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  • 1. Transversal Project Analysis and Future Prospect of E-Business Market in Korea - Focused on Portal Business Model – June 29, 2004 Kang Yoo Lee (xiaojie622@icu.ac.kr) Shin Sang Ook (sysboy@icu.ac.kr) International Major in E-Business Institut National des Télécommunications
  • 2. ABSTRACT Mobile Internet enables users to access to all sorts of information and contents with any handset devices on the based 2.3GHz frequency. Korea has already equipped with good fixed Internet infrastructure. July 2003, Korean government announced mobile Internet as the next generation industry. Moreover, in the beginning of 2004, they set the mobile Internet standard parameter. In coming September, they plan to choose players in the market. Current situation is turbulent and ongoing changing. However, we assume that there are some similarities between fixed Internet and wireless Internet. In Korean e-business, portal is said to be most active player. Therefore, it’s meaningful to draw the blueprint of mobile portal on the basis of successful fixed Internet portal. Key Words: E-Business, Korea, Mobile, Internet, Portal
  • 3. TABLE OF CONTENTS 1. Introduction 1.1. Definition of Business Model 1.2. E-Business Model 2. Korean E-Business Market 2.1. Overview of E-Business Market in Korea 2.2. Overview of Portal Sites in Korea 3. Analysis of Korean Portal Sites 3.1. NHN 3.1.1. Company Overview 3.1.2. Corporate Identity 3.1.3. Value Chain Analysis 3.1.4. SWOT Analysis 3.1.5. 5C Analysis 3.1.6. Critical Success Factor 3.1.7. Financial Analysis 3.2. SK Communications 3.2.1. Company Overview 3.2.2. Brief History 3.2.3. Value Chain Analysis 3.2.4. SWOT Analysis 3.2.5. 5C Analysis 3.2.6. Critical Success Factor 4. Future Prospect of Korean Portal Model 4.1. Mobilization 4.1.1. Integration of Fixed and Mobile 4.1.2. Open up Wireless Networks
  • 4. 4.1.3. The Change of Market Situation 4.1.4. The Evolution of Mobile Handset 4.2. Personalization 4.2.1. Blog, Next Community 4.2.2. Location Based Service (LBS) 4.2.3. Private Secretary 4.3. Presentation of Future Portal Business Model 4.3.1. Value Chain Analysis 4.3.2. SWOT Analysis 4.3.3. 5C Analysis 4.3.4. Personalized Mobile Portal 5. Conclusion 1. Introduction
  • 5. 1.1. Definition of Business Model In this project, we would like to consider business model, so let us, firstly, review and specify the concept of business model. Simply speaking, business model is the way a company makes a profit. By the definition of Timmers, business model is that  An architecture for the product, service and information flow, including a description of the various business actors and their roles  A description of the potential benefits for the various business actors  A description of the sources of revenues According to this definition, the concept of business model, which will treat in this project, is a specification of business actors in firm’s value chain and a description of their roles to be sure the firm’s source of profit. 1.2. E-Business Model <Figure 1: Business Model Taxonomy by Timmers> Timmers had tried a systematic access with deconstruction and re-construction of value chain to confirm the business model architecture. Actually, identifying the components in value chain and analyzing the interaction pattern between business actors, he would like to describe how to integrate information. As shown in Figure 1, he used two criteria, functional integration and
