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Kakao to focus investment on building AI ecosystem

Kakao posts record earnings in 2017 Q3 on upbeat content, ad sales

Kakao, the firm behind South Korea’s most widely-used mobile messenger KakaoTalk, will ramp up efforts to build a new business ecosystem built on artificial intelligence, its chief executive said Thursday.

“We view AI as not a passing trend but a foundational part of technology and infrastructure,” Kakao CEO Jimmy Rim said during the firm’s third-quarter earnings call.

“The fundamental value of KakaoTalk is communication,” he said. “Through our AI engine Kakao I, people will be able to chat via voice interface and chatbot services, making life more convenient.”

Kakao CEO Jimmy Rim (Kakao)
Kakao CEO Jimmy Rim (Kakao)

Rim’s remarks came as Kakao officially debuted its voice-activated AI speaker, the Kakao Mini, in Korea this week. Similar to the Amazon Echo or Google Home, Kakao’s smart speaker can play music, call up the day’s weather, read out news, and more.

The Kakao Mini operates on Kakao I, an AI platform developed by the Korean mobile giant. It offers five engines for voice, image, chat, suggest and translation that can work inside apps and smart services like chatbots or be integrated into hardware made by third parties.

The Kakao Mini connects only to KakaoTalk and Kakao’s music streaming app Melon for now, but in the future services including taxi hailing, shopping, translation, finance services and Internet of Things will be added one-by-one, the firm said.

The Mini is just the beginning step in Kakao’s broader vision is to emerge as a leader in the AI platform market by inviting many external developers to create smart services powered by its AI engines. It also hopes that some of the products that are developed can be linked to Kakao’s smart speaker.

Kakao's Kakao Mini smart speaker (Kakao)
Kakao's Kakao Mini smart speaker (Kakao)

“Our goal is to create a more convenient world in which consumers can meet Kakao I in the home, inside cars and at offline stores nationwide. We want to hear people say that life has become more convenient thanks to Kakao I,” Rim said.

Kakao has already secured a number of collaborative partnerships for Kakao I, including with Samsung Electronics, Hyundai Motor, Lotte Communication, GS Engineering & Construction and Posco Engineering & Construction.

Kakao’s renewed pledge to focus its resources on the AI platform business came as the company posted record quarterly earnings in the third quarter.

Kakao said its operating profit jumped 57 percent on-year to 47.3 billion won ($42.5 million) in the July-September period, pulled by robust sales generated by its content and advertising businesses.

Revenue rose 32 percent to 515.4 billion won and net profit jumped 193 percent to 39.9 billion won during the third quarter, it said.

Ads, mainly featured via the KakaoTalk platform, brought in 151.5 billion won in revenue, while content, including mobile games and music distributed via Melon, raised 122.1 billion won in revenue.

Kakao also spent 468 billion won as operating costs for content royalty payouts and marketing activities during the third quarter, it said.

By Sohn Ji-young (