Kakao will split its KakaoTalk and artificial intelligence (AI) businesses and its investment and management business for finance, content, and mobility affiliates into separate companies. Kakao cited "fast decision-making" as the reason for the partitioning. Two years ago, when it brought the core business and talent of its AI subsidiary Kakao Brain into headquarters, the justification was also speed. At the time, it said execution would improve by putting AI technology and the KakaoTalk service under one company. This time, it says that while it will maintain the combination of the two businesses, decision-making and capital allocation will be faster if the affiliate investment and management business is legally separated. The targets of consolidation and partitioning are different, but the company is offering the same solution every time it reorganizes its structure.
But some noted that the specialized talent and computing infrastructure that determine AI competitiveness, as well as differentiated products and revenue models, do not emerge just by changing the org chart. The market reaction was also chilly. Kakao shares extended losses after the partitioning announcement on the 21st, falling intraday to 33,600 won. That is 5,100 won (13.18%) below the previous day's close of 38,700 won. Although a spin-off does not immediately dilute existing shareholders' equity, the market appeared to question whether the sum of the two companies' corporate value would rise on partitioning alone.
◇ Absorption, consolidation, partitioning… the justification every time is "speed"
Kakao held a board meeting on the 21st and decided to conduct a spin-off into KakaoAI and KakaoX. The partitioning ratio is 0.36 for KakaoAI and 0.64 for KakaoX, and existing shareholders will receive shares in both companies. KakaoAI will combine AI with KakaoTalk to perform everything from search and recommendations to reservations, purchases, and payments. Its goals for 2030 are 20 million AI daily active users (DAU), total sales of 6 trillion won, and AI sales of 1 trillion won. KakaoX will handle finance, content, and mobility affiliates and new investments.
In June 2024, Kakao moved Kakao Brain's language and image model businesses and core talent to headquarters. The intent was to speed up execution by bringing AI technology and the KakaoTalk service together. In February this year, it unified the organization split between Kanana and AI Studio into AI Studio and shifted to a structure directly overseen by CEO Chung Shin-a. Just half a year later, it is reshuffling even the corporate structure again.
This partitioning does not overturn the 2024 integration strategy because it maintains the combination of KakaoTalk and AI. But it will be hard to avoid criticism that it is blaming organizational structure for the AI business's lack of speed. Early this year, performance leader Lee Sang-ho, who served as chief AI officer, and performance leader Kim Byung-hak, who led Kanana model development, also left in succession. A platform industry official said, "A company split can shorten decision-making steps, but AI talent, graphics processing units (GPUs), and differentiated services do not materialize on their own," adding, "It's not the reorg that should be evaluated, but products and monetization performance."
◇ Despite the "double the value" claim, shares plunge
Kakao argues that partitioning will allow each business's value to be properly assessed by the market. The average sum-of-the-parts (SOTP) estimate by domestic and foreign securities firms is 34.2 trillion won, which it says is more than double the 16.8 trillion won average market cap over the past three months.
But the sum of estimated values by business does not necessarily translate into actual market value. KakaoX will take on a stronger character as an investment company managing equity stakes in finance, content, and mobility subsidiaries. Regardless of whether it qualifies as a holding company under the law, it could face a "holding company discount," where the value of its subsidiaries held is not fully reflected in the share price. Value fluctuations in duplicate listings and unlisted affiliates are also variables.
Unlike a physical split, it is positive that existing shareholders will receive shares in both companies. But receiving two tickers and the value of assets held increasing are separate matters. It cannot be ruled out that the combined value of the two companies after the partitioning could be assessed as lower than Kakao's current value. The share price plunge on the day of the announcement suggests the market reflected the uncertainty after the partitioning ahead of the "hidden value" Kakao presented.
◇ Do not package KakaoTalk results as "AI performance"
Kakao chose a strategy of using external models such as OpenAI and Google instead of focusing solely on developing its own general-purpose model, while connecting roughly 50 million KakaoTalk users to transactions. It is a realistic choice in that it avoids the foundation-model race that requires massive investment and focuses on user touchpoints.
But AI agents that connect search, shopping, reservations, and payments are also being developed competitively by domestic and overseas platform corporations. Owning the national messenger and having AI technological competitiveness are different issues. For the size of KakaoTalk's user base to become a barrier to entry, it must build functions, data, and transaction structures that are hard to substitute on other services.
KakaoAI will include not only the AI business but also stable revenue sources in KakaoTalk ads and commerce. Kakao posted quarterly record results in the second quarter this year with sales of 2.099 trillion won and operating profit of 277 billion won. After the partitioning, if KakaoTalk's ad and commerce sales increase, KakaoAI's overall results could improve, but that cannot be seen immediately as the AI business's performance.
Kakao should disclose separately how much AI additionally increased revenue in its existing businesses and how many users, transaction amounts, subscribers, and sales came from AI services. For the goals of 20 million AI DAU and 1 trillion won in AI sales by 2030 not to remain just declarations, products and metrics must come before the org chart. An IT industry official said, "What Kakao needs to prove is not how quickly it can split the company," adding, "What matters is whether the separated companies can ship products faster than before and generate real revenue."