New industry, old strategy

In the early 2000s, Korea seemed to be a leading country in the internet industry. Its businesses were creative and they were taking full advantage of newly developed technologies. However, it is losing its leading position in the world since the mid-2000s. For example, Cyworld.com was one of the most successful business stories in the internet, but it is not any more. While the US launched new stars like Facebook, Myspace, Youtube, and Google, Korea failed to show its potential. Korea may have lost its competency, or it doesn’t work in the new phases of this ever-changing industry.

Many experts point out that the crisis of Korean internet industry is caused by its old-style strategies applied in the brand-new industry. The big portals wanted to take all of its profits exclusively and didn’t allow other players to grow the pie. They didn’t open the interface of their services, making them closed-architecture. Furthermore, big conglomerates acquired small ventures and made them “efficient” with their proven hierarchy structures. Also, these big portals focus on localizing their services to maximize their page view in the short term. As a result, Korea is left behind in the context of web 2.0, where the globalization is a key to success, despite its decent profitability.

Dr. Ahn Chulsoo, one of the most famous entrepreneur points out that the biggest problem with the Korean internet industry is the decline of entrepreneurship. With deepening oligopoly by the big portals, many small ventures are losing the morale. There are hundreds of companies developing widgets for Facebook in the US, and some of them would grow next stars. However, this may not be the case in Korea.

Korea is Naverland?

Economist introduced the Korean internet industry as Naverland, dominated by Naver.com. The article tells reasons why Naver is so powerful while google still has less than 3% of market share. It gives an interesting example: when you type "rain" in Google, it would show the result about the rain, liquid precipitation, but Naver would provide information about a famous Korean singer Rain. If you want to read the full article, try the link below.

http://www.economist.com/business/displaystory.cfm?story_id=13185891

Top 10 Korean websites

Every three months, Alexa, the web information company, announces website rankings globally and country by country. It shows some interesting characteristics about a country’s internet industry such as the rate of globalization. Here’s the ranking in Korea.

#1. Naver.com : I already introduced this site in my blog. It has convenient search function as well as news and email.
#2. Daum.net : It provided the first free webmail service in Korea. Interestingly, its original domain was hanmail.net, which sounds similar to hotmail.com. Although it has expanded its service to search, online shopping, news, and entertainment, many people still use it for email service.
#3. Yahoo.co.kr : Although its market share is far behind Naver.com, Yahoo is more popular than Google. The reason is that Yahoo Korea adopted strong localization policies.
#4. YouTube.com : Many Koreans enjoy internet videos thanks to its high-speed internet connection. They share various videos and I also enjoy Korean TV programs in London through Youtube.
#5. Google.com : It has been not that successful in Korea, since it has done almost nothing to satisfy Korean users. Will Google Korea localize, or will Korean users globalize?
#6. Cyworld.com : As introduced in my previous blog, it is the largest social networking service in Korea. I had never seen any Facebook users in Korea before coming to London.
#7. Paran.com : It gained popularity through 5GB free webmail, serviced by KT, the largest telecommunication company.
#8. Windows live : We have learned the power of default in class. Especially in Korea, people rarely use Apple’s laptop.
#9. Tistory.com : Bloging site run by Daum.net, ranked at 2nd.
#10. Joins.com : The first internet news service launched in Asia. Joongang Daily, one of the largest newspapers in Korea operates it.

Cyworld.com, the earliest social networking service

Cyworld home page of an user

Are you using Facebook.com or Myspace.com? If you are from outside Korea, your answer should be Yes, if you are not a person enjoying isolation. However, in Korea, the question should change like this: are you using Cyworld? Cyworld.com is a social networking website launched in 1999, and more than 90 percent of the Korean 20s are using the site for their social life. Its weekly page view is more than 4 billions, which is the second highest number.

Why Cyworld was so successful? I mentioned Koreans’ early-adapting nature in my previous blog, and it was obvious in the introduction of digital cameras. Many young Koreans who purchased digital cameras wanted to share their pictures with their friends. Maybe, the same need should exist in other countries, but what was different was that the rate of penetration was much faster in Korea.

Another innovative feature of Cyworld was that it implemented Acorn System. Users buy acorns, cyber money in Cyworld, with real cash, and use them for installing trendy songs as background music and pretty wallpapers in their home page. People can buy acorns at convenience stores as well as on-line. It was the first successful case of monetizing page views, which enabled continuous re-investment.

Cyworld is still one of the most popular sites in Korea. In 2003, it was acquired by SK Communication, an affiliate of SK Group, the third largest conglomerate in Korea. It launched Cyworld service in Japan, USA, Taiwan, China, and Vietnam.

