Shifting Tides: The Korean Portal Market in Flux as Naver Eats Daum, and Nate (and Google Emerges)

Korean's Web Portal Giants

Between 1997 and 2001, 3 web portal giants were born in Korea in a mini .com boom that mirrored similar in the west. Daum, Naver and Nate utilized the incredible IT infrastructure that had been built through a massive, strategic cash injection from the Korean government that aimed (and succeeded) in powering Korea to the status of one of the most progressive technology hubs in the world. This legacy still prevails and is helping Korea stay one step ahead of other world nations as a leader in broadband. The next grand ambition for the nation is to role out the first 5G services later this year.

Ever since its creation, the Korean web portal industry has gone through the most unpredictable, deviant path that one can imagine. Korea is one of the few places where Google still struggles to dominate, and where Yahoo was forced to shut down its local operations in late 2012, after a fifteen year slog.

Since 2004, Naver has been firmly dominating the industry as the number one player, outgrowing its peers with innovative services and marketing strategies. Now, with the consolidation of smartphones and new technologies, things are changing even faster than before, and these web portal giants are becoming more ambitious with their plan to reach out to lucrative overseas markets. While some services have succeeded, others have failed in a fiercely competitive market where total dominance is the only option (think Samsung ambition for global supremacy on a national level).

So, how have things changed over the last 4 years, since the smartphone first took hold in Korea? A recent market analysis study by PPSS sheds

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some light on the current status of the Korean portal market at a time when Google finally looks to be making some headway into Korea, challenging the old guard.

Naver: “Never been better”

  • Overview: Naver gave up on several products, but, with the astonishing success of LINE, Korea’s No. 1 search giant is now becoming a global player and its growth seems almost unstoppable. Spurred on by the recent massive acquisition of WhatsApp by Facebook a couple of weeks ago, Naver shares are still surging, after a year that saw their value double based on the successful monetization of their LINE chat app.
  • Failed products: Metoday (SNS), NaverTalk (Mobile messenger), Naver Coupon (Local), KaN (Wifi advertisement), Naver Japan (Search engine), Wanna B! (Fashion curation), Social Apps (SNG platform), Kitchen (Information app), Wingbus (Information app), Wingspoon (Information app), Good Morning (Alarm app)
  • Average performers: Naver ME (Customized services), N Drive (Cloud service), Naver Media Player (Video player), Livedoor (Blog service in Japan), Shop N (Open market), Dodol Launcher (Smartphone customization), Naver Web Novel, Mobile advertising, Naver Music
  • Performed better than expected: Band (Mobile community), Mobile Search Ads
  • Jackpot: LINE (Mobile messenger)
Naver's Incredible stock price rise over the last year

Naver’s Incredible stock price rise over the last year (Bloomberg Mar 2014)

Daum: “We’re surviving…”

  • Overview: They aren’t doing that bad, but not that good either. ‘Underdog’ will be a perfect way to describe them, in a country where anything worse than first position is a dangerous place to be. While the company held a reasonably strong position for many years, albeit with a minority market share of around 20%, their position now seems tenuous as Naver and Google both begin to hack away at their slowly dwindling position.
  • Failed products: Yozm (SNS), Store View (Map), Dangol (Local)
  • Average performers: QrooQroo (QR code), Camp (Mobile community), Ad@m (Mobile advertising), Daum Music, Mobile Search Ad, MyPeople (Mobile messenger), Daum Mobile Game, Daum View (Crowdsourced media platform), Daum TV (Smart TV), Daum Cloud
  • Performed better than expected: Buzz Launcher (Smartphone customization), Cardoc (a spin-off company now)
Daum stock has suffered lately (Bloomberg Mar 2014)

Daum is struggling to survive (Bloomberg Mar 2014)

SK Communications (Nate): “The ship is sinking”

  • Overview: How can a company survive when its President is serving a 4-year sentence in jail? After years of trying desperately to play catch up to the dominant pair of Naver and little brother Daum, the company is going through constant restructuring and is selling of assets in a bid to merely stay afloat.
  • Failed products: C Log (SNS), Cyworld Global (SNS), Nate On Talk (Mobile messenger)
  • Average performers: Daybe (Mobile community), Cyworld Appstore (SNG platform), Cyworld Mobile (SNS), Nate On UC (Mobile messenger)
  • Performed better than expected: Cymera (Camera app)
SK Communications is on a temporary life support (Bloomberg Mar 2014)

SK Communications is on a temporary life support (Bloomberg Mar 2014)

“Looking back at the past, it’s quite astounding how things have changed. Naver is the only one smiling right now. Daum is barely surviving, and Nate has gone through some intense restructuring with 60~70% of their staff gone. To summarize the past 4 years of web portal industry:

Competition in the IT industry is pretty much a zero-sum game where the winner takes all. In Korea, Naver has become that winner. As you can read in their financials, Naver has received quite a lot of outside investments. In the software industry it’s okay to have 10 small failures if you can come up with 1 big successful product. Naver had the audacity to continuously come up with new ideas, while having the agility to quickly exit if they perceived danger. Also, as NHN Chairman, Hae-jin Lee, said in the interview; “I would have been fired if LINE app wasn’t successful.” This demonstrates the company’s intense will to survive.

Naver and Daum both had similar strategies, yet neither were successful with most of the new products. In the end, they had the same idea. However, what made Naver successful, unlike Daum, was that its execution was better than the others, in part also thanks to the huge cash reserves built up through years of successful Ad revenue on their portal site. You have to be able to differentiate yourself from the others, no matter what.

SK Communications (Nate) has nothing up its sleeve anymore. With its people and know-how gone, SK’s comeback in the portal space seems extremely unlikely.”

Original Korean article on PPSS

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