Naver is Korea's top internet company, dominating in search, e-commerce, fintech, and content. They are heavily investing in AI to enhance services and expand globally. Known for their webtoon platform and innovative services like Naver Pay, they face challenges from competitors like Kakao and Google. Despite this, Naver maintains strong financials and a solid growth trajectory.
Naver is the leading internet company in South Korea, providing a variety of online services centered around its search portal 'Naver'. Founded in 1999, Naver holds a leading position in various fields such as search engines, news, blogs, cafes, Knowledge iN, shopping, webtoons, and finance, and has established itself as an essential platform for Korean internet users . Naver has continuously grown by providing technology and services with the goal of the global market . Under the vision of 'Connecting through technology', Naver strives to connect all the knowledge, people, and technology in the world to provide users with intellectual insights, fulfilling relationships, and convenient daily lives . In addition, Naver's mission is to support entrepreneurs and connect them with more customers in a wider world.
(https://www.navercorp.com/naver/naverMain)
Naver has led the domestic internet industry by dominating the search engine market since the early 2000s. In 2004, it launched the 'Naver Webtoon' service, which has now grown into the largest webtoon platform in Korea, and in 2005, it established itself as an indicator reflecting social issues through the 'Naver Real-time Search Ranking' service . Since then, Naver has expanded its business into various fields such as shopping, finance, and cloud, growing into a comprehensive IT company. Naver has steadily expanded its services since its establishment and has won various awards.
Main Products & Services
Naver provides core products and services in various fields such as search, shopping, fintech, cloud, content, and work platforms.
- Search: Naver Search is the largest search platform in Korea with 40 million users. Recently, it launched the AI-based search service 'Cue:' to provide users with a more personalized search experience .
- Shopping: Naver Shopping is one of the major platforms in the Korean e-commerce market. Naver provides personalized product recommendation services through 'Naver Plus Store' and operates various support programs for Smart Store sellers .
- Fintech: Naver Pay is a comprehensive financial platform that provides various financial services such as simple payment, remittance, and investment. Naver Pay is opening new horizons in the digital financial market and provides financial services for small and medium-sized businesses and financially underprivileged people .
- Cloud: Naver Cloud Platform provides AI and cloud solutions that support digital transformation of businesses. Naver provides 'Neurocloud', a customized hybrid cloud service for businesses, to simultaneously ensure compliance with corporate security and the advantages of public cloud .
- Content: Naver Webtoon is the largest webtoon platform in Korea, providing webtoons of various genres. Naver is accelerating its entry into the global content market based on webtoons and operates support programs for webtoon artists .
- Work Platform: Naver Works is an integrated work platform for workflow simplification and productivity improvement. It ranks first in the domestic collaboration tool rankings and first in the Japanese paid business messenger market share, with more than 530,000 global corporate customers and more than 5.4 million global users .
Naver's various products and services are interconnected to form a powerful ecosystem, which provides users with a more convenient and innovative experience. For example, Naver Shopping is linked with Naver Search and Naver Pay to provide users with a convenient shopping experience . In addition, Naver supports offline businesses to register and manage their businesses on Naver Maps and Search through Smart Place, thereby strengthening O2O services that connect online and offline . This ecosystem is one of Naver's core competitiveness and a strength that other competitors cannot easily imitate.
Growth Strategy
Naver aims to accelerate its entry into the global market while maintaining its dominant position in the domestic market. To this end, Naver is pursuing the following growth strategies:
- Expanding investment in AI technology: Naver invests 22% of its revenue in R&D, and its cumulative investment in AI over the past five years amounts to approximately 1 trillion won. Naver is upgrading various services such as search, shopping, and content based on AI technology, and plans to continuously expand investment to strengthen its AI technology competitiveness . Naver is also investing in robot technology and is developing ARC and Naver robots . In addition, Naver is focusing on developing Vision technology through HyperCLOVA X . Naver is leading the development of domestic AI technology , and this is expected to be a key driver for Naver's future growth . In particular, AI is expected to play an important role in strengthening the competitiveness of Naver's core services and creating new growth engines .
