Kakao to Split into AI and Investment Firms to Boost Growth

South Korean tech giant Kakao announced on August 21st its decision to undergo a corporate split, dividing its operations into two distinct entities: Kakao AI and Kakao X. This move aims to streamline operations and improve strategic execution in the rapidly evolving tech landscape.

The company will be split through an "involuntary split," where the existing company divides into a new entity and a surviving entity. Kakao AI will inherit the core platform businesses, including KakaoTalk, artificial intelligence, advertising, and commerce. Kakao X will retain the surviving entity status, overseeing investments in Kakao's diverse affiliates such as Kakao Bank, Kakao Pay, Kakao Entertainment, SM Entertainment, and Kakao Mobility.

Kakao cited limitations in pursuing tailored strategies at speed within a single decision-making framework as the primary reason for the split. The company has spent the past two years consolidating its structure by divesting non-core assets and reducing affiliates. Kakao AI is projected to become a significant player in the AI sector, aiming for over 20 million daily active AI users and 6 trillion won in revenue by 2030. This division leverages the 50 million user base of KakaoTalk, transforming it into an AI-driven service that integrates search, recommendation, purchase, and payment functionalities.

Kakao X will focus on "future value investment," managing its portfolio of financial, content, and mobility affiliates while exploring new growth areas like virtual assets, physical AI, and global fandom. The company plans to utilize 2.3 trillion won from asset securitization and 4.1 trillion won from its subsidiaries' capital for investment, targeting over 10 trillion won in revenue from its main businesses by 2030. Kakao anticipates that this structural change will lead to clearer valuations for each entity and improve shareholder returns through dedicated dividend and share buyback policies. The split is expected to be finalized by January 1, 2027, following shareholder approval in December.

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This split is a decision for Kakao to transition into a structure with the speed and responsibility befitting the AI era. We will strive to ensure that Kakao AI and Kakao X establish strategies and capital allocation principles suited to their respective business characteristics, execute them more rapidly, and communicate performance transparently with the market.