NAVER Corporation Analysis

NAVER Final Paper (click here for the PDF)

NAVER Corporation (click here for the power point presentation)

NAVER CORPORATION ANALYSIS 

Andrea Bellini, Inside Tech Ventures, 25.04.2017

Contents:

Introduction

Milestones

Reasons for Naver’s success

Future aims, internal and external threats

Conclusion

References

Introduction

Naver Corporation is Korea’s premier internet content service operator headquartered in Seongam, South Korea.

Naver Corporation operates the nation’s top search portal ‘’NAVER’’ (www.Naver.com), Korea’s first children’s online portal Jr. Naver (http://jr.Naver.com/), and the nation’s first online donation portal Happybean(http://happybean.Naver.com/).

Naver provides community services including: blogs and cafes, other convenient services such as news, shopping, maps, books, e-mail and Naver tool bar.

The Jr. Naver offers educational content for children including the homework helper and preschool,and entertainment services such as animal farm and game land.

In this way Naver Corporation became one of the most profitable Korea’s internet company in terms of net profit.

With search as the company’s core business, the companyis regarded nowadays as the undisputed leader in Korea’s online service industry, providing innovative and convenient services.

This extraordinary growth is attributable to the company’s efforts to create and introduce stable profit model in its core services, including search-oriented advertising services.

Naver Corporation is also advancing into the overseas market, outside of Korea.

In June 2011 for instance, NHN Japan, Naver’s Japanese subsidiary, launched LINE,a messaging application that quickly soared in usage.

LINE Corporation is a global successfully company nowadays with its mobile messenger service which has helped the Naver to obtain a global presence which is needed to become the world’s leading Internet company.

Naver Corporation’s key mission is to provide users with services that are beneficial to all.

For this reason, the company remains fully committed to provide vanguard services thanks to the continuous investments in the research and development. (Naver Corporation, s.d.)

Milestones

Naver Corporation was founded on June 2 of 1999, by Lee Hae-jin an ex-Samsun employee.

In June 2000 Naver merged with Hangame Communications, South Korea’s first online game portal and Search Solutions.

Then, in August 2000, Naver launched the Comprehensive Search service, which allows users to get a variety of results from a search query on a single page, organized by type, including: blogs, websites, images, cafes, etc…
In 2001, Naver Corporation was renamed to NHN Corporation (Next Human Network) and in 2002 it was listed on KOSDAQ (Korean Securities Dealers Automated Quotations), an independent stock market from the Korean Stock Exchange, just like NASDAQ in U.S.The launch of the Comprehensive Search was years before than Google launched a similar offering with its “Universal Search” in May 2007. (http://searchengineland.com/library/google/google-universal-search, s.d.)

It was also awarded as the ‘’Top Internet Company’’ by Korea Internet Corporations Association.

In 2003 Naveracquired a digital content transmission technology company called Future Valley and it was ranked as the best search portal by NCSI (National Customers Satisfaction Index).

In 2004, the company Launched Ourgame, a joint venture company with Sea Rainbow Holdings Corporation in China, it established a game development studio called NHN Games, and it was ranked n°1 on KOSDAQ in market capitalization.

Then in 2005 it launched the online donation portal ‘Happybean’ and it established an Internet service management company called NHN Services.

In 2006, it acquired a search company ‘1noon’ and a data storage management solution company called Datachorus; in 2009 instead,Naveracquired ‘me2day’, a micro blog website, and ‘Wingbus’, a tour guide website.

In 2007 Naver had also established Naver Japan that merged in 2012 with NHN Japan (ex Hangame Japan) and Livedoor, a Japanese internet service provider acquired in 2010.

NHN Japan had also launched LINE in March 2011, a freeware app for instant communications on electronic devices such as smartphones, tablet computers and personal computers.

