Internet portals clash over new search service

Korea`s Web search market has so far been dominated by a few giants such as NHN Corp., which controls more than 60 percent of the search traffic here through its search engine Naver (www.naver.com).

However, a smaller company has found a way to renew the competition by using the databases of larger rivals to their advantage. Empas Corp., the operator of search engine Empas (www.empas.com), launched a new search tool early last week that allows users to access content from rival search engines such as Naver, Daum (www.daum.net) and Yahoo! Korea (www.yahoo.co.kr).

"Our new search tool is the industry`s first product to be developed using algorithms for searching content from Weblogs and other user-created content. The search results provide the users links to the Web sites where the information can be found, benefiting both Internet users and Web companies," said Empas chief executive Park Seok-bong.

<**1>

"Search engines such as Naver have been using content created by their users to drive up their search traffic, but it is hard to say that they have any legal rights over them."

Empas ranks fifth among Korean search engines in traffic. Park hopes the company`s new search tool will put Empas in second spot by the end of the year.

Korean Internet companies, including NHN, reacted nervously to the move, accusing Empas of being a freeloader. NHN said it will block Empas from accessing its database and even hinted at filling a lawsuit.

The company`s Naver search engine currently controls more than 68 percent of local search traffic, about six times more than its closest rival Daum, according to industry figures.

"Content created by our `Knowledge Search` and other search services belongs to us. It would not be hard to technically block Empas from accessing our database," said an NHN spokesman.

NHN, which also operates the popular online game portal Hangame (www.hangame.com), is Korea`s biggest Internet company in terms of revenue. The company saw its revenue grow 37.9 percent year-on-year to 229.4 billion ($229 million) won in 2004, riding on a larger share of search-related advertising and more aggressive overseas operations.

NHN is targeting 300 billion won in revenue and 100 billion won in operating profit for 2005. The company also expects greater sales from its overseas business in Japan and China.

Naver`s popularity relies on its question-and-answer type search tool Knowledge Search, which allows users to answer and edit search results.

With an Internet penetration rate that exceeds 70 percent, of which 85 percent have broadband connections, enhancing search results with user-created content has been a major trend in the Korean Internet industry, where peer-to-peer activity is more popular than in many other countries.

Rival portals such as Empas, Yahoo! Korea and Daum raced to roll out peer-to-peer type search engines last year, similar to Naver`s Knowledge Search.

"We don`t expect legal problems in the future. Internet portals can`t claim the copyrights of content written by Internet users," said Park referring to Empas` new search tool.

Korean Internet companies are increasingly relying on Web search services to keep growth alive in a matured market, attempting to tap a search-related advertising market that is expected to approach 600 billion won this year.

Increasing traffic is critical, since the amount of money advertisers pay the Internet companies alters according to online exposure.

Industry watchers are mixed on whether Empas` new search tool will have a significant impact on the local market. However, most analysts expect Naver to continue its dominance, at least for now.

"In the short-term, Empas` new services will actually increase Naver`s traffic by providing links to their Web pages and exposing its database to a larger audience," said Woori Securities analyst Lee Wang-sang, also saying the technical issues could keep Empas` new search services from making a quick start. Lee believes the solidification of the top players` positions will continue.

"Naver`s control of the Web search market has grown even more this year. The Korean marketplace is dominated by question-and-answer type search services, which tend to have stronger customer loyalty than general Web search services," said Lee.

(thkim@heraldm.com)



By Kim Tong-hyung