Naver Reports Operating Profit Decline Last Year... "SearchGPT Launch in First Half of This Year" (Comprehensive)

Operating profit down 1.6% to 1.3 trillion KRW last year
First decline in 4 years since 2018 due to slowing ad performance
Launched SearchGPT in H1, joining ChatGPT competition

[Asia Economy Reporter Yuri Choi] Naver surpassed 8 trillion KRW in sales last year, achieving its highest annual revenue, but operating profit slightly decreased. This was due to a slowdown in advertising performance, a major revenue source, amid the economic downturn. Given the significant economic uncertainties this year as well, the company will focus on improving profitability through cost efficiency. In the first half of the year, it plans to respond to new search trends by launching 'Search GPT,' a service responding to 'Chat GPT.'

Last year's annual sales exceeded 8 trillion KRW... Operating profit decreased by 1.6%

On the 3rd, Naver announced that its annual sales for 2022 reached 8.2201 trillion KRW, a 20.6% increase compared to the previous year. Operating profit for the same period was 1.3047 trillion KRW, down 1.6%. This marks the first decline in operating profit in four years since 2018.

As economic uncertainty grew, growth in advertising and commerce sales slowed. Last year, search platform sales amounted to 3.568 trillion KRW, a 7.9% increase from the previous year. This growth rate slowed compared to the 17.4% annual growth rate in 2021. The commerce sector recorded sales of 1.8011 trillion KRW, a 21.0% increase from the previous year.

Fintech and content business sales exceeded 1 trillion KRW annually for the first time. This was thanks to the expansion of Naver Pay payment volume and growth in the Japanese webtoon business. Last year, the fintech sector grew 21.2% year-over-year, achieving sales of 1.1866 trillion KRW. Content sales recorded 1.2615 trillion KRW, a 91.3% increase. The number of paid users in Japan increased by 25% compared to the same period last year, continuing global growth. Cloud and other sales grew 5.3% year-over-year to 402.9 billion KRW.

Kim Nam-sun, Naver's Chief Financial Officer (CFO), stated, "The uncertain macro environment continues, where even global search advertising companies cannot provide guidance," adding, "We are doing our best to defend against negative growth."

Search GPT launch in the first half... Targeting monetization with GPT-based B2B solutions

Naver revealed a surprise new growth engine on the same day. It announced plans to launch 'Search GPT,' a search service utilizing generative AI similar to Chat GPT, in the first half of this year.

Choi Soo-yeon, Naver CEO, said, "We are preparing countermeasures for new search trends such as generative AI, which has recently attracted much attention," adding, "We will open a beta service separately and actively consider incorporating it into informational searches once sufficient data is accumulated."

They plan to complement Chat GPT's shortcomings, such as not reflecting the latest information and limitations in Korean translation. By combining Naver's abundant user data with AI technology, they explained that it can solve problems difficult to address with existing search methods.

While the immediate goal is research and development (R&D) for new search technology, it is also expected to have significance for profitability. This is because the paid business-to-business (B2B) market using Naver's large-scale AI, 'Hyper Clova,' is expanding. CEO Choi said, "We can contribute to monetization by applying GPT technology to B2B solutions such as Clova Care Call and Clova Optical Character Recognition (OCR)."

Meanwhile, Naver plans to focus on defending profitability this year as economic uncertainties are expected to continue. While improving cost efficiency in labor and marketing expenses, the company aims to sustain growth by launching new advertising products.