Expected to Suffer KRW22.0bn Hit to 4Q22 Revenue
The author is an analyst of KB Securities. She can be reached at leesunhwa@kbfg.com. -- Ed.
Fire at SK C&C’s Pangyo data center shuts down KakaoTalk, other key platforms
— On Oct 15, a fire broke out at 3:33 p.m. at SK C&C’s Pangyo data center (building A’s electrical room, sublevel three).
— The data center manages data for Kakao, Naver and other key platform operators, as well as SK telecom. The fire crippled a large number of Kakao’s community services (e.g., KakaoTalk, Daum portal website) and a handful of Naver services.
— The fire was extinguished at 11:46 p.m. and power was restored to 90% of the affected servers by 9:00 a.m. the next day. However, there has been no announcement on when services will be fully back online.
32,000 Kakao servers go offline
— The damaged data center serves as Kakao’s main data center of 32,000 servers. As of the morning of Oct 16, some 12,000 servers were restored.
— The fire caused connection issues and errors to key Kakao services (e.g., KakaoTalk, Daum portal website, Kakao T Map, Melon, KakaoPage, Kakao Games).
— Services are being gradually brought back online, but crucial services still remain offline. KakaoTalk Channel is still down, creating problems for businesses that rely on the service for various business functions (e.g., customer service, reservation management).
Kakao expected to suffer KRW22.0bn hit to 4Q22 revenue
— Kakao is expected to suffer damage across key business segments (e.g., ad, e-commerce, content).
— All KakaoTalk BizBoard ads have been suspended, with the service currently used to send out notices regarding service status. Meanwhile, Kakao is working on restoring KakaoTalk Channel; damage caused by its absence should begin to mount when businesses open on Oct 17.
— The server shutdowns should hit revenue of key mobility services (e.g., T Map, Navi, taxi/designated driver/pick-up apps).
— The e-commerce segment has been hurt by payment errors on Gift, Shopping, Friends Shop and Kakao Smile (Zigzag).
— Content revenue should suffer because of debilitated services (e.g., game, webtoon, KakaoPage, Melon).
— A simple estimate of damages suggests that Kakao will suffer a KRW22.0bn hit to 4Q22 revenue. The company is currently focusing on bringing services back online. Details on damage claims and insurance coverage will be disclosed in future announcements.
Compensation for paid services being discussed; increase in costs seem inevitable
— In response to the fire, Kakao has established an “emergency response committee” composed of management and business segment heads to discuss damage compensation.
— The committee is divided into three subcommittees, one for investigating the cause of the fire, another dedicated to disaster contingencies and the other handling damage compensation.
— The compensation subcommittee will establish plans to compensate users, business partners and other interests. A channel for receiving damage claims will be opened by next week; the received claims will be used to discuss the scope and beneficiaries of damage compensation.
— Kakao Webtoon and Melon have decided to extend subscriptions by three days, and Kakao Games plans to announce individual compensation details for key games (e.g., Odin, Uma Musume). The mobility segment is discussing methods for compensating paid service users (e.g., Kakao T, Kickboard rentals).