Lots of things can end up being popular on a mostly regional basis. I'm sure there are many sites that are only popular to a specific locale that you've never heard of.
As an example, do you think it would have seen the light of day if Twitter, not Plurk, was involved?
Whenever something like this happens, it's a sign that the people who could have stopped it were completely unaware of what was happening. I'm sure the final work product was reviewed and approved by one or more people, who likely don't live in holes.
Microsoft knows better than to try something like this deliberately. They're big enough and do enough that something like this was bound to happen eventually. I think they handled it well, and may be more circumspect going forward.