TLDRs;
- Kakao plans to cut affiliates to 80 by 2025, deepening its AI-focused corporate overhaul.
- CEO Chung Shin-a leads reforms after scandals involving stock manipulation and sales inflation.
- Kakao integrates GPT-5 into KakaoTalk and prepares on-device AI assistant “Kanana.”
- Analysts warn affiliate cuts may hurt strategic depth despite improved profitability.
South Korean tech conglomerate Kakao Corp. has announced plans to further slim down its sprawling corporate network, signaling an intensified phase in its ongoing reform campaign.
The company, best known for its flagship messaging app KakaoTalk, has already reduced the number of its affiliates by nearly 30%, from 132 to 99, over the past 18 months. Now, under CEO Chung Shin-a, Kakao aims to bring that number down to around 80 by the end of 2025.
The restructuring, which began in earnest in 2023, marks one of the company’s most significant overhauls since its founding. Kakao’s leadership says the cuts are designed to sharpen the firm’s focus on artificial intelligence (AI) and improve overall corporate governance after a turbulent period marred by executive scandals and regulatory scrutiny.
Reform Follows Scandals and Setbacks
Kakao’s reform push comes in the wake of a series of controversies that have tarnished its image and investor confidence. In 2023, founder Kim Beom-su was indicted for alleged stock manipulation linked to the company’s attempted acquisition of SM Entertainment, one of South Korea’s largest entertainment agencies.
In addition, Kakao’s taxi-hailing unit, Kakao Mobility, was fined for inflating sales figures, intensifying calls for stronger oversight and ethical accountability. The combination of public criticism and legal challenges placed enormous pressure on the firm to prove it could reform itself without compromising its vast digital ecosystem.
“We are entering a new phase of accountability and efficiency,” said CEO Chung Shin-a, who took office in March 2024. “Our goal is to focus on sustainable innovation and strengthen Kakao’s position in the AI-driven economy.”
AI Focus Drives Kakao’s Future Vision
Chung’s leadership has emphasized pivoting toward AI-driven products and services as the cornerstone of Kakao’s next chapter. The company’s roadmap includes integrating AI tools into KakaoTalk, including upcoming collaborations with OpenAI’s GPT-5 for chatbot features and content recommendation systems.
Reports indicate that Kakao is also preparing to launch Kanana, a Korean-language AI assistant that runs locally on smartphones rather than relying on cloud computing. The on-device model aims to boost user privacy and response speed, aligning with global trends toward edge AI solutions.
Meanwhile, the tech giant has seen operating profit jump 39% year-over-year in the second quarter to ₩185.9 billion (US$130.3 million), signaling early financial benefits from its leaner corporate structure.
Non-Core Units Face Sale or Mergers
Kakao’s renewed efficiency drive means non-core subsidiaries are being offloaded or merged. On October 15, 2025, Kakao Games will sell its stake in golf tech unit Kakao VX to IVG Investment Group for ₩259.5 billion. The gaming arm has also sold stakes in Sena Technology and Neptune, signaling a broader effort to redirect capital toward AAA game development and AI infrastructure.
However, analysts warn that the cuts, while bold, could prove too blunt to be strategic. One internal memo raised concerns that divisions like Kakao Entertainment, valued near ₩10 trillion but still posting net losses, lack clear plans for turnaround or IPO success. Meanwhile, user engagement on KakaoTalk has fallen 16% since 2021, overtaken by YouTube and Instagram in both active users and time spent.
“Trimming affiliates can improve short-term margins,” said one Seoul-based analyst, “but unless Kakao redefines its user ecosystem, it risks losing relevance in its home market.”
