Kakao, South Korea’s leading mobile communication company, and OpenAI, the developer behind ChatGPT, have announced a strategic collaboration aimed at enhancing AI capabilities within Kakao’s services and developing new AI-driven products, marking OpenAI’s first strategic alliance with a Korean company.

OpenAI’s AI models, including ChatGPT, will be integrated into Kakao’s ecosystem, particularly within its flagship messaging app, KakaoTalk, to enhance user experiences. They plan to develop a new Korean-language assistant called “Kanana” powered by OpenAI’s technology. The collaboration focuses on co-developing AI products tailored for the Korean market, leveraging Kakao’s understanding of local consumer behavior with OpenAI’s advanced AI technologies. This includes both consumer-facing applications and enterprise solutions like ChatGPT Enterprise for internal use.

For Kakao, this partnership aligns with its “AI Model Orchestration” strategy, where instead of building a large language model from scratch, it integrates with leading external AI technologies to deliver high-quality services. For OpenAI, this move expands its presence in Asia, following a similar partnership with SoftBank for the Japanese market. Tailored solutions for businesses have been another avenue for revenue. These offerings provide customized AI capabilities for corporate environments, which are more lucrative than general consumer subscriptions due to the higher price points and contracts involved. Through partnerships with companies like Microsoft, which has invested heavily in OpenAI, there’s an indirect benefit through the commercialization of AI technologies within Microsoft’s ecosystem (like GitHub Copilot, Bing, Office). Additionally, collaborations with companies like Kakao for localized AI solutions in markets like South Korea will contribute future revenues through shared benefits or licensing deals and popularise Open AI’s applications in Asian Markets.

A significant portion of OpenAI’s revenue comes from licensing its AI models through APIs. This allows developers to integrate OpenAI’s technology into their applications, providing a scalable and recurring revenue model. OpenAI introduced premium subscriptions like ChatGPT Plus, where users pay a monthly fee for enhanced access to its AI models. This has been a notable revenue generator. Developing and training large language models is extremely expensive. The AI market, particularly generative AI, has shown signs of being smaller than initially anticipated, which could limit growth in application sales. The landscape is highly competitive, with both established tech giants and new startups vying for market share, which can pressure pricing strategies and profitability.

The collaboration could lead to significant advancements in how AI is used in messaging, entertainment, productivity, and other digital services in South Korea, potentially setting new standards for AI application in the region. There’s also a focus on addressing local needs with AI including concerns over data privacy and ethical AI usage. With this partnership, there’s an expectation of growth in AI adoption in South Korea, potentially influencing how AI services are developed and consumed globally. It’s also seen as a step towards Kakao becoming an “AI-native” company, with plans to further integrate AI across its platforms.

For Open AI, whilst selling applications directly to consumers through subscriptions like ChatGPT Plus is part of OpenAI’s business model, it’s not the sole or even the primary path to profitability. Open AI’s strategy leans heavily on API licensing for developers and enterprises, which offers a more sustainable revenue model due to its scalability. However, given the high costs associated with AI development, particularly in training and infrastructure, OpenAI would need to balance these streams carefully to achieve and maintain profitability. The emphasis has been on creating a broad ecosystem where its AI can be leveraged in numerous ways, suggesting that while direct application sales are important, they are part of a larger, more diversified revenue strategy.

For South Korea, AI ecosystem is gaining stride within the country both through Government support as well as through strategic collaboration and startup ecosystem withing the country. Country has been making significant advacnement in the field of artificial intelligence (AI), positioning itself as a leader in both research and application of AI technologies. The South Korean government has launched several initiatives to bolster AI research, including the “AI National Strategy” aimed at fostering an AI ecosystem, securing AI talent, and achieving technological sovereignty in AI. Significant investments have been made in AI R&D, with plans to allocate billions of dollars over the next few years. Companies like Samsung Electronics, LG Electronics, and Naver are at the forefront of AI application. Samsung has been integrating AI into its devices, from smartphones with Bixby to AI-powered appliances. LG has its own AI strategy with “ThinQ” for smart homes, and Naver has developed its AI platform, Clova. There’s a vibrant startup scene in South Korea focused on AI technologies, ranging from healthcare, robotics, to financial services. These startups often collaborate with academia and larger corporations, benefiting from government initiatives like the AI Startup Support Program.

Country has invested in supercomputing resources, like the AI-dedicated supercomputer ‘Exaone’, which helps in training large-scale AI models. The country has expanded its data center capabilities to support the massive data processing needs of AI, with companies like Kakao and SK Telecom building out infrastructure. There are numerous programs for AI education, from elementary to higher education, to cultivate a workforce adept in AI technologies. While South Korea excels in certain AI applications, it faces stiff competition from the US, China, and Europe in terms of AI scale and breadth of innovation. South Korea aims to be among the top four countries in AI technology by 2025, focusing on areas like autonomous driving, medical AI, and AI chips. The integration of AI in traditional industries, particularly manufacturing and services, continues to grow, promising a future where AI significantly enhances productivity and quality of life.

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