Facebook and Twitter are no longer foreign to South Korean users. In this highly wired nation, people increasingly rely on non-Korean IT services, which pose a serious threat to local brands.
The battle is now expected to intensify further this year as global IT companies step up their attacks, especially in the mobile market, where the stakes are the biggest in the post-PC era.
Up until now, it could be argued that Korean Internet companies were effectively protecting their home turf against foreign competitors, thanks partly to the complex regulations imposed by Korean regulators.
The foreign camp saw one high-profile victim when Yahoo Korea bowed out of the Korean market in 2012 after several years of lackluster performance against its local rivals such as Naver and Daum Communications.
Even Google, the world’s biggest search engine, did not make a big dent here, at least initially. It recorded only single-digit growth since its 2006 Korean service launch, while its services in other countries saw exponential growth.
Only a few years ago, domestic social media such as Cyworld of SK Communications seemed to have a lasting edge over Facebook and Twitter. The logic was simple enough: Korean IT companies know much more about Korean customers.
It turned out that foreign IT heavyweights were more powerful than previously thought. With the market trends shifting from PCs to mobile platforms and social media, a growing number of Korean users found global services easier to tinker with.
According to Korean Click, an Internet market researcher, South Korean online users in their 20s ― a key demographic ― tend to favor global IT services over homegrown ones.
Facebook, the frontrunner of U.S. social media, has made great strides among Korean 20-somethings. Its number of unique visitors in their 20s surged 98 percent between January 2012 and September 2013.
Google also caught up quickly. While only 27 percent of local mobile users in their 20s used the Google Search app in January 2012, the figure jumped to 67 percent in September 2013.
Meanwhile, google.co.kr and google.com ranked second and third on the list of most visited mobile websites here, unseating Daum from the No. 2 post, according to Korean Click’s November data.
“Daum and Google are likely to engage in cutthroat competition this year. With the mobile ad market still fledgling, the two could be the each other’s biggest rivals,” said an industry source familiar with the companies.
Google’s the biggest player in the post-PC era is its Android operation system. According to data submitted by major mobile carriers, nearly 33 million South Koreans use Android-based smartphones, accounting for a whopping 91.7 percent market share. Thanks to its mobile apps preinstalled on Android smartphones, Google dominates the mobile app market in Korea.
Among the top 15 apps, only three ― Kakao Talk (No. 7), Kakao Story (No. 11) and Naver (No. 15) ― came from Korean firms, and the remaining 12 were related to Google, according to Korean Click’s report in October.
Google’s recent growth was also attributed to the popular video-sharing site YouTube, which is outside of the Korean government’s strict regulations. Korean online companies worry that they are getting a harsher deal compared to foreign companies in terms of online regulations.
For instance, after the Internet real-name system was implemented on Korean video-sharing sites, top-ranked Pandora TV suffered a lethal setback. The market share of the Korean start-up fell from 42 percent in 2008 to a mere 4 percent in 2013. In contrast, YouTube’s market share surged from 2 percent to 74 percent during the same period.
A similar case was made in October last year when Korean lawmakers claimed that overregulation was hurting Korean online companies. The Ministry of Science, ICT and Future Planning unveiled a set of Internet search guidelines to require Korean portals to disclose their search standards ― a requirement that is not applied to foreign rivals.
As disputes flared up over the alleged reverse discrimination in the Internet industry, the government said it would form a committee to explore regulatory reforms involving the fast-evolving market.
The change, however, is not designed to benefit only Korean companies. Google Korea is also taking part in the panel as a member to discuss possible options to ensure fair conditions.
Global IT companies are keen to secure better market conditions here as they see a potentially big change in the country’s mobile ad market. Korea, after all, has a nearly 80 percent smartphone penetration rate, which is driving the rapid growth of mobile ads.
Facebook and Twitter officially announced that they would step up efforts to expand in the Korean market. In December, Facebook Korea’s vice president Cho Yong-bum was named country manager, a position that had been vacant for three years since the branch was established in 2011.
Dan Neary, head of Facebook’s global marketing solutions team in the Asia-Pacific, said Korea is an important market with some 11 million users and an advanced ad market.
As for the mobile gaming business, Facebook selected two Korean mobile game developers, WeMade and Gamevil, along with eight other companies worldwide as its partners for a pilot mobile game project.
“You can see how deeply Facebook is interested in the Korean market given its decision to work with two Korean companies for the mobile game business,” a PR official for Facebook Korea told The Korea Herald.
Twitter drew up a specific marketing strategy to reach potential customers in the Korean market. Under the plan, it rolled out a host of new ad products and other content services such as trending topics and news focused on Korea.
“As Internet traffic shifts to mobile platforms, Twitter and Facebook are likely to get more Korean users, which will translate into more revenue here,” said Lee Mi-na, an analyst at HI Investment & Securities.
By Park Han-na (email@example.com