The competition between Naver and Kakao is not very serious. Almost all information technology (IT) platform markets are transforming into battlefields. The executives of the two companies, who once ate Korean pot rice at NHN (now Naver), are leading the’Big 2’Daejeon, encouraging employees who are agitated over the distribution of performance.
Naver and Kakao recently announced that they are the number ones in the global webtoon distribution market. The global webtoon market worth 3 billion dollars (about 3.37 trillion won) is worth 60 billion dollars (about 67.56 trillion won) when the secondary market, online video service (OTT), is added. It is one of the business explosively growing in the global content market. It’s not just webtoons. Digital finance, online commerce, private authentication, cloud, and more.
An IT industry official said, “As the digital transformation of the non-face-to-face culture and the economic world is rapidly spreading due to the recent coronavirus infection (Corona 19), the competitive landscape between the two companies is sharpening unprecedented.”
The wire between the two companies is expanding to securing manpower, a key resource for IT companies. This year, Naver and Kakao are planning to hire at least 1,000 and 2,000 new employees, respectively. The industry predicts that both companies will increase their workforce this year to the largest ever.
Kakao’s board chairman Kim Beom-soo explained at a recent employee meeting, “Kakao is trying to balance overall (annual salary, bonus, stock options, etc.) compared to Naver.” Naver CEO Han Seong-suk also received a response at a recent employee meeting, saying, “We will maintain the highest level in the industry in terms of compensation.”
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The competitive landscape of the two companies reminds us of Samsung and Hyundai’s first and second place in the business world. They form different allies and fight. Naver is targeting the global entertainment market in cooperation with CJ and Big Hit. Overseas, Japan’s Softbank and its subsidiaries joined hands in a way to integrate management. Kakao recently formed a so-called’artificial intelligence (AI) alliance’ with Samsung Electronics and SK Telecom.
An official in the IT industry explained, “In the IT platform, the market is eventually dominated by the No. 1 operator, so the competition between Naver and Kakao is inevitable.”
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“It is the nature of the Internet business that new challenges are not immediately visible as sales until they grow and bear fruit. That’s why we need additional rewards that focus on long-term growth.”
This is the method of sharing results that Naver CEO Han Sung-sook emphasized at the employee conference on the 25th of last month. This is because most of Naver’s major businesses are information technology (IT) platforms. The IT platform business is inevitable for a while due to initial investment and user acquisition. However, when a certain size of users gathers, sales increase exponentially. Google’s YouTube is representative. This is the background in which the remarks of a representative were accepted as being highly conscious of Kakao, the’Internet Big 2′.
○ Growth through competition for preoccupation of IT platform
Naver and Kakao, the leading internet companies in Korea, have begun to fight again over the new IT platform market. The two companies that dominated the domestic Internet search and mobile messenger markets are competing fiercely in webtoon distribution and private certification. It is not an exaggeration to say that the’take and take away’ point of contact is almost all areas of the digital business field. It is an analysis that the competition for preoccupation in the IT platform market will intensify because once the IT platform market is stolen, it is difficult to retry.
The history of Naver and Kakao can be summarized as the process of IT platform competition. This is also the first meeting between Naver’s founder Hae-jin Lee, Global Investment Officer (GIO) and Kakao founder Kim Beom-soo, chairman of the board of directors. This GIO founded Navercom, which operates an Internet search service in 1999. Earlier, Chairman Kim founded Hangame Communication, an online game distributor in 1998. Both companies set their first goal to acquire a certain amount of users who could make a profit. Hangame has surpassed 1 million members within three months of service launch. But because it was free, I couldn’t make money properly. On the other hand, Navercom had technology and money, but the pace of user growth was slow. The two companies decided to make up for each other’s shortcomings. NHN (now Naver), which was born as a result of the merger of the two companies, has risen to the No. 1 service provider in Korea in an IT platform called Internet search and game portal.
The competition between the two companies started acting as a’local war’ in 2006, when Chairman Kim left NHN and founded Kakao (I-We Lab). Ahead of the proliferation of smartphones, Naver and Kakao have begun to heat up competition on another IT platform called mobile messenger. Naver released Naver Talk and Line one after another, but the domestic market was stolen by Kakao Talk. However, Naver’s Line has been very successful overseas, such as being called’national messenger’ in Japan, Taiwan, and Thailand.
○Who is the winner of the new market?
For a while, there was also a’peace period’ similar to the ceasefire. An official in the IT industry explained, “It is because of the characteristics of the IT platform that the game is difficult to change once it is solidified as the number one operator.” It is said that there was a time when one side of a business unit actually admitted’complete defeat’ and sought a detour instead of a fight, such as finding a new business. Kakao took over the portal company Daum in 2014 and launched a counterattack, but the results were disastrous. Naver’s position in the Internet search market has not been shaken. Kakao remains the No. 1 in the music distribution market because it acquired Melon in 2016, which was originally No. Naver and Kakao have grown mainly with IT platforms dominated by each company, such as Internet search and mobile messenger.
It was two or three years ago that the two companies began to rebuild their angles. As a new IT platform market opens up. A new coronavirus infection (Corona 19) that came suddenly was fueled here. This is due to the rapid expansion of a non-face-to-face, non-contact culture. The webtoon distribution market is representative. A new way to enjoy cartoons based on IT called webtoon has come out in Korea. With the rapid growth of related markets overseas, Naver and Kakao are fighting for the global No. 1 position recently. Competition is fierce in the private authentication and simple payment markets. Naver and Kakao are also clashing in the online commerce and enterprise software markets.
Reporter Kim Joo-wan [email protected]