[Asia Economy Reporter Buaeri] Naver posted mid-1 trillion KRW in sales in the first quarter as its commerce, fintech, content, and cloud sectors all grew. However, operating profit slightly declined due to increased labor costs. Naver plans to create opportunities for global business expansion going forward.
Operating Profit Stalls in Q1... 'Impact of Stock Compensation'
Naver announced on the 29th that its first-quarter sales reached 1.4991 trillion KRW, and operating profit was 288.8 billion KRW. This represents a 29.8% increase in sales year-on-year and a 1% decrease in operating profit.
The decline in operating profit was influenced by increased stock compensation costs, such as stock options granted to employees. However, EBITDA, which reflects actual cash-generating ability, hit an all-time high of 440.6 billion KRW, a 23.7% increase from the previous year.
Net profit for the period reached 15.3145 trillion KRW following the completion of the management integration between Line and Z Holdings on the 1st of last month. The company explained that this figure reflects the accounting disposal gains of the Line group, i.e., the 'Line valuation,' and does not involve actual cash inflows or outflows.
Shopping and Webtoon Take Off
By sector, search platform sales, including advertising, reached 752.7 billion KRW, up 16.8% year-on-year. This was the result of new advertiser inflows, expanded ad space, and improved matching technology that enhanced the platform. In particular, performance-based advertising (charging based on the number of clicks) continued to expand, leading to a 46.4% increase in display ad revenue compared to the previous year.
Commerce sector sales rose 40.3% year-on-year to 324.4 billion KRW. Naver Smart Store expanded to 450,000 stores, and Brand Store to 320. The monthly average number of new sellers on Smart Store surpassed 33,000, and 'Shopping Live' transaction volume more than doubled compared to six months ago.
Naver set a transaction target of 25 trillion KRW for Smart Store this year.
Naver has begun expanding its commerce business by discussing cooperation in fresh food, logistics, and luxury goods with Shinsegae and E-Mart, with whom it exchanged shares worth 250 billion KRW. Starting in August this year, they plan to collaborate in fresh food shopping and logistics and expand services into other areas.
Fintech sector sales reached 209.5 billion KRW, a 52.2% increase year-on-year. Naver Pay's payment volume grew 56% year-on-year to 8.4 trillion KRW. Naver Financial has started beta testing a postpaid payment service, expanding its fintech portfolio for thin-file customers (those with limited financial history).
The content business, including webtoons, Snow, and V Live, also showed strong growth. Content sales rose 40% year-on-year to 130.8 billion KRW. In particular, webtoon sales grew 43% year-on-year, driven by increased user loyalty and higher conversion rates to paying users.
The cloud sector recorded sales of 81.7 billion KRW, up 71.1% year-on-year. Especially, sales in the public sector increased more than tenfold, resulting in a 168% growth in cloud platform sales compared to the previous year.
Han Seong-sook, CEO of Naver, said, "In the first quarter, steady growth in the search platform and significant growth across all new business areas were observed, along with meaningful investments and collaborations such as the acquisition of Wattpad, share exchanges with Shinsegae and E-Mart, and the management integration of Line and Z Holdings. Securing top talent is also crucial to accelerate global business growth, so we will strive to establish an advanced compensation system."
Accelerating Global Expansion
Naver announced plans to accelerate global expansion in shopping and content sectors. CEO Han said, "We plan to target the global commerce market through the launch of Smart Store in Japan," adding, "We are also creating opportunities for diverse business expansion globally by making strategic investments in Spain's largest resale platform 'Wallapop' and Indonesia's largest comprehensive media group 'Emtek.'"
Naver expects to achieve a global sales ratio of 30%. CFO Park Sang-jin said, "In the past, overseas sales including Line reached up to 35%, and I believe that excluding Line, overseas sales can increase to that level within a few years."
Naver completed the acquisition of Canada's world's largest web novel platform Wattpad in May and plans to focus on building a global intellectual property (IP) creation ecosystem. Naver also decided to invest an additional 204 billion KRW in its U.S. subsidiary Webtoon Entertainment. The company aims to reclaim the No. 1 position in the Japanese webtoon market. CEO Han said, "Starting in May, we will begin user traffic exchange with Wattpad and simultaneously release impactful original content to maximize effectiveness."
Besides webtoons and web novels, Naver plans to expand secondary derivative works through about 90 video projects underway at Wattpad, creating synergy. CEO Han added, "We will transplant the revenue models proven in webtoons to Wattpad, creating the world's largest global creative ecosystem where revenue generated from global users is shared and grows together."
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