Web Portals Flying High As Economy Recovers
By Kim Tong-hyung
Staff Reporter
Despite all the theories about the search industry being recession-proof, South Korean Internet companies haven't exactly been immune from the economic turmoil of the past year.
However, as the economy rebounds after months of tanking, major Web sites are seeing their profit bounce even higher.
NHN, which controls more than 70 percent of the country's search market through Naver (www.naver.com), saw its operating profit jump more than 19 percent year-on-year at 132.9 billion won (about $117.6 million) in the third quarter.
Revenue rose 13.7 percent during the same period to 333.2 billion won, while net profit was reported at 106.8 billion won.
Daum (www.daum.net), the second-largest Web portal behind Naver, also posted a record operating profit of 13.4 billion won, on sales of 61.3 billion won, during the third quarter, rebounding from mediocre showings in the previous two quarters.
The company's net profit of 13.6 billion won represented more than a three-fold increase from last year's numbers.
SK Communications, which operates Nate (www.nate.com), said it expects a loss during the third quarter, due to its heavy spending to give the Web portal a facelift, including incorporating the company's popular Cyworld (www.cyworld.com) social networking service into it.
However, with the revamped Nate garnering more traffic, SK Communications vowed to be back in the black by the fourth quarter.
The impressive performance by the Internet companies, which had suffered from a decline in paid clicks in the earlier part of the year, is an indicator that money is flowing again in the online advertising industry.
NHN said its revenue from search advertising rose nearly 10 percent year-on-year to 173.6 billion won during the July-September period, while sales from display advertisement rose by a similar rate to 50.4 billion won.
Industry watchers are expecting intensified search advertisement competition in the coming months, with Web sites like Daum and Nate hoping to put up a meaningful challenge against Naver, the undisputed industry kingpin.
It remains to be seen whether Daum's decision to part with Google Korea in cost per click (CPC) advertising and instead partner with Yahoo!-backed Overture will help the company steal some of the advertising money made by Naver.
CPC is a performance-based model where the advertiser pays a fee for every click on its advertisement. The majority of text advertisements sold by search engines are based on the CPC model.
Controlling the pay-per-click advertising placement on Web sites and search engines has been a significant business model for Google and Overture.
Daum gives Overture a client list that already includes Naver, Nate, Paran (www.paran.com) and Yahoo! Korea (www.yahoo.co.kr). Daum is hoping that Overture's broad platform will help it leverage its enhanced search competitiveness ― reflected by a significant bump in queries ― to generate more profit.