Hello, thank you for joining Kakao's Q1 2024 earnings conference call. We will begin with a presentation by Kakao, which will be followed by a Q&A session. For those of you who have questions, please press star and one on your phone. I will now turn it over to Kakao.
Good morning. My name is Jeffrey Shin from Kakao IR. Thank you for joining Kakao's earnings call for Q1 2024. As with me today, CEO of Kakao, Shina Chung, and CFO, Carly Choi, and Head of Capital Markets, Kate Kim. Please note that the earnings results are consolidated estimates under the K-IFRS basis and are subject to change upon the auditor's review. Also, as forward-looking estimates are based on assumptions, actual results may differ from figures included in today's presentation. We'll begin with key business highlights for the Q1, presented by both the CEO and CFO, and end with Kakao's new direction forward and its AI strategy presented by Shina, the CEO, which I believe are the topics that the markets are most interested in.
Hello, I'm Shina Chung, CEO of Kakao. As it is my first earnings call as the CEO, I will briefly walk through key highlights of Q1 results and then present on Kakao's new way forward. In the Q1, Kakao's consolidated revenue reached KRW 1.99 trillion, up 22% year-over-year. Operating profit rose to KRW 120 billion, up 92% year-over-year. Despite a challenging external business environment, KakaoTalk Biz showed solid growth, demonstrating the company's core strength. However, increased investments in Kakao Brain's AI foundation model during the Q1 partially offset the financial restructuring gains made by Kakao Enterprise last year. On a positive note, several encouraging trends emerged this quarter that suggest profitability will improve throughout the year. Kakao Entertainment remains profitable, and Kakao Pay reduced its losses as revenue from its securities and insurance business grew. Next, on Kakao's business highlights.
On a standalone basis, Kakao's operating profit recorded KRW 138 billion. Although this is a 22% QoQ decline caused by ad business seasonality, which is usually a big profit contributor, compared to KRW 121 billion reported last year, standalone OP was up 14% year-over-year, once again, attesting to growth potential from the core business. Moving on to an overall operational update of Kakao Corp. Kakao in 2024 still faces challenging operation headwind. It is hard to have clear visibility of an upcycle in ad business, while domestic e-commerce landscape is undergoing a rapid transformation, which is adding on to the uncertainties of the commerce business. Nonetheless, thanks to the realignment of KakaoTalk over the years, Talk Biz outperformed the market growth.
By expanding relationship building and interactions beyond the constraint of Chat tab, we saw a rise in traffic and new inventory, driving BizBoard to outperform the market despite being a display ad that are exposed to economic cycle. It is not only to mention that business messaging, being Kakao's unique ad product that connects users and business partners via messenger, has been posting a double-digit YoY growth every quarter, despite has been seen in the ad market since last year. All the Talk Channel message is actually an advertisement. User acceptance and conversion rates are outstanding. As such, we plan to actively expand the pool of advertisers this year. In our commerce business, against the backdrop of fierce domestic competition triggered by entry of cross-border e-commerce players, we are driving growth, pivoting on Talk Gift, offering unique relationship-based commerce experience.
We will continue to broaden the context and relationship for gift giving and solidify product lineups by being the first domestic e-commerce platform to bring high-end global brands to Korea. In 2024, we plan to focus on enhancing user messaging experience and identify new business model that is the best fit with the ethos of KakaoTalk, like the Talk Channel and Talk Gift. This will be the underpinning of another leap for Talk Biz growth. To funnel Kakao's resources and capabilities, we undertook reorganization in Q1, and our goal is to enhance margin growth through the growth of Talk Biz, which is the biggest contributing business to Kakao's consolidated operating growth.
Over the course of last year, we worked on improving the financial structure of Kakao Entertainment and Kakao Enterprise, whose profit contribution has been relatively limited, and we expect to see the results of such improvements come through starting this year. Supported by sound financials, we will either downside losses or turn around to profit depending on the financial position of the subsidiary, or sustain growth profit and focus on achieving results most appreciative for their stage of development. I will now turn it over to our CFO, Carly, who will present on details and share an update on key subsidiaries.
