Kakao's AI service turns into nonfactor just month after launch

Kakao Chief AI Officer Lee Sang-ho demonstrates the Kanana app during the company's event, if kakaoAI 2024, in Yongin, Gyeonggi Province, Oct. 22, 2024. Courtesy of Kakao

It has been over a month since Kakao unveiled Kanana, its conversational artificial intelligence (AI) agent, and launched its beta service on May 8.

However, despite high expectations of becoming a game-changer for the tech giant, the service is quickly losing momentum, failing to sustain user interest just weeks after its release.

According to mobile data analysis platform Mobile Index, daily new installations of Kanana recently fell below 100. On June 14, only 66 new installs were recorded.

That marked a sharp decline since it reached its peak at about 19,000 installations on May 15, falling far behind the numbers for rival OpenAI's ChatGPT, which continues to see over 30,000 new installations per day.

Kakao has been pushing for AI-driven initiatives by restructuring its sprawling business portfolio to streamline its affiliates, positioning AI as a key engine for future growth.

As part of this initiative, the company introduced Kanana, designed to provide a unique conversational experience by understanding the context of users’ group chat conversations.

However, the service seems to have fallen short of expectations in the real world.

Kakao’s decision to operate Kanana as a standalone app rather than integrating it with its main messaging platform, KakaoTalk, seems to contribute to its struggles in gaining traction. By forcing users to download a new platform, it not only creates a barrier to accessibility but also limits opportunities to improve service quality and expand the user base.

Kanana is starting from scratch to accumulate chats solely from the newly launched app for training and improving its personalized AI features, instead of leveraging KakaoTalk’s massive user base and its rich data. This means it will take significantly longer to enhance the service quality, which could have been expedited if integrated.

Kakao CEO Chung Shin-a introduces Kanana during a press event at the company's AI campus in Yongin, Gyeonggi Province, Oct. 22, 2024. Courtesy of Kakao

The company forefronted Kanana’s usefulness in group chats with its ability to summarize and organize conversations between multiple users and to interact with actual users in those conversations, features that differentiate it from AI services like ChatGPT.

However, as a standalone platform, all parties have to install the app to join the group chat, which severely limits its appeal and the practical use of its features. According to Mobile Index, the total number of installations for the Kanana app was a little over 75,200 as of June 14.

The company’s decision to launch as a separate app raises speculation that it is paving the way for a subscription-based business model.

“In terms of monetizing (Kanana), the basic direction would be a subscription-based model,” Kakao CEO Chung Shin-a said during a conference call last November.

“However, specific plans are still under careful consideration. The decision will likely be made after observing users’ behavior during the closed beta test period. So the details regarding the revenue model are expected to be announced after the official launch of the service.”

Kakao aims to launch the official version later this year following the beta test. Every three weeks, it will release updates to enhance features and improve the platform.

It has updated new functions to assess the quality of AI assistant responses, to collect user feedback and features allowing users to react to messages, such as likes.

“Our goal is to make communication among people more natural and meaningful through AI,” Kim Jong-han Kakao’s product lead for Kanana, said.

“As Kanana is a growth-oriented service that improves the more it is used, we plan to actively reflect user feedback during the closed beta period to enhance its overall quality.”