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 Now, Lee Hae-jin is stepping onto the world stage with Line, a
messaging app developed by a subsidiary in Japan to overcome downed
communications after the 2011 earthquake and tsunami.
But Lee will face a very different market to the one that welcomed
Naver.com. Instead of developing a local lead and fending off a
global giant, Lee will have to take on established rivals in an
international context.
"I am playing the part of an attacking winger who needs to run to
break through the global market," Lee, 47, said recently, referring
to a goal-scoring role in soccer akin to that of FIFA Player of the
Year Cristiano Ronaldo.
Line has lured 470 million users with its simple design and
elaborate emoticons, such as a cartoon happy-go-lucky rabbit. Its
user base eclipses that of local peer Kakao Corp's KakaoTalk and
places Line nearer Tencent Holdings Ltd's WeChat and Facebook Inc's
WhatsApp.
To fund expansion and close the gap, bankers familiar with the
matter said Naver is considering selling shares of Line Corp in
Tokyo, New York or both. They said any initial public offering could
value the subsidiary at up to $20 billion.
On listing plans, Line and Naver declined to comment.
GOOGLE
Lee founded Naver.com in 1999 to rival the portal of Daum
Communications Corp and Korean-language versions of foreign entrants
such as Yahoo! Inc.
Naver.com attracted clicks with features such as a user
question-and-answer forum and a search engine which displays results
from news, blogs and other categories on a single page.
The portal built up such a lead that its search engine makes up 75
percent of the search market, according to researcher KoreanClick.
Google, which embarked on a major push in Korea in 2006, holds 2
percent.
That put South Korea in a handful of markets including China and
Russia where Google is not the dominant force. It also left Naver
the country's fifth-most valuable stock with a capitalization of 27
trillion won ($26.76 billion).
But in just three years, Line has grown to account for nearly a
quarter of Naver's 638 billion won in January-March revenue by
selling ads, games and emoticons, known as stamps.
Around 80 percent of Line's revenue comes from Japan. Elsewhere,
Thailand and Indonesia are big markets in terms of user numbers, and
as part of its global expansion, Line has made inroads in Mexico and
the United States.
The messaging market is still growing and it is likely to take a
couple years before any app solidifies itself as a leader in
particular countries, said Tom Mowat, principal analyst at Analysys
Mason.
"The next few years will be decisive for the global messaging
market," Lee said in rare public appearance at a conference on the
resort island of Jeju.
"So we will concentrate on growing our user base in the near term as
opposed to profitability."
UNCONVENTIONAL
Lee's rise to the pinnacle of South Korea's digital economy was
unconventional in a country where business is dominated by
conglomerates and startup hits are rare.
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His early career epitomized mainstream success. He earned degrees at
top schools Seoul National University and Korea Advanced Institute
of Science and Technology, then started his career at Samsung SDS,
the IT arm of Samsung Group.
But Lee, who declined to be interviewed for this article, walked
away from the country's biggest conglomerate to launch Naver.com.
Those who know Lee said he is soft-spoken, has a sharp sense of
humor, and will willingly defer to others better informed of a
particular subject. They also said he is widely read and even reads
the latest web comics published through Naver.
"Lee isn't someone who you would describe as a person who commands
the room with sheer charisma, and he himself worried about that at
one point," said a close friend, who declined to be identified due
to the personal nature of the relationship.
"He is the most tenacious competitor I have ever seen," the friend
said. "After deciding to go global, he wants to stick with it until
the bitter end."
LOYALTY
Going global means nothing short of taking on Facebook and Tencent,
and Line has neither the financial backing of WhatsApp nor the
variety of features such as taxi booking offered over WeChat.
That heightens the challenge of retaining users in a market where it
is common to switch between apps to accommodate the preferences of
contacts.
The messaging market is "starting to feel an awful lot like cheap
prepaid cellular," said Analysys Mason's Mowat. "High churn (user
turnover), and there's not necessarily any customer loyalty beyond
the convenience of it."
Another challenge to ensure long-term growth is how to boost
advertising revenue, said Alpha Asset Management's Hong Jeong-woong,
who manages funds holding Naver shares.
Line needs to analyze its vast amount of data and devise something
different in in-app advertising, Hong said. "But Naver hasn't shown
much on this end and I haven't heard anything concrete from the
company executives."
($1 = 1009.1000 South Korean Won)
(Additional reporting by Emi Emoto and Teppei Kasai in TOKYO;
Editing by Tony Munroe and Christopher Cushing)
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