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| Advertisements are displayed at the top of Naver's mobile app. Naver will introduce its new Smart Channel service, Monday. / Captured from Naver |
By Baek Byung-yeul
Korea's largest portal operator Naver will launch a new advertising service, Smart Channel, that places ads at the top of its mobile app to boost revenue following a fall in the firs quarter because of the COVID-19 pandemic.
The service, to be test-launched Monday, apparently aims to follow that of its smaller rival Kakao's Talk Biz Board platform that displays ads on the firm's messaging app Kakao Talk.
With the service, which was introduced in 2019, Kakao generated sales of 224.7 billion won in the first quarter of 2020, up 1 percent from the previous quarter and a 77 percent increase on the same quarter last year.
Market researcher IGAWorks said the moves will likely see Naver and Kakao compete to attract advertisers.
Naver's mobile portal app had 30.8 million users as of 2019 ― the third-most used mobile app in Korea ― following Kakao Talk with 37.4 million and Google's YouTube with 34.3 million.
Naver has told advertisers it will begin test-operating the Smart Channel service from Monday, saying it will provide ad exposure at the top of each section, such as news, sports and entertainment.
In the first quarter, Naver posted 1.73 trillion won in sales and 221.5 billion won in operating profit, up 14.6 percent and 7.4 percent year-on-year, respectively. The improved earnings performance was possible thanks to increased online shopping after the coronavirus outbreak.
However, the company's ad sales revenue was 144 billion won, down 16.2 percent from the previous quarter. Naver said it fell as "ad execution from certain industries declined following the COVID-19 outbreak."
Naver CEO Han Seong-sook told investors that Smart Channel "will help boost the premium image of advertisers," adding that it would be able to become an integrated marketing platform that engages customers throughout the purchasing process.
Meritz Securities analyst Kim Dong-hee said Smart Channel will help Naver manage the tough times caused by the coronavirus pandemic.
"Naver's second-quarter sales and operating profit are expected to rise by 12 percent to 1.82 trillion won and 76.6 percent to 226.6 billion won year-on-year, respectively," Kim said. "The ad sales revenue is forecast to decrease by 2.1 percent year-on-year.
"COVID-19 has dramatically shrunk the advertisement sales business and impacted negatively in search traffic and ad sales revenue from small business owners during the March-April period. But it is positive that Naver is trying to reduce the negative impact on the advertisement market by launching the new advertisement service Smart Channel."
