Overseas sales boost NHN while Daum, SK struggle
By Kim Yoo-chul
NHN, the operator of the nation’s No. 1 portal site Naver, has solidified its position in the domestic market, as rivals Daum Communications and SK Communications, struggle to turn a profit.
NHN showed steady growth in the third quarter as efforts to increase its presence overseas have started paying off while other players have been hit hard by a prolonged domestic slump.
With the local market saturated, KT’s Paran and Yahoo have already exited. If Daum and SK fail to find new growth engines, it is probable that NHN’s dominance will intensify.
NHN posted a net profit of 156.6 billion won between January and September, up 4.3 percent from a year ago. The main driver for the expansion was its expanded presence in the global marketplace with its popular Line chat app helping this.
``As of the end of September, NHN increased the number of Line users to 73 million. Line has done well in Japan and countries in Southeast Asia. Our next targets are the United States and China,’’ said NHN Chief Financial Officer Hwang In-joon.
Line is a proprietary instant message service for computers and smartphones and NHN has released a number of apps compatible with it. It has also unveiled a new range of special stickers for phones using the Android operating system featuring Korean singer Psy who has won fans all over the world with the hit single ``Gangnam Style.’’ The stickers will be available for the iOS platform shortly.
``Based on the steady popularity of Line, NHN aims to grow it as a new but competitive mobile gaming platform,’’ said Eugene Investment analyst Kim Dong-joon.
During the third quarter, NHN’s overseas revenue rose by 55 percent to reach 111.3 billion won year-on-year, while it only grew 6.3 percent locally during the same period, data from the Korea Exchange (KRX) showed.
In contrast, the nation’s No. 2 portal site Daum suffered from a steep fall in third-quarter profit. It reported 22.2 billion won in net profit, a drop of 22.5 percent year-on-year.
Daum’s Chief Financial Officer Nam Jae-kwan said the disappointing quarterly earnings report was due to its failure to better compete with YouTube, Line and Kakao Talk in the race for mobile traffic.
Nam declined to comment on the company’s overseas business strategies and stressed it will recover in the last quarter of the year as it’s been increasing its PC platform search-advertisement and mobile-ad- price-per-click (PPC) rates after a recent announcement to terminate a contract with search advertisement agency Overture this year.
``A brighter overseas performance by NHN’s Line cushioned sluggish local growth. But Daum has balked at investing in the next thing. Without evolution, there’s no future,’’ said a fund manager from a United States-headquartered investment bank in Seoul by phone, asking not to be identified, adding the bank has sold a sizable amount of Daum stocks in the tech-heavy junior KOSDAQ market.
The situation is even worse for the smallest SK Communications. Its quarterly operating loss widened by 46 percent during the July-September period year-on-year. The net loss for the quarter reached 8.1 billion won.
SK is conducting voluntary retirement programs, while the company is restructuring to try and prevent further deterioration, and is rearranging business units.
``Our top priority is to implement every measure we can for an early business turnaround,’’ said the company’s Chief Financial Officer Park Yoon-taek.
SK, which operates the Cyworld social networking service, recently released its upgraded service, however, consumer responses aren’t noticeable.
``This year, KT’s portal site Paran and Yahoo exited the market. Except for NHN, survival is the key word for the remainder, meaning diversification should be undertaken for corporate sustainability,’’ said a high-ranking industry executive.