Kakao CEO apologizes, vows to implement organizational reform

Kakao CEO Hong Eun-taek [Photo by Yonhap]

Kakao Corp. CEO Hong Eun-taek issued an official apology to shareholders on Thursday, addressing the controversies surrounding stock price manipulation allegations during the SM Entertainment takeover process. Hong also outlined strategies to improve the company’s performance and minimize risks.

“I sincerely apologize to Kakao shareholders for the concerns caused by various negative news reports about the SM Entertainment acquisition process. I will diligently work to clarify these allegations in court,” Hong said during a conference call.

“We will fulfill our social responsibilities commensurate with the company’s scale and re-examine our management structure,” he added, emphasizing the company’s commitment to social responsibility. “We believe that minimizing business risk is a top priority for our shareholders, and we will continue to execute our current initiatives as planned.”

To mitigate existing risks, Hong presented plans for additional business strategies, focusing on Kakao’s future growth engine, artificial intelligence (AI).

The company is planning to launch an ‘AI Content Bot,’ which is integrated with KakaoTalk. This bot, combined with open chatting, will provide curated content based on user interests to create micro-vertical AI communities and enhance user engagement.

“We will verify the bot’s usefulness to users and assess its potential for further scalability,” Hong explained while describing the offering as ‘Micro Vertical AI.’

The plan includes using Kakaobrain’s internally developed foundation models while concurrently fine-tuning open-source models, providing flexibility in adopting models that best suit the cost efficiency for the intended service.

Hong also highlighted Kakao’s commitment to practical AI application, saying that Kakaobrain’s proprietary models, fine-tuned open-source models, and even models from global big tech companies would be considered, offering diverse options for implementing services based on cost-effectiveness.

Beyond AI, Hong shared insights into Kakaoenterprise’s rapid recognition in the AI cloud market, indicating a restructuring plan to transition Kakaoenterprise into a cloud-centric business model, while also forecasting the completion of this transition by the first quarter of 2024.

Meanwhile, Kakao reported its third-quarter consolidated revenue at 2.16 trillion won ($1.64 billion), marking a record-breaking 16.3 percent increase from a year earlier. However, operating profit fell by 6.7 percent from the previous year, attributed to increased expenses related to AI investment, data center construction, and one-off personnel costs.