Korean Internet Giant Kakao’s Co-CEO Resigns Amid Heat From Data Center Fire

Korean internet giant Kakao’s co-CEO Whon Nam-koong resigned Wednesday morning, following public outrage and regulatory scrutiny over a service outage that upended the company’s most popular services.

Founded by Korean billionaire Kim Beom-su, who topped this year’s list of Korea’s 50 Richest with a net worth of $9.6 billion, Kakao covers messaging, payments, banking, gaming and ride-hailing. Its messaging app, KakaoTalk, has over 47.5 million users in Korea – more than 90% of the country’s population, according to Kakao.

Kakao’s services went offline on Saturday for approximately 11 hours, as 32,000 Kakao servers were affected by a fire at the SK C&C data center located in Pangyo, a city south of Seoul, Korea’s capital. Operated by the SK conglomerate, the data center also houses servers for Korean billionaire Lee Hae-jin’s Naver, the country’s largest internet company by market capitalization.

“As a CEO of Kakao, I feel miserable and strongly responsible for the incident. So I am stepping down from the post,” Whon said during a press conference held in Pangyo, reported by local media. He apologized to Kakao’s users and pledged “Kakao will do its best to restore public confidence.”

The former CEO of Kakao’s video games subsidiary, Whon became co-CEO of Kakao this January alongside Hong Eun-taek. Hong will stay on as the sole CEO, leading emergency efforts in recovering from the service outage. Kakao plans to invest 460 billion won ($325 million) to build its own data center from next year, with an additional data center slated for the following year.

The outage had an immediate effect on Korea, where Kakao’s services are deeply integrated into everyday life. While of millions of users could not contact one another over KakaoTalk, shopowners reliant on KakaoBank or KakaoPay were also unable to conduct business. Over 650 small businesses complained about lost sales due to the Kakao outage, lobby group Korea Federation of Micro Enterprises said.

In response to the fire, Korea’s President Yoon Suk-yeol announced Sunday that a Fair Trade Commission probe into Kakao was underway, accompanied by the creation of a cybersecurity task force to review the incident and its potential ramifications for national security.

“Although Kakao is a network operated by a private company, it is virtually no different from a national communication network from the perspective of the people,” Yoon said in a press conference reported by local media. The leader of Korea’s ruling party also announced it would prepare “legislative measures” to address the disruption of Kakao’s services.

Shares of Kakao are down 70% since their peak in July last year. The price dipped by 9.5% on Monday following the fire, the lowest level since May 2020, but rose by almost 6% on Wednesday. As of writing, Kim’s net worth stands at $4 billion, less than half of his net worth in April.

More broadly, Kakao has come under fire over the past year as regulators have investigated Kakao for monopolistic activity. In September, the country’s antitrust regulator launched a probe into Kim and his company K Cube over potential fair trade holding violations. In turn, Kakao postponed the listing fintech unit Kakao Pay until last November, when it raised $1.3 billion, and indefinitely pushed back the IPO of taxi-hailing app Kakao Mobility.

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