In 2013 NHN Japan changed name to LINE Corporation and the LINE exclusive ‘’LINE plus’’ was established.
Through a creative combination of sticker sales and a bunch of interconnected mobile apps and games, LINE has been able to grow quickly and profitably with its 600 million registered users (data from 2015(Smith, 2017 )) and its 217 million monthly active users worldwide in the fourth quarter of 2016.

(Number of monthly active LINE users worldwide, in millions (https://www.statista.com/statistics/327292/number-of-monthly-active-LINE-app-users/, 2016))

(Number of registered LINE app users worldwide in October 2014, in millions (https://www.statista.com/statistics/250927/number-of-registered-LINE-app-users-in-selected-countries/, 2014))

Naver Corporation has also established many other activities in the last decade such as: NHN investment, Orange Crew (a smart device game developer), NTS (NHN Technology Services), Khan Communications for local advertising, The Sarang for hiring vulnerable social group, NHN SINGAPORE PTE.LTD, Gak (an internet data center), Works Mobile (a company for enterprises/business services) and SNOW Inc.

The company also purchasedIjji, an American game portal in 2007, andGogolook, a Taiwanese spam filtering app in 2013.

Naver has also received many awards, in 2009 it was listed by Forbes in the 50 promising Asia-Pacific companies and it was ranked n°3 in the ‘’2009 Top 100 Brands of Korea’’ by Brandstock.

It was listed then in the Top 10 Tech Companies representing Asia in 2010, and it was ranked the best search portals for ten consecutive years by NCSI (National Customers Satisfaction Index) in 2016.

It was also listed by Forbes in ‘’The World Most Innovative Companies’’ for the third consecutive year in 2016.

(Naver Corporation company history, s.d.)(Naver Corporation company awards, s.d.)

Reasons for Naver’s success

Naver Corporation became one of the most profitable Korean company with its $19 Billion of Market Capitalization and its $2.87 Billion of revenues and $458.3 Million of profits in 2016 (Forbes , 2016)

Google is commonly known as the global search engine, but there are some markets which are not dominated by the American tech giant.

South Korea, with China and Russia, is one of these markets characterized by a main search engine which is not Google.

Naver accounts for more than 75% of all search queries in South Korea, making it the fifth-most-used search engine in the world, behind Google search, Yahoo!, Baidu and Bing. (Sritama, 2015)

When the company was founded its chances looked slim as it had to face the competition of Yahoo and Daum, another Korean web portal.

This new search engine was characterized by a question-and-answer service and because there were not many web pages written in Korean atthat time the question-and-answer service was a masterstroke, in this way the users who answered other’s questions provided lots of free content.

Naverhas also handed out grades, from “commoner” to “superman”, to encourage users to keep writing.

“Everyone wanted to be God in cyberspace”, says Lim Wonki, the author of “The Secret of Naver’s Success”, published in 2007.(The Economist, 2014)

The question-and-answer service was one of the main reasons of Naver’s initial success.

Naver’s homepage looks chaotic and crowded, completely different from minimalist Google’s homepage.

Analysing the South Korean search engine, we can find that the homepage covers a range of topics and the search results are displayed in grouping of results, these include: Paid, Organic, NaverCafè, Naver Encyclopaedia, Maps, Images, Blogs, Q&A, Apps, Shopping, Books and Cartoons.

Furthermore,Naver gives up-to-date trends on the right side of the homepage, unlike Google which only has a simple search box.

Naver displays the most frequently searched keywords or topics in the past hour.

Just looking at the homepage lets you know what people are searching for and talking about in the South Korean market.

“When you search for an item on Naver, it will present the most frequently used related keywords. For example, if you search for ‘iPhone’, you will see related search words such as ‘iPhone 6’, ‘iPhone sale’, ‘iPhone damage’. This in turn increases the user’s browsing time on the portal’’, states Mandy Shin of L’atelier.net.

Moreover, Naver offers a quick way to determine the public opinion for a certain topic.

We can find for trend topics thousands of responses from Naver users and it’s interesting to see which responses got more votes.