Hello, I'm Carly from Kakao, CFO. First, on key financial highlights for the Q1, consolidated revenue was KRW 1,988 billion, which was flat QQ and up 22% YoY. Platform revenue was KRW 955 billion, in line with last quarter and up 13% YoY. Out of this, Talk Biz revenue was KRW 522 billion, up 8% YoY, but down 3% QQ. Of the Talk Biz revenue, ad revenue was KRW 279 billion, while Business Message and BizBoard posted solid growth of 10% YoY. On the back of seasonality, it was down 9% QQ. For business messaging, which includes Talk Channel and Notification Talk, we saw the number of active advertisers, mostly from commerce and financial sectors, increased by 12% YoY.
There has been a growing number of financial advertisers as we offer messaging templates and custom skins, incorporating the needs of financial partners who consider security as a critical factor in customer communications. With enhanced products and templates using images and videos, and as businesses are able to send personalized and targeted ad messages, we are seeing more active marketing activities launched by advertisers, especially from the commerce verticals, as they tend to go for a higher ad efficiency. Business messaging thus posted a year-over-year growth of 14% in Q1, and we expect the growth to be double-digit this year. For this, BizBoard, despite it being sensitive to business cycle, leveraging the Spot CPT in the Friends Path, we drove year-over-year growth of 11% on back of new products and inventory.
Talk Biz ad business saw solid growth coming from the current set of products while we continue to explore new business model. Underpinned by the expansion of Kakao's local businesses, we're exploring services and products to better meet long-tail advertisers' varying needs. We are also developing a new type of messaging experience that combines chatting features with AI, which can enhance usability. Next, Talk Biz commerce business revenue was KRW 244 billion, up 5%, both YoY and QQ. Combined commerce GMV was up 7% YoY, reporting KRW 2.6 trillion. During the new year holidays, Talk Gift ran sophisticated CRM marketing based on buyers' past purchasing history, which led to a growth in AOV, average order value, and RPU, which eventually drove 6% YoY revenue growth for Talk Gift and 7% GMV growth.
GMV for luxury brands posted 13% YoY growth on the back of gifting of luxury beauty products, fragrances, and jewelry between family members and the loved ones during Valentine's and White Day. Talk Gift has expanded its circle of families and acquaintances to include strangers who share common interests and even brands that ones like, which shows that there is more opportunity for incremental growth. For example, we are seeing new gifting patterns, such as casually gifting online friends who share common interests and tastes inside the Open Chat, or even self-gifting of limited editions or brands. This new gifting behavior, accompanied by robust merchandising lineup, is contributing to a solid bottom line growth. We'll make sure Kakao Commerce continues its growth uptrend through distinctive relationship-based offerings by delivering business solutions based on expanded relationships between the brands and users.
Last year, with the Shopping tab revamp, highly personalized recommendations were made to users, and those brands were then added as channel friends. Users received the updated news through Talk Channels on a regular basis, which then triggers repurchasing within the Talk platform. Sellers using Talk Channel and Talk Store experienced a virtuous cycle inside the platform, spanning from sophisticated CRM marketing to commerce, which worked as a fuel behind growing the number of channel stores to approximately 50,000. They are also actively using Kakao Shopping Live to communicate with consumers real time, and the number of live commerce sessions grossing more than KRW 0.1 billion in sales, which doubled compared to last year. Under the platform business, the portal biz revenue came in at KRW 85 billion, up 1% YoY.
Since Q4 last year, we started collaboration with advertising partners to try to improve the profitability, and also we positioned the organization as a content CIC to secure competitiveness through content diversification. We are seeing user metrics improve with adoption of monetization business model for creators, for Story business, and rollout of a short form tab. Thus, we expect to see improvement in portal revenue in the second half of the year. Lastly, others revenue, which includes the mobility and pay, was up 24% YoY and 5% QoQ, coming in at KRW 348 billion. There was a positive top line impact on the back of steady growth coming from the mobility business, including taxi, designated driver, and parking.
Driven by the cross-border and offline payment growth, as well as the top line growth from the securities and insurance business, Kakao Pay also reported the record high quarterly revenue. Content business reported revenue of KRW 1,034 billion in Q1, which was flat quarter-over-quarter and 33% increase year-over-year. Driven by global expansion efforts, Q1 story revenue came in at KRW 226 billion, down 0.7% year-over-year, and up 6% quarter-over-quarter. Domestic market is our key market, where we explore and select premium content for the Story business, and it works also as an outpost for global expansion, including Japan and North America.
