Google is the world's dominant search engine. With over 90% market share as of 2020,
the company handles over 5.4 billion searches a day. They are the tech company gold standard.
There are a few countries, however, where Google isn’t the search leader. China is one.
South Korea is another. There, Naver Corporation's eponymous search engine
holds over 70% market share. One of Korea's largest internet companies,
it owns a collection of amazing online properties. Furthermore, it has been
able to keep those properties profitable and competitive against Google even to this day.
Any market where Google has not been able to take hold in is worth studying.
So in this video, we are going to study how Naver beat Google in search.
Naver Corporation was founded in 1999 by a number of ex-Samsung employees.
They launched their web portal site that same year. A web portal is a site that brings together
information from various sources to be the single access point to everything you need on the web.
A few examples of American portals include Yahoo and America Online.
Naver then quickly launched a search engine in 2000 - the first web portal in Korea to do so.
They were quickly joined in competition by others: Daum, Yahoo! and Lycos were soon in the market
too. Google Korea would also launch that same year, adding another player to the industry.
This competition was fierce and though Naver was doing alright, it found itself in third place.
It needed additional capital to fight and take share. Their ads
business was not doing well enough yet and they were not profitable.
So in 2001, Naver merged with a gaming company called Hangame. Hangame made a series of popular
card games on the web. These games were very popular but also very profitable.
Both companies felt that they could cross-promote each other's user bases and grow.
The combined company was called NHN, standing for "Next Human Network" and soon went public
on the KOSDAQ stock exchange. While Hangame and Naver were technically part of the same company,
the two companies worked somewhat independently. It was never quite a perfect fit.
Over ten years later in 2013, the two would split again.
Hangame's cash flow however did help fund Naver's next few product launches.
These new products would be crucial in helping the company to secure
its search market share and box Google Korea out of the market.
The first and most critical Naver launch was its 2002 "Knowledge Search" service, or Knowledge iN.
This was Yahoo Answers three years before Yahoo Answers ever existed.
It allows users to post questions and vote up answers from other users.
This was one of the first websites anywhere to feature user-generated content.
This matters because in those years, Korea did not have much in terms of digital content.
As late as October 1999, there were only 159,525 Korean registered domains.
The number of sites with useful information was far smaller - estimated to be around 50,000.
Furthermore, a large percentage of those Korean websites prevented Google from crawling their
content. This is ostensibly to prevent Google from exposing "private" information. As late as 2012,
nearly half of the country's government websites still blocked Google from indexing their pages.
Google probably had superior technology when it came to crawling and archiving web pages.
But the small size of the Korean internet back then as well as nuances in the Korean language
invalidated that technical advantage.
So web portals like Naver and Daum captured the market by generating their own proprietary library
of Korean-language content. They can essentially curate the search experience for their customers.
Knowledge iN helped Naver overtake Yahoo in 2003 and Daum a year later. Naver became
Korea's most popular website in 2005 and that has not really changed since then.
In the years that came after, Naver added to its library with book search,
local and blogger information search, maps, and original content with its manga service Webtoon.
The more content Naver added to its walled garden,
the more useful its searches were in comparison to the competition.
These walled gardens became immensely profitable for Naver, Daum and other portals. You see,
Naver monetizes with search and display ads on its content properties.
So the longer a user stayed within the Naver garden, the more money they made from them.
The profit from these ads helped Naver launch more properties, extending its competitive advantages.
Thus, Naver users visit the site far more than Google and stay for far longer.
They trust Naver web properties more than that of some random third party.
Owning that content (and blocking it from being indexed by Google) allowed Naver to
maintain its strong position over the years despite challenges from Western tech companies.
Naver quickly sought to globalize and expand its presence outside of its home market.
They launched a Japanese Naver search engine in 2000,
but that failed to gain traction against Yahoo Japan, another web portal, and Google.
Eventually, the company succeeded overseas.
But not with search. Instead, it was messaging with Line.
Line was Naver's second attempt at a messenger service after the failure of Naver Talk in
its home market. Independently developed by subsidiary Naver Japan after the 2011 earthquake,
it has become the dominant messenger in Japan, Taiwan, and Thailand.
