Kakao to boost profitability with KakaoTalk AI, subscription models

Chung Shin-a, CEO of Kakao, delivers a keynote speech at the ‘if kakao AI 2024’ developer conference held at Kakao AI Campus in Yongin, Gyeonggi Province, on October 22. (Kakao)

Kakao is set to enhance user engagement on KakaoTalk by expanding entertainment features, upgrading services with AI, and strengthening its subscription model, with plans to introduce its AI-powered virtual assistant, kanana, to the public in the first quarter of 2025.

Kakao CEO Chung Shin-a shared the plans on Thursday during the company’s third-quarter 2024 earnings call, saying that kanana has already undergone internal beta testing and will be available to a wider audience in early 2025.

“We plan to conduct a closed beta test with general users in the first quarter of 2025 to refine kanana,” Chung said, adding that the monetization strategy is likely to be a subscription-based model although various revenue options are still being considered.

Initially showcased at the “if Kakao AI 2024” developer conference last month, kanana is designed to be a personalized AI companion that learns from past conversations to offer the most relevant responses tailored to each user.

In tandem with kanana’s launch, Kakao announced an extensive overhaul of the KakaoTalk app. According to Chung, the goal is to enhance users’ in-app experience by incorporating more interactive content and engaging features across all tabs. “We aim to create a reason for users to explore each section of KakaoTalk, even without a specific purpose,” she explained.

One planned update involves the shopping tab, which will use purchase history to recommend personalized products. It will also evolve into a participatory commerce space, where users of similar tastes and ages can share their experiences.

Kakao is also set to roll out an “AI commerce MD” feature in the fourth quarter, which will assist users in selecting gifts on KakaoTalk, further advancing AI-based enhancements to bolster user interaction on the platform. These changes are ultimately aimed at boosting engagement, driving growth in Kakao’s advertising and commerce businesses, as well as laying the groundwork for future ventures.

Kakao also intends to bolster its subscription services as a means of enhancing profitability. The company reported a revenue of 1.92 trillion won ($1.38 billion) in its financial results for the third quarter of 2024, down 4 percent from a year ago. However, operating profit rose 5 percent to 130.5 billion won.