Naver's decision to enable online payment on its Knowledge Search price comparison site has online shopping sites like Auction and Gmarket trembling. / Korea Times |
By Kim Tong-hyung
Staff Reporter
EBay's haul of Auction (www.auction.co.kr) and Gmarket (www.auction.co.kr) was supposed to acquire the American Internet giant a monopoly of South Korea's super-sized online marketplace.
But it now looks like the cost of adding size would be a head-on collision with NHN, the country's undisputed Internet industry kingpin.
NHN, which operators Naver (www.naver.com), Korea's most visited Web site that controls more than 70 percent of all search queries, recently announced that it will allow users to purchase products directly from Naver's ``Knowledge Shopping (shopping.naver.com)'' search services by the end of the month.
Naver's online shopping pages currently act as a middleman between Internet users and online shopping sites, with the Web portal charging commission for the redirected traffic.
Thus, Naver's move to enable electronic payment on its own sites is seen as a direct attack on the online retailers, most particularly the Auction and Gmarket duopoly that combines for nearly 90 percent of the country's customer-to-customer (C2C) online market.
Since eBay completed its absorbing of Gmarket in April, Naver has been accelerating its moves to reinvent its online shopping services to convert more of its search traffic into retail revenue. Recently, Naver revealed that it had started developing an ``escrow'' system to enable secure, person-to-person auctions at its ``cafe'' Web communities, which has more than 43 million subscribers.
``It is clear that Naver is rebuilding its shopping business with bigger ambitions and we heard that the Web portal is ready to launch a taskforce to guide the process soon,'' said an Internet industry official.
``Considering Naver's domination of online search traffic, the thought of the company attempting to leverage that traffic into the e-retail business will have a lot of shopping malls losing sleep. We might be seeing a totally different Naver by the start of next year.''
Blurring Boundaries
Naver adopting a more direct approach in its retail business has been somewhat of a predictable conclusion, as there has been concerns within the company that it could surrender some of its influence over online shopping sites. The traffic generated by Naver and other search engine still accounts for a major part of the customers for online retailers.
According to market researcher, Korean Click (www.koreanclick.com), about 44.6 percent of the 87 million visits to Auction during the month of May were redirected from Naver. The Web portal was also responsible for more than 45 percent of the traffic of Gmarket, which totaled 84 million visits.
However, both Auction and Gmarket have been looking to lessen their reliance on other Web sites in generating traffic, and now with both companies joined under the eBay empire, they may have secured a foundation to create a powerful search advertising platform that could rival Web portals.
The combined volume of Gmarket and Auction is larger than that of Yahoo! Korea (www.yahoo.co.kr), the country's fifth most popular Web site, according to industry figures.
The online shopping sites are already beginning to look more like Web portals, adding a wealth of information and entertainment content on top of their regular product listings.
Gmarket's new features include movies, music, video games, comic strips, ring tone downloads and search services for traveling information. Some online shopping sites are also considering limiting the number of items exposed on Web portals to compete in traffic.
So Naver attempting to steal the bread and butter of online retailers could be interpreted as a move to guard its own. And with the economic turmoil hurting its advertisement business, Naver is also facing pressure to develop new revenue models.
Naver's revenue from search advertisements saw slow growth last year, while the sales from display advertisements declined continuously during the third and fourth quarters. However, Naver's e-commerce business was one of the rare areas that flourished, growing more than 41 percent from 2007.
``Auction alone has been spending about 10 billion won per year to put search advertisements on Naver, Daum (www.daum.net.com) and other portals,'' said an official from Rankey.com (www.rankey.com), an online market research firm.
``Auction and Gmarket as a team will give both companies a big enough online audience to generate their own search advertisement business. Now, Naver is making the countermoves.''
Naver's Version of `Checkout''
Currently, Naver's Knowledge Search is basically a price comparison site, and is popular among online shoppers for its professional product reviews and store ratings.
The site is only involved in the pre-purchase experience, with the ordering, payment, product exchanges and refunds handled at the linked shopping sites.
Naver earned about 84.3 billion won (about $66.4 million) last year in commissions from online shopping sites, which accounted for about 7 percent of the 1.2 trillion won it generated from its e-commerce business.
The size of the commission revenue is impressive and a testimony to Naver's strength, showing that Korean Internet users are gladly going through the trouble of visiting Knowledge Search first instead of logging onto the shopping sites directly.
Naver enabling payment on Knowledge Search would obviously provide users with a faster and more convenient way to shop online.
The online payment process, dubbed ``Checkout,'' allows Naver subsribers to use their regular e-mail accounts to buy the listed products. Inicis, an online payment service provider, will handle the transactions, while Goodsflow (www.goodsflow.com) will manage the deliveries, Naver officials said.
Naver is reluctant to fuel the expectations that the company is seeking to become a direct player in the online auction and retail market, stressing that Checkout doesn't alter the structure of collaboration between the Web portal and shopping sites. However, it's hard to deny that enabling payment on its own site will give Naver a bigger slice of the e-retail market share and also boost its already massive traffic.
Naver has yet to decide on the commissions it will charge to the online shopping malls exposing their products to Knowledge Search.
``The basic idea is to allow our users to use a single account to buy a variety of products on Knowledge Search, without having to subscribe to different shopping malls,'' said a NHN spokesman.
``It will certainly help the smaller shopping malls, which are experiencing trouble in gathering new customers. We could help them on the part of credibility.''
thkim@koreatimes.co.kr
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