Kakao to cut affiliates to 80 by year-end to focus on AI

Kakao CEO Chung Shin-a speaks during the company's annual if(Kakao)25 conference at Kakao AI Campus in Yongin, Gyeonggi Province, Sept. 23. Courtesy of Kakao

Kakao is pushing ahead with a significant reorganization of its corporate structure, aiming to further trim its sprawling network of affiliates to streamline governance and refocus on artificial intelligence (AI) as a core growth engine.

The tech giant’s CEO Chung Shin-a announced plans to pare down its affiliates from the current 99 to around 80 by the end of this year in a shareholder letter on Monday, continuing her two-year effort to simplify the group’s structure.

Streamlining corporate governance has been one of Chung’s top priorities since she joined the Kakao Corporate Alignment Council in 2023, when there were 142 affiliates. By the time she became CEO in March last year, she had reduced the number to 132. It now stands at 99, down about 30 percent in just two years.

“Kakao has spent the last year and a half rapidly reforming its corporate governance while implementing companywide cost efficiencies, building a financial structure that allows us to focus on future growth,” the CEO said in the letter.

“Based on this foundation, we will begin delivering another wave of innovation in our everyday lives through the integration of AI and KakaoTalk in the second half of this year.”

In the second quarter of this year, the company posted a record-high quarterly operating profit of 185.9 billion won ($130.1 million), up 39 percent year-on-year. Despite the sluggish economy, it solidified its financial footing on the steady growth in its platform business and improved profitability throughout affiliates, shifting the company toward a more stable operating structure.

An image of ChatGPT for Kakao / Courtesy of Kakao

Kakao is now accelerating efforts to create new growth momentum by introducing AI into its flagship messaging platform KakaoTalk. The company plans to offer AI-powered services that are personalized to each user’s needs and preferences through the app, making it easier and more accessible for all its 50 million users.

At the end of October, Kakao will launch ChatGPT for Kakao, a joint product in collaboration with OpenAI. This will allow users to access ChatGPT directly within the messaging app without installing a separate app.

The company is also preparing to roll out its proprietary AI model Kanana in KakaoTalk, an on-device AI service that runs entirely on customers’ phones to ensure user privacy and safe AI interactions.

In addition, Kakao is expanding its AI ecosystem through the recently introduced model context protocol and agentic AI platform, enabling external services to connect as AI agents.

In the shareholder letter, Chung also outlined the company’s commitment to responsible management, focusing on three pillars — boosting shareholder value, fostering AI experts in Korea and supporting small businesses.

The company pledged to contribute about 50 billion won over the next five years in partnership with Korea’s four leading science and technology institutes to develop AI experts, support research and startups and create a task force to support small business owners.