SK Telecom's (017670) decision to sell its entire stake in Scatter Lab has drawn a range of interpretations. Scatter Lab has been growing rapidly, and the two companies had been expected to generate synergy in content, leaving little apparent reason to unload the shares now. That has fueled speculation that SK Telecom wants to limit its exposure to the controversy over sexual content and material harmful to minors on Zeta, the artificial intelligence character chat service that is Scatter Lab's main product.
At the same time, the move is read as a strategic decision to reorganize its business around AI data centers. SK Telecom has indeed been accelerating its expansion in the AIDC business, treating AI infrastructure as a new growth engine and increasing investment in data center operations as part of a broader restructuring. The company sold stakes in Joby Aviation in March and in Penguin Solutions in August.
The rise in Scatter Lab's valuation since the initial investment, which puts a gain of more than 10 billion won within reach, is also cited as a reason behind the sale. When SK Telecom invested 15 billion won in 2023, Scatter Lab was valued at about 200 billion won. The secondary share deal now under way values the company at about 420 billion won, more than double that level.
NC (036570), an early investor in Scatter Lab, is also understood to have sold part of its holdings recently. NC took part in Scatter Lab's funding rounds in 2017 and 2018 and had held the shares for years. With NC and now SK Telecom moving to sell, major investors appear to be cashing out.
Scatter Lab's valuation has climbed on the back of Zeta's rapid growth. Launched in April 2024, Zeta lets users create AI characters and fictional worlds of their own and develop stories through conversation. It has proved especially popular among people in their teens and 20s, establishing itself as the dominant AI character chat service in South Korea. Scatter Lab posted revenue of 70.9 billion won in the first half of this year, 2.7 times its full-year revenue of 26.7 billion won last year. Operating profit came to 5.2 billion won.
Zeta's popularity also shows up in time spent on the app. According to app analytics firm WiseApp Retail, Zeta drew the most usage time of any AI chatbot app in South Korea in June last year. Monthly usage reached 52.48 million hours, about 10 million hours more than OpenAI's ChatGPT at 42.54 million hours.
Given the nature of the service, young users account for a large share of the total. According to IGAWorks' Mobile Index, Zeta had about 920,000 users aged in their teens or younger in August this year, or 58.3% of all users. With more than half the user base in that age group, the management of harmful content generated by AI and the effectiveness of safeguards for minors carry outsized importance.
The problem is that, despite the app's popularity, critics say the safeguards meant to block harmful content are not working well enough. Concerns have been raised that conversations with AI characters on Zeta can produce content inappropriate for minors, including sexual and violent language. There have also been reported cases of exchanges involving drugs and of content that glorified suicide.
A review by the office of Rep. Hwang Jung-a of the Democratic Party of Korea, a member of the National Assembly's Science, ICT, Broadcasting and Communications Committee, found that even in "safe mode," which is intended to protect minors, the service generated depictions of sexual violence, sexual exploitation and intimidation involving underage characters. The review also found cases in which the AI suggested phrasing that could circumvent filters designed to block harmful conversations. That has raised questions about how effective the safeguards for minors actually are.
Scatter Lab is strengthening its protections in response. The company has decided to introduce a policy this year capping basic daily usage for minors at three hours and monthly spending at 100,000 won. Users will be prompted to take a break before their time runs out, and use and additional payments will be restricted once the limits are reached. The company also plans to break content age ratings into finer categories and improve the AI's ability to detect harmful conversations.
SK Telecom is said to maintain that the stake sale is unrelated to the controversy over sexual content on Zeta. An SK Telecom official said the company is "reviewing the matter as a matter of selection and focus, but nothing has been finalized."
Given the nature of the service, young users account for a large share of the total. According to IGAWorks' Mobile Index, Zeta had about 920,000 users aged in their teens or younger in August this year, or 58.3% of all users. With more than half the user base in that age group, the management of harmful content generated by AI and the effectiveness of safeguards for minors carry outsized importance.
The problem is that, despite the app's popularity, critics say the safeguards meant to block harmful content are not working well enough. Concerns have been raised that conversations with AI characters on Zeta can produce content inappropriate for minors, including sexual and violent language. There have also been reported cases of exchanges involving drugs and of content that glorified suicide.
A review by the office of Rep. Hwang Jung-a of the Democratic Party of Korea, a member of the National Assembly's Science, ICT, Broadcasting and Communications Committee, found that even in "safe mode," which is intended to protect minors, the service generated depictions of sexual violence, sexual exploitation and intimidation involving underage characters. The review also found cases in which the AI suggested phrasing that could circumvent filters designed to block harmful conversations. That has raised questions about how effective the safeguards for minors actually are.
Scatter Lab is strengthening its protections in response. The company has decided to introduce a policy this year capping basic daily usage for minors at three hours and monthly spending at 100,000 won. Users will be prompted to take a break before their time runs out, and use and additional payments will be restricted once the limits are reached. The company also plans to break content age ratings into finer categories and improve the AI's ability to detect harmful conversations.
SK Telecom is said to maintain that the stake sale is unrelated to the controversy over sexual content on Zeta. An SK Telecom official said the company is "reviewing the matter as a matter of selection and focus, but nothing has been finalized."