Their biggest challenge should be future growth. Korean internet penetration seems to have reached its saturation point while their overseas business doesn’t look successful so far. Nevertheless, they are still competent in Korea, evidenced by the fact that their international competitor Myspace.com announced withdrawal from Korea in 2009. It shows pros and cons of strongly localized internet service.

The most famous blogger in Korea

Minerva heading for the court

Korea is one of the Asian countries that have most developed democratic political system. People can express their opinion through various media including internet. In the sense, the arrest of Minerva, the most famous blogger in Korea, was sensational event.

Minerva is a pen name of a Korean blogger who posted tragic prediction about Korean economy since last July. At first, his arguments failed to draw much attention, because people thought they were unrealistic. However, he was placed in the center of the public attention, as like his prophecy, Lehman Brothers went bankrupt, Korean Won fell down, and Korean stock market plummeted. He posted more than 100 blogs and most of them were about the dark future of Korean economy. One of his expectations was that within 2008, the stock market index would fell down to 500, which was higher than 2,000 one year ago and now at 1,100.

Eventually, in 2009, the government decided to arrest Minerva for hurting the public interest by spreading false information. People thought Minerva should be a well-educated influential person in the finance industry, but he turned out to be a jobless with just 2-year college diploma.

There are still hot debates surrounding Minerva with most of internet users criticizing the government's reaction as the death sentence for internet democracy.

Naver.com, the number one portal in Korea

Korean top actress in Naver.com ad

In the last posting, I described Korean internet industry as very unique. One aspect different from other internet markets is the portal. Although Google and Yahoo are big two in the world, they have just less than 15% market share in Korea. Then, who is leading the market? It is Naver.com, which has around 70% of market share.

It is not coincidence that Naver.com has become number one portal in Korea. Naver.com kept making efforts to satisfy Korean internet users. Then, Yahoo Korea, which once had more than 50% of portal users, didn’t try to keep their customers? Of course, they did, but its strategies were different from Naver’s. Yahoo tried to answer their customer’s request in a most efficient way, but Naver.com tried to entertain their customers.

A study says that internet users from western countries use internet mainly for improving their work efficiency or social network while Koreans use it for entertainment. In the sense, it is no wonder that internet traffic for online games is exceptionally high in Korea. Please note that the largest online game site in Korea is Hangame.com, which is an affiliate of Naver.com.

Another unique feature of Naver.com is ‘webtoon’, cartoons posted online regularly. One of the most popular webtoon, ‘The Voice of Mind’ by Jo Seok, is gathering more than 2 million visitors each episode. Jo’s webtoon appears twice a week on the Webtoon section of Naver.com and its reception has been hotter than a major TV series. Yahoo must have admitted that this kind of effort to entertain people has been effective. Yahoo Korea just launched its webtoon section last May.

Have you been to Korean web sites?

In Korea, internet is not only for the young

Welcome to Injae’s blog! In my blog, I would like to talk about the internet industry in Korea. I think it should be an interesting topic to you, students at Internet Marketing class, because Korea has one of the most developed internet industries in the world and it is very unique.

To most Koreans, the internet is part of their daily life. People buy various stuffs and book restaurants through internet, run their blogs, and enjoy online games. They are quite familiar with using internet. From 2002 to 2005, Korea had the highest high-speed internet penetration rate in the world. There are many reasons for this phenomenon. First, Korean government has kept proactive IT-friendly policies. From the 1990s, major cities started laying optical fibers under the ground and the new buildings were required to be ready for high-speed internet. So, when new internet technology emerged, Korea could adopt it very fast. Second, Korea has developed around densely populated areas. Most people live in tall apartment near the urban center, which is an ideal condition for FTTH (Fiber to the Home). Third, Koreans are receptive to new technology. Do you know that the world’s first MP3 player was invented in Korea? Before Facebook.com, Koreans already had a similar business, iloveschool.co.kr (Yahoo tried to acquire it but failed). After World of Warcraft, Lineage is the second-largest online game in the world, which was launched in 1998.

Korean internet industry is unique in that it is not consolidated with other foreign markets. That is partly due to the existence of local language Korean. They use independent character-set, Hangul, different from Japanese Kana or Chinese characters. Also, they had time to develop their own internet culture due to the advanced internet environment and their early-adopting nature. In the sense, it should be very interesting to observe what has happened and what is happening in Korea. Who knows? You may be able to predict the world internet market from the observation.