- Expanding the global market: Naver has bases in 16 countries around the world and is creating global multiple synergies. Naver Webtoon is gaining high popularity in overseas markets such as North America and Japan, and Naver is accelerating its entry into the global content market centered on webtoons . In addition, Naver is strengthening its strategy to target the Japanese market through cooperation with Line Yahoo in Japan . However, Naver may face various difficulties in the process of entering overseas markets, such as intensifying competition and regulatory changes . In order to overcome these difficulties and succeed in the global market, Naver needs an in-depth understanding of the local market and a strategic approach . In addition, Naver plans to strengthen its e-commerce competitiveness in the domestic market by improving personalized recommendation services and shopping experience .
- Entering new businesses: Naver is promoting new businesses in various fields such as fintech, cloud, and content. Naver is expanding its financial services based on Naver Pay and supporting digital transformation of businesses through Naver Cloud Platform. In addition, Naver is strengthening its content business such as webtoons and web novels, and securing new growth engines through the metaverse platform Zepeto .
Through these growth strategies, Naver is expected to strengthen its competitiveness in the domestic market and accelerate growth in the global market. In particular, expanding investment in AI technology is expected to play an important role in strengthening the competitiveness of Naver's core services and creating new growth engines .
Industry Trends
The internet, IT, and platform industries to which Naver belongs are rapidly growing in a rapidly changing technological environment and intensifying competition.
- Internet industry: The internet industry is continuously growing due to the spread of mobile devices, commercialization of 5G networks, and development of artificial intelligence technology. In particular, the e-commerce market is growing rapidly, and the proportion of mobile shopping is increasing .
- IT industry: The IT industry is developing around advanced technologies such as cloud computing, big data, artificial intelligence, and the Internet of Things. These technologies are accelerating the digital transformation of businesses and enabling the creation of new business models .
- Platform industry: The platform industry is growing rapidly based on network effects, and platform companies are emerging in various industrial fields. Platform companies connect users, provide various services based on data, and build ecosystems to strengthen their competitiveness .
These industry trends provide both opportunities and threats to Naver. Naver needs to secure new growth engines through investment in advanced technology and strengthen its platform competitiveness to maintain market dominance. At the same time, Naver needs to respond to threats such as intensifying competition and strengthening regulations .
Competitor Comparison
Naver's main competitors are domestic and foreign IT companies such as Kakao, Google, and Meta.
Kakao: Kakao is a dominant player in the domestic mobile messenger market and provides various services based on KakaoTalk. KakaoTalk has secured a high user base, enough to be called a national messenger, and based on this, it is expanding its business into various fields such as Kakao Pay, Kakao Bank, and Kakao Mobility . This is a major threat to Naver, but Kakao is facing problems such as improving profitability and intensifying platform competition.
(https://www.kakaocorp.com/ir/referenceRoom/earningsAnnouncement)
Google: Google dominates the global search market and provides various services based on its overwhelming technological prowess. Google holds a leading position in various fields such as search engines, advertising, cloud, mobile OS, and AI, and is constantly developing new technologies based on its enormous capital . However, Google is struggling to compete with domestic companies such as Naver and Kakao in the domestic market, and is sometimes criticized for privacy issues.
Naver is striving to secure differentiated competitiveness from these competitors. Naver provides various services based on its strong platform competitiveness in the domestic market and is developing innovative services through investment in AI technology. In addition, Naver is strengthening its content business such as webtoons and web novels to secure competitiveness in the global market .
Financial Statement Analysis
Naver has maintained steady revenue growth and stable profitability in recent years. Based on consolidated financial statements, Naver recorded sales of KRW 6,817.6 billion and operating profit of KRW 1,325.5 billion in 2021. In 2022, sales increased to KRW 8,220.1 billion and operating profit slightly decreased to KRW 1,304.7 billion. In 2023, Naver showed a growth trend again with sales of KRW 8,972.3 billion and operating profit of KRW 1,410.1 billion .
| Category | 2021 | 2022 | 2023 |
|---|---|---|---|
| Revenue (KRW 100 million) | 68,176 | 82,201 | 89,723 |
| Operating profit (KRW 100 million) | 13,255 | 13,047 | 14,101 |
| Operating profit margin (%) | 19.4% | 15.9% | 15.7% |
Looking at recent quarterly performance, in the third quarter of 2024, consolidated revenue was KRW 2,715.6 billion and operating profit was KRW 525.3 billion, an increase of 11% and 38%, respectively, year-on-year. In particular, operating profit recorded the highest ever, showing solid growth .
