Should Korean Search Engine Naver Worry About Local Competitors Or Google?

For just about the last decade, Naver has been the dominant player in the south Korean search market holding a share of some 70%. However, this doesn’t mean that Naver is not worried about competition — including from global players such as Google.

How many other industries do you know where the principal worry is not about the second or third player or even smaller competitors — but about the also ran which only has a two percent share in the market — namely Google?

In September of last year, the CEO from Naver’s parent company NHN Communications, Kin Sang-hun, said that Naver has indeed a long way to go when competing with Google. He added that, Naver is interested in “real-time searches and particularly connecting with social network services, since the popularity of Twitter and me2day has been rising.”

South Korean Search Engine Market Share

In fact, Naver’s market share did apparently take a battering at the beginning of 2010, nothing much to do with Google directly though. According to figures from KoreanClick from May 2010, Naver’s share has dropped to 63% with number two search engine Daum having 21% with Nate in third place at 9%. No huge shift to report in relation to Google.

Third place Nate, which is run by SK Communications, believes it is making inroads into Naver’s market share thanks to its introduction of a semantic search system which uses the network of relationships between terms to help it decide what user were really looking for.

In fact, the bullish President of SK Communications has gone on record as saying that Nate could gain more ground from Naver and Daum and expand its share to even as high as 20 percent or more than doubling its current size.

Meanwhile, closest on Naver’s heals is Daum which has just announced its financial figures for 2010 showing a significantly improved performance overall as a portal with net profit virtually hitting $100 million compared with just $28 million in the previous year. Search advertising grew 44% year on year so growth was only partly as a result of search itself — but this is still not a performance to be sniffed at.

Daum also has some significant partnerships including a recent agreement from January with Twitter to enable Twitter users to sign in directly to Twitter from Daum. Meanwhile, it takes its advertising from Google and has done since 2008 when it switched from Yahoo.

Part of the fallout of the Microsoft-Yahoo partnership was that in November Naver moved away from using Yahoo’s Overture system to run its own home built advertising system.

According to Yahoo Inc regulatory filings at the time, “The Naver search engine brought in less than one percent of its gross profit for the first half of the year (2010).” Regardless of what Yahoo says, the fact is that Naver is now able to keep the revenue from advertising strengthen its financial position.

Naver has already launched its social search system where you’re able to search through information uploaded on social network sites which, according to Kim San-hun, will make searches more “personal”. Daum followed that with its launch of a similar social search system in December of last year. The company is also planning to launch voice search in order to more effectively compete with Google.

Through Shopping.Naver.com, the NHN Corporation is also planning to take on eBay which last year acquired Auction.co.kr and Gmarket.com giving it a stronger foothold in Korea. Shopping.Naver.com operates as a middleman collected commissions for customers buying on partner sites, but they are supposedly launching a new version or approach to this just around about now.

Keeping A Close Eye On Competition In Korea

So should Naver be worrying about Google or its local competition? The flippant amongst you would answer “both”, but I think there is a strong argument that Naver must track Google very closely.

There are two reasons for this. Firstly, whilst south Korea could be described as an advanced and sophisticated market, most of the search engine developments there mimic those by Google whether it’s semantic changes or voice search.

Secondly, it only takes Daum or Google to fall into Google’s camp fully as a trojan horse to upset the market entirely, remove a player and put Google rapidly into a much stronger position to change the rules overnight.

Naver has an aspiration to deliver search in some fabulous ways too. Take this statement by NHN CEO, Kim Hun-sang, “In the future, information an services will be provided without the user having to type in requests but rather the search engine realizing the intention of the user first.” Wow. What will it do then — send me an email?

Meanwhile, for advertisers, the market is straightforward and clear. Naver first, followed by Daum and then Nate.