Kakao outage in South Korea prompts security, monopoly concerns

SEOUL — In South Korea, Kakao is ubiquitous. Nearly everyone, from schoolchildren to the elderly, uses the Korean tech company’s apps for messaging, taxis, navigation and payments. It’s Facebook Messenger, WhatsApp, Uber, Google Maps and Venmo wrapped into one.

So when a fire broke out this weekend at the building where the company’s servers are run, disabling its apps, people joked that the country would shut down.

But the outage forced a serious reckoning over security and monopoly concerns in Korea, where a handful of giant conglomerates hold dominance over the country’s economy. (Hyundai, known for its cars in the United States, operates apartment complexes and department stores here; Samsung, the technology giant, also sells insurance and owns a high-end clothing company.)

Kakao said in a presentation to investors in August that its customer base had grown to 53.3 million active users, with 47.5 million of those in South Korea — striking dominance in a country of more than 51 million. Many stores accept Kakao Pay, most of the taxis across the Seoul metropolitan area run on Kakao T, the company’s ride-hailing app, and friends, companies and even the government use Kakao Talk to exchange messages.

It’s not uncommon for websites and apps to experience outages — Amazon Web Services, Slack, Facebook, WhatsApp and Apple have all made headlines and panicked consumers — but they usually last hours, not days, and they don’t often affect so many parts of people’s lives.

On Monday, as Kakao was still getting some of its services back online, President Yoon Suk-yeol said his administration would investigate whether Kakao had a monopoly on the market. If that were the case, with Kakao becoming “nationwide infrastructure,” Yoon said, “then the state must take necessary measures for the good of the people.”

On Sunday, Yoon’s spokeswoman, Kim Eun-hye, said the disruption “not only damages people’s livelihoods, but also causes fatal problems to national security in case of emergency.” Resilience in the face of such incidents, Kim said, “is a corporate responsibility and a social promise.”

Kakao shares plunged 9.5 percent on Monday morning before closing nearly 6 percent lower from Friday’s close.

“Risk management in Korea is not a strong suit of most companies,” said J.R. Reagan, an American cybersecurity adviser in South Korea who runs the consulting firm IdeaXplorer Global. “They don’t like planning for things that haven’t happened yet.”

Kakao’s first problem, he said, was that there didn’t appear to be backup generators to make up for the power outage. Second, “you don’t put all your servers in one location — you spread those out,” so that one incident — like the fire — doesn’t cause such a widespread and slow-to-fix outage, he said. He added that U.S. tech companies have “learned their lessons” there.

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Kakao and SK Telecom, a conglomerate that runs Kakao’s servers, did not respond to requests for comment Monday. Kakao said in a statement Sunday that it had created an emergency response committee to address the incident. Some features, such as messaging and Kakao T, were restored as of Sunday evening, the statement said.

Hong Eun-taek, co-chief executive of Kakao, said in the statement, “We sincerely apologize for the inconvenience caused by this accident, and we are currently doing our best to normalize the service.” He added that the company was working to prevent similar incidents from happening again and that it was preparing a “compensation policy” for those affected.

Tammy Lee, a student at Korea University, turned 21 on Sunday. “When the outage happened a day before, I started to get super nervous,” Lee said. In Korea, young people often use Kakao to send birthday presents; the recipient gets a message and can choose the color or size of the item and confirm the delivery address.

“When I realized that I would not be able to receive any gifts this year, I was really sad,” Lee told The Washington Post on Monday (in a Kakao message). By the time the gifting feature came back online Sunday night, “only a few people” who had texted her birthday messages had checked back in to send a present, she said.

“I think the past few days show why Kakao’s dominance can be a threat, but honestly I don’t think any other ‘competitor’ will replace Kakao at this point because it’s SO deeply rooted in our lives,” she said. “I can’t imagine people abandoning a whole life style just to move on to another application.”

That didn’t stop competitors from trying to take advantage of the moment. Line, a messaging app run by internet giant Naver — Korea’s version of Google — promoted its reliability. Line, Uber and the messaging app Telegram rose to the top of the App Store charts in Korea. Telegram taunted Kakao on Twitter, saying, “We welcome our new Korean users and hope they will enjoy the stability of Telegram’s multiple data center infrastructure.”

Hwang Lee, director of the Innovation, Competition and Regulation Law Center at Korea University, said Kakao can be called monopolistic “in a plain sense,” but he wouldn’t go so far as declaring it a monopoly in regard to antitrust enforcement.

Korea’s Fair Trade Commission “has kept a close eye on Kakao and other monopolistic digital platforms for a long time,” Lee said. But “their efficient services have survived government regulations so far” as the government weighs the pros and cons of the well-integrated platform, he said.

Still, the outage was a wake-up call for Koreans, Lee said. “They realized the potential dangers of a platform monopoly, which have been overlooked.”