By Kim Tong-hyung
It’s a marquee showdown that needs no build-up; NHN, Korea’s Internet industry kingpin, launching out against eBay, the American electronic commerce giant, over the supremacy of the country’s supersized online marketplace. And it now appears that SK Telecom, Korea’s biggest mobile-phone operator, has thrown itself into the mix to add drama.
Through the acquiring of Auction (www.auction.co.kr) and Gmarket (www.gmarket.com) over the past few years, eBay has cemented its place as the dominant e-commerce player, with its services combining for nearly a 90 percent share of Korea’s customer-to-customer (C2C) online auction and shopping market.
However the cost of eBay’s expansion now appears to be a head-on collision with NHN, which controls more than 70 percent of the local Internet search market through Naver (www.naver.com), which is by far the country’s most visited website.
NHN is intent on leveraging its presence to the e-commerce sector and plans to have its own online auction and shopping platform by March or April of next year.
For now, the company is operating an online shopping portal on Naver that is called ``Knowledge Shopping (shopping.naver.com),’’ which functions as a middleman between Internet users and partner e-commerce sites and collects commissions for redirected traffic.
Knowledge Search is obviously a massive building block for NHN’s e-commerce business. Industry insiders estimate that around 30 to 40 percent of the country’s entire e-commerce traffic is channeled through Knowledge Search and other Naver platforms and generates up to 4 trillion won (about $3.5 billion) in transactions annually. And this is allowing NHN to attack eBay services before directly competing with them with its own online shopping brand.
According to industry sources, Naver has inked a partnership with 11th Street (www.11st.co.kr), an online shopping site operated by SK Telecom that is struggling to compete with the Auction and Gmarket duo.
Since October, Naver has been providing 2 percent discount coupons to 11th Street customers accessing through Knowledge Search and is considering similar arrangements with other e-commerce destinations such as Inter Park (www.interpark.com). So basically, Naver is trading off the 2 percent commissions it had been collecting from its partners to suppress traffic directed to Auction and Gmarket.
Auction and Gmarket is responding to Naver’s move by partnering with price-comparison sites Danawa (www.danawa.com) and Enuri (www.enuri.com) and providing the same 2 percent discounts on some of their products.
``We have presented the same conditions to every one of our partner e-commerce sites listed on Knowledge Shopping, including Gmarket and Auction. But obviously, 11th Street was most aggressive about embracing it and this will result in increased traffic for them,’’ said an NHN official.
NHN is intent on getting its hands on eBay’s breadbasket, but it also has to just as concerned about defending its own. Back in July, Auction launched a new price-comparison service, About (www.about.co.kr), which aims to become more than just an e-commerce destination, but a full-blown web portal that generates profit from search-related traffic.
In About, which brings together more than 6,000 e-commerce destinations, Auction will get the opportunity to build a revenue model based on search advertisements and paid clicks, company officials said, which means it could eventually compete with Naver and other web portals such as Daum (www.daum.net) for advertisers.