9 billion won ▲Media 312 billion won.

Hong Eun-taek, CEO of Kakao, said, "The advertising business was affected by reduced advertiser budgets and delayed service recovery due to a data center fire." He added, "Although difficulties due to the economic downturn are expected to continue this year, we are exploring various measures."

"Chat GPT is both a crisis and an opportunity"... Launching highly efficient AI services

This year, Kakao will sequentially proceed with the KakaoTalk overhaul delayed by the data center fire. The goal is to expand new advertising spaces and increase the advertising revenue growth rate compared to last year.

Specifically, a separate Open Chat tab will be created. Beyond simply checking real-time chat lists, functions to discover and explore interests will be enhanced. The KakaoTalk friends list will be flexibly reorganized based on relationship importance and conversation frequency. Multi-profiles will be linked with digital IDs, and short-form content will also be added.

CEO Hong emphasized, "We will segment the various communication methods that were grouped under the chat tab and provide appropriate communication formats and functions tailored to the conversation target and relationship." He added, "Through this, we aim to achieve qualitative growth in KakaoTalk communication."

To seize new growth opportunities, multiple AI services have also been announced. Subsidiaries such as Kakao Brain and Kakao Healthcare will simultaneously develop these businesses.

Kakao Brain will launch AI services within the year using KoGPT. Kakao Healthcare will release a service in Australia where AI interprets X-rays. They will also introduce a service that allows users to monitor their health data independently.

AI services linked with KakaoTalk are also in preparation. Using the image generation AI 'Karlo,' a service to create KakaoTalk profile and background photos will be launched in the first half of the year. AI services that act as personal assistants in chat windows or write advertising copy for small business owners on KakaoTalk channels are also planned.

CEO Hong stated, "The emergence of ultra-large AI models like Chat GPT is a crisis but also an opportunity." He added, "In a situation overwhelmingly favorable to global companies, Kakao will compete through cost efficiency."

This content was produced with the assistance of AI translation services.