  • 6. degree of innovation, to classify a business model into 11 different ones. Rappa, also, provide 9 kinds of distinct business model by the way of business operation. Rappa’s business model includes most of Timmers’ ones. Rappa’s Business Model Note: Corresponding Timmers’ Business Model Brokerage model Third Party Marketplace e-Auction Advertising model Infomediary model Information Brokers Value Chain Integrator Merchant model e-shop e-procurement Manufacturer model Affiliate model Community model Virtual Community Subscription model Utility model <Table 1: Business Model Taxonomy by Rappa> According to the ever changing business environment, because new business models are emerging, we can’t allocate all models into these kinds of formal frame. However, this taxonomy gives the idea to predict potential derived model. Actually, business model have been changed along with development of technology, currently emerging ex-professionalism and integration. For example, in the Timmers model, Information Brokerage and Virtual Community integrated in to general portal (Naver.com), and the distinction between e-shop, e-mall, and e-auction became dim and they would like to show availability of service than individual professionalism and then combined together (Auction.co.kr) 2. Korean E-Business Market 2.1. Overview of E-Business Market in Korea By the support of fast development of IT (Information Technology) fields, Korean e-business market has grown significantly. The world’s second top of internet usage rate derived from such IT infrastructure as high spread rate of PC and high speed Internet and so on. On the background of that, company’s high investment into IT fields and government’s friendly policies
  • 7. made total volume of e-business market increase. Despite of long term depression of economy, the market volume has increased from $47.97 billion in 2000 to $195.85 billion in 2003 (MOICE, 2004). As shown in Figure 4, B2B (business-to-business), concentrated on e-marketplace, market is most significant part and B2G (business-to-government) and B2C (business-to- customer) is following sequentially. Currently, there is a trend of dimness between B2B and B2C by a continuous investment of large firms. Also, after appearance of Korean e-government, B2G is predicted high growth focusing on e-procurement. However, SMEs (Small and Medium-Sized Enterprises) has shown relatively poor level of adoption of IT; about 50% of SMEs have no sales amount from e-business. It is required to develop with balance with large firms and SMEs. 100% Internet Usage Rate 80% 60% 40% 20% 0% d . a e nd nd a nd k en .S an re or ad ar U la la la ed ap Ko m nl an e er a Sw en Fi Ic ng Ze C h S. et D Si ew N N <Figure 2: Internet Usage Rate, 2003, ITU>
  • 8. Wireless Internet Subscriber LG Telecom KTF SK Telecom Total - 10,000,000 20,000,000 30,000,000 40,000,000 Total SK Telecom KTF LG Telecom Subscriber 33,093,095 17,362,393 11,094,992 4,635,710 <Figure 3: Wireless Internet Subscriber, 2004, MIC> E-Commerce Market Volume in Billion B2C, $508.00 B2G, $1,803.00 Others, $0.37 B2B, $17,238.00 <Figure 4: E-Commerce Market Volume, 2003, NSO> 2.2. Overview of Portal Sites in Korea Portal is the Internet intermediary service which links buyers and sellers on the Internet. In other words, portal sites create the added value by gathering users on the basis of already constructed network connection. In the beginning, portal site was considered as gateway to access the Web browser. Especially, foreign portal sites such as YAHOO and LYCOS dominated Korean market in this
  • 9. period. As search becomes hot issue, directory occupies important position. Now, top 3 portal sites (DAUM, NAVER and NATE) are pure Korean sites. The gap between top 3 and the remaining sites is obvious, thus Korean top portals enjoy economies of scale. Nowadays, they are trying to change from fixed Internet portal to wireless Internet portal. Portal sites have media business model which brings together users and traffic in one place. After Internet bubble fall down, portal sites were regarded as unprofitable business model. Their main revenue sources were limited to banner ads and transaction fees. However, they try to diversify the revenue sources recently. They provide premium services such as game, avatar and sponsor links, so they charge fees. Top Korean portal sites are becoming profitable, the competition becomes fierce. When a portal makes a successful content, the other sites imitate soon. That’s why they seem to provide similar contents. When closely looking, however, each of them has unique contents; DAUM is famous for mail and café, NAVER is information search and game and NATE is personal home page. Under the competitive portal market, Korean portal sites are paying attention to M&A and strategic alliance. NAVER and NATE are the successful cases of M&A. In June 2004, NHN made strategic alliance with IBM for entering global market. Based on such phenomena, portal competition will be more severe in the future. 