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NHN: The Little Search Engine That Could


Quick. What's the hottest Internet search company on earth? If you answered Google, you'd be wrong by at least one metric. While the Silicon Valley sensation doubtless had a great year in 2005, shares of a Korean rival -- NHN Corp. -- have done far better. Google Inc.'s (GOOG) stock climbed an impressive 103% in 2005, to nearly $415, but that paled beside NHN's 218% gain to $267.

Sure, NHN is still a midget compared with Google. Its revenues leapt 53% last year, to $351 million, while earnings should come in at $86 million, Daewoo Securities estimates. Google, meanwhile, is expected to post profits of $1.7 billion on $4 billion in net sales. Google remains a power stock despite a hit in mid-January on fears that it's overvalued.

But in its home market, NHN's Naver.com search engine trounced Google's offering. Google's 4-year-old Korean-language search service accounts for less than 2% of search page views and search-related ad revenues in Korea. Under CEO Kim Beom Su's adroit direction, NHN sold about $228 million in online ads last year, nearly 40% of the country's total. "In the vibrant and volatile Korean Internet sector, NHN is clearly the star," says Jay Park, an analyst at Samsung Securities in Seoul. "NHN's user-friendly approach outshined its rivals." Google declined to comment for this story.

Why is Naver so popular? One reason is that Naver can deliver more relevant search results than Google can, at least on its home turf. A simple Google search will return only certain kinds of Web pages, and a user needs to click another link to find, say, related images or news stories. NHN offers a mix of categories including blogs and community sites unless the user specifies a particular kind of document. A Naver search for a subway station, for instance, will return a map, information on the subway line serving the station, connecting bus lines, restaurants and shops near the station, blog entries mentioning it, and more. "Google has a superb search engine," says Choi Jae Hyeon, NHN's search chief. "We have, however, built up knowhow and a database by extracting knowledge from users' brains."

GODS AND MORTALS

What he's talking about is a three-year-old initiative called "Knowledge-In." The program lets users ask and answer questions on anything from recipes for kimchi to the composition of rocket fuel. Readers judge the responses, and the millions of folks who have answered questions are ranked as "ordinary," "knowledgeable," "highly knowledgeable," "supernatural," or -- for 22 truly prolific answerers -- "gods." "Naver is great because you get all sorts of detailed information in very specific questions and answers," says Song Han Sil, a 25-year-old pianist in Seoul. "Many of my friends don't even know that Google offers Korean-language service." The database now has some 37 million questions and answers that can get returned with search results. The idea is so popular among Koreans that most other search engines in the country, including Yahoo! Korea (YHOO), now offer their own versions of Knowledge-In services.

Soon, Google may start running into NHN elsewhere, too. After stumbling with Naver in Japan in 2000 (NHN pulled the plug four years later), the company is using online games -- everything from chess and solitaire to elaborate fantasy role-playing contests -- as its entry into Japan, China, and the U.S. Already in Japan, NHN is the largest game portal, with 13 million subscribers, while in China it bought half of Ourgame.com, a portal with 170 million subscribers, in 2004. And in October it set up a subsidiary in the U.S. to launch online games. Later, NHN hopes to introduce community sites and search services in those markets. Google may still be far ahead, but it would do well to keep an eye out for this little Korean search engine.

By Moon Ihlwan, with Elizabeth Woyke in New York and Ben Elgin in San Mateo, Calif.


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