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Approaching a turning point

Efforts to integrate leading AI models into existing platforms to accelerate

We believe that global AI companies are likely to pursue/expand partnerships with popular messaging platforms in order to accelerate global penetration and secure new sources of monetization. Indeed, users who would not normally install a separate AI app may still interact with B2C AI services if they are embedded within their primary messaging apps.

In terms of integration with messaging apps, AI features/services could either be embedded directly into chat rooms or housed in a separate tab/screen. If users subscribe to paid AI services or if AI leads to the creation of new ad inventory, messaging platforms and AI companies will likely develop profit-sharing schemes. Potential monetization strategies include banner ads in a separate AI-dedicated tab or ads within chatbot interactions (which could be particularly effective).

KakaoTalk user engagement to rebound starting in 2026

With Kakao set to launch an AI agent co-developed with OpenAI, we expect user engagement (i.e., average time spent on KakaoTalk) to rebound and growth in Talk Biz ad revenue to accelerate. Currently, the average time spent on KakaoTalk is just 1.1 minutes per session, compared with 1.8 minutes for ChatGPT.

This suggests that the integration of the AI agent, if successful, could lead to a meaningful increase in engagement. We project that the average time spent on KakaoTalk will grow by more than 5% annually from 2026 to 2028, and we see growth in Talk Biz ad revenue recovering to over 15% YoY.

Maintain Buy and raise TP to W54,000

We lift our target price on Kakao to W54,000 (from W51,000), as we revised up our 2026 earnings forecasts to reflect the likely increase in Talk Biz ad revenue (target P/E of 42x unchanged). We are encouraged by Kakao’s deepening collaboration with OpenAI, as this is helping to bolster the medium/long-term growth outlook.

From 2026 onward, we expect the new AI agent to support simultaneous increases in user engagement and ad rates, driving ad revenue growth. Momentum will likely build as details about AI services co-developed with OpenAI take clearer shape (likely in 3Q25). Given KakaoTalk’s massive monthly active user (MAU) base, we see potential for additional partnerships (beyond the collaboration with OpenAI).