3. Analysis of Korean Portal Sites We would like to focus on portal model which is one of the most high-leveled fields among e- business models. NHN is from Internet searching service of NAVER and SK Communications is from wireless date service of NATE. Even if two companies stated differently, they are the companies which has been successful with general portal sites. Actually, there is no uninterrupted success in the ever changing Internet environment. For example, just one year age, FREECHAL which was very promising community sites failed, because it announced charge to customer for fundamental services without an awareness of customer’s indication. There is always possibility to fail, unless the companies understand new trends and corresponding customer’s needs. However, it would be very helpful that analyzing NHN and SK Communications leading new trend of portal models, and guiding the development of new profit model with ongoing innovation. Ranking Domain Unique visitors(x1000) Reach rate (%) 1 daum.net 22,906 91.59%
  • 10. 2 naver.com 22,818 91.24% 3 nate.com 18,580 74.29% 4 yahoo.co.kr 17,854 71.39% 5 msn.com 15,072 60.27% 6 bugs.co.kr 14,835 59.32% 7 hanafos.com 12,498 49.97% 8 auction.co.kr 11,948 47.78% 9 dreamwiz.com 11,744 46.96% 10 empas.com 11,720 46.86% <Table 2: Top Site Ranking, May 2004, Metrix> What is interesting is that the 4 sites of the top 5 except msn.com are portal sites. We are curious about how they attract users. With the participation of NATE as a third rank, there is severe competition among 3 big portals. Among them, NAVER and NATE are remarkable because both of them have high turnovers and become hot issues among Korean users nowadays. Therefore, we analyze these two companies’ businesses and then expect how they will transform in the future. 3.1. NHN 3.1.1. Company Over1view NHN is a major force in the online media industry with NAVER, its search service-based Internet search portal, HANGAME, which boasts the largest number of simultaneous connections in Korea, ENTOI, blog*-based entertainment community service, and Junior NAVER, portal for children. Launched in June 1999 as Naver.com, a full-fledged Internet portal service, NHN merged with HANGAME Communications in July 2000 in order to expand into new areas of on-line business. The new entity assumed the name Next Human Network, or NHN Corporation in 2001, and was listed on the KOSDAQ in October 2002. The company has stepped up its expansion effort since. NHN has been recognized for its technological expertise and competitiveness worldwide. It was chosen as a business partner of world-class IT companies in Japan, Indonesia and China when it advanced into those countries’ markets. In June 2004, it selected IBM for world wide expansion. 1 * Blog: A short form for weblog(web+logs), is a personal journal that is frequently updated and intended for general public consumption. Blog generally represents the personality of the author or the Web site and its purpose.
  • 11. Size of bubble: the number of unique visitor H Search Game L Communication O Y New A s Free L Bulletin homepage T Y Life information E-commerce Kids Entertainment L L IMPRESSION H <Figure 5: Analysis of NHN contents> 3.1.2. Corporate Identity NHN has four main sites, among them; NAVER and HANGAME are the most viable sites. Its main revenue source is from search/registration and game. Revenue from ads, and e- commerce follow. Figure 6 explains its corporate identity.
