In South Korea people who want to look something up on the internet don’t “Google it”. Instead they “ask Naver”. Among the 35m South Koreans who use the internet every day, the nine-year-old search engine is wildly popular, accounting for 76% of internet searches, compared with less than 3% each for Yahoo! and Google.
Naver owes its popularity, in part, to the fact that it is not just a search engine. Like Yahoo!, it is also a portal, drawing together news, e-mail, discussion groups, stockmarket information, videos, restaurant reviews and so on. Some 17m people visit its home-page every day and since January they have been able to customise it according to their own tastes.
But Naver is also dominant—too dominant, say some—because it caters to the interests of South Koreans. “Yahoo! and Google have a very American, English-based search engine,” says Chae Hwi-Young, the chief executive of NHN, Naver’s parent company. If you go to Google and type in “rain”, for example, the result is lots of pages about water falling from the sky. In South Korea, however, it makes more sense to return pages, as Naver does, about a popular singer and actor called Rain.
Naver pioneered the idea of presenting search results from several categories—web pages, images, videos, books—on the same page, something that Google later adopted. Another popular feature is Naver’s “Knowledge Search” service, launched in 2002. It enables people to ask questions, the answers to which are served up from a database provided by other users. If an answer is incomplete or inaccurate, it can be easily changed, Wikipedia-style, for the benefit of others who ask the same question in future. A points system rewards users who submit questions, provide answers or rate the answers provided by other people.
On February 4th NHN announced record sales and profits for 2008, becoming the first South Korean internet company to record sales of more than 1 trillion won ($660m). Such is Naver’s grip on the market that Yahoo! and Google have just agreed to combine some of their services in South Korea, in order to give them greater clout against the local giant.
Although Google is having trouble making any headway in South Korea, it may have more of a chance in China, where the market leader, Baidu, has been hit by a series of scandals. Last September, at the height of the scandal over melamine-tainted milk, rumours began to spread that Baidu had accepted payment to expunge stories on the subject from its search results. Baidu denied any wrongdoing. A few weeks later the firm was accused of giving prominence in its search results, in return for payment, to unlicensed drugs companies.
This led to speculation in the local media that web users might be turning against Baidu. Whether or not this is true, it does not help that unlike Google and other rivals, Baidu does not distinguish in search results between paid links (ie, advertisements) and unpaid ones—a practice that was criticised in a report by CCTV, a state-run broadcaster, in November.
As Chinese web users become more sophisticated, they may be gaining a preference for search results that are separate from advertising, which could benefit Google. Advertisers, at least, seem to be switching: the most recent figures suggest that Google increased its market share of internet advertising by 4.4 percentage points during 2008, compared with Baidu’s 2.9 percentage points. Baidu has announced plans to delineate more clearly between paid and unpaid links, and has removed links to unlicensed providers of drugs and medical care from its index.
In the Japanese market, meanwhile, Google plays second fiddle to Yahoo! Japan, despite frantic efforts to catch up by launching more Japan-specific services. It will soon face a new rival, in the form of Naver, which has decided to enter the Japanese market on the basis that Japan, like South Korea, has a unique and distinctive culture and language. After eight years studying and collecting data on Japanese tastes, Mr Chae is confident that Naver can become the leading search engine in Japan—despite the failure of his firm’s previous foray into the country, selling search services to companies.
After that, Mr Chae says he plans to launch several more culturally specific search engines, such as “Naver California”, “Naver Korean-American” or “Naver Chinese-American”. That would be attacking Google on its home turf. Is this too ambitious? Naver say never.
http://www.economist.com/business/displaystory.cfm?story_id=13185891
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