Lack of innovation hurts Naver’s search grip

With the increasing popularity of smartphones, such as the Apple iPhone, the Web is increasingly moving toward mobile users, and Internet companies are scrambling to rethink their business models and adapt to their changing attitudes and consumption behavior. The latter’s response to Naver, the country’s most popular website and leading search engine, has so far been underwhelming. / Korea Times

By Kim Tong-hyung
Staff reporter

Naver (www.naver.com) has dominated the Korean search market like a fat kid does a cookie jar. However, as the website's presence is taking an abrupt dip, it's worth questioning whether the seeds of defeat were sown at the height of success, as the obsession toward prolonging old business models appears to have made Naver predictable and boring.

Perhaps, Naver could blame Apple for exposing its lost ability to innovate.

Since its belated Korean debut in November last year, the iPhone, Apple's do-it-all smartphone, has obviously been on a run in the gadget market, singlehandedly igniting what had been a muted mobile Internet explosion.

And the wealth of mobile applications (apps) and social networking services that have been fueling the smartphone boom has further shown Korean Internet users that, yes, there is life without Naver.

The demise of Naver, the main unit of NHN, the country's biggest Internet company, would have sounded absurd just two years ago, when the website commanded nearly an 80 percent share of the country's search market by revenue. It bears further watching whether the firm's compromised grip in search will force NHN to shift its focus to its online games business, based on Hangame (www.hangame.com) and a number of high-profile role-playing titles.

In the realm of personal computers, Naver has been crushing its competitors such as Daum (www.daum.net), Nate (www.nate.com) and Google Korea (www.google.co.kr). But as the Web becomes increasingly mobile, Naver is seen as struggling to extend its footing beyond the wired world, while its rivals have impressed.

Naver's underwhelming start in the mobile Internet is alarming, as changes in Web behavior suggest that this may in turn deteriorate the website's desktop stronghold.

As smartphones and other data-enabled portable devices go mass market, people are experiencing dramatic changes in the way they acquire information and consume media. At the core of this revolution are social networking services such as Facebook and Twitter and the variety of apps that are available for download to handsets.

Of course, people will continue to rely on the Internet to find solutions for their daily questions, but they no longer necessarily need the traditional search engine to do that. Apps are providing a more direct and specific route for information users had previously been getting from search results, while social networking services allow them to pick and choose people to answer and respond to.

This has Naver, which never found a way to monetize its vast pool of user-generated content in blogs and ``caf?'' online communities, looking increasingly vulnerable.

``The competitions in fixed-line and wireless Internet are proving to be two totally different games, much to the dismay of Naver. You have to think that the company has been slow to respond to an important opportunity to renew itself and restore some of its coolness,'' said a representative from an Internet company that develops apps for iPhone and devices powered by the Google-backed Android operating system.

``It's apparent that Daum has been preparing longer and harder for the mobile Internet era and now shows clear direction and purpose, and while SK Communications was a little late into the game, Cyworld (www.cyworld.com) and the quickly-rising Nate are good building blocks to have. Naver, on the other hand, is showing a lack of imagination, and although they now seem to be admitting that their early approach has been lax, they are scaring nobody at this point,'' he said.

Rivals appear closer in rear-view mirror

Naver's weakening market position was confirmed again in a recent study by analysts Rankey.com, which indicated that the volume of search requests powered by the website has declined dramatically over the past two years.

Based on the number of visitors, Naver's share in the search market dropped from 70-percent-plus in May 2008 to just over 50 percent as of May this year. Daum, the runner-up search provider, saw its search share jump from 18.4 percent to 40.2 percent during the same period.

A separate report by Korean Click, which based its study on searches performed, pretty much tells the same story. Judging by the number of queries, Naver's share in searches dropped from over 70 percent in 2007 to the low 60s in recent months.

The biggest problem for Naver, according to many industry watchers, is that it has ceased to be interesting. Naver quickly conquered the search market after introducing ``Knowledge Search,'' one of the industry's first question-and-answer-type search services, in 2005. However, the company hasn't provided a game-changing product ever since.

Naver's lack of imagination now appears to be resulting in its inability to rethink its business model to align with the attitudes and habits of people using mobile phones, according to critics.

Unlike Daum, which is garnering positive reviews among mobile users for apps emphasizing location-based information and personalized leisure and entertainment, Naver is rather focusing on merely reformatting its desktop offerings for the smaller handset screens.

Mobile users doesn't appear too impressed ― in the current list of the 50 most popular free applications downloaded by iPhone users here, Naver is represented only by the mobile version of its N-Drive online storage service.

In comparison, Daum appears to be being rewarded for its massive investment in its Daum Map app, based on a detailed photographic map of the country that provides aerial views and sharp ground-level images.

And one has to believe that SK Communications has some tricks up its sleeve as well, as the increasingly popular Web portal, Nate, and the Cyworld social networking service, which has 25 million users, are providing the company an ideal position to exploit the mobile market.

Another problem for Naver is that, in spite of garnering a massive number of users for its blog and online community services, it has failed to establish a level of connection with its users that could compare to Facebook and Cyworld.

