Amid fierce commerce competition between Naver and Kakao, Google has entered the commerce battle leveraging YouTube. The photo shows (from left) Naver, YouTube, and Kakao shopping pages.
Naver and Kakao are strengthening their competitiveness in the commerce business. As both companies expand their service portfolios, their areas of business are increasingly overlapping, leading to expectations of fiercer competition in commerce. On top of this, Google has joined the commerce race by leveraging YouTube, making it difficult for either side to secure a clear victory.
Commerce Drives Results for Naver and Kakao
The commerce business has long been a key pillar of performance for both Naver and Kakao. Despite the economic downturn, they have continued to achieve annual growth, and this trend persisted in the second quarter of this year.
In the second quarter of this year, Naver's commerce segment revenue reached KRW 632.9 billion, up 44% from the same period last year. Among Naver's major business segments, commerce showed the highest growth rate, driving the company's overall results. During the same quarter, Naver's total integrated commerce transaction volume increased by 14.8% to KRW 11.9 trillion.
During the same period, Kakao's Talk Biz (which includes KakaoTalk advertising and commerce) revenue was KRW 503 billion, an 11% increase compared to the same period last year. Excluding the music business, which was affected by the acquisition of SM Entertainment, Talk Biz was the only segment to achieve double-digit growth. In the second quarter, Kakao Commerce's integrated transaction volume, including KakaoTalk's "Gift" feature, grew 7% year-on-year to KRW 2.3 trillion.
Personalized Services Powered by AI
Naver and Kakao have announced plans to introduce hyper-personalized services by integrating large-scale artificial intelligence (AI) models into their commerce platforms in the second half of the year. Their goal is to enhance the "lock-in effect" by providing highly tailored services that prevent consumers from switching to other platforms.
Choi Soo-yeon, CEO of Naver, stated during the second quarter earnings conference call, "The greatest strength of Naver Shopping lies in its seamless flow from search to shopping, payment, and repurchase. If AI integration is expanded, this experience will be further maximized."
Kakao plans to use AI to maximize synergies between its Shopping Channel, Store, and Live Commerce. Hong Eun-taek, CEO of Kakao, explained during the second quarter earnings conference call, "We believe AI will enable us to deliver personalized messages to countless users," adding, "It will also be well integrated with transactional services such as ordering, reservations, consultations, and payments."
Kakao, which has grown mainly through its Gift feature, is also expanding its service scope. In the second half of the year, Kakao will introduce a local service space in the KakaoTalk Friends tab, providing various benefits and useful information focused on geographically close favorite stores. The aim is to strengthen partnerships with small business owners, which overlaps with several services already offered by Naver. In particular, as both companies aim to organically connect commerce, advertising, and payment through AI, competition between the two is expected to intensify.
Google Enters the Fray with YouTube
As competition between Naver and Kakao in commerce intensifies, Google has also entered the market. On June 30, Google launched an online shopping channel called "YouTube Shopping" on YouTube. This platform allows users to watch live commerce broadcasts from various creators, similar to the live commerce offerings of Naver and Kakao.
The entry of YouTube has put Naver and Kakao on alert. YouTube boasts more than 40 million monthly active users in Korea. In addition, many creators on YouTube have millions of subscribers, which is a significant advantage. As a result, YouTube is quickly proving its competitiveness. On YouTube Shopping, it is common to find live commerce videos with over 100,000 views, a level comparable to Naver and Kakao, who have been refining their services for years.
To prevent user attrition, Naver and Kakao plan to accelerate the advancement of their commerce services by rapidly integrating AI technologies.
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