In Korea, Naver Trumps Google

NHN's search engine is the clear favorite here, with more relevant, Korean language results. It's got games and Q&A, too

by Moon Ihlwan

Google (GOOG) certainly is a juggernaut around the world. But in South Korea—where virtually every household is surfing the Net through ultra-fast connections—the U.S. giant simply doesn't come to mind when citizens search for information. That's because they much prefer local search engine Naver.com run by NHN Corp. "I get everything I want though Naver," says Choi Hye Won, a housewife in her early 40s. "It's also much easier to use than Google."

Indeed, Google has been completely outgunned by NHN. In May, for example, Google's six-year-old Korean-language search service took a mere 1.7% of 4.28 billion queries made through the Net in the country, while NHN accounted for 69.7%. "NHN's dominance is unlikely to be diminished anytime soon," figures Jay Park, an analyst covering Internet-related companies for Samsung Securities in Seoul. Park expects NHN to sell almost $600 million in online ads in 2007, nearly half of the country's total and up by more than a third from last year.

Little wonder NHN is a star performer on Korea's tech-rich bourse, Kosdaq. NHN's share price jumped 47.7% in the first six months of this year, far outpacing the rise of 28.5% for the overall market. The company expects its operating profit to rise 14%, to $367 million, this year on revenues of $939 million, up 52% from last year, but many corporate analysts forecast NHN's 2007 profit will top $400 million.

Gaming Strength

One reason for Naver's popularity is that it can deliver more relevant search results for local users than Google can. One huge hit among local Net users is its five-year-old initiative called "Knowledge-In." The service lets users ask and answer questions on everything from recipes for Korean barbecue to herbal medicines for hepatitis. The user-created content makes up for a lack of Korean-language content on the Web. NHN's database now has some 69 million questions and answers that can get returned with search results. "Google is an excellent search engine but it is not very interactive," says Hong Eun Tak, NHN director in charge of Naver services.

Now NHN wants to take advantage of its strength in online games to expand overseas. Controlling about 30% of its home online game market—with everything from chess and racing games to fantasy role-playing contests—NHN sees games as launch pads for community sites and then search services later in foreign markets. Already in Japan, NHN is the largest game portal, with 22 million subscribers. In China it bought half of Ourgame.com, a portal with 170 million subscribers, in 2004. And in May it launched a game portal, Ijji.com, in the U.S. NHN plans to introduce Naver search service in Japan later this year to test its strategy.

Moon is BusinessWeek's Seoul bureau chief.