Naver's main sources of revenue are search advertising, shopping fees, and content sales, and its fintech and cloud businesses are also growing rapidly . Naver also has a sound financial position and its debt ratio is low .
However, recently, there are concerns about slowing growth due to the economic downturn and intensifying competition. Naver is making various efforts such as cost efficiency and expansion of new businesses to overcome these difficulties .
CEO Analysis
CEO Choi Soo-yeon took office as CEO of Naver in November 2021. CEO Choi graduated from Seoul National University with a degree in Industrial Engineering and received a Master's degree from Yonsei University Law School, and then worked as a lawyer at Yulchon LLC . She later joined Naver and led the global business support division, and was appointed as the new head of Naver in 2021 .
Since taking office, CEO Choi has been leading organizational culture innovation by emphasizing quick decision-making and communication. In addition, she is focusing on securing Naver's future growth engines through global business expansion and investment in AI technology . CEO Choi is leading the generational change of Naver as a young female CEO and is recognized for her ability and leadership.
(https://www.businesspost.co.kr/BP?command=article_view&num=338923#:~:text=2012%EB%85%84%20%EB%B2%95%EB%AC%B4%EB%B2%95%EC%9D%B8%20%EC%9C%A8%EC%B4%8C,%EB%8C%80%ED%91%9C%EC%9D%B4%EC%82%AC%EB%A1%9C%20%EB%82%B4%EC%A0%95%EB%90%90%EB%8B%A4.)
Recent News
Naver has recently been at the center of news and media reports in various fields.
- Positive news: Naver continues its solid performance by achieving record-high operating profit in the third quarter of 2024 . In addition, Naver is expanding investment in AI technology and is improving user experience by applying AI to various services such as shopping, search, and real estate . Naver Webtoon is gaining high popularity in the global market, and Naver is accelerating its entry into the global content market based on webtoons.
- Negative news: Naver faces various risks such as Line Yahoo's request to reduce its stake, privacy issues, and strengthening regulations . In addition, there are concerns about slowing growth due to intensifying competition and technological changes.
Naver should establish future growth strategies and manage investment risks in consideration of both positive and negative news.
Investment Risk Analysis
The following are risk factors to consider when investing in Naver:
- Intensifying competition: Competition in the domestic and foreign internet and platform markets is intensifying. There are strong competitors such as Kakao, Google, and Meta, and there is a possibility of new competitors emerging . Naver needs to maintain its competitive edge through continuous innovation and differentiated services.
- Regulatory changes: Regulations on the internet and platform industries may be strengthened. The government is promoting various policies to regulate monopolies and unfair trade practices of platform companies, which can act as a constraint on Naver's business activities . Naver needs to respond flexibly to regulatory changes and operate its business in compliance with government policies.
- Technological changes: The internet and platform industries are industries where technological changes are rapid. The emergence of new technologies and the development of existing technologies may weaken Naver's competitiveness . Naver needs to respond to technological changes through continuous technology development and innovation.
Conclusion and Investment Strategy
Naver is the largest internet company in Korea, providing core services in various fields such as search, shopping, fintech, and content. Naver is pursuing continuous growth through expanding investment in AI technology, expanding the global market, and entering new businesses. However, there are also various risk factors such as intensifying competition, strengthening regulations, and technological changes.
When investing in Naver, the following should be considered:
- Growth potential: Naver is strengthening its core service competitiveness through investment in AI technology and has high growth potential in the global market. However, there is also a possibility of slowing growth due to intensifying competition and strengthening regulations.
- Profitability: Naver has a stable revenue structure and good profitability. However, there is a possibility of profitability fluctuations due to increased investment in new businesses such as fintech and cloud.
- Stability: Naver has a sound financial position and high market dominance, making it considered a stable investment destination. However, there is a possibility that stability may be undermined due to intensifying competition and regulatory changes.
- Valuation: Naver's current stock price is considered undervalued based on valuation indicators such as PER and PBR . However, investment decisions should be made in consideration of future growth potential, profitability, and risks.
Naver has continued stable growth based on a solid business portfolio and a strong financial structure. Active investment in future technologies such as AI and cloud is expected to provide long-term growth momentum. However, intensifying domestic and foreign competition, changes in the regulatory environment, and the possibility of a global economic slowdown are risk factors to consider when investing.