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Korea's Internet empire NHN is dominating cyberspace at an alarming rate. Known best for its portal Naver, the company is sweeping core online business areas like gaming, community services and advertising armed with a near-monopoly share (70 percent) of the Internet search market. It has seen its sales grow 70-fold over the past six years since it began business as a start-up in 2000. It's expected to post W900 billion (US$1=W916) in sales and W270 billion in net profit this year. At one point its market capitalization even surpassed that of Korea Telecom, whose sales are more than W10 trillion.
But NHN's explosive growth has the Korean Internet industry shaking at its roots. As NHN tightens its grip on the market, small Internet companies either become subordinate to the giant or are eventually run out of business. "Small Internet start-ups are being undermined at their foundations as NHN scouts and hires talented workers," said Ahn Chul-soo, chairman of the board of AhnLab.
NHN's two pillars are search portal Naver (www.naver.com) and game portal Hangame (www.hangame.com). Naver has near invincible power. According to KoreanClick, an Internet market researcher and consulting company, Korea averages about 4.7 billion Internet searches per month. Naver accounts for 70 percent of those, with 3.3 billion, far ahead of second-ranking Daum (16 percent) and third-ranking Empas (5 percent). This monopolistic lead is unprecedented in the world.
What sets Naver apart from other search engines is its exclusivity -- it doesn't allow users to go to other sites. Unlike Google, which points its users to all different areas of the web, Naver is designed so that users can do all they need without leaving the site, offering everything from an encyclopedia to news to a knowledge database and blogs.
Naver's policy of confining users to its site has destroyed diversity within Korea's Internet. "The recent business trend is to find a new business idea that NHN is unlikely to want to pursue," said the president of an Internet company. But NHN argues that its success is the result of superior service, not monopoly power.
"We invest over 10 percent of our sales into research and development every year, and try to develop new services to satisfy users," a Naver spokesperson said. "We're working closely with content developers to develop service models that will benefit both us and them. It's part of our efforts to protect the digital ecosystem.¡±
But Naver's domination of the search market is a de facto monopolistic wall that smaller firms cannot overcome. The Fair Trade Commission and Korea Communications Commission are investigating the issue. Their results are expected as early as late this year.
(englishnews@chosun.com )
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