Kakao plans new cost-efficient AI

Kakao's Pangyo headquarters in Gyeonggi Province (Kakao)

Kakao, the operator of South Korea’s No. 1 messenger app KakaoTalk, said Thursday that it plans to introduce a new artificial intelligence foundation model to balance performance and cost efficiency, as well as services integrated to the model after October this year.

Kakao CEO Hong Eun-taek said at the company’s earnings conference that he believes that a sole hyperscale model would not be suitable for providing every service under the most optimized conditions.

“Many AI models have come out, but it seems that no model with the four elements, benefiting cost, speed, up to date and accuracy has yet been released. It is difficult to predict the picture of solving all problems with a hyperscale AI model,” the CEO said.

“The key (to winning a competition) is not who constructs a hyperscale generative AI first, but who creates a cost-effective and appropriate model and applies it to integrated services. … We’re thinking of creating a cost-effective AI model by testing models with various parameter sizes from 6 billion and 13 billion to 25 billion and 65 billion,” he added.

Hong said the tech company’s Korean language-based AI model KoGPT, developed by its AI technology research and development subsidiary Kakao Brain, will also be unveiled “as planned,” and the timeline will likely be after October.

It is in preparations for several models, testing which is the best fit for its AI-powered vertical services. Citing the results, the CEO explained that a lightweight AI model with 6 billion parameters can run most effectively in terms of cost for summarizing KakaoTalk messages.

“We are seeing the integration of KakaoTalk and AI as a very important service sector. While the messaging app is evolving into a comprehensive communication platform with three pillars -- personal, social and business -- we are expecting that AI will create the most powerful synergy in the business communication area,” Hong said.

During the earnings call, Kakao's Chief Information Officer Bae Jae-hyun also hinted that the company’s upcoming AI foundation model can be integrated to create virtual versions of SM Entertainment artists. In March, the IT giant won control of the K-pop powerhouse by acquiring its target of a 35 percent stake in SM through its tender offer.

Kakao is also expected to strengthen its social interaction function by introducing a feature that will allow users to share daily content that expires after 24 hours, similar to the Instagram story function, in the third quarter. It also aims to introduce a more personalized curation service by adding a chatroom recommendation feature tailored to user interests.

Under the plans, Kakao looks to increase the number of daily active users of KakaoTalk. According to Hong, the daily active users of KakaoTalk’s friends tab increased to 30 million in the second quarter of this year, up from 22 million at the end of last year. Hong said, “We plan to secure 40 million DAUs by the end of this year through various updates in the second half.”

Before Thursday's earnings call, the IT firm released its quarterly earnings reports for the April-June period prior to the opening of the Korea Exchange.

Kakao said its operating profit plunged 33.7 percent on-year to 113.5 billion won ($87.3 million), which was slightly lower than the consensus of 124.4 billion won by local analysts provided by market intelligence firm FnGuide.

The company's net profit came to 56.3 billion won, down 44 percent from a year earlier, while sales rose 12.1 percent to 2.04 trillion won over the cited period. Its operating costs climbed 17 percent on-year to 1.92 trillion won due to increased investments in AI, health care and data center facilities, the Kakao officials said.

Kakao Brain has seen an increase in operating losses in the April-June period, due to the massive infrastructure costs required to build a foundation model. The losses are expected to increase in the latter half of this year with the company’s active investment in research and development and construction of next-generation AI, according to Bae.

“Infrastructure costs have increased by 50 percent on-year. We’re expecting AI investment to peak as it takes place in the second half of this year, and will decrease significantly starting next year,” the CIO said. He was cautious on citing the amount of investment given the rapidly changing AI industry, but promised to implement it at a “bearable level.”

Meanwhile, Kakao shares slightly gained 0.19 percent to close at 53,300 won on Thursday, following the company's second-quarter earnings results.

By Jie Ye-eun(yeeun@heraldcorp.com)