Naver and Kakao, which have touted artificial intelligence (AI) as a next-generation growth engine, have embarked on contrasting business overhauls. Kakao has pared back businesses that continue to post losses or have low linkage to its core operations, and decided to split the company into "KakaoAI," which will focus on KakaoTalk, AI, advertising, and commerce, and "KakaoX," which will oversee affiliates and invest in new businesses. Naver, by contrast, is expanding the user, product, and transaction data it can apply to AI by acquiring overseas platforms. After both companies trimmed subsidiaries through 2024, their AI growth strategies now diverge into Kakao's "separation and focus" and Naver's "global expansion."
An analysis of the two companies' semiannual reports by ChosunBiz on the 24th found that as of the end of June this year, Naver had 95 consolidated subsidiaries, up six from 89 at the end of June last year. Over the same period, Kakao decreased from 162 to 125, down 37. The gap in the number of subsidiaries between the two also narrowed from 73 to 30.
Until 2024, both companies slimmed down in tandem. Naver's subsidiaries fell from 103 at the end of 2023 to 82 at the end of 2024, and Kakao's from 175 to 158. The goal was to boost management efficiency by winding down entities with low business viability or weak ties to their core operations. But since the second half of last year, their paths have diverged. More noteworthy than the subsidiary counts are the businesses added and removed. This reveals how each company is allocating resources.
Kakao shed businesses that were loss-making or had weak linkage to KakaoTalk. In the first half of this year, with Kakao Games removed from consolidation, a swath of game-related entities—such as Metabora, XLGAMES, LIONHEART STUDIO, and Ocean Drive Studio—were excluded. AXZ, operator of the Daum portal, and content entities that were liquidated also dropped out of consolidation. Earlier, Kakao transferred control of Kakao Healthcare to the CHA Bio Group.
According to Kakao, the combined operating loss last year of entities excluded from consolidation, such as games and healthcare, was about 100 billion won. Removing them improves the annual operating margin by about 2 percentage points. The streamlining of affiliates is thus more than a mere downsizing; it is a process to improve profitability and secure room in capital and talent to deploy into AI.
This restructuring led to a corporate split. On the 21st, Kakao said it will carry out a spin-off, creating a new entity, "KakaoAI," in charge of KakaoTalk, AI, advertising, and commerce, and a surviving entity, "KakaoX," that will manage key affiliates and invest in new businesses. KakaoAI will concentrate capital and talent on KakaoTalk-based AI services, while KakaoX will work to raise the corporate value of its tech-finance, content, and mobility affiliates. The two-year affiliate reduction has culminated in a governance overhaul that separates the AI business from the investment business.
Naver, by contrast, is broadening overseas markets and user bases where it can apply AI. That said, the number of subsidiaries did not see a net increase in the first half of this year. While it added four—Npay Japan Corporation, Spain's consumer-to-consumer (C2C) platform Wallapop, and two entities for investing in and operating the screen adaptation of webtoon intellectual property (IP)—it also liquidated four existing investment entities, keeping the total at 95, the same as at the end of last year. The increase of six from a year earlier stems from expanding overseas business entities in the second half of last year. In effect, Naver replaced its portfolio by winding down legacy investment entities and adding growth-area entities in payments, C2C, and webtoon IP.
The biggest change is the inclusion of Wallapop. Naver invested an additional 377 million euros (about 604.5 billion won at the time of the acquisition announcement) on top of its existing 29.5% equity to secure the remaining stake. Following consolidation, Wallapop contributed 87.6 billion won in revenue and 5.6 billion won in net profit to Naver's first-half results.
Naver has built a C2C network spanning Korea's Kream, Japan's SODA, North America's Poshmark, and Europe's Wallapop. In its semiannual report, it said it would use each platform to secure region-by-region transaction trends and data, and later link the databases to develop a cross-border transaction base. It also presented AI-based recommendations and image search technology as competitive strengths in its C2C business.
The risks the two companies must bear differ. Naver has chosen to shoulder acquisition expense and integration risk to secure users and markets externally where it can apply AI. Kakao has bet on shedding low-growth businesses and generating AI revenue from its existing user base. One is pursuing external expansion, while the other is reallocating internal resources.
An IT industry official said, "More important than the increase or decrease in the number of subsidiaries is which businesses receive capital and what synergies are created with the core business," and added, "For Naver, the key will be whether it can integrate the technologies and data of platforms scattered across regions; for Kakao, whether the company split actually raises decision-making speed and the profitability of its AI business will determine success or failure."