The company is well known for pioneering the monetization method of selling digital goods
like stickers. Today Line has its own news function, shop, payment function and more.
Kind of like Naver itself. A fuller profile of Line is for another day,
but its emergence proved that Naver was not a one hit wonder.
The interesting thing is to compare Naver's situation with that of
Korea's domestic social networking giant, Cyworld. Founded in 1999,
the company signed up over 50% of all internet-connected Koreans by 2003.
On Cyworld, users can write blogs, join clubs, and share pictures. You can also have this
cute little room in which you can decorate and fill with accessories. Accessories you
pay for, naturally. It is kind of like Animal Crossing, I guess? I haven't played that game.
Why haven't you heard of Cyworld? Well, that is because the company never globalized.
They were owned by SK Telecom, one of Korea's dominant telecom companies,
and that significantly interfered with their expansion plans.
Frankly, SKT had no idea what to do with this special thing they had. They refused
to allow Cyworld to expand into messaging, because it would cannibalize their $2 billion
texting business. And they did not want to fund a global expansion into Japan like Naver did.
They just left it as is, just like Fox and MySpace.
Eventually, Facebook broke Cyworld down. Here’s how.
First. People outside of Korea didn't use Cyworld. Koreans had to sign up to Facebook
to connect with their overseas friends. Second, Cyworld missed the mobile phone app transition
(again, the SK Telecom connection). Facebook, bless their hearts, did not.
Cyworld's still around. But then again, so is MySpace.
Naver avoided Cyworld's fate for two reasons. It maintained the strength of its
most valuable content - its proprietary knowledge base and other properties.
And at the same time, the company had the freedom to experiment, expand and globalize.
Today, Naver remains one of Korea's most valuable and profitable internet companies.
Rankings vary depending on the source but most traffic research sites find that Naver.com is
still the country's most popular web property with 29 million monthly unique visitors as of 2020.
For what it is worth, Google is still doing fine in Korea. First, there’s the 90% global
market share, the $180 billion in revenue, $40 billion in profit and what not. And second,
YouTube and Google are the third and fourth most visited sites in the country.
YouTube in particular is showing a lot of traction in the space,
pressuring Naver's domestic ad businesses. Lower cellular data costs and a huge network
of user created content from around the world has made the service very popular.
YouTube now has leading share in the video advertising space and users spend more time
in the YouTube app than they do in Naver or KakaoTalk (the dominant chat app).
Naver is fighting another big battle in the e-commerce space.
A new company called Coupang has exploded onto the scene,
disrupting the first generation of Korean web giants. Fueled with $2 billion from the
Softbank Vision Fund, the company recently went public in the US and is valued at $60 billion.
Coupang has followed the Amazon playbook to a tee.
They built out a fulfillment service that allows them to deliver products overnight.
They have their own version of Amazon Prime with a future video service.
Naver is fighting back with its proprietary properties, expanding its selection of marketplace
sellers, and positioning its SmartShop site as the go-to place to buy anything and everything.
They have struck deals with Korea's leading retail
giants to build economies of scale and expand their offline presence.
Regardless, Coupang has a lot of momentum behind it and it goes to show just how
fierce the Korean internet industry can be. No moat is invincible. It must be maintained.
In recent years, Google has been accused of taking a page out of the Naver playbook and
promoting its own content and sites in its search results. These include its Google Shopping Ads,
YouTube search results, Google Maps listings, or whatever. “We want to get you out of Google
and to the right place as fast as possible,” Larry Page had said in 2004. Not so much today.
Whether this is due to a desire to show higher quality search results,
entrap its users within its own walled garden, or otherwise, the trend is interesting to look at.
And one last thing. Learning about how powerful Naver’s proprietary knowledge base has been for it
has got me thinking about how impactful (and valuable) Wikipedia is to the
Western internet. The English and Korean internets were way different in the 90s,
but the need was the same: Reliable answers to the searchers’ questions.
Naver built their own database of answers and it allowed them to encircle their wall around
the Korean web. Google never had the chance to own that space because Wikipedia eventually
took it for themselves. Their pages are often seen to be the most authoritative on a subject.
I know Google’s own principles at the time probably would have precluded them from trying,
but it is an interesting thought experiment nevertheless.