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| Kakao Agit building in Seongnam, Gyeonggi Province / Korea Times file |
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Kakao said Friday it will come up with a cost-effective artificial intelligence (AI) powered chatbot fluent in Korean and that it will collaborate with SM Entertainment to utilize K-pop content for the global expansion of both companies.
Announcing that its annual revenue rose 16 percent year-on-year to a record 7.1 trillion won ($5.6 billion), while its operating profit fell for the first time in four years to 580.5 billion won, down 2 percent from a year earlier, the IT firm unveiled its strategies to overcome the uncertain market environment.
"The appearance of ChatGPT will create both opportunities and crises for Kakao," Kakao CEO Hong Eun-taek said in the company's conference call on its fourth-quarter earnings. "Instead of vying with global companies, we will focus on a vertical AI service utilizing Kakao Brain's KoGPT, which is fluent in Korean."
Kakao's vertical AI service will be released by the end of this year, according to the CEO.
Hong emphasized that the service will use relatively fewer parameters to perform as well as those of its rivals. He added that Kakao's AI services will create images for users of KakaoTalk to use for their profile pictures and help small merchants write their advertising copy.
Regarding its recent acquisition of a 9.05 percent stake in SM Entertainment to become the K-pop agency's second-largest shareholder, Kakao reiterated its plan to strengthen its competitiveness in the global content market in cooperation with K-pop artists.
"As a result of a long period of talks with SM Entertainment, we signed an agreement for a comprehensive business partnership through our recent investment," Kakao Executive Vice President Bae Jae-hyun said. "Both companies will create a synergy effect by integrating platforms, technologies and intellectual properties."
He added that his company will utilize webtoon and web novel platforms, as well as its related Kakao characters merchandise, in order to maximize the synergy effect with SM Entertainment.
Both companies are also in talks to hold a concert featuring SM Entertainment's artists at Kakao's Seoul Arena, Korea's first concert venue dedicated to K-pop, according to the executive vice president.
His remarks came just after HYBE, better known as the agency of BTS, announced its plan to become the largest shareholder of SM Entertainment so as to prevent Kakao and SM Entertainment's management from expelling founder Lee Soo-man.
HYBE said Friday it signed a contract to acquire a 14.8 percent stake in SM Entertainment for 422.8 billion won from its founder, as HYBE Chairman Bang Si-hyuk joined hands with Lee, who took legal action against SM Entertainment's sale of its shares to Kakao.
Although Kakao did not comment on this issue in its conference call, SM Entertainment's management expressed their displeasure at the deal, saying their collaboration with Kakao is intended for the sake of shareholders and stakeholders, as well as fans of K-pop artists.
Align Partners Capital Management, an activist fund manager that had first questioned SM Entertainment's governance structure, also criticized HYBE for its attempt to acquire SM Entertainment shares at excessively low prices. Align has already welcomed the partnership between SM Entertainment and Kakao.
Amid the intensifying conflict over SM Entertainment, stock prices of the companies involved in the issue fluctuated in Friday's trading session.
The stock price of SM C&C, SM Entertainment's affiliate, which is listed on the Kosdaq, hit its daily ceiling of 4,630 won, while the stock prices of other affiliates ― SM and SM Life Design ― soared 16.45 percent and 26.32 percent, respectively.
HYBE's stock price rose temporarily to 218,500 won on Friday morning from Thursday's closing price of 198,300 won, but then it fell sharply and closed at 195,300 won, down 1.51 percent from the previous session's closing price.
Kakao's stock price declined 4.65 percent and closed at 67,600 won.
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