By Kim Tong-hyung
Staff Reporter
In the South Korean Internet market, NHN makes domination look easy. Expanding the borders of its search kingdom, however, has proven to be a difficult challenge.
The company, which controls more than 70 percent of Korea’s search market through Naver (www.naver.com), had been looking to expand internationally and picked Japan as its first target. Nine years later, NHN is still stuck on the first step.
Granted, it isn’t that NHN is totally missing out. Hangame Japan (www.hangame.co.jp), the localized version of NHN’s online games portal, has enjoyed modest success.
However, finding a winning formula for Naver, which would be a truer indicator of the company’s overseas performance, remains elusive. After five years of irrelevance, NHN closed its Japanese search page in 2005 to the noise of crickets.
Obviously, NHN doesn’t intend to remain a bad joke for long, as it is renewing its attempt to penetrate the Japanese search market. Last week, the company announced the establishment of the Next Human Search Technology Corporation (NHST) Japan, a Fukuoka-based unit that will perform database analysis and study search patterns.
The new affiliate will work closely with Naver Japan (www.naver.jp), established in November 2007 as the headquarters of NHN’s Japanese search business, thus freeing NHN Japan to focus predominantly on online games.
NHST Japan is listed as the local unit of NHST, a China-based company established in December 2007, and represents NHN’s efforts to streamline its business strategies and product development in the three Asian countries.
NHST Japan is also seen as the latest sign that NHN is close to revealing its new Japanese search engine.
The company had initially planned to launch the search engine late last year, but the debut was delayed repeatedly, with NHN ending up looking like the ``boy who cried wolf,’’ in the words of company chief executive Choi Hwi-young.
And the point of the story is, as always, the wolf eventually shows up. Although NHN has yet to announce the details of its Japanese business plans for the year, company officials expect Naver Japan to launch its search engine as early as during the first quarter.
``The development of the search engine is nearing completion and we won’t keep you waiting too long for the beta version,’’ said an NHN official, adding that Naver Japan had recently completed hiring its local workforce.
``Differentiating our services from other search engines in Japan will be key for us and we’ve invested a lot of effort to come up with something new and innovative. We want to reveal a finished and polished product, not a rough and green one, and the timing of the launch was the least of our concerns,’’ he said.
To gain a foothold in Japan, the world’s second largest search market behind the United States, NHN would be forced to compete with global Internet giants it so successfully fended off at home.
Yahoo! Japan and Google Japan, locked in a tight battle for supremacy, control about 85 percent of the Japanese search market. The biggest scrap from the table falls to Goo, a search engine operated by telecommunications operator NTT and MSN Japan.
It remains to be seen whether Naver can stick out from the pile or get buried under it, but the recent experience of Chinese search engine Baidu doesn’t inspire much confidence.
Baidu has been pushing into the Japanese search market with passion and hired Toshikazu Inoue, former search director of Yahoo! Japan, to head its Japanese unit and spend lavishly to hire top engineering talent.
But despite rolling out its Japanese search engine early last year, Baidu only has a 0.1 percent market share.
``Japan differs from China and Korea in that Internet users haven’t been navigating heavily toward local search services, and that makes the country the second most important market for many search engines aside of their home turf,’’ said an official from one of NHN’s Korean rivals.
``Naver will basically be forced to compete directly with Yahoo, Google and MSN in search technology. I wonder whether they can come up with something significantly new and better, but history hasn’t been kind to failed search engines, regardless of the market. Companies like Alta Vista and Lycos were never allowed a second life,’’ he said.
Although NHN declined to comment on the specific features of its sequel search engine, company officials say the focus is to customize services to the habits of Japanese online users, representing a different approach from NHN’s first try, when company officials claimed the ``social and cultural’’ similarities between the countries would allow Naver to excel in Japan with an identical business model to that used in Korea.
Lee Hae-jin, founder of Naver and now NHN’s chief strategy officer (CSO), has been heading the company’s task in Japan since 2007 to develop search services for the local market.
Although NHN officials say that Naver’s Japanese site will have its own identity and not merely be a translated extension of its Korean site, it’s questionable whether there will be enough differentiation.
The secret to NHN’s success in Korea is simply explained by ``Knowledge-In,’’ which allowed users to question and edit search results, and ``Integrated Search,’’ which sectionalizes search results by type of content and source, such as Web, news, images, blogs and videos.
However, as Yahoo! Answers and Google’s Universal Search can attest, those features have become conventional.
Success in Japan is crucial to NHN’s long-term growth strategy, as the Korean market for them continues to decrease. NHN saw its net profit drop 10.7 percent to 83 billion won in the third-quarter last year, while operating profit dropped 13.4 percent from the previous quarter to 111.3 billion won.
It’s 292.9 billion won revenue represented nearly a 4 percent slide, the first time the company disclosed a decline in quarterly growth since being listed on the stock market in October 2002.