Following financial restructuring last year, we made marketing more efficient, powered by AI tech, which drove an uptrend in combined GMV versus last quarter, and we are seeing improving revenue and profit metrics underpinned by a robust paying user base. Our plan this year is to bring growth through active realignment of services for North America and the global market. Piccoma sustained healthy growth in Q1, supported by core competitiveness of its content and uptrend in screen adaptations. One of the major contents of Piccoma, Solo Leveling, was made into TV animation, and there were promotions riding on the trend of screen adaptation of Japanese anime, which helped to improve new user count and user metrics. Japanese yen- based GMV continued to grow, with revenue up 7% QoQ. Despite activated marketing, OP margin showed a big increase QoQ.
Music revenue was KRW 468 billion, up 102% YoY, but down 6% QoQ. Excluding SM consolidation, revenue was up 11% YoY to KRW 256 billion. In Q1, release of IU's mini album and her first world tour, as well as IVE's global performance kicking off in full swing, offset the impact of QQ decline in SM album sales. Many in-house artists are planning to engage in more active activities in North America and Japan, and also we expect to solidify our positioning in the global music market. Media revenue was down 4% QoQ, but up 41% YoY, reaching KRW 95 billion. High YoY growth rate is due to the base effect of lower revenue in the first half of last year, as new production was mostly lined up in the second half.
Large increase in the production lineup from Q4 stayed as such in Q1 as well. Next is the operating expense. Q1 consolidated expense was KRW 1,868 billion, up 2% QoQ and 20% YoY. Labor cost was KRW 479 billion, increasing 1% QoQ on wage increase and booking of apportioned bonus expense in line with 2024 annual performance pay plan. On a YoY basis, there was 7% increase due to SM consolidation. We are maintaining a conservative hiring stance and headcount efficiency, and thus, we are to exclude the SM consolidation impact, the labor cost is actually down versus last year. Cost of revenue expense was KRW 820 billion.
On reclassification of SM's cost of revenue into labor and outsourcing costs to comply with the Kakao's consolidated accounting basis, there was a one-off base effect, which led to 15% QoQ rise.... due to SM consolidation and higher media and performance revenue from Kakao Entertainment, there was 28% YoY increase. For your information, cost of revenue against Q1 revenue was 41%, and due to the reclassification of SM's revenue-linked expenses, there was 5.5% QQ increase. Outsourcing and infrastructure expense was KRW 202 billion, down 21% QQ due to reclassification of SM account, despite the rise in AI-related infrastructure fees, and it was 16% YoY.
The marketing expense was KRW 89 billion, down 14% QQ and 8% YoY on the back of efficient spending under the cost control discipline, and marketing costs against revenue fell to 4.5%. Depreciation was one hundred and ninety-eight billion won, while depreciation from buildings and servers from running our own IDC center increased, there was 6% QQ decline on lower PPA amortization following the losses booked for PPA impairment last quarter. However, on rise in depreciation costs for service and others, and SM-related PPA amortization, depreciation was up 32% YoY. In the Q1, depreciation expenses for new data centers totaled KRW 6 billion.
Of this amount, depreciation for Ansan data center accounted for 3.5 billion KRW, while the remaining amount pertains to the amortization of usage rights for the Hanam data center, which began operation in March. In the Q2, the combined depreciation expenses for the Ansan and Hanam data centers are estimated at approximately 10 billion KRW, with 3 billion KRW for Ansan and 7 billion KRW for Hanam. Operating profit recorded 120 billion KRW, with OP margin at 6%. Standalone operating profit for the parent Kakao made up of ad and commerce business came in at 138 billion KRW, with OP margin of 21.5%. Next, briefly on non-operating revenue and expense. Due to base effects from large-scale impairment loss and disposition gain in Q4, direct QQ comparison may not be in order.
However, underpinned by strong affiliate performance, including Kakao Bank, equity method gain for the quarter was record high since 2022, which drove the YoY improvement in the non-operating account. Other revenue reported KRW 26 billion, with other expenses at KRW 47 billion, about half of which came from the disposition loss from investment assets and subsidiaries, which are non-recurring factors. Equity method gain was KRW 43 billion, equity method loss was KRW 27 billion, while financial income was flat YoY at KRW 80 billion, and financial expense was up KRW 8 billion to KRW 54 billion on back of higher interest expense, redemption losses from bonds, and valuation losses from derivatives. Next is on CapEx. Total CapEx for Q1 was KRW 140 billion, out of which KRW 107 billion was for tangible assets and KRW 34 billion for intangibles.
