Shares of Naver drop after Facebook's WhatsApp buyout

By 정주원
  • Published : Feb 20, 2014 - 15:26
  • Updated : Feb 20, 2014 - 15:26

Shares of Naver Corp., South Korea's top Internet portal operator, dropped more than 8 percent on Thursday on concerns that its free chat service LINE would face increased competition following Facebook Inc.'s takeover of WhatsApp, the largest free messenger service provider in the North American region with a user base of 450 million.

Naver sank 8.13 percent to close at 689,000 won ($642) on the Seoul bourse after falling to as low as 687,000 won at one point. Its market cap stood at 22.7 trillion won.

On Wednesday (U.S. time), Facebook, the world's largest social network, announced a record $19 billion for fast-growing messaging service WhatsApp, a deal seen to help in attracting more younger generations to its service and foray into the fast-growing mobile messaging sector.

"Facebook's acquisition of WhatsApp is raising questions about LINE's valuation," said Ahn Jae-min, an analyst at Kiwoom Securities. "But LINE differs from WhatsApp in terms of target market and income sources."

Shares of Naver have skyrocketed for the past months on hopes that LINE, owned by its wholly owned Japanese affiliate Line Corp., would reap sharply increased revenue on growth in the user base. Naver reached a 52-week high of 767,000 won on Tuesday on the back of foreign buying.

The number of users for its free messenger application, launched in June 2011, currently stands at roughly 350 million. It broke the 300-million mark last November as worldwide smartphone users rushed to connect with one another through the mobile messenger service.

The milestone came four months after the service drew 200 million users in July of last year and seven months after attracting 150 million earlier that year in April.

The free messenger service is expected to reach another milestone of 500 million download hits worldwide by next year.

Some analysts said Facebook's purchase of WhatsApp may actually help jack up LINE's valuation. "The deal clearly shows that a mobile messaging service sector has a great potential to grow," said Kim Chang-kwon, an analyst at KDB-Daewoo Securities.

Also, LINE is witnessing a rise in its revenue, another positive factor for a higher valuation.

Naver said earlier it logged a 137 billion won in revenue from its messenger service during the fourth quarter of last year, up 232.2 percent from a year earlier. The figure also accounted for nearly 20 percent of its overall revenue.

Since the initial launch, the company has expanded the service to roughly 230 countries in 14 languages, including Chinese, Spanish and Indonesian.

Currently, 90 percent of LINE users are based overseas, with Japan, Thailand and Taiwan noted as its three biggest markets. 

By nation, Japanese subscribers to the messenger service reached some 50 million, followed by Thailand with 20 million, Taiwan with 17 million and Spain with 15 million, according to Naver. (Yonhap News)