Kakao shares plunge as shutdown prompts calls for antitrust scrutiny According to Reuters

© Reuters. FILE PHOTO: Kakao messaging app and taxi booking app Kakao T are seen on mobile phones in this illustration photo March 13, 2018. REUTERS / Thomas White / Illustration

By Joyce Lee and Jihoon Lee

SEOUL (Reuters) – Shares of South Korea’s Kakao Corp plunged on Monday after the country’s largest mobile chat app was shut down on a large scale, sparking fierce political backlash and calls for a boost. monitoring for the company’s market dominance.

The outage was caused by a fire at a data center near Seoul over the weekend, and while systems were mostly restored on Monday, disruptions to a range of related services from payments Taxis and restaurant reservations have raised questions about the public’s reliance on apps.

Chairman Yoon Suk-yeol said on Monday that the company’s services, including the flagship KakaoTalk messaging app, are “like a basic national telecommunications network as far as the public is concerned,” and promised to take further measures in the event of service outage.

“If the market is distorted into a severe monopoly or monopoly, to the extent that it serves a function similar to that of national infrastructure, the government should take the necessary measures in the interest of the country.” the interests of the people,” Yoon added, noting that South Korea’s antitrust watchdog will examine the matter.

Kakao stock fell as much as 9.5% on Monday, to its lowest level since May 2020, wiping out 2 trillion won ($1.39 billion) market capitalization at one point, while shares of affiliated companies KakaoPay and KakaoBank lost more than 8% before the loss.

(Kakao stock price plunges

On Monday, rival messaging service LINE rose to the top of the most downloaded apps on the iPhone App Store in South Korea, not even breaking into the top 100 on Friday, according to SensorTower data. . KakaoTalk dropped to 36th from 13th.

Officials said on Sunday that South Korea’s Ministry of Technology was investigating whether the outage violated any laws while the media regulator was looking into the matter, including User compensation question.

A Kakao spokesman told Reuters on Monday core services such as messaging were back online, although some small apps were still being restored.

“It’s basically a free service, and how compensation will work for paid services is unclear,” said Choi Yoo-june, an analyst at Shinhan Financial Corp. but it’s seen as a national communication network, not a private network.” right now, and it has the potential to spread to the issue of platform monopoly regulation. “

An initial probe on Sunday found electrical problems around the battery rack in the third basement of the data center, operated by SK C&C, may have caused the fire. A forensic investigation was conducted on Monday.


The company said in August that messaging app Kakao KakaoTalk had more than 47 million active accounts in South Korea and 53 million globally, the company said in August, making it one of the most popular apps. most popular in this country of 51.6 million people.

The free messaging service took mobile users by storm soon after the introduction of smartphones in the late 2000s, and its early mobile advantage allowed it to outshine its competitors, including including tech giant Naver, to become Korea’s dominant messenger.

It was then able to leverage its large user base to expand into gaming, advertising, intellectual property, and other entertainment, shopping, payments, and mobile activities.

Kakao is not expected to take a major financial hit from the compensation, but the reputational impact is important if businesses and consumers reduce their reliance on the service, analysts say. know.

“Assuming that the scope of damages is limited to paying users, the impact on operating profit is estimated at around 12 billion won,” said Kim Jin-woo, analyst at Daol Investment & Securities. “What will be important will be user traffic trends after full service recovery.”

Kakao reported an operating profit of 330 billion won for the first half of 2022.

On Monday, it said it would discuss compensation with data center operator SK C&C for the losses suffered by the company and its key entities.

Kakao said Sunday that while its servers were distributed across four data centers, the data center that caught fire had 32,000 servers, or the main part, its servers, lost power and were damaged. damaged by fire.

Joo Ho-young, a ruling party lawmaker, told a party meeting on Monday that Kakao’s failure to manage its own data center and centralize most of its systems in one place indicates “insufficient management”.

Yang Hyun-seo, vice president at Kakao, said Sunday that although the extent of the damage makes it difficult to respond, the storage redundancy means no data is lost.

A Kakao spokesperson declined to provide the total number of servers it uses, citing security concerns.

(1 dollar = 1,435,700 won)


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