Total CapEx narrowed by KRW 97 billion on decrease in investment for construction in progress following the completion of Kakao's data center in the Q4. But with a full-fledged operation of number one data center, we expect increases in investment for machinery, network equipment, and service required for AI and cloud services. We are looking into various ways to lessen the financial impact from the rising CapEx, and we'll continue back to you once the details are settled. Now, moving on to earnings outlook for the year and the financial plan. This year, we expect to drive a double-digit YoY growth of consolidated annual revenue on the back of balanced growth platform and content businesses.
Also, robust growth from the profitable top list will continue throughout this year, and we are seeing the signs of profitability improvement from subsidiaries, whose bottom line contributions have been constrained to date, and so we're looking forward to higher operating margins versus last year. From a strategic perspective, the Kakao will still in its growth phase, although we will continue to invest in its core projects and also areas such as AI. Our goal is to focus on driving profit through business efficiency enhancement and efficient allocation of capital, rather than top-line expansion built by aggressive investment. All of our decision-making for raising capital, strategic investment, and shareholder return will be in full consideration of sustaining Kakao's long-term growth trajectory.
It's Shina again. Let me briefly discuss Kakao's overarching future directions. Since KakaoTalk is fundamentally about connecting relationships w hether between family, friends, colleagues, or even strangers who share common interests, KakaoTalk brings together a diverse spectrum of users. Over time, these connections have evolved beyond simply exchanging messages to include sharing emojis, gifts, money, and more. Despite concerns that the growth has been slowed down post-pandemic, KakaoTalk's domestic MAU increased to 48.7 million in the Q1, up by 240,000 from the previous quarter, reinforcing the cornerstone of our business. This year, the strategic direction of Kakao is committed to enhancing the asset perspective of KakaoTalk's platform and enhancing its user experience as a messaging tool.
To leverage the usage pattern and activity data of over 50 million domestic users, we'll emphasize two key objectives: increasing the frequency of user visits by fostering stronger and more diverse connections, and enhancing stickiness of user engagement by expanding the variety of chat rooms and type of interactions available. To encourage more frequent use of KakaoTalk and help users broaden their social networks, we'll progressively enhance the social graph and introduce features like multi-profile and multi-account functionalities. Additionally, we will launch new type of chat rooms to accommodate diverse purposes, offering more convenient communication options and potentially uncovering new business opportunities. Furthermore, we will expand the range of objects exchanged within relationships via messages, gifts, and money transfers to drive growth focused on Talk, KakaoTalk core value proposition.
Despite rising domestic competition from international e-commerce companies, Kakao, we believe Kakao can continue to strengthen its possibility through unique relationships and context-focused services like gifting, which set Kakao apart and aligns with distinct platform ecosystem. Next, I would like to provide an update on Kakao's strategic direction in AI, a field that's drawn significant attention. In late 2022, OpenAI ChatGPT captured public interest, prompting the market in early 2023 to evaluate tech companies based on their involvement in large-scale language models. By the second half of 2023, attention turned to the potential costs associated with developing and maintaining these models, and the market shifted its focus from foundation models to how well companies have monetized their AI.
Corporations now face a complex challenge: maintaining technical capabilities in emerging AI while ensuring these investments fit their financial structure and produce economic return. This requires a strategic balance to maximize value and enhance shareholder return in a rapidly evolving AI landscape. Kakao is navigating the same challenges. AI and investing in AI is a strategic reinvestment of cash flow from our current businesses, aiming at generating long-term shareholder value rather than just paying dividends. However, we recognize that the capital market demands a balanced approach to ensure our investments don't jeopardize our current financial stability or profitability. Even global tech giants, despite significant capital investments, struggle to build a sustainable business model around generative AI.
While agility is crucial in a fast-forward, fast-moving AI field, we recognize that our progress with our fundamental model and the launch of commercially viable services has not fully met market expectations. To address this, we have removed barriers between Kakao Brain, which focuses on AI model, and Kakao, which focuses on AI services. On May second, our board of directors approved the transfer of Kakao Brain's AI business. This strategy integration allows closer collaboration between our AI research and service teams, speeding up AI commerce commercialization. Kakao has developed fundamental models from small LLMs to large LLMs and continues to build technical capacity through research. For example, last year, we introduced a small LM tailored to summarizing unread messages. We plan to develop more cost-efficient models with specialized features to meet future AI service needs.
Our strategy also includes developing multimodal models for audio, video, and images, supporting broader service commercialization. To ensure efficient capital allocation, which aligns with market demands, we will integrate external non-proprietary models where appropriate, embedding generative AI in our services rather than relying solely on our models. Right now, most generative AI applications are text-based chats, a user experience where KakaoTalk excels. We are preparing services like content description and consultations that fit the unique chat context. We'll also create an AI playground where users can explore and experiment with various AI services and create and share their own AI models. This platform will serve as a testing ground for AI services, allowing us to rapidly integrate successful models into KakaoTalk. Through these initiatives, we are meaningfully expanding our AI ecosystem centered on Kakao.
Finally, I want to reaffirm our commitment to shareholder returns and responsible management. To enhance shareholder value, Kakao established a mid- to long-term policy of returning 50%-30% of its standalone free cash flow for 3 years, starting from 2021. We are currently reviewing our shareholder return plan for 2024 and beyond to ensure it's aligned with the government's newly announced guidelines for corporate value-up programs and meet the market expectations for Kakao. We will provide detailed communication to the market following discussions with the board of directors. This year, it will be pivotal in refining our business operation and restoring trust. We intend to shift our previous expansion-centric management strategy and place greater emphasis on essential values of Kakao, as previously outlined.
Leveraging the robust performance of our core business, particularly through improved advertising commerce monetization within KakaoTalk, we will invest in high growth opportunities. Our growth, our goal is to establish a virtual cycle that sustainably boosts profitability across the group, ultimately enhancing our enterprise value. We will remain dedicated to improving our group governance structure to focus more on our core business. Under the Fair Trade Act, Kakao currently oversees 128 domestic affiliates, a reduction of 19 since May 1, 2023, despite the addition of 25 affiliates from SM Entertainment. Our commitment to governance improvement aligns with the expectations of the capital markets and our diverse shareholders, and we will continue to prioritize these efforts to ensure effective and transparent management.
We are dedicated to improving shareholder value by enhancing transparency around our profit and growth, ensuring Kakao can meet market expectations and growth-oriented company. Furthermore, we will maintain open communication with the capital markets, enable investors to gain deeper insights in our business status and strategic directions. We will listen attentively to substantive, constructive suggestions and criticism from the market, guiding us to pursue sustainable long-term growth. We appreciate your continued support as we embark on this renewed journey with Kakao. Thank you. This concludes the overview of Q1 2024 earnings. We will now move on to the QA session. Please limit your questions to two per person due to time constraints.
Now Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone. The first question will be provided by Dongjun Kim from CLSA. Please go ahead with your question.
Thank you for taking my question. Before I ask my question, I would like to first congratulate the new incoming CEO, Shina. Congratulations on your new position. Moving on to my question, we see that the GDP growth rate has outperformed the expectation of the market, and we are seeing some signs of recovery in both domestic consumption and investment. Could you provide us with some color as to what the company's take is with regards to the outlook for the overall advertisement market? Second question is, if you look at your ad revenue, we've seen a double-digit growth from your Business Message as well as BizBoard. What is your strategy and your outlook for these businesses going forward?
This is Shina. I will respond to your first question relating to the overall advertisement cycle, and the outlook that we are currently projecting. There is expectation that there will be a bit of a delay in terms of the interest rate cut and the recovery of the overall economic cycle, and we see that the advertisers are continuing to stick to their quite conservative marketing stance. So with the continuing of the high rate backdrop, we see that there is no particular industry vertical that is leading the advertisement market, and we see that some of the partners are finding it quite difficult to raise funds, and hence that had worked as a constraint on their marketing activities.
Now, despite such headwinds, Kakao was able to very quickly and nimbly address the changes that we were seeing in the market, and particularly regarding the Chinese e-commerce platforms and their marketing activities, and we were able to win the ad budget, and hence we were able to outperform the industry by posting a quite solid growth. Now for this year, if you look at the online ad market for Korea, about 4% growth is expected versus 2023. But considering the current global economic cycle, as well as all of the geopolitical issues that the world is facing, it's quite difficult for us to time when that economic recovery will take place.
Now, but if you look at Kakao, we have our core competitive advantage in business messaging. This is something that other online platforms do not have. And last year, we've carried out some revamping of the Talk platform, expanding the business opportunities, and we've also diversified the pool of the advertisers, setting in place a solid foundation for us to continue on with the healthy growth. Hence, we expect that for this year we will be able to outperform the overall online ad market growth. Now, also responding to your second question about Kakao's objective and goal regarding our ad business and what our growth strategies are. Now, there will be three aspects that I'll be talking about, three across three different products.
First, if you look at Business Message, we are seeing a continuous expansion of a pool of advertisers using Business Message, and especially out of that, a number of active advertisers within that pool making use of our messaging marketing is also uptrending continuously. If you look at the financial verticals and the advertisers, what they need is a template that they could use to safely and in a secure manner, communicate with their customer base by preventing any risks relating to spam or smishing. And so we were able to respond to this advertiser need quite well, and hence we are seeing revenue per advertiser going up.
Also, for commerce, we have provided them with certain templates that they can use to provide more personalized messaging and for them to leverage rich images and videos, which really helped to drive improvement in the overall reach and conversion rate for these advertisers. And hence, as a result, we are seeing a bigger rise in top line revenue compared to the number of messages sent. This year as well, underpinned by such high reach as well as conversion rate and all of these, positive metrics, we believe that we will be able to satisfy the various different needs of our advertisers and continue on with a solid growth trajectory.
Now moving on to Biz Board, we now see that the Biz Board CPT product in the friends tab, its top line contribution has been quite significantly risen on an YoY basis. And what we did was, we were able to run performance ads during a specific time slot when there was low demand for CPT products. We were able to maximize this top line potential, which really contributed to a significant growth of the overall Biz Board. With this year, we will be providing the Biz Board inventory, the KakaoTalk inventory, to the third party advertiser platform called DSP, so that they could make use of the premium inventories that Kakao can offer for the advertisers. As such, we will be able to further develop this board inventory into a high quality media and also expand the advertisement ecosystem.
Now, regarding new businesses, on top of growing the current suite of products that we are currently offering, we are looking into various different strategies to make new business models. So we will be strengthening the product lineup that better meet the needs of the branding advertisers. In order to achieve that, what we did was we released a Talk PC impression ad last month, and also within the end of, or before the end of the year, we will launch a full screen branding ad product that could really help to further enhance the appeal of the brand. Our mid to longer term approach will be to explore very specialized and new products that really fit with the overall context of the communication and the ethos of Kakao, which is to expand the relationship base. Next question, please.
The next question will be presented by Hoyun Chung from Korea Investment & Securities. Please go ahead with your question.
Thank you for taking my question. I have two questions. I would like to know as to what impact the Chinese e-commerce players are having on your Talk Biz, either positive or negative? Second question, can you share any specific guidance on your Talk Biz going forward? Any particular, I guess, metrics or numbers that you could share with us?
Yes, this is Shina, responding to your question about what impact the entrance of Ali and Temu is having on Kakao's overall ad business. Now, when the Chinese e-commerce platforms announced that they will enter into the Korean market, we expected to see a bigger amount of new marketing budget for the online market. During that period of time, Kakao had really studied and also preemptively responded to the marketing needs that these Chinese e-commerce players would have, and we were able to successfully win the new marketing budget, and that had worked as a positive driver behind our Q1 ad growth. Now, regarding the outlook that we are currently looking at, I think it'll be helpful to divide that between our Talk Biz and the commerce business.
So just first looking at the ad impact, the entrance of Chinese e-commerce platforms into the Korean market is expected to have positive impact on the online ad market. So we'll be in line with that trend and very nimbly respond to the needs of the advertisers, and we'll continue to win their marketing budget as we go forward. Now, having said that, if you look at the case in the United States, when the US, the Chinese e-commerce platforms entered into the US market, it triggered a sudden change in the overall market environment, and there may be some negative impact that the existing pool of advertisers will feel in terms of their top line revenue or their ad spending. So we are very closely monitoring overall situation regarding Korea's e-commerce industry.
Now, the second part to this answer is on commerce, and, as you know, for Kakao Commerce, it is Talk Gift that is really driving the growth, as it is underpinned by the relationship that we've mentioned before. And if you look at the special characteristics of Talk Gift, basically, it is all about providing and offering value to the other person. So its price sensitivity is quite low compared to other groups of products. Also we have a very specialized product lineup focusing on global high-end premium products as well. So we believe that the impact that our commerce business will feel from the entrance of the Chinese e-commerce platforms will be quite limited.
To the question on Talk Biz annual guidance, as we've communicated at the beginning of the year, our objective is outperform the market growth. And if you look at our Talk Biz ad business, our objective once again is to achieve growth that is higher than the online ad industry growth rate. And this year, we will continue to focus on expanding the very ethos of Kakao service, which is based upon the business relationship, and we will be expanding our advertiser tool, and also we'll develop lineup of products that is specialized for a specific context and occasion. And if you look at commerce, we are expanding its scope from acquaintances and families and friends to even to strangers, and we see a very clear growth in terms of the growth of the luxury brand as well as the delivery product.
And for Kakao Gift, we've changed the timing of recognizing the revenue to the time of usage. And so depending on the amount of usage for the exchange coupons, there may be some fluctuations in the growth rate of the top line sales.
Next question, please. The following question will be presented by Jinu Kim from CGS International. Please go ahead with your question.
Thank you for taking my question. My first question is on, what are the plans regarding the proceeds that you get from the EB issuance? Where would that proceed be used? And regarding the remaining shareholders, what would be the use for those, the shares, your treasury shares, that is? And then with the incoming of the new management, I see that there's been quite a bit of change in your overall AI business organization. So what is the investment plan going forward? And also, what is the amount of the losses that you are currently booking from these new initiatives?
Yes, this is Kelly. I will respond to your question about EB and our treasury shares, and regarding new initiative, Shina will talk about the outlook, and I will talk about the investment, plans. Now, as we've made the disclosure in April, because we felt that there was need for us to have, funds for investment so that we can really strengthen our AI capabilities across various different platforms, and for us to secure global content and to expand our infrastructure. What we did was, based on the underlying of 4.6 million treasury shares, which is about 1% of total outstanding, we've issued a, cross-border exchangeable bond, EBs, in the amount of $200 million.
So this issuance, this was decided because there was quite a bit of interest rate differential between Korea and US, and we believe that we would have been able to or the FX rate, excuse me, we could leverage the exchange rate environment, and also because the current equity price of the company is considered to be quite undervalued, and we were looking forward to an upside in the share price going forward. So one of the terms and conditions was on 30% of exchange premium.
So a lot of highly reputed long-only investors have shown interest, and there was quite a bit of demand, and I can tell you that this was a successful issuance. From the investors or from the underwriter's perspective, because it's difficult with these types of instruments for them to hedge their position because they're short-selling constraint, they eventually would have to bear about 2% additional interest so that they could actually have come up with some synthesized or hybrid positioning. So it was a quite difficult situation, but even despite that, we were able to issue these EBs at 2.65%, which is relatively a low rate, and so we've been quite successful.
So initially there were some concerns internally that this may actually be going against the trend of the government-led value up program, which actually, you know, seeks to facilitate more share buyback and cancellation. But we believe that this was a necessary financing for us to sustain our growth potential and also to minimize the financial burden as much as possible, while at the same time secure ample amount of investment funds. So we also ask for your understanding as well. We will also look at, you know, whether the share prices are continuously going to be undervalued, and also we'll look at the increases in the surplus cash flow. So, we can give you our words that we will not shy away from strengthening, further enhancing the shareholder value.
So of the KRW 100 billion that is raised through EBs, of the EB funds that was raised, about KRW 100 billion will be used for AI content and GPUs and servers, and the remainder will be used for the proceeds for overseas cross-border M&As or setting up of JVs. However, no specifics as of this time has been confirmed.
So as according to the three-year shareholder return policy, which we announced back in 2021, at the general shareholders meeting, we've decided to cancel about 2 million shares, which is about 0.4% of the total outstanding, and that cancellation has been completed as of May the 3rd. So the remaining treasury shares that we hold at this point is 3,143 shares.
This is Shina, responding to your question about our, outlook projections regarding new initiatives. So Kakao Brain's AI business is going to come under, going forward and under Kakao Corp's, separate basis, PNL. And of course, the operating expense is going to vary depending on the size of the investment amount. And if you look at the annual losses coming from the new initiatives, due to the, the efforts behind restructuring of Kakao Enterprise, which we did last year, basically our objective once again is to reduce the amount on an absolute basis as much as possible.
Now, this is Kelly. Regarding the size of investment, I think it will be helpful to separate between OpEx and CapEx. First, just looking at OpEx alone, last year, Kakao Brain, on its own, spent about KRW 80 billion in AI-related spending. From June up until the end of the year when the business transfer gets completed, there will be integration of Kakao and Kakao Brain's AI businesses. So we're expecting around KRW 100 billion of AI-related expense. Kakao Brain, during Q1, booked about KRW 24.5 billion in operating losses, and with the integration of the AI businesses, we expect to see improvement in efficiencies relating to infrastructure cost.
Now, moving on to CapEx. We are continuously purchasing GPU servers as we speak. Last year, on a consolidated basis, out of the machinery investment, GPU investment accounted for about 23%, which is about KRW 45.5 billion. This year, we're have set aside about KRW 50 billion of investment for that same purpose. Having said that, depending on the level of monetization and the type of business models that is powered by generative AI models, there may be some fluctuations in the size of infrastructure investment.
Well, due to the time constraint, we would now take the last question.
The last question will be presented by Yeji Yoon from HI Investment & Securities. Please go ahead with your question.
Thank you for taking my question. I see that there's been some accounting changes for your mobility and commerce business. What is your operating profit impact from such changes in accounting basis? Second question relates to your mobility business. On top of the changes in the accounting method, I understand that there's been some new fee products or commission products that was introduced for your franchise-based taxis. So with the change in the fee structure, what impact are you seeing? And also, what are some of the other key products or services that you are, at this point, thinking of in order to drive mobility business going forward?
Yes, this is Kelly. Responding to your first question about change in our accounting basis for booking the top line revenue. We've engaged third party experts and outside independent bodies and received their advice and recommendations, and made some changes in our accounting standards. We've applied a conservative accounting approach on the top line revenue side and have made two major changes. The first one being that the revenues coming from the franchise taxi business of mobility and Kakao Makers have been converted to a net basis booking for top line revenue. And for Talk Gift, the timing of booking for the revenue has been changed to the timing of use. Regarding the impact on commerce, the change of net basis accounting treatment for makers has no impact on OP.
It's just a changing of the timing of booking for that revenue for KakaoTalk Gift does have an OpEx impact, but also will have an impact on the growth of the top line revenue. From the revenue side, basically, there's going to be accumulation of unused vouchers that were actually paid for back in 2023, but unused as of yet. And so that's going to really increase the scope of the duration for the usage of these specific vouchers. So when we say use, that means that usage actually has to take place in order for revenue to be booked.
So we would need to think of ways to expand and grow our delivery products and facilitate the use of the vouchers, and also to sell more preferred vouchers to the customers to make sure that there are no unneeded deferrals of bookings of the revenue. On the OP side, there could be both positive and negative. In terms of the payment fees and commissions, basically, it actually is hinged on the GMV of the revenue linked expenses and the timing of such. So basically, if it is a certain quarter where the actual usage volume is higher than the GMV, then the OP could actually go up quite significantly.
In terms of the mobility impact, the taxi revenue has been changed on a net revenue basis, and that drove down also the outsource and infrastructure expense down, and hence there actually is no impact on OP. Regarding your question on Kakao Mobility, we've introduced a new franchise product at a lower fee level of 2.8%, and we will continuously seek ways to thrive together with the overall industry. Regarding the specific benefits and how this product is configured, we are currently also internally going through discussions and ironing out the specifics. So please do understand that since this product has not yet been rolled out into the market, it'll be difficult for us to give you a clearer picture on its impact on top line and bottom line.
But I just want to highlight before I end, that despite very difficult economic backdrop and economic slump and the slump in the consumption, we were able to expand on the supply, including for our taxi driver for hire and parking business. And we've seen an evenly spread out growth across all of these business segments, and we have hence completed the setup of a very firm revenue stream. So this year, we will continue to drive growth and also expand into new platforms to include, for instance, advertisement, gig economy, and car owners platform, so that we may be able to sustain the year-over-year growth that we've seen last year.
Well, this brings us to the end of Kakao's earnings presentation as of Q1 of 2024. Thank you very much for joining us.