When Kakao Becomes a ‘National Infrastructure‘

It was a quiet afternoon of October 15, 2022 – sipping warm coffee from a cup and stroking keys on my laptop to write an email to a client. Breaking the silence, my phone started to ring with a loud noise. It was a call from my younger sister, who lives at least a few subway stations away from my office. I picked up the phone, wondering why she decided to give me a phone call instead of sending a message on Kakao Talk, South Korea’s most widely used messenger app.

“Does your Kakao T app work?” My sister shouted before I even asked how she was doing. She explained that she was trying to book a taxi to return home via Kakao’s taxi-hailing app Kakao T, but the buttons on the app did not work. My sister said that she tried sending me a message on Kakao Talk, but the app couldn’t deliver them to my end. I then noticed that I hadn’t received any Kakao Talk messages for a couple of hours already. “Is South Korea under attack?” I laughed at her silly joke but was also concerned about what was going on. 

Kakao – South Korea

After closing the phone call, I typed in “Kakao” in Korean in the search bar of Daum, a search engine run by Kakao. The search engine responded at a much slower pace than it used to before. I then opened Twitter, only to discover many of the trending keywords in South Korea, all including the word “Kakao” or related to the disruption in its services. The internet was flooded with people complaining about the sudden disruptions in using apps owned or operated by Kakao.

Later that day, the news of a fire at Kakao’s data centre in Pangyo, Seongnam, Gyeonggi Province, dominated the headlines. The fire had shut down the centre used by two largest internet companies, Kakao and Naver. Kakao’s all servers, 32,000 in total, went offline due to the blaze, and its popular services, such as banking, taxi-hailing, webtoon, and music streaming, were affected.

Restoring the servers took a longer time than expected for Kakao. Naver, which owned its data infrastructure and had a backup process to restore its service, managed to run its services as usual within a few hours after the shutdown from the fire. On the other hand, Kakao’s services were unavailable or lagging until October 20, about five days after the blaze.

Kakao Data Server

Brief challenges followed the disruption in the Kakao data server in people’s daily lives since the company runs more than 41 different services, according to its official website. However, the biggest challenge of all was contacting other people. Kakao’s messenger app Kakao Talk, the company’s first-ever service, had more than 46 million monthly active users in South Korea as of September 2022. Considering the country’s population is about 51 million, almost 90 per cent of Koreans use the app to chat.

As Kakao Talk went out of service, Naver’s messenger app LINE and Telegram topped the download charts in Google Play Store and App Store in South Korea for a few days. On October 17, the Korean government categorized Kakao’s outage as a “national disaster” and sent updates on Kakao server recovery through a series of national disaster alert messages that inform people about disasters or diseases. The government explained that the blackout wasn’t a traditional disaster or disease but decided to send through the messages as it heavily impacted people’s daily lives.

South Korean President Yoon Suk-yeol noted that Kakao Talk is a “national communications infrastructure” on October 17. He also said that the government will investigate the causes of the outage, with comments about Kakao’s domination over the messenger app. “If the near-monopoly or monopoly distorts the market or sizes its business up as big to become a national communications infrastructure, the government should respond with necessary systematic measures for the people,” he said. “I respect corporate autonomy and creativity, but that is based on the premise that the market reasonably allocates resources and income in a system of fair competition,” he added. “If a monopoly situation causes market manipulation, the government should take systemic action.”

Stock Markets

Kakao administration has been on a rocky road since the data centre fire. The National Assembly held a parliamentary audit to ask the responsibility for the blackout of services to Kakao, and the operator of the SK C&C Data Center, SK Inc. SK C&C’s Chairman Chey Tae-won told the lawmakers that he “takes full responsibility” for the blackout.

As soon as the stock markets opened on October 17, many of Kakao and its subsidiary companies, such as Kakao Pay and Kakao Bank, saw more than a 6 per cent drop in their stock prices. According to the reports, Kakao lost more than 2 trillion won ($US 1.5 billion) on the day. One of Kakao’s top co-CEO Nam Goong Hoon resigned on October 19, apologizing for any inconvenience caused by the blaze. The company was expected to offer compensation of 40 billion won ($US 31 million) to its users.

Since President Yoon’s comments on curbing Kakao’s monopoly in the country, the government also has been seeking ways to establish “fair competition” in the internet industry. Yoon supported the policies of online platform companies’ autonomy in the free market to assure fair competition in the beginning. Still, his recent comments on Kakao starkly contrast his earlier policies. 

People’s Solidarity for Participatory Democracy, a non-governmental policy watchdog, also said the government is responsible for letting a corporate-owned communications infrastructure expand nationwide without proper regulations and pointed out that the policies supporting online platform autonomy should be discarded in its opinion article.

Some experts think the problem lies in Kakao’s lack of due diligence rather than the company’s monopoly over the internet market.

Blackout Incident

Kwon Nam-hoon, an Economics professor at Konkuk University, said in a report that “many people think the company’s monopoly caused the Kakao blackout incident, but that is not true”. He explained that other internet platforms dominate other markets but don’t necessarily have similar problems. For example, Naver, also a big internet company in South Korea, also was affected by the fire. Still, its servers were distributed to other centres, so it didn’t experience much disruption.

Hong Dae-Shik, a professor at Sogang University’s Law School, commented that Kakao’s blackout is inherently different from the cases where monopolistic companies negatively affect other competitors or consumers, inviting the regulations of KFTC. “The committee should promote the market competition to have alternative services to Kakao’s instead of introducing uniformed regulations for internet platforms.”

Almost two months have passed since the incident, but it looks like many people are still dependent on Kakao’s services. I still talk to my sister, friends, and business clients via Kakao Talk, hail taxis via Kakao Taxi, read webtoons on Kakao Webtoon, and find information on Daum. To prevent any similar incidents from happening, the first and most necessary measure now should be establishing a better server restoration system that can respond to server outages more quickly. Also, it might be a good idea to look around for other messenger apps in the market or at least have them downloaded on phones so that we won’t be completely cut off from the conversations when something happens to Kakao.

Sunny Um is a Seoul-based journalist working with 4i Magazine. She writes and talks about policies, business updates, and social issues around the Korean tech industry. She is best known for in-depth explanations of local issues for readers who need a better understanding of the Korean context. Sunny’s works appeared in prominent Korean news outlets, such as the Korea Times and Wired Korea. She currently makes regular writing contributions to newsrooms worldwide, such as Maritime Fairtrade, a non-profit media organization based in Singapore. She also works as a content strategist at 1021 Creative. A person who holds a Master’s degree in Political Economy from King’s College London, she loves to follow up on news of Korean politics and economy when she’s not writing.