The influence that those responses have on the public is so extraordinary that even the biggest companies are worried about their online reputation.

Naver provides also a platform where users can consume contents such as comics (webtoon) and novels (webnovels).

All these features are helpful to compete with Google, but more important is that Naver provides relevant information tailored for South Korean users; therefore, South Korean search engines (Naver, Daum, Nate) perform better due to a difference in the cultural attitudes of the searcher.

To many users in South Korea, Naver is more than a search engine.

Many use this portal as a hub where they can see news on a range of their interests and receive suggestions and ideas, Naver operates as the Korean homepage of internet.

Moreover, when you register with Naver it sets up a blog for you, this is because blogging is really popular in South Korea and because of that, blogs are included in the search listing.

Thank to these features Naver was able to become the leader of its country in this crowded industry and now it’s able to control around 80% of the search engine market share in South Korea (The Economist, 2014).

Naver was also able to remove Yahoo from its industry, therefore Yahoo is the tenth most-visited portal in Korea now and it decided to stop producing specialist contents for the South Korean market in 2012.
(Marsden, 2017)

We have already dealt with the reasons of Naver’s success, but to monetize this success the company decided to focus on advertising.

As Ryu Min Ho said, the company’s Internet research team leader “In South Korea, Naver is providing users with a lot of online data and information, ranging from news, entertainment, music and education, to an online cafe and encyclopaedia. These services are our strength, and that helps us gain revenue from advertising.”(Sritama, 2015)

To reinforce competitiveness and to maintain revenue from advertising, the company is also working more closely with local newspapers to provide online news.

Therefore, the quality of the sites found by Naver is better that the quality of those that we can find with Google, because Naver prefers less stuff in its index, but to make sure that is real.

“Naver and news organisations synergise to survive. If we can keep our users, it means we can get advertising,” Ryu Min Ho said.(Sritama, 2015)

 

Future aims, internal and external threats

Google on the other hand has an excellent access to a huge amount of English-language contents that don’t generate any significant interest for Koreans.

Therefore, Google is trying to purchase and to control as much Korean contents that it can, but Naver has been reluctant to allow to other search engines to use content generated by its subscribers.

Naverseems to have an untouchable position in South Korean market because of its loyal audience, but it does not limit the number of keyword search ads and it does not prioritize authorized search result.

This harms Naver’s user experience and it harms its reputation.

Moreover, 90% of South Korean smartphones run on Google’s Android operating system, which offers Google as the default search engine, so Google is increasing its market share even if most of Koreans seem to be comfortable with Naver. (The Economist, 2014)

Another dangerous threat for Naver is KakaoTalk, a Korean mobile platform and a messaging app that like Naver, offers games, e-books, photo storage and other services, launched in 2010 by a founder of Naver who left the firm.

South Koreans now spend more time on it than they do on Naver.

The main challenges for Naver now are to preserve its shares in the South Korean market from the assault of KakaoTalk and Google and to increase its influence and its market shares abroad.

“Now when companies are competing in a single world market, going global is crucial for our survival,” CEO Kim Sang-hun told reporters during the 2015 company’s annual conference in Seoul.(Ji-yoon, 2015)

The most successful product established by Naver is surely LINE which has become one of the most widely used chat apps in Asia, especially in Japan, Taiwan, Thailand and other countries in Southeast Asia. (Ji-yoon, 2015)

Therefore, even if Naver is losing in its home market due to the immensely popular chat app KakaoTalk, LINE continued to expand and to increase its popularity, especially in other Asian countries, and it’s focusing on countries where smartphones use is low but is ready to boom, such as Mexico and India. (The Economist, 2014)

The app still faces some difficulties to impress users, especially in the US, but Naver’s real strength abroad is its decade of experience in the portal business, doing everything from games to shopping to online newspapers.

