Naver headquarters in South Korea (Courtesy of Yonhap)
South Kora’s online giant Naver Corp. is struggling with sluggish core domestic businesses – commerce, search and sports – as Japan has already been pressuring the company to give up its capital control in its joint venture operator with SoftBank Corp. of the popular mobile messenger app Line in the country.
Naver’s commerce division sought measures as the business, which made up 27.5% of the company’s total sales, suffered the first-ever quarterly decline in the transaction value, according to industry sources on Tuesday.
Its transaction value fell 1.6% to 12.2 trillion won ($9 billion) in the first quarter from the previous three months, although the e-commerce unit logged record sales of 703.4 billion won thanks to healthy shopping ads, brokerage and sales fees, as well as paid memberships. It was the first time for the company to report a drop in the transaction value on-quarter.
“A lower transaction value bodes ill,” said a Naver official. “We are preparing measures as it is expected to affect memberships and ads.”
That came as Chinese e-commerce giants such as AliExpress, Temu and Shein have been quickly expanding their presence in South Korea, biting into local players including Naver.
The online behemoth was the No. 2 internet shopping service provider with a market share of 23.3% in 2022, following the leader Coupang with a 24.5% share, according to the Korea Fair Trade Commission.
SEARCH, SPORTS BUSINESSES SLOW DOWN
Naver’s search business is also losing ground as global Big Tech companies are raising their market shares in South Korea with generative artificial intelligence such as ChatGPT developed by Microsoft Corp.-backed OpenAI.
Naver, the country’s top online portal made up 56.6% of the local search market in the first 19 days of this month, lower than 60% at end-2023 and 64.8% at end-2022, according to InternetTrend, a domestic market tracker.
On the other hand, global tech giant Google has been raising its share to 35.7% in the May 1-19 period from 29.1% at end-2023 and 26.8% at end-2022.
South Korean users are likely to use advanced AI services including OpenAI’s GPT-40 and Google’s Gemini 1.5 Pro more than search engines, hurting Naver further, industry sources said.
Ryu Hyun-jin, a pitcher of South Korean professional baseball team Hanwha Eagles (Courtesy of Yonhap)
Naver lost momentum in its sports business as the over-the-top streaming platform TVing of the country’s entertainment powerhouse CJ ENM Co. won the rights to broadcast the country’s professional baseball league in 2024-2026. TVing vowed not to resell the rights to Naver.
Baseball fans, who had watched games through Naver, do not need to rely on the online platform anymore, hurting its search business and ad traffic.
Those bearish factors hammered Naver’s share prices to 179,100 won in April, the lowest since October 2023.
NEW GROWTH ENGINES HAVE YET TO SUCCEED
Naver has been seeking new growth drivers to change its business model that focuses on the search and commerce sectors. The efforts have yet to pay off, however.
Naver services based on its upgraded large language model (LLM) HyperCLOVA X are struggling in competition against those of global Big Tech companies.
The company is working on a digital twin platform in Saudi Arabia but it is expected to take more time to make money from the project as it is still in a very early stage.
Line flagship store in Gangnam, Seoul (Courtesy of Yonhap)
Naver’s goal of expanding its businesses in Southeast Asia hit a roadblock as Japan ramped up pressures on the company to sell its stake in LY Corp., the operator of Line, which is also popular in Southeast Asia.
Unionized workers at Naver asked South Korea’s National Pension Service (NPS), which has a 7.96% stake in Naver, to exercise the stewardship code to block any sale of LY’s stake.
By Ji-Eun Jeong
jeong@hakyung.com
Jongwoo Chon edited this article.
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