Seoul - Internet search giants Yahoo and Google are still overshadowed in South Korea by local search engines, but both are gaining ground in the booming Internet search ad market through cosy partnerships with these local companies. Both Yahoo Inc and Google Inc have said they are committed to gaining traction in the world Internet hotbed of South Korea, even though the local portals run by NHN Corp, Daum Communications and SK Communications continue to dominate the local market.
About 70 per cent of South Koreans surveyed by the United Nations Conference on Trade & Development (UNCTAD) in January were Internet users, making it one of the most Internet-savvy countries in the world.
To gain a foothold, Yahoo-affiliated Overture Korea has teamed up with the number one local search engine, NHN, under an agreement in which Overture shares with NHN the sales revenue from search ads run at NHN's front-page portal.
"South Korea has become Yahoo's largest paid search market after the US and Japan," said James Kim, managing director of Yahoo's Korea Operation, which includes both Korea Yahoo and Korea Overture.
The partnership is run with Overture's association with more than 50,000 local advertisers who use Overture's platform to run search ads at NHN's front-page portal site.
NHN's traffic volume power, combined with Korea Overture's huge base of South Korean advertisers, have made it possible for the Yahoo-NHN team to top the local search ad market. NHN is known to handle at least 70 per cent of total search query traffic in the Korean language.
But NHN-Overture's dominance of the local search engine ad market is being challenged by Google. In December, 2006, South Korea's number-two search engine, Daum, ended its advertising relationship with Yahoo and switched to Google.
"The bigger query traffic a portal generates, the more popular it will become (with our advertisers). And the more expensive it will become to run a search ad," said a manager with Echomarketing, an agent for both the Google-Daum partnership and the Yahoo-NHN team.
"Newcomer Google is doing pretty good business. In general, however, the NHN is more popular than Daum for our advertisers to run their search ads," he said.
The name of portal site run by NHN is naver and it is located on the web at www.naver.net.
He added: "Naver is the most popular portal site, although the CPC (cost-per-click) is more than twice as expensive to run a search ad at the www.naver.net run by NHN than at the www.daum.net run by Daum," he said.
It has become more expensive to run a search ad at the Naver site since NHN introduced a new "blind bidding system" into its own portal site, www.naver.net, a few months ago.
"Under the blind bidding, advertisers do not know how much more money was put up by other bidders (to place a search ad at the Naver's front web page). Therefore, they would try to offer an even higher price than they had intended, if they really want to win the bidding," said the Echomarketing manager.
Meanwhile, Overture has gained more traffic exposure than Google. Korea Overture has signed up four top portals - www.empass.com, www.nate.com and www.paran.com, besides www.naver.com - while Google has signed only with Daum at www.daum.net.
"If you are an advertiser, it would usually be a choice whether to use the Google platform to reach about 20 per cent of search traffic, or whether to use the Yahoo platform to reach the remainder, even if you pay a premium price," said YongKab Yee, vice president of Korea Overture.
South Korea's search ad market is estimated by Internet Marketing Council of Korea (IMCK) to be at least 770 million US dollars for 2007, and is expected to grow to 900 million US dollars for 2008.
"Search ads in South Korea are on a faster growth track than in the US," said Choi Hui-Young, CEO of NHN.
NHN is generating about half of its sales revenues from search ads, with the remainder coming from e-commerce, banner ads and online games.
Meanwhile, bigger companies are putting more money into Internet advertising.
"If the rising query traffic is an old driver, a new driver is the on-going expansion of Internet advertisers from small business to bigger ones," said YongKab Yee of Korea Overture.
Local advertisers surveyed by IMCK said they put 15.7 per cent of their total ad expenditures into the Internet during 2007, up from 11.7 percent in 2006.
The comparable numbers for 2007 are 8 per cent for Japan and 10 per cent for the US.
