Kakao's AI chatbot app to shut down as homegrown services lose ground to foreign rivals

South Korea's homegrown AI chatbots are disappearing one by one. Following Naver's shutdown of its AI chatbot Clova X, Kakao will next month pull the plug on its standalone Kanana service.

As foreign AI services such as ChatGPT rapidly expand their foothold in South Korea, domestic AI chatbots are running out of room. Fears within the industry that local players would lose their users to foreign AI services are proving well-founded.

Kakao will officially shut down the app and PC versions of Kanana — its chatbot built on a proprietary AI model — on Oct. 15, industry sources said Tuesday. The service will have lasted about a year and five months since its beta launch in May last year.

Industry watchers believe Kakao decided to end the standalone service after Kanana failed to build a sufficient user base. According to data tracker Mobile Index, Kanana's monthly active users in South Korea stood at 69,631 immediately after its launch in May last year, but fell to 10,488 last month — a drop of roughly 85 percent from its debut.

Kakao plans to apply the technology and user feedback gathered through Kanana to future AI services within KakaoTalk. Rather than launching a separate service, the company will continue operating Kanana in KakaoTalk, an AI service accessible from within the messaging app.

This is not the first time a homegrown AI chatbot has quietly exited the market. Naver shut down its AI chatbot service Clova X in April. Clova X was built on Naver's proprietary large language model HyperCLOVA X and operated as a standalone web service where users could type questions and hold conversations with the AI.

Naver also discontinued its generative AI search service Cue: at the same time. Cue: allowed users to ask questions in natural language on a dedicated webpage and receive AI-synthesized answers drawn from search results.

Naver is now focusing its strategy on embedding AI into its existing search service. Its AI Briefing feature summarizes search results, while an AI Tab lets users ask follow-up questions. The company is also integrating generative AI into other existing services, including shopping and local search.

Industry analysts say that as foreign AI services rapidly expanded their domestic user base, homegrown AI chatbots lost their footing as standalone products.

Foreign services now dominate South Korea's AI app rankings. In July, the top five apps by monthly active users were ChatGPT with about 16.45 million users, Claude with about 1.42 million, SK Telecom's A. with about 1.2 million, Perplexity with 610,000, and Grok with 510,000. The only domestic app in the top five was SK Telecom's A.

With generative AI demand concentrated in foreign services, analysts say domestic companies cannot easily compete head-on with general-purpose chatbots. "The adoption of generative AI in South Korea is growing rapidly, but usage is tilting heavily toward foreign AI services," one industry official said. "For domestic companies, the realistic strategy is to integrate AI into their existing services rather than launching separate AI chatbots."