Kakao’s Struggles: A Company in Crisis
Kakao, once a dominant force in South Korea’s tech landscape, is currently facing a deepening crisis that has left investors and employees questioning its future. Despite initial optimism following its 2017 IPO on the Korea Composite Stock Price Index (KOSPI), the company has struggled to maintain momentum, with earnings declining and its stock price hovering far below its peak.
Since 2021, Kakao has been embroiled in multiple controversies, including allegations of harming small businesses, prolonged service outages, and a stock option controversy involving executives cashing out. These issues have compounded the company’s challenges, leading to what many now describe as a fourfold crisis: deteriorating performance, a collapsing stock price, a lack of new growth engines, and ineffective leadership.
The company’s stock has shown some signs of recovery under the new administration, but it remains at just one-third of its pandemic-era peak. In June 2021, Kakao’s shares reached a post-split high of 169,500 won, but by July 2024, the stock closed at 56,900 won. While there was a modest rebound from April 2024 to May 2025, the stock remained largely stagnant, hitting a low of 32,800 won on November 14, 2024.
Among Kakao’s 1.66 million retail shareholders, many have expressed frustration, with some referring to the stock as a “betrayal” of their trust. This sentiment reflects broader concerns about the company’s ability to compete in the age of artificial intelligence (AI). After failing to develop its own large language model (LLM), Kakao announced plans to launch an AI service called “Kakana,” built on OpenAI’s ChatGPT.
Industry experts have questioned the company’s reliance on foreign AI technology, arguing that this approach may hinder long-term growth. The beta version of Kakana, launched in May, saw a peak of approximately 19,000 daily installations, but user interest quickly waned, with numbers dropping to under 100 per day within a month.
Kakao’s financial performance has also been troubling. The company has posted three consecutive quarters of revenue loss, with operating profits declining significantly. In the fourth quarter of 2024, operating profit fell 34% year-on-year to 107 billion won ($77 million), and dropped further to 105 billion won in the first quarter of 2025. A spokesperson attributed the decline to weak performance in the content sector, including music, games, webtoons, and media.
Looking ahead, Kakao is projecting another drop in both revenue and operating profit for the second quarter, with revenue expected to fall by 2.8% and operating profit by 5.22%. These figures underscore the company’s ongoing struggles to regain its footing.
Employee frustrations have also surfaced, particularly over rising fixed costs. Kakao has leased the Alphadom City building in Seongnam, Gyeonggi Province, under a 10-year agreement that began in 2022. The lease reportedly costs the company several tens of billions of won annually, raising questions about the company’s long-term financial planning.
Internally, criticism has also mounted against Chief Executive Officer Chung Shin-a, who took the helm last year. Many within the company say she has failed to present a clear vision and has been unable to stem the decline in performance.
Founder Kim Beom-soo, who is currently on trial over alleged stock manipulation tied to the SM Entertainment deal, has also stepped down from his role as co-chair of the Corporate Alignment (CA) Council to focus on treatment. His absence has further complicated the company’s leadership situation.
As Kakao continues to navigate these challenges, the question remains whether the company can find a path to recovery or if it will be forced to confront even greater difficulties in the years ahead.
