‘Republic of Naver’ Builds Up
This is the first in a three-party series on the nation's top Web portal Naver and its influence on Korea. _ ED.
By Kim Tae-gyu
Staff Reporter
Midway through 2005, the slogan `Republic of Samsung' was coined here to show how Samsung Group, Korea's No. 1 conglomerate by any measure, dominates the country.
Now, the buzzword is `Republic of Naver,' as the nation's foremost Internet site Naver continues to expand its influence not only on the virtual world but also on the actual world.
Last year, NHN that operates Naver chalked up 573.4 billion won in sales with operating profits of 229.6 billion won. Its operating profit rate is in the neighborhood of 40 percent.
These sharply contrast with the industry's runner-up player Daum Communications, which racked up just 10.2 billion won in operating profit and 460.8 billion won in revenue last year.
In the first quarter of this year, NHN stayed ahead of the curve with whopping performances _ 199.6 billion won in sales and 85.6 billion won in operating income, up 63.9 percent and 51.5 percent from a year before, respectively.
The accomplishments boost stock prices of NHN, of which market capitalization is 7.65 trillion won. Daum's market value is less than 800 billion won.
This means NHN, which is listed on the tech-filled Kosdaq market, is the country's 26th biggest company by market capitalization.
Corporations with the market value similar to that of NHN include Industrial Bank of Korea, a state-invested bank, and Daewoo Shipbuilding & Marine Engineering, one of the country's leading shipbuilders.
Observers predict Naver's dominance over the domestic Internet business would remain intact for the time being thanks to its glittering array of services and applications.
In particular, Naver's unique services called knowledge search are the main pillar to drum up loyal support from tech-savvy and trend-sensitive Korean Internet users.
Plus, the company accounts for more than half of the country's keyword advertisements market, which is growing at a breakneck pace.
``The prowess of Naver is not likely to wither out in the near future as the company's services are widely famous. It will remain ahead of the pack,'' said Kang Lok-hee, an analyst at Daishin Securities.
``Its financial status would be also hyper-healthy because the keyword ads market continues to flourish. Naver will be a runaway leader in subsequent years,'' he said.
The above-mentioned financial status of Naver is notable but the clout of Naver is most outstanding in that the Internet portal site penetrates into the daily lives of every Tom, Dick and Harry.
Naver Overwhelms Daily Lives
Kwon Young-sang is a 35-year-old office worker at a telecom firm. As soon as he reports to work at 8:30, he logs onto the Internet that pops up via the Web browser start-up site Naver.
Kwon scans news and checks e-mail at the site. Then he searches for anything for either his work or personal causes through Naver's search services all day long.
``I have used various Naver services for around two years. I tried out other portal sites but soon returned to Naver for some reason,'' Kwon said.
``I can't figure out why I stick to Naver so much but I am not likely to defect to others. Maybe I am too accustomed to Naver to flee to other services,'' he said.
Kwon represents an average Korean, who uses Naver services around the clock.
According to the Korea Federation of Advertising Associations last year, 52.7 percent of Internet users set Naver as the
start-up page of their Web browsers.
This is a huge progress as its market share was just 36 percent in 2005. In particular, the market share stood at 63.5 percent for 20-somethings.
In addition, Naver is elbowing out newspapers in the online news service market as a mounting number of folks get news information through the online portals, not through newspaper homepages.
According to KoreanClick, a local Internet market consultancy, the number of page views to Naver's news services skyrocketed over the past years while that to the newspapers' homepages leveled off or declined.
Currently, the monthly page views at Naver stand at billions while those at the homepage of Chosun Ilbo, one of the country's leading newspapers, are hundreds of millions.
``Koreans are hooked on Naver. Sometimes we say Koreans are not addicted to the Internet but addicted to Naver,'' a Seoul analyst who declined to be named said.
``And Naver knows how to make money with all the addiction. The company gains reputation and gathers users through knowledge search and has made a boon via keyword ads,'' he said.
Knowledge Search and Keyword Ads
As the anonymous analyst points out, market consensus is that Naver's success started from Knowledge search, which was launched in late 2002.
Knowledge search, similar to Yahoo! Answers of the United States, enables Web users to ask questions or answer ones posted by other users.
For example, included in the most popular questions now are why fingernails grow faster than toenails, how fast a fly can fly and why seagulls sit in the same direction.
``Knowledge search is like oozing out knowledge in human brains to the Internet. People who know something better than others can present their know-how, skills or knowledge,'' NHN CEO Chae Hwi-young said.
``This worked because Korea lacked content in cyberspace. It created rich content and the 60 million-plus database demonstrates it,'' he said.
On the strength of the knowledge-brokering application, Naver attracted many royal customers to its compelling service lineup that includes games and e-mail on top of the Web search.
Tens of millions of Koreans use the community-drive services and the numbers of their database topped the 60 million mark early this year, about five years after its premiere.
``All the success of Naver started from the knowledge search and it is still the company's killer service,'' KoreanClick CEO Yoo Do-hyun said.
``People recognized Naver because of knowledge search, which in turn prompted them to use search services of the portal. This gave Naver a windfall in relation to keyword ads,'' he said.
Keyword ads refer to a new concept of online promotions for selling ads related to the query keywords to produce results in a fashion favorable to marketers who pay money to the search engine.
Contrary to the colorful banner ads that sometimes cause visual distractions, keyword ads are typically all-text ads comprised only of a title and a brief description.
When specific keyword phrases are searched by Internet users, for instance, the ads may be displayed on the top of regular query results and companies pay when users actually click on the site.
The model is called cost-per-click (CPC) and is currently a hot ad feature. The country's CPC ads market surpassed 500 billion won this year and is expected to more than double in four years.
NHN that operates Naver carves out more than half of the local keyword ads market. In the first quarter of this year, the company's keyword ads sales topped 100 billion won.
Based on the cash cow, Naver is projected to keep exerting strong influence on the whole society to an extent that some people claim is too much.