January 18, 2011 12:35
Goldman Sachs recently valued Facebook at US$50 billion. The wildly popular social networking service was established in 2004 and has yet to be listed on the stock exchange, but already it is being evaluated as being worth more than the cream of the so-called first generation of Internet start-ups such as eBay and Yahoo. As of the end of last year, the only listed Korean company worth more than Facebook was Samsung Electronics.
The growth of collective buying website GroupOn has also been phenomenal. It made headlines in November last year, just two years after it was established, by turning down a $6 billion acquisition offer from Google. Zynga, which makes the most popular games on Facebook, saw its net worth soar to $5.6 billion last year. In 2007, three years after it was founded, Zynga overtook Electronics Arts, the world's second-largest game software developer with a 28-year history, in terms of total market capitalization.
It remains to be seen how objective and reasonable the evaluations are. It may be a repeat of the overenthusiastic assessments seen just before the implosion of the dot-com bubble in the late 1990s. But it is always impressive to see the vibrancy of the U.S. economy, where an endless stream of creative and innovative companies appear and reshape the paradigms of the economy.
Recently the Silicon Valley Insider announced a list of the world's most valuable start-ups. A total of 105 were chosen, with Facebook ranked first, Zynga second, Twitter sixth and GroupOn 11th. The list was dominated by 91 U.S. companies, but there were four British start-ups, three from China, two each from Russia and Canada and one each from Luxembourg, France and Finland. No Korean companies were on the list. In other words, there is no company in Korea that could lead the IT era.
In a recent radio address, President Lee Myung-bak pledged to come up with support that would make it possible for someone like Facebook creator Mark Zuckerberg to come out of Korea. Lee made similar comments early last year, mentioning names like Bill Gates and Steve Jobs. But young Koreans do not believe him. They think that if Zuckerberg had been born in Korea, he would probably be studying to become a civil servant.
Why? Recently, one game developer in Korea was not even able to register his company as a business entity because the roof of the parking lot in the building housing his office was an unauthorized structure. As a result, the developer’s games could not be reviewed by the government. The government has been steadily cutting red tape, but many regulatory obstacles remain. There are no capable venture capital funds that support and advise companies or individuals with promising technologies or ideas. Monopolistic domination by major conglomerates and unfair trade practices reduce the chances of survival for start-ups, while it is legally and socially difficult for a person to bounce back after a venture fails.
The small size of the Korean market is another problem. Although the global market should be the target, language and cultural barriers remain high. In no instances has a Korean Internet start-up become a success overseas. How realistic is it to dream of a "Korean Zuckerberg"?
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