Does NHN finally have global case?

Success of mobile messenger opens new opportunities for search giant

By Kim Yoo-chul, Cho Mu-hyun

NHN, the country’s biggest Internet company, has been described by pundits as the biggest frog in the well. The explosion of mobile Internet is allowing the operator of local search king Naver (www.naver.com) to find new opportunities.

The early success of its mobile messaging service Line has pleased company officials. Originally developed by NHN Japan, it now has over 60 million registered users.

``NHN failed to meet market expectations in profit during the first half of this year. But the bullishness of Line is strengthening the bottom line. This is inspiring,’’ said KB Investment and Securities in a recent report. KB expects Line itself to create 370 billion won in revenue in 2014, the same as NHN’s total profit in 2005.

``It’s interesting to see NHN’s cash-generating structure is expanding to mobile advertising from the previous game, search and display sectors with Line leading the way. Amid continued growth in mobile devices, NHN is seeing a second-chance for corporate growth,’’ the brokerage said.

It’s too early to talk about global dominance for Line. But its rise in Asia has seen download numbers for the app for texts free voice calls double since April.

NHN may achieve 100 million downloads by the end of this year and crack new markets such as China and even the United States.

``We always wanted to go international but failed previously. Now, we are on the right track,’’ said an NHN official.

Of course, there is competition. Chinese smartphone users are in love with Tencent, a mobile messaging service with more than 110 million users. And although Line is popular in Southeast Asia, rival services, such as WeChat, are picking up as well. The U.S. market is ruled by services like Viber and Skype.

``NHN has already shown it can be successful in Asia. But the key point is that Line’s success also represents that consumers are open to new applications. Providing localized services for China and the U.S. and fending off copycats are major tasks for NHN,’’ said hedge fund manager Kim Sang-min.

NHN officials said the firm is talking with major carriers in the U.S. and China to launch Line.

``Line is very good in Japan. It has defeated DeNA, Gree and Mixi _ the top three social networking services there _ in registered user numbers. How to develop the business model is the condition for Line’s further growth, as this is a totally new trend,’’ said KTB Investment and Securities.

Taking next step

The success of the messenger service is also providing a chance for NHN’s other services to shine in Japan.

``Thanks to Line, the recognition of the NHN brand in Japan is rising and this could lead to other successful ventures,” said NHN spokeswoman Lee Won-mi. “For instance, pop group Sonar Pocket named Line in one of their songs.”

NHN is trying to develop Line into an emoticon business. Animated characters like Moony the humanoid, Brown the bear and Conny the bunny have been downloaded frequently by Japanese smartphone users.

The messenger service has also opened more doors for the search giant to find business partners in Japan. The company offers exclusive Line accounts for corporations that allow them to use the mobile messenger for marketing.

As of September, 14 companies had subscribed to the service. Among them is convenience store franchise chain Lawsons. The Japanese company said digital marketing results tripled after it offered discount coupons through the messenger app.

NHN launched its Japanese office in 2000, but has struggled to gain momentum there for over a decade. Its three main revenue pipelines in the neighboring country have been game portal Han Game, its search engine and blog search service Live Door.

“Our long commitment to Japan has started to payoff in recent years thanks to a better understanding of market sentiment there,” said Lee. In July, NHN signed a deal to provide its search engine to major Japanese retailer AEON’s online website.

AEON is one of Japan’s largest businesses with over 300,000 employees and annual revenue of 70 trillion won. The website opened in August to allow convenient searches of product and client information for subscribers, said NHN. The Korean firm will also provide advertisement platform solutions for AEON.

“NHN has long been investing in Japan and there are good opportunities for it to earn more there through advertising platforms,” said Lee Seong-ju, head of Mobile Monday’s Seoul chapter. “Japan is the world’s third largest economy which guarantees high returns.”

“NHN’s strength has always been its power to concentrate resources when it sets a business target. It has been aiming at Japan, with the likelihood of seeing increased profits. Japan will be a good base for NHN to expand to other Asian countries,” said an industry official.