$100 Million Ventures Top 100
By Kim Tae-gyu
Staff Reporter
As of the end of last year, the number of Korean venture start-ups with annual sales above 100 billion won ($107.7 million) topped 100 for the first time.
The Small and Medium Business Administration said Monday that a total of 102 local venture companies had reached 100 billion won in sales last year.
``The 100 billion won annual turnover is of great significance for venture firms because it guarantees stability in the management of the otherwise risk-laden outfits,’’ said Yun Yun-guk, a director at the state-run agency.
``The achievement is expected to prompt the government to funnel more funds and energy to prop up small-sized promising companies,’’ Yun said.
Members of the 100-billion-won club remained at a mere 68 in 2004 but the figure substantially increased to 80 in 2005 and 102 in 2006.
The Small and Medium Business Administration said the large number of successful ventures contributes to the economy in a big way.
For example, the 102 entities combined to employ 33,816 workers in 2006 while the total sales stood at 17.8 trillion won. Aggregate exports were about 7 trillion won.
``Thus far, experts pointed out that ventures are basically about technologies rather than substantive contribution to the economy,’’ Yun said.
``However, their performances last year flat-out dismiss such a belief. Venture companies are one of our society’s cornerstone assets,’’ he said.
Under such a mantra, the government plans to keep a law in tact, which was introduced in 1998 and aimed at underpinning venture start-ups.
The 10-year sunset law is due to expire this year but the government asked the National Assembly to extend it for 10 more years.
Under the law, venture companies have enjoyed tax breaks or special support in advertisements as well as favorable treatments from banks.
Runaway Leaders
Among the 102 successful players, just three exceeded 500 billion won in revenues. Included in the exclusive fraternity are Humax, NHN and DS LCD.
Humax is a perennial leader in the domestic venture industry as the country’s biggest maker of set-top boxes remained atop the venture sales list over the past three years.
The Seongnam, Gyeonggi Province-based firm chalked up 387.4 billion won in sales in 2004 and jacked up the figure to 618.1 billion won in 2005 and to 655.8 billion won last year.
DS LCD, the producer of backlight units of liquid crystal displays, was second last year with 578.1 billion won, up 53.5 percent from the previous year.
NHN, which operates the country’s foremost Internet portal site Naver, came in at third with 573.3 billion won, up 60.4 percent from a year ago.
However, the history of venture companies is not all a bed of roses _ there have been some entities that collapsed abruptly after racking up notable growth.
The country’s mid-string handset makers such as Sewon Telecom and Telson Telecom are the most outstanding examples of such unexpected failures.
Once they dwelled on the highest echelons of the list of stellar venture firms but went bankrupt in 2004 when Chinese rivals popped up to provide phones at rock-bottom prices.
``It is really tough for venture companies to become stable after going through the ups and downs of the fast business cycle,’’ said Kim Kyung-mo, an analyst at Mirae Asset.
``Ventures always run the high risk of going down because most of them are middle-of-the-pack players that have little leeway to shell out big bucks for research, a must to remain ahead of the curve,’’ Kim said.
1 Trillion Won Venture
It remains to be seen whether Humax will be able to be ahead of the pack down the road, especially in the face of tough challenges from NHN.
In particular, many observers expect NHN will exceed 1 trillion won in sales faster than any other venture companies.
``I cannot be 100 percent sure which company will become the first to join the 1-trillion-won club,’’ said Wayne Lee, an economist at Daishin Securities.
``But I can say that NHN will reach the plateau soon thanks to its cash cow of keyword advertisements, which are growing at a breakneck pace,’’ Lee said.
The company posted a record turnover in the first quarter of this year with 199.6 billion won, up 63.9 percent from a year earlier. Operating profit was 85.6 billion won, up 83.8 percent.
Among the 199.6-billion won sales of NHN over the first three months, keyword ads accounted for more than half, with 108.4 billion won, up 84.8 percent year-on-year.
Keyword ads are a new concept of online promotions for selling ads associated with query keywords to produce results in a way favorable to marketers who pay the search engine.
For example, a marketer, possibly a travel agency, pays to buy a keyword such as ``Chinese trip’’ and Naver displays the marketer on the top of regular query results for the word.
The keyword ads provide a win-win solution for both searchers and marketers.
Keyword ads, which are typically all-text ads comprised only of a title and a brief description, don’t cause visual distractions of users, contrary to colorful banner ads.
On the part of marketers, they pay only when users actually click on the site demonstrated at the search results.
The model is called cost-per-click (CPC) and is currently a hot ad feature. The nation’s CPC market is set to reach 700 billion won this year and 1.2 trillion won in 2010.