Moreover Facebook, the owner of WhatsApp which is the main global competitor of LINE, still relies heavily on advertising, while LINE makes 70% of its profits from games and electronic stickers. (The Economist, 2014)

Even Coca-Cola and Barcelona football club have paid LINE to design special stickers for them.

However, Naver’s board is aware that the main reason of its success in the domestic market is the quality of its service and because they were able to better perform the needs of their customers instead of simply focusing on quantity.

“We cannot bring all Naver services to global markets even though they have been successful in Korea. We are fine-tuning individual services for different markets,” Kim Sang-hun, the new CEO, said.

For this reason, the company is testing in the US three new services, including a tag-based location tracking service called Tale.

Furthermore, the company is also betting on the improvement of other services such as webtoons, group-chatting and a real-time content streaming service featuring Korean pop stars. (Ji-yoon, 2015)

 

Conclusion

Since 2012 Narver has changed frequently its search algorithm to improve its customers’ experience and its advertising strategy.

In 2013, the new Sonar search algorithm allowed search engine to identify and to protect original content by preventing the copied content from being indexed or ranked higher than the original.

In 2014 instead, Naver released a new update which created an interactive search experience.(Hyung-min, 2014)

Therefore, this algorithm allows the search engine to interact with Naver users, providing more tailored and reliable search results.

In conclusion, I consider Naver an innovative company because it was able to enter in a tech industry which was already characterized by an intense competition, because it was able to gain the largest market share of its domestic market providing a better and a wider service and because it was able to find new ways to increase its profits such as the use of electronic stickers.

However, the main reason because I have chosen Naver and because I consider this company very innovative is its continuous attempts to improve its services and the establishment and the acquisitions of many new businesses such as: Ourgame, Happybean, 1noon, Datachorus, me2day, Wingbus, Livedoor and LINE.

Therefore, as the CEO said during the 2015 company’s annual conference in Seoul: “Software power is important in an era of technology convergence. We are increasing investments in tech start-ups and have plans to acquire them.”(Ji-yoon, 2015)

References:

Forbes . (2016, May). https://www.forbes.com/companies/naver/.

Forbes . (n.d.). https://www.forbes.com/lists/2009/83/korea-rich-09_Lee-Hae-Jin_UWFI.html.

http://searchengineland.com/library/google/google-universal-search. (n.d.). Retrieved from Search Engine Land.

https://www.statista.com/statistics/250927/number-of-registered-LINE-app-users-in-selected-countries/. (2014). Retrieved from Statista.

https://www.statista.com/statistics/327292/number-of-monthly-active-LINE-app-users/. (2016). Retrieved from Statista.

Hyung-min, K. (2014, November 9). http://seoseminkorea.blogspot.it/2014/11/naver-algorithm-change-history.html.

Ji-yoon, L. (2015, November 19). http://www.asianews.network/content/Naver-seeks-global-success-beyond-LINE-messenger-4008 . Retrieved from Asian News Network.

Marsden, T. (2017, March 13). https://www.minttwist.com/blog/2017/03/13/google-vs-Naver-googles-struggles-south-korea-focus/. Retrieved from Minttwist.

Naver Corporation company awards. (n.d.). Retrieved from https://www.Navercorp.com/en/company/companyAward.nhn.

Naver Corporation company history. (n.d.). http://www.Navercorp.com/en/company/companyHistory.nhn#.

Naver Corporation. (n.d.). http://www.navercorp.com/en/company/companyInfo.nhn.

Smith, C. (2017 , March 10). http://expandedramblings.com/index.php/LINE-statistics/. Retrieved from DMR.

Sritama, S. (2015, November 23). http://www.nationmultimedia.com/news/business/corporate/30273511. Retrieved from The Nation.

The Economist. (2014, March 1 ). http://www.economist.com/news/business/21597937-home-south-koreas-biggest-web-portal-has-thrashed-yahoo-and-kept-google-bay-now-its. Retrieved from The Economist.

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