NHN, operator of the country’s most-visited website Naver, recorded a solid performance for the first quarter thanks to growth in its keyword advertisements and online games.

The firm announced that it had 517.3 billion won (about $457 million) in sales and 168.5 billion won in operating profit for the first quarter, representing annual growth of 14.3 percent and 13.7 percent, respectively.

The company’s net profit stood at 127.2 billion won, up by 13.4 percent year-on-year.

The performance showed that it made the right decision when it started in the keyword advertisement business. NHN split with Web advertisement agency Overture, to independently branch out. When it announced the decision, some were concerned that it would see a drop in sales as it lacked the know-how in Web advertising.

However, NHN overcame any inexperience thanks to its huge dominance in the search market. It accounts for 71 percent of the local Internet search service, making Korea one of the few countries in the world where Google isn’t the leader. “The charge per click grew by 22 percent from the previous year, and the number of advertisers reached 180,000,” said Hwang In-joon, chief finance officer (CFO) of NHN, during a conference call.

NHN marked 250.3 billion won sales in search ads, up 23.7 percent from the previous year, contributing 49 percent of NHN’s total sales.

Sales from display advertisements, such as banners, marked 66.8 billion won, up 18.3 percent from a year ago.

NHN saw sales grow in the game business as well. It reaped 167.7 billion won sales in game business, up 0.7 percent from a year ago, and 33.9 percent from the previous quarter. It owes the growth to solid sales of new game titles such as TERA in Korea and Dragon Nest in Japan.

The introduction of a nighttime curfew of online games for teenagers and children, scheduled to take effect in November, isn’t likely to damage NHN’s game business as they are a small portion of NHN’s game service users, according to NHN.

“The successful transition of the NBP advertisement platform and the good feedback for new games on both domestic and overseas markets helped us continue solid growth,” said Kim Sang-hun, CEO of NHN.

“We will advance in the market by upgrading our mobile services, diversifying genres of online games, and launching an open market service, all scheduled for this year,” he added.

Challenges remain

NHN expects further growth in the second quarter. Hwang said it predicts over 25 percent year-on-year growth for keyword advertising in the second quarter.

NHN, however, is not without challenges. The biggest challenge is the transition from desktop to smartphone. Naver’s dominance in Internet searches is inarguable on desktops, but the plot changes on mobile platforms. Naver is still the top search service, but Google, which takes less than 2 percent of the Web search engine market, takes 16 percent in mobile. Google is actively expanding its mobile advertisement business, and this is keeping NHN on its toes, with some analysts expecting smart devices to completely substitute for desktops and laptops in the near future.

NHN filed a complaint to the Fair Trade Commission along with the second largest portal Daum last month, arguing that Google pressured smartphone manufacturers to preload Google as the search engine, hinting at underlying anxiety about the expansion of Google.

NHN said keyword searches through smartphones take 17 to 18 percent of the total traffic. It is recording around 70 million won in daily sales from mobile keyword advertisements.

/repost of original article at Korea Times by Yoon Ja-young

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