Internet Industry Bets Future on Smartphones
By Kim Tong-hyung
Staff Reporter
It's a great time to be in the Korean Internet industry where companies insist on spending their corporate wealth to equip their employees with some of the planet's coolest and priciest gadgetry.
NHN, the operator of Naver (www.naver.com), the country's most popular Web site, became the latest Internet company to announce that it would be paying for the smartphone purchases of its employees.
Daum, which operates the eponymous Web portal (www.daum.net) that trails only Naver in search traffic, is having all of its 1,000 employees choose between the Apple iPhone 3GS and Samsung Electronics' flagship smartphone, T-Omnia II, in the company's free phone program.
KTH, the Internet unit of telecommunications giant KT that operates Paran (www.paran.com), is having its 400 employees choose between the iPhone, Samsung's Show-Omnia handset and "net books" - the minimalist, book-sized laptop computers that are the current consumer electronics craze.
Although NHN's offering is not completely free, the company will give 250,000 won to each employee who purchases a smartphone.
Apparently, the companies say that the mobile Internet devices handed out to their employees for free are intended to be much more than lavish Christmas presents.
As the conditions ripen for a mobile Internet explosion, the ability to extend their desktop services to the smaller screens of portable devices is becoming the key to competition in the Internet industry, evidenced by companies spending more on local searches, digital maps and other location-related applications.
And by giving out the data-enabled handsets to their employees for free, with Daum even offering to pay for the data expenses for the first two years, companies are looking to source innovation from in-house.
"By offering an iPhone or other devices to our employees, they will be able to use and evaluate our own services like consumers do. This will allow us to improve our existing offerings and develop better and more attentive services for mobile users," said a representative of KTH's management support division.
"The strengthened local services will be the key as smart phones become more widely used, as there is a potential for a lucrative market in local advertisements enabled through the mobile Internet."
Will Smartphones Kill Microsoft Monoculture?
Smart phones, which support a wealth of Internet and multimedia features such as e-mail, videos, games and music, are critical in business strategies for device makers, as they provide larger margins than conventional handsets.
Mobile telephony operators are hoping that smartphones will also allow them to get a better return from their massive 3G investment and other mobile Internet networks by bumping up data revenue.
But so far the devices have been slow to take off here, hampered by their cost, lack of software content and also the expensive data rates set by mobile carriers.
Industry watchers are now expecting a belated surge in the premium handset sector, with the recent release of the iPhone, offered by mobile carrier KT, and other smart phones like T-Omnia II and Blackberry Bold generating a buzz here.
Wireless users are expected to benefit from the changes, with mobile carriers like KT and SK Telecom now moving to lower their data rates and offer Wi-Fi connectivity to a wider range of their devices amid renewed competition.
And there is also hope that the expected smartphone boom could emerge as an unlikely solution to solve one of the most frustrating aspects of the Korean Internet experience - the monoculture of Microsoft and its Internet Explorer (IE) Web browser.
Virtually all encrypted online communications here are made to rely on Active-X controls, which first debuted in 1996, when the government recognizes the tool as the only method for downloading public key certificates that were required for online transactions.
Korea's dependence on Active-X is unique, as security concerns have limited the deployment of the technology elsewhere.
Instead of a security-based model, Active-X relies on signatures to allow users to judge whether to download an Active-X control. This is a risky arrangement, since Active-X controls require full access to the Windows operating system, meaning it is often abused by cyber criminals to compromise the user's control of the computer.
Its usage became a hot topic again in July when a massive Internet attack left more than 80,000 Korean computers crippled.
After neglecting the issue for years, the government has finally shown commitment in recent years to promote the diversity of browsers, with a plan currently underway to reprogram the country's e-government sites to work properly on non-Microsoft browsers.
However, with financial service providers, such as banks and credit card companies, refusing to budge, unwilling to take larger responsibility to secure the safety of their customers' online transactions, the country's Active-X chokehold remained intact.
This is an area where the debut of iPhone and other smart phones could help, industry watchers said.
With the iPhone already looking as a game-changer in the local mobile market, needing just three days to achieve a 5 percent share in handsets after its release in late November, banks are now being forced to develop standardized approaches to enable online transactions on smartphones.
The Mobile Financial Council (MFC), a joint organization of 17 local banks and the Korea Financial Telecommunications and Clearings Institute (KFTC), has recently announced plans to jointly develop a unified specification for online banking services provided to smartphones.
This means that Microsoft will lose its dominance in online transactions, at least in the mobile sector, as the acceptance of Windows Mobile among handset vendors is nowhere near the Windows dominance in desktop computers.
"The increasing use of iPhone and full Web browsing on handheld devices will force changes to online retail and Internet banking services that were only designed to work on Windows and IE. This will indirectly help improve the experience of personal computer (PC) users," said Channy Yun, a Daum manger and also the local leader of the Mozilla foundation, a non-profit organization promoting the Firefox Web browser.
"The industry's interest for providing better Web accessibility will increase," he said.