Portals bet on mobile commerce

Internet companies NHN, Daum and SK Communications are facing considerable challenges as the Web moves from desktop computers to mobile devices, threatening their reign as online gateways.

Industry observers believe that the three Web portals Naver, Daum and Nate manged by the three firms will continue to struggle to compete with global giants such as Google to be relevant on mobile devices, although Naver, the Korean search king, is better positioned than its rivals.

While the companies have traditionally relied on search revenue created by advertisements, electronic commerce will become a bigger part of their business as they move to mobile with data-enabled handsets providing consumers the convenience of finding and purchasing products and services instantly.

According to market research agency KoreanClick, the three portal’s mobile versions were abysmal in their ranking based on usage in handsets. Naver was ranked 10th, while Daum and Nate were 46 and 55th respectively.

NHN, the operator of Naver, seems to be the only major search company managing to stay competitive in the mobile realm, thanks to its long established brand power. Its No.1 position in desktop computers also provides a backbone for its growth that brings in steady revenue.

Google seemed to have the mobile world at its grasp, with six of its apps positioned within the top ten, with its Market app ranking first.

The American Internet giant has taken full advantage of the wide dissemination of Android-based smartphones, which has its Google search automatically configured as the first webpage to appear when users go online.

“Expanding into mobile will be the obvious priority for portal businesses next year,” said KB Securities analyst Choi Hoon. “Their goal for next year will be to expand their mobile commerce business in the platform and use advertisements, as it does in its PC portal, to bring in revenue.”

NHN, having vowed to diversify its service portfolio to include more mobile content, found its next growth engine in mobile messenger Line. The service boasts over 90 million subscribers which is near triple that from the beginning of 2012.

“The main point of Line was to draw user traffic to its mobile platform, which it was successful this year. Next year it will mull over how to make that subscriber pool a cash-generator,” said Choi. The free mobile messenger’s main luring tool is its social games which keeps subscribers using it as their communication tool.

Runner-up Daum is in a more difficult situation as its sponsored search partner Overture is to completely withdraw from the Korean market. It needs to quickly fill the vacuum left by the departure and build an advertisement network. “Daum’s outlook for next year will depend on how efficiently it absorbs Overture’s shares,” said the analyst.

An industry official requesting anonymity agreed with Choi, going far as calling it a possible opportunity. “Daum use to pay a 10 percent commission to Overture for its services, but if it does it itself, it can save a substantial amount of money which will increase its advertisement revenue,” he said.

Mirae Asset analyst Jung Woo-cheol said that expansion of advertisement must be dealt with quickly for Daum to increase its margins from the business.

The firm released its set-top box service called Daum TV in May which sold a mere 10,000 before it disappeared from the public altogether. The company claimed it was reinforcing its content on the platform. “For the get-go, Daum probably wasn’t considering a commercial expansion using the service because there are too many heavyweights in television contents: Samsung Electronics among others have bigger potential,” said the official.

“It is more of a public demonstration to increase awareness of its contents,” he added.

SK Communications, which recently signed an agreement to cooperate with Daum in expanding their mobile commerce businesses, will retain a similar strategy with its partner, according to analysts.

It is fighting a hard battle in mobile apps spearheaded by Nate and its social network service Cyworld, that is losing out to competing counterparts. Facebook and Kakao Story, the SNS service managed by Kakao, is especially posing a challenge.

“We will strengthen our search, as well as expand more aggressively into the mobile market next year,” said NHN spokeswoman Choi Seo-hee. <The Korea Times/Cho Mu-hyun, Kim Yoo-chul>