Kakao failed to make the cut in August last year when five elite teams were selected for the government-led "independent artificial intelligence (AI) foundation model" project. Then in September last year, it rolled out a sweeping overhaul of "KakaoTalk," but moved to restore the original after user backlash. The national messenger "KakaoTalk" ceded the No. 1 app spot in Korea to YouTube, and the AI business has lost direction. ChosunBiz diagnoses the structural problems Kakao currently faces. [Editor's note]
In July last year, Kakao formed a consortium with Seoul National University, Yonsei University, Korea University, Sungkyunkwan University, Hanyang University, Chung-Ang University, and Ulsan National Institute of Science and Technology (UNIST) to bid for the Ministry of Science and ICT's "independent artificial intelligence (AI) foundation model" project (nicknamed the national AI). It passed only the document screening and suffered the bitter disappointment of being eliminated from the selection of five elite teams to participate in the first phase. The industry said, "Kakao's elimination is not actually surprising," adding, "its AI capabilities and the strategic direction under CEO Chung Shin-a's leadership are ambiguous."
Kakao CEO Chung Shin-a said at the third-quarter 2025 earnings announcement in Nov. last year, "We will proceed with (KakaoTalk) service improvements by gathering user feedback," emphasizing, "it is a meaningful change that KakaoTalk time-on-app has begun to rebound." In response, KakaoTalk users said, "Kakao's results are good now, so the company is intoxicated by its mobile-centered success and has no sense of crisis at all," and raised criticism, saying, "the KakaoTalk update ended in failure, so is this the time for the chief executive officer (CEO) to boast?"
In a New Year's address last month for 2026, CEO Chung said, "A 'people-centered AI' that maximizes Kakao's unique strength of understanding the context of the daily lives and relationships of 50 million users is the group's growth pillar." But inside and outside Kakao, the reaction is, "In the AI era, it is impossible to know what Kakao's future technology and strategy are."
Lee Kyung-jun, a professor of business administration at Kyunghee University, said, "If a service emerges that replaces KakaoTalk during the AI transition, Kakao could collapse in an instant like NateOn and Skype," and added, "without strategy and vision, it must not neglect technology development as it is now." NateOn was called the "national messenger" in the PC era, but after the ordeal of a user personal information leak, it is gradually fading from users' memory in the mobile era.
◇ "Failing to take the lead in AI shakes technical direction"
Until Nov. 2022, before OpenAI released ChatGPT, Kakao's AI business appeared to be sailing smoothly. In Nov. 2021, a year before ChatGPT came out, Kakao's subsidiary Kakao Brain unveiled the large language model (LLM) "KoGPT1.0," and in Dec. the same year released the first multimodal (capable of understanding composite information such as images and text) model "minDALL-E" as open source.
But founder Kim Beom-su was summoned by the Financial Supervisory Service in Oct. 2023 on allegations of market manipulation and began to be investigated, and amid the inability to focus on management, the giant wave of AI surged in an instant. Shortly after taking office, in May 2024, CEO Chung said at a board meeting, "AI has now moved past technological verification into a period where practical use is crucial," and announced the merger of Kakao with its subsidiary Kakao Brain.
Then in Oct. 2024, Kakao integrated its language, multimodal, image, and voice AI models under the name "Canana." Canana is being used for call and conversation summaries and template services, but the consensus is that there has been no innovation that ordinary users can feel. CEO Chung played a high-stakes card last Feb. by partnering with OpenAI, but this too only fueled confusion with a zigzag approach of in-house development and external collaboration. This led to assessments that Kakao's AI orchestration strategy appears to have limitations in the current competitive landscape.
Kim Doo-hyun, a professor in the Department of Computer Science and Engineering at Konkuk University, said, "The application of ChatGPT within KakaoTalk pursued in the founder's absence appears to have no utility value, and Canana also lacks innovations that resonate with the general public," adding, "if KakaoTalk fails to embed innovation and convenience using AI in a communication platform, there is no future for KakaoTalk."
A former Kakao employee, identified as A, said, "Because Kakao has failed to push out in front with an AI foundation model, a lightweight model, or applications that integrate AI into services, its technical direction is wavering." A source well-versed in Kakao's internal affairs assessed, "The AI business requires massive capital, talent, drive, and quick decision-making, but the golden time 2 to 3 years ago was missed."
◇ Internal opposition and user tests ignored… overhaul disaster for KakaoTalk
Confusion under CEO Chung's leadership was not limited to technology and strategy. There were also gaps in talent utilization. For example, Kakao announced a reorganization at the end of Feb. last year. To strengthen KakaoTalk's competitiveness, it created the position of CPO (chief product officer) and appointed former Toss Bank CEO Hong Min-taek to the role.
Hong, the CPO, majored in industrial engineering at KAIST and built anticipation after being recruited, having worked at IBM, Deloitte Touche Tohmatsu Limited (DTTL), Samsung Electronics, and Viva Republica (Toss). But the KakaoTalk overhaul he led ended in a complete failure. Inside Kakao, there is talk that the failure stemmed from no one being able to check Hong's dogmatic leadership. He is said to have pushed through the overhaul by ignoring opposition from practitioners and the results of user testing.
A Kakao official said, "Although CEO Chung is at the helm of Kakao, an ambiguous structure has ironically formed in which she cannot freely direct the CPO organization that develops KakaoTalk." It is reported that about 2,000 employees, roughly half of Kakao's workforce, currently work under Hong, the CPO.
Lee Sang-ho, AI quality and safety performance leader, also drew attention as a key talent when he was recruited in Apr. 2024 as CAIO (chief AI officer), thanks to his glittering resume, including serving as SK Planet CTO (chief technology officer) and CEO of 11Street. But he is said to be on track to leave as his contract expires.
A Kakao employee said, "Kakao offers good pay and benefits, so it brings in many external talents, but in fact there has been nothing new in its core mobile-based services since KakaoBank," adding, "many experts who come expecting big roles end up unable to demonstrate their capabilities."