Naver’s core search and e-commerce businesses look solid as others improve profitability

For the past 15 years, Naver has been a leader in the South Korean Internet search market, resulting in decent revenue growth, strong margins and strong cash flow. While Google captures overall search market share, we estimate that Naver holds about two-thirds of the overall search market and a higher percentage of profitable local searches in South Korea, which it monetizes primarily through display advertising and paid search placements. Naver’s strategy was to use this strong search business to create an integrated Internet platform by adding other services, including e-commerce, financial technology, content production and cloud services. Naver has not yet been able to monetize these other businesses to the same extent as its search business, but has a strong number one or two position in most of them in the South Korean market.