  • 12. Business model SITE Business Model NHN Online ads, Coope Home page Ads ration Premium game Directory & Channel Ads 7 genre games (40) Member service Ads Search/Registration Wireless game (14) Junior naver Ads 프리미엄 서비스 e-commerce Revenue(,02 1H) Total mall (18) : 6,684M Special mall (15) Keyword shop Revenue(’02.1H) SOHO Plus registration : 20,621M Registration screen Business screen Revenue(’02.1H) : 1,722M REVENUE Business Model <Figure 6: Site and Revenue Business Model> ① Naver.com (Search portal) Core competence Beginning with a daughter firm of Samsung SDS, NAVER invented domestic search engine. At that time, foreign search engines such as YAHOO, LYCOS, and AltaVista predominated over
  • 13. the world market. They either already entered or prepared for entering the Korean market. Global portals such as YAHOO and Lycos performed aggressive marketing based on strong brand power. NAVER tried to upgrade its quality of search engine rather than marketing competition. Under the tough competition of portal sites, NAVER kept and developed its original core competence ‘searching’. Through buzz marketing, NAVER became known to people. Except banner advertisement, there was no appropriate revenue source in the Internet market. NAVER introduced keyword advertisement which exposes special company names to visitors when they searched for certain keywords. New search service There is evolving trend of supportive method search service for internet surfing. As the competition between portal sites becomes fierce, the search ability is improved and the search service such as knowledge search is invented. As a result, the usage of search service is near 90%. NAVER is the first mover of launching knowledge search service called “KnowledgeiN”. This service is to reflect the new searching trends. Korean visitors want to know the answer to their absurd questions. For example, they want to know how many grains of sand in the beach. By inducing visitors to participate into the services, NAVER increases the site duration and cohesive power which are the major weak points of portal site. The way to attract users is to give users a point which is used for transaction. As the first mover, NAVER surpasses the competitors with accumulated database and various derivative services. This kind of knowledge search draws high interests because it is combination of contents, communication and entertainment. Knowledge search makes users to create search contents by uploading knowledge and registering DB. It also combines entertainment factors such as point system and community and communication concepts such as bulletin board or messages. Therefore, it enforces total page view and visitor loyalty. NAVER also provides portal users with free album service which results in abundant image contents collection.
  • 14. Communication Customized Community Search Service Service Service Service Search engine Messenger Stock information Cross lingual Mail Homepage Yellow page Naver Café Life information Knowledge community <Figure 7: NAVER Development Process> Unit 1000 people 20,000 18,000 16,000 14,000 12,000 Total search 10,000 Knowledge search 8,000 14,186 6,000 4,000 6,816 6,518 2,000 0 naver.com yahoo.co.kr empas.com <Figure 8: The portion of knowledge search in total search, Nov 2003, Metrix> ② Hangame.com It pioneered a new genre of Internet games in December 1999 and boasted 17 million members and 210,000 simultaneous connections as of December 2003 in its large game communities. It entered the online game distribution business in 2002 and has expanded its service into various game genre including role playing game, shooting game as well as casual
  • 15. games. Now firmly established as the most prominent game portal service provider representing Korea, HANGAME is determined to further establish its position through the entire gaming arena and become the center of Internet games. Its development process is depicted in the Figure 9. Entertainment Wireless Games Game Avatar Items Publishing Casual Games 16+ Titles to Comics, VOD 14+ Game SKT (Movies, Casual games Items 4+ Titles to Cartoons) etc. 40+ Titles in & MMORPG Avatar Items KTF service Publishing <Figure 9: HANGAME Development Process> 7,000 6,033 6,001 6,000 5,000 4,000 3,287 3,000 2,000 1,000 0 Netmarble Hangame Nexon <Figure 10: Game Service Unique Visitors, May 2004, Metrix> 3.1.3. Value Chain Analysis
  • 16. Contents Contents NHN Infrastructure End Owner Provider (Contents Aggregator) Provider User Handset Formulating Provider Fixed Internet idea Internet Packaging Repackaging available Users Acquiring right Service data information Wireless Provider Internet Users Network Operator <Figure 11: Value Chain of NHN> 3.1.4. SWOT Analysis Recently, the competition among portal sites becomes fierce. Services provided by different sites are becoming similar and active M&A happens frequently. Under this tough condition, NHN’s SWOT is presented below in Figure 12.
  • 17. -Hold proprietary search engine technology -Easy to launch services based on own -Lower community power than technology competitors -High customer loyalty -Legal issues related to knowledge -Profitable business model market -Continuous rise of brand image -Pioneer on-line game -Successful M&A S W O T -Enter foreign market -Fierce entrance competition among late -Broaden into wireless Internet market movers -Synergy effect through M&A -Strengthen industry competition <Figure 12: SWOT Analysis of NHN> 3.1.5. 5C Analysis* Communication Avatar, Chatting, E-mail Contents KnowledgeiN(knowledge database), Hangame, Hancine, Entoi, Financial information, News, Keyword advertisement, E-mail, Local information Community CaféiN, Blog, Commerce Shopping mall, Avatar shop, Item shop Coