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Kakao faces probes after data center fire took out all services

President Yoon launches security and anti-trust inquiries after data center fire disrupted tens of millions of Kakao services.

Robert Clark

October 17, 2022

3 Min Read
Kakao faces probes after data center fire took out all services

South Korean internet giant Kakao is counting the cost of a disastrous data center fire on the weekend that took down its services, crashed its stock and sparked multiple inquiries.

The fire in a third party-owned data center on Saturday crashed its ubiquitous messaging platform, KakaoTalk, as well as its games, ride-sharing, payment and other services for half a day.

By Monday afternoon most services had been restored but the company has attracted trenchant criticism for its poor disaster recovery.

"The point of this crisis was that the business did not have appropriate backup systems in order to cut costs," Park Hong-geun, floor leader of the main opposition Democratic Party, said.

Some legislators have drafted a bill that brings the leading digital service providers into the government's disaster response system, Yonhap reported.

Others called for the reintroduction of a 2020 bill that would have designated data centers as state disaster facilities, but had been rejected following protests from the industry.

Kakao founder Brian Kim, CEO Hong Eun-taek, and Choi Soo-yeon, CEO of rival Naver, which was also affected by the fire, have been called to appear before the National Assembly next week.

President Yoon Suk Yeol has set up a cybersecurity task force to review the national security implications of the incident.

He also said a Fair Trade Commission probe was underway.

'Government should take action'

"Although the network is run by a private company, it's practically national communications infrastructure," he said. "If a monopoly or an oligopoly causes market distortions and acts like national infrastructure, I think the government should take action."

The fire broke out in a data center run by SK C&C, a part of the SK conglomerate, at Pangyo, south of Seoul on Saturday afternoon. The fire reportedly started in a battery stored in the basement.

"We weren't prepared enough for a crash of an entire server system from a fire," Yang Hyun-seo, Kakao vice president, told Korea JoongAng Daily on Sunday. "There is some difficulty as it is the first time in the history of IT in which 32,000 servers were shut down."

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Most functions of KakaoTalk and other Kakao services had returned to normal service, the company said Monday afternoon. "Some of the less popular services are still unavailable, but we're working on them," an executive told Yonhap.

Kakao's stock plunged 9.5% in early trading Monday before recovering to close down 5.9%.

The Kakao Corp share price has fallen 58% and KakaoPay Corp has sunk 80% since the beginning of the year as the company faces growing scrutiny over its dominance in multiple segments.

Kakao reported 47.5 million active users in Korea in Q2, with another 6 million worldwide. Kakao Talk, its biggest single product and Korea's most popular messaging platform, accounts for just under a quarter of revenue.

The company said in a statement Sunday that it expected the fire would have "limited" impact on revenue. It said it would seek talks with SK C&C over compensation.

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— Robert Clark, contributing editor, special to Light Reading

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About the Author(s)

Robert Clark

Contributing Editor, Special to Light Reading

Robert Clark is an independent technology editor and researcher based in Hong Kong. In addition to contributing to Light Reading, he also has his own blog,  Electric Speech (http://www.electricspeech.com). 

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