Naver - Myth of Internet Age Success

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Wednesday, August 15th, 2007

As of the end of June 2007, the emperor of the domestic Internet portal business is Naver. Naver takes 70% of the market in terms of the ratio of search engine inflow which is directly related with sales turnover, and based on this, NHN, the mother company of Naver, has grown into a huge business with market capitalization of 8 trillion won (US$8.66 billion). NHN made sales turnover of 57.34 billion won (US$62.1 million) and sales profit of 22.96 billion won (US$24.87 million) last year. Considering that the sales profit of Daum Communications, which is second-ranking, is 10.2 billion won (US$11.0 million), the power of Naver in the Internet portal business is unimaginable.

Since Naver occupies Search, an access channel to information, Naver has acquired a nickname, Naver Republic. It can't be denied that the nickname has a negative nuance, but it also means that Naver has become so huge that everyone can't help accepting its influential power. Under this circumstance, some insist Naver comes to a crisis, the background of which is this: the world's largest search engine, Google, is increasing its market share in Korea; and the political circle tries to regulate the portal business. And further, some mass media have started to check Naver. Until when will Republic of Naver become okay?

10 years of continued initiative change

Now the power of Naver is great, but looking back at the history of the domestic Internet portal for the last 10 years, there have been a lot of changes in initiative. Impregnable Naver can't guarantee its future.

Yahoo Korea, which made an Internet boom when it landed in Korea in 1997, showed its great power until the beginning of 2000. After that, Empas made an advance into the search engine market with the slogan, Have Empas If You Can't Find It in Yahoo. This was an advertisement slogan that Empas intended to emphasize the performance of its search engine, but it was also a contrary proof to show Yahoo's market dominance.

At that time, Yahoo's influence seemed to be permanent, but when the 21st century it started to be slowly pushed out by Daum. Daum, which made a rapid growth on the basis of its Hanmail service, continued to make a hit with its cafe service, and it finally acceded to the throne of the new Internet governor, defeating Yahoo. However, the honor of Daum didn't last long.

Naver, which started from an in-company venture of Samsung SDS, took the initiative in the search service by introducing Knowledge iN, a knowledge search service, together with integrated search. In 2001, 2 years later after it was founded, Naver became one of three powers including Daum and Yahoo, and in the following year it got ranked second, passing Yahoo. After 2003, it has been the number one in internet search rankings.

Origin of Naver's power

What has Naver into what it is? Is its technology excellent enough to be second to none? Experts reply that it is not technology.

Naver grasped the search culture of domestic customers fast and reflected it in search results well, which is the cause of its success. We can easily understand the strengths of Naver against Google by searching for Shin Jeong-ah, a professor of Dongguk University who made headlines by forging her educational background. Naver shows not only the personal information of Professor Shin, but also the latest related news, photos, animated pictures, user-submitted information from Knowledge iN, and blog-related writings.

On the other hand, Google shows some web pages related with several news websites. Naver is faster than Google at satisfying netizen curiosity on such questions as "Who is Shin Jeong-Ah?" or "What does she look like?" In terms of the relevant searched words, Naver shows Gwangju Biennale or Dongguk University, but Google shows unrelated words such as Shinjeong High School, Shinjeong Travel, or Shinjeong Precision. Koreans show more interest in what other Koreans are interested in rather than what they want.

Naver is strong at key words that become issues. Kim Joong-tae, director of My Engine, pointed out marketing and sales abilities as Naver's strengths. He said: "The planning and marketing abilities which started from the TV advertisement of intellectuals are excellent. In addition, its internal advertising sales abilities are great too."

Naver Republic crisis

Recently Naver has been seriously offended by outside interests: Korea Online Newspaper Association's request for restricting the period of news storage to a week; a national assemblyman of Hannara Party, Jin Soo-hee's proposal of the Act on Search Service Operators; an amendment of the Act on Promotion of Information and Communication Network Use and Information Protection drafted by the Ministry of Information & Communication; the Fair Trade Commission's investigation of illegal collusion; and the National Tax Service's investigation of tax affairs. These measures don't target only Naver, but Naver can't help being influenced by them most. Naver is a symbolical being of Korean Internet history.

Its advance into the world can be interpreted as the Korean Internet's advance into the world. Whether Naver, which suffers from various disheartening factors, can overcome this crisis through advance into the overseas market or not is being watched.

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