Google left behind as Koreans Naver-gate web

By Anna Fifield

Published: January 2 2008 00:27 | Last updated: January 2 2008 00:27

When South Koreans want to find something on the internet, they almost never “Google it”. They much prefer to “Naver it”.

Koreans are so loyal to their home-grown search engine that Naver has become the world’s fifth-largest portal, according to comScore, the US internet researcher. Not bad for a nation of 48m people, even if it is one of the most wired countries on earth.
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“I love Naver because everything I need is conveniently shown on the first page,” says Hwang Ji-sun, a 22-year-old college student in Seoul. “I get everything from news, shopping advice, the latest entertainment gossip, interesting pictures and hot search words. On Google you see nothing but a search box.”

Naver – based on the English word “navigator” – attracts about 16m unique users a day, generating a total of 1bn page views.

This means that it commands more than 77 per cent of the internet search market in Korea – streets ahead of its local and international rivals.

Daum, another Korean portal, has about 11 per cent of searches, but Yahoo has only 4 per cent and Google trails in a distant fourth with less than 2 per cent, according to KoreanClick, an internet market research company.

The secret to Naver’s success lies in the way it has harnessed the human.

“Korea has very advanced infrastructure and Koreans rely on the internet a lot in their daily lives,” Chae Hwi-young, chief executive of NHN, Naver’s parent company, says.

“That meant we needed to come up with a way to have these people interact continuously, to understand the way they interact, and to satisfy their internet needs,” he adds.

NHN also owns Hangame, the popular game portal, and is Korea’s most profitable internet company.

Third quarter sales from search-related services grew by 55 per cent from the previous year to Won123bn ($130.296m), while those from its gaming business more than doubled to Won65bn.

As Ms Hwang noted, Koreans think Naver offers a more user-friendly interface than many of its rivals. When users search Naver, the answers don’t appear as a simple list, such as on Google or Yahoo, but are categorised by type – such as websites, news, blogs, photos, video, books and shopping.

But one of Naver’s most popular features, and one that distinguished it from other search engines, is “Knowledge In”, where Korean internet users – or “netizens”, as they are known – ask an average of 44,000 questions each day. Fellow netizens supply more than 100,000 responses each day.

Questions posted by users range from the serious – such as the best bus route from one part of town to another, or why the death penalty should be abolished – to the more esoteric, such as why stomachs rumble or how to kiss well.

This kind of facility came about simply because when Naver started in 1999, it was a search engine with nothing to search.

There was simply not enough Korean language content on the internet to make the engine viable.

“Since we didn’t have much Korean content, we had to find information and if we couldn’t find it, we had to make it,” Mr Chae says.

“We had to focus on the knowledge that our users had. So rather than saying we created the content, I prefer to say that we digitalised the offline information in our users’ heads.”

Naver retains ownership of all the content and does not allow other search engines to access it.

Indeed, search remains at the heart of the operation, Mr Chae says.

“Even though we are developing new areas, search is still our core competency and we continue to try to make our search engine better,” he says.

“Our rivals don’t invest as much as we do into search but we continue to focus our attention on search.”

Naver’s engineers – who comprise about 60 per cent of the 2,300 workers at its headquarters just south of Seoul – are now testing about 100 new innovations.

But the international players are hopeful of occupying more of the market.

“South Korea’s internet market is expected to rise 20 per cent on average annually over the next four years,” Susan Decker, president of US search engine Yahoo, said in Seoul in October.

“Higher penetration of personal computers, innovative technology and amazing mobile speed well explain why we should increase investments here,” she said, adding that Korea was the company’s single largest market outside its domestic market of the US.

But Wayne Lee, an internet analyst at Woori Securities, says it will be hard for any competitors to take on Naver.

“Naver will retain its competitive edge in the domestic market because it has a very valuable database,” he says.

“Knowledge In is a great feature and it’s growing very fast, so no one else will be able to catch up with it.”

Meanwhile, Naver is looking at expanding abroad.

It will enter the Japanese search market in the first quarter of 2008, hoping to apply its winning formula there.

“We don’t need to invest a lot of money into the Japanese market because we already have a multi-language search engine, so we can just tinker with it and then enter the Japanese market efficiently,” Mr Chae says.

Mr Lee of Woori says this will be a crucial test. “No one knows whether they will be successful in Japan. This is will determine Naver’s enterprise value.”

Copyright The Financial Times Limited 2008