AI may threaten the search advertising market, but South Korean tech giant Naver sees an opportunity, too


Naver Corp. The website is arranged on a screen in Gimpo, South Korea on September 9, 2021.

Seongjoon Cho | Bloomberg | Getty Images

While artificial intelligence chatbots like ChatGPT pose a threat to the search advertising market, South Korean internet giant Naver sees the rise of AI as an opportunity for the company.

Naver is the most used search engine in South Korea. according to Statista, commanded 61.2% market share of monthly active users. In contrast, the ever-ubiquitous Google has a market share of 28.55% in the country.

AI-powered chatbots like ChatGPT pose a threat to search engines because they are able to answer users’ questions directly, instead of presenting a list of webpages that the user has to browse through to find the answer.

This should result in a quicker search process for the user – assuming all the information presented is correct.

If fewer people use search engines, this will lead to a decline in search advertising revenue, which is often the largest source of revenue for their operators. In 2022, Alphabet generated over 57% of its revenue, or $162 billion, from Google searches alone.

While Naver, like Google, primarily operates a search engine, it also has other business units, such as its content platform Naver Webtoon and multimedia mobile application Snow, fintech arm Naver Pay and Naver Shopping, an e-commerce Platform.

talking to cnbc cherry kong In South Korea, Kim says AI will be a “huge opportunity” for each of its businesses, “whether it’s advanced search [results]Is this [an] Better shopping experience, whether it’s fintech or when it comes to webtoon recommendations, or even webtoon illustration tools.”

He believes that AI will only strengthen Naver’s offering, pointing out that “AI is something that is not foreign to us, but it is very important to each of our businesses.”

In terms of user experience, Kim says that AI-powered Naver will mean an enhanced search experience, shopping experience as well as travel recommendations for users.

They believe Naver is the biggest go-to site in terms of itinerary searches. “So to the extent that AI can actually improve that experience, I think it’s a game changer for the user.”

In its first quarter earnings presentation, Naver revealed that the company is set to launch its “hyperscale AI” product this summer, codenamed Hyperclava X. The company said it will provide “generative AI-powered search for users and new customized services for enterprises.”

In the first quarter, the company’s sales rose 23.6% year-on-year to 2.28 trillion won (1.72 billion), but its net profit fell 71.2% to 43.7 billion from the same period last year. Operating profit stood at 330.5 billion won, an increase of 9.5% year-on-year.

Shares of Naver were trading 1.93% higher on Tuesday, following a 5.56% gain on Monday after the company released morning results.

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