``Daum has been clearly the most alert and most impressive Internet company in the mobile market. Naver still has time, but the past months have proven that you can't rely entirely on the same formula that carried you in the fixed-line Internet market,'' said Hong Jong-gil, an analyst from Korea Investment and Securities.

``Of course, it's hard to imagine Naver being crushed completely ― it still has a massive advantage in money and personnel over its competitors and you have to think they will come up with something. However, Naver clearly needs to think differently and also find a better way to use its pool of user-generated content.''

An NHN representative defended Naver's mobile strategies, saying that the company is focused more on the quality of its services than their quick deployment. Despite the criticism about lacking a mobile-specific strategy, she said that achieving cohesion between Naver's fixed-line and wireless offerings will continue to be its predominant focus.

``Our products have been better, we continue to have the best technology and we are investing more money and personnel than our rivals are doing in developing mobile Internet services,'' she said.

``We will continue to consider ways to better use our vast content pool in user-generated content, and will be releasing a number of high-quality apps by the end of the year, including a voice search service that will rival Google's.''



혁신이 부족한 네이버, 검색 주도권 약해지나.

네이버는 한국의 검색시장을 압도적으로 지배해왔다. 마치 아이가 과자통을 독차지하듯 말이다. 그러나 최근 네이버의 떨어지는 검색점유율은 성공의 정점에서 실패의 씨앗도 뿌려진 것이 아니었나 하는 생각을 들게 한다. 과거 비즈니스 모델에 대한 과도한 집착이 네이버의 인터넷 서비스를 지루하고 뻔하게 만들고 있는 듯하다.

네이버의 약화된 혁신성이 노출 된 것은 애플에 의해서다. 아이폰은 지난해 11월 뒤늦게 한국에 출시된 이후 전자기기 시장에서 유례없는 돌풍을 일으키며 국내 모바일 인터넷 시장의 폭발적인 성장을 견인했다. 또 다양한 소셜네트워크 서비스와 모바일 애플리케이션 등은 한국 인터넷 사용자들로 하여금 네이버가 없는 인생도 가능할 수 있음을 증명해주고 있다.

네이버의 쇠락은 몇 년 전만해도 상상하기 힘들었을 것이다. 네이버는 한국 최대 인터넷 회사인 NHN의 주력 조직으로서 2년 전만해도 한국 검색시장 전체 매출의 80퍼센트를 가져갔다. 그러나 네이버가 검색에서 점차 힘을 일으키면서 장기적으로 NHN에 한게임과 MMORPG등이 기반된 게임사업 쪽으로 무게중심을 옮기게 될지 지켜볼 일이다.

적어도 PC의 영역에서 네이버는 다음, 네이트, 구글코리아 등의 경쟁상대들을 간단하게 짓눌렀다. 그러나 인터넷이 점차 무선의 영역으로 넘어가면서 네이버는 경쟁업체들에 오히려 뒤쳐지는 행보를 보이고 있는 듯하다.

모바일 인터넷 영역에서의 네이버의 미적지근한 출발은 모바일 인터넷 서비스의 보편화가 사람들의 인터넷 사용습관에 커다란 변화를 가져오고 있음을 감안할 때 회사로서 우려되는 일이 아닐 수 없다. 모바일이 가져온 변화들이 결국 PC에서의 서비스 선택과 이용패턴에도 영향을 줄 수 있는 가능성이 크기 때문이다.

스마트폰과 다른 데이터기반 휴대기기의 폭발적 성장은 사람들이 정보를 취득하고 소비하는 행태에 커다란 변화를 가져오고 있다. 이 변화의 중심에는 페이스북과 트위터 등의 소셜 네트워크 서비스와 단말기에 다운로드 되는 다양한 종류의 앱들이 자리한다. 물론 사람들은 여전히 그들의 궁금증에 대한 해답과 정보를 구하기 위해서 인터넷을 이용하고 있다. 그러나 이 과정은 더 이상 검색엔진에 의해서 독점되어지지 않는다. 앱들은 사람들이 필요한 정보를 취득하는 보다 직접적이고 특화된 경로를 제공하고 있으며 소셜 네트워킹 서비스들은 유저들이 스스로 정보제공자들을 선택하고 그들과 반응할 수 있게 하는 플랫폼을 제공하고 있다.

네이버가 ``카페'' 등 온라인 커뮤니티와 블로그 등을 통해 방대한 양의 유저 콘텐츠를 확보했음에도 그것을 통해 뚜렷한 비즈니스모델을 창출하지 못해왔다는 점을 고려해볼 때 이러한 변화의 흐름에 대처할 충분한 힘을 갖고 있는가에 대한 의문이 생길 수밖에 없다.

아이폰용 애플리케이션을 개발하기도 하는 한 인터넷 기업 관계자는 ``네이버로선 유감스러운 일이겠지만 유선과 무선 인터넷 시장에서의 경쟁은 서로 전혀 다른 게임인 것이 확실해지고 있다. 네이버는 혁신할 수 있는 중요한 기회에 밋밋하게 대응하고 있음을 지적하지 않을 수 없다''라고 말했다.