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Overseas expansion

Regulations drive Naver to seek growth abroad

Mar 10, 2021 (Gmt+09:00)

Regulations drive Naver to seek growth abroad

South Korean platform giant Naver Corp. is seeking growth opportunities abroad to avoid regulatory constraints that hinder its operations at home. The country’s toughened regulations have caused a strained relationship between Naver employees pushing for domestic expansion and the high-level executives who have taken a prudent approach, according to industry officials on Mar. 10.

Last month, a group of young employees came armed with fresh business ideas to the director in charge of Naver's office in Gyeonggi Province. The meeting quickly spiraled into a heated discussion when the director stressed concerns raised by the government and political authorities over already dominant Naver further increasing its market presence. The meeting ended without a resolution.

Naver officials say the executive's cautious stance on expanding operations in Korea mirrors the views of Lee Hae-jin, the company’s founder and global investment officer (GIO).

According to industry watchers, Lee’s concerns arose last year when the National Assembly passed a bill banning the popular ride-hailing service Tada after Korean taxi drivers took a stand against it.

“Tada was an innovative service, but the political authorities sided with taxi drivers – and this was quite a shock for Lee,” said a Naver official, adding that the bill prompted Lee to take a more conservative approach toward domestic operations.

Lee’s wariness towards beefing up operations at home began in 2017 when the Korean antitrust watchdog added Naver to its watchlist and designated him as the owner. The Korea Fair Trade Commission (KFTC) watchlist monitors local companies with over 5 trillion won ($4.4 billion) in assets, thus mostly large conglomerates.

Naver reacted strongly, pointing out that Lee only holds a 4% stake in the company, and putting him in the same group as conglomerate owners would be extreme. But the efforts were in vain and Lee, alongside his relatives and affiliated companies, became subject to regulatory disclosures.


Regulations drive Naver to seek growth abroad
The Korean government and political authorities have begun imposing various regulations on big tech firms such as Naver. A primary example is an amendment to the E-commerce Act, which requires platform providers to take joint responsibility when a dispute arises between consumers and businesses operating on the platforms.

Also, the KFTC’s push for the Online Platform Act has caused an uproar within the platform industry as it requests companies to partially disclose their search algorithm.

“Disclosing our algorithm is no different than asking a five-star restaurant to reveal its secret recipe,” said Naver. But the KFTC has maintained its stance, saying that it is only natural to inform businesses operating on platforms to know what type of content affects search results.

The toughened regulations in Korea have raised criticism that they don't consider that domestic firms are competing with bigger global tech firms, such as Google and Amazon.

Google holds a 90% market share in the global search engine market; Korea is one of the few remaining countries where a homegrown platform has a stronger market presence.

“Domestic platform providers are constantly in fear that they may lose turf to global firms,” said an IT industry official.

Reverse discrimination is another challenge that domestic platforms encounter. Under the Personal Information Protection Act (PIPA), Korean platform providers collect personal information in segments by classifying it as either mandatory or optional. In contrast, foreign platforms, such as Google and Facebook, can collect comprehensive information via a single click without upholding local regulations.


Naver is setting its sights overseas for growth opportunities. The company’s messaging service Line is the most widely used app in Japan, as well as Indonesia, Thailand and Taiwan -- regions that Naver has forayed into for new ventures.

Z Holdings, the subsidiary of a joint venture between Naver and SoftBank Group, aims to position itself as a leading artificial intelligence tech firm. The company plans to invest over 5 trillion won ($4.4 billion) over the next five years to secure around 5,000 AI experts in Japan and other global markets. By 2023, the company aims to deliver 21 trillion won in revenue and an operating profit of 2.4 trillion won.

Naver has also been increasing large-scale investments abroad. In November 2019, Naver committed around 64.4 billion won in private equity firm KKR & Co.'s Europe startup fund.

Last November, the company invested 75 billion won in Singapore-based online marketplace platform Carousell. This year, the company acquired a 100% stake in Toronto-based web novel platform Wattpad for 652 billion won.

Write to Ji-hoon Lee and Min-ki Koo at

Danbee Lee edited this article.

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