Naver’s monopoly challenged

Local giant to cultivate collaborative ecosystem

Over the past 13 years, the local search giant like Naver has focused on providing Korean-language content and serving the local audience.

Unlike Google which originally specialized as a search engine that acted as a conduit of existing Web content, Naver started from scratch to offer its own content and work with third-party content providers.

“Naver’s business model has to do with Korea’s closed Internet ecosystem, which enabled the company to become the local powerhouse,” said Kim Jae-yeon, author of “Being Social Web.”

“Google believes that as long as the search function works well, advertisers will come along and the business will automatically grow, whereas Naver has tried for ownership of as much content as possible, which it believes benefits the company as well as the users,” Kim said.

In the late 1990s when Naver had just launched, only some 200,000 Korean language-based websites existed while the number of local Internet users snowballed thanks to the government’s strong push for nationwide broadband implementation.

While the local dominance has enjoyed a monopoly across the sectors, global players like Google and Apple have adapted to the latest trends as Web and PC platforms expanded to mobile phones, tablet and apps.

Also small startups with innovative ideas surged into the market competing head-to-head with the industry juggernauts or were bought by them for hefty prices.

Just earlier this week, Facebook paid $1 billion for photo-sharing app Instagram, which was launched by two Stanford University graduates in October 2010.

“It’s not until last year that Naver started to seriously look to bring its business to a global stage,” he said.

Representatives of Naver were not available for comment.

Slow segue to global stage

Naver has recently made a shift in expanding to mobile apps in an attempt to improve its global presence, but experts say it still lacks original ideas and quality content to gain competitiveness.

Moves by NHN in acquiring me2day, a Korean version of Twitter and launching Naver Talk, a mobile messenger app like Kakao Talk, both fell short of catching up to the existing leaders.

“Does that mean Naver has no future? I think its latest app called Line is gaining momentum … depending on its success this year, we will be able to tell whether the company can truly reform,” Kim said.

Last March when a massive earthquake and tsunami hit Japan, NHN app makers took an idea from families and friends who relied on mobile messenger services to locate their loved ones from a distance.

Unlike Facebook and Twitter, Naver’s Line is for a closed circle of people whom users can add by phone number or a Naver login ID.

It gained 2 million registered users worldwide in eight months, the firm said in a statement.

Good content and global partnerships are the two areas of improvement for Naver, said Thomas Kang, an analyst with Strategy Analytics.

“To create a thriving platform, there has to be abundant content but Naver doesn’t have the same relationships it enjoys with domestic partners, with those overseas in news and media,” Kang said.

That is why a strong partnership with content providers matters more for Korean Web portals that have a search model more similar to Yahoo!, which has a strength in its aggregate of a wide variety of news and other media content rather than a sophisticated search engine like Google.

A different business model is another reason for the local company to distinguish its strategy from Google.

On the domestic mobile platform, Google’s search engine has secured the No. 1 spot ahead of Naver and Daum.

However, local media companies argue it is due to a default setting on Android cellphones and Google allegedly struck a deal with the handset makers.

Last year, NHN and Daum Corporation filed a complaint with the Korean Fair Trade Commission claiming Google restricted Android phone makers from preloading local search sites on smartphones, thus discouraging users to switch to a different Web search page.

Regulation

Korean players also criticized the government’s stringent regulations, applied differently to domestic and foreign companies.

For instance, online users have to give in their real names and ID numbers to sign up for local portal sites in order to write a comment or join an online community. The rule doesn’t apply to foreign companies such as Google and Facebook.

The Korean government also restricts Naver’s map service from showing a clear satellite view on key places like the Blue House for security reasons, but again Google Maps gets away with it, according to Moon Jeong-seong, a senior researcher at non-profit organization Kinternet.

“It clearly hurts a level playing field between local and foreign companies,” Moon said.

The government started to lift the real-name rule on several public websites in March, using different methods of identification such as credit card numbers.

By August, it plans to fully implement the policy to all Web pages.

But critics argue that such policy is enforced at the convenience of the regulators rather than for the purpose of protecting cyber bullying as the government claims.

“It is clear that this kind of Internet regulation only hurts the domestic industries. How can we expect to see a company like PayPal emerge in Korea when the regulators still insist on the use of Active X, an inefficient online transaction system, which it has been proven several times that it doesn’t fit the open Web and does not promise online security, either,” said Kim.

Despite the hostile environment that stifles the Korean Internet industry, as local firms claim, at the end of the day it’s innovation and open platforms that are key to their global success, said Kang.

“Because Naver has been the No. 1 player domestically made it to stay in its comfort zone for too long, it needs to break out of it,” he said. <Korea Times/Kang Ye-won>