Naver losing grip in Korea
Portal firm's growth potential ebbing away as it sticks to comfort zone
By Cho Mu-hyun
Naver, Korea’s biggest Web portal, is losing its grip on the domestic market. The local search giant is being cornered, needing to diversify its business portfolio amid a rapid rise of social networking services (SNS), according to market analysts.
Though Naver is still No. 1 in visitors to a portal site traffic in Korea in charts released by Nielsen Koreanclick for March, its main foreign contender Google has passed Nate to move up to second.
Google, which offers a much more diverse experience with multiple service platforms, is slowly gaining the upper hand in various services: especially in entertainment with YouTube, which marked 7.9 million visitors last month, near two times that of second-place GomTV with 4.7 million.
Naver, on the other hand, is going sideways, offering no new services for its Internet mainstay but is branching out to other non-technology markets.
It started an online shopping service named “Shop N” last month, which drew criticism for the possible destruction of the established ecosystem. Considering the monopoly it had in the online real estate market in 2009, the concern is warranted.
Naver’s American counterpart Google is taking advantage of the rapid changes in first-hand platforms, such as smartphones, which users are more inclined to use for their wide accessibility.
Thanks to the dissemination of android smartphones and Google’s various partnerships with Korean electronics companies, Google was third place in mobile visitors to portal sites here last month with 14 percent, according to Metrix.
“Besides spreading its presence in various technology platforms, Google is undertaking various projects that are specifically targeting a strong foothold in the Korean market,” said a representative of an online service provider, who declined to be named.
“After Cyworld went into rapid decline, Facebook garnered much attention, sustaining 5 million subscribers (domestically),” said Davis Woo, an analyst at Mirae Asset.
“The company (Naver) has been behind in innovation compared to its counterparts across the globe, and is just starting to branch out. It will take at least one to two years for them to rise to the same level as its competitors, while others will continue to develop,” Woo added.
With the domestic market saturated, the company has sought to find new growth engines abroad but such attempts have failed to yield tangible results. Still, Naver’s top management is tight-lipped to unveil more of its overseas business strategies.
“NHN (Naver) is putting some investment in Me2day, and their Japanese messaging service Line, to catch up,” said Woo.
With a great surge of information technology, strongly backed by former president Kim Dae-jung after Korea’s financial crisis in the late 1990s, Korea’s monopoly in the area seemed untouchable. Naver, Cyworld and Daum all skyrocketed during the first decade of the new millennium.
In the late ‘90s, domestic Web portals had around 1,000 servers, similar to the number Google had at the time. But hesitant in its own capabilities, Naver never expanded outside the Korean Peninsula, and most of its marketing and development was exclusively centered on the domestic population of 50 million.
“Naver is still the dominant search engine in Korea,” said Kim Chang-won, an analyst at Daewoo Securities. “Based on user-time alone, other foreign search engines don’t even come close to the overwhelming use of Naver by Koreans.”
“But it has not yet expanded outside (of Korea) in any noticeable way. The results of its Japan expenditure are too small to be called a success,” he added.
Naver set its eyes on Japan in 2000 but the move was disastrous.
In 2006, at the peak of its growth, the corporation regained confidence and tried again, and failed miserably with all of its projects, closing them by 2009. Line has only just begun, with the results yet to show, said Kim.
Unable to recuperate the deficits of overseas investment, the company retreated to where it felt safe and continues to fixate on Korea for its cost efficiency.
The result was a sub-par translation services for other languages, even English, which now even drives the once loyal domestic users to other options widely available.
Naver is simply unprepared to meet the demand of smooth translations much needed by Koreans to communicate smoothly on the global stage.
In contrast, Google supports translations of over 100 languages, and is expanding with proper investment within its areas of expertise: mobile technology, SNS, cloud computing, and platforms that can run Internet and communications technology (ICT), said the representative.
“Google’s search engine, impartial in its results, allows users, or rather pushes them to diverse websites and ultimately promotes them. Unlike Google, Naver isolates its users to its own domain,” he added.
Naver, in contrast, is busy tweaking innovative ideas of other foreign services to meet the demands of only Koreans without any risk taking on other ventures. Multiple developments in ICT, an area Naver is not currently investing, are gaining popularity.
The now 14-year-old and well-established company saw a profit of 600 billion won from 2 trillion won in turnover last year. But remaining tentative in new ventures and continuing to be limited compared to its competitors’ growth, Naver’s shortsighted outlook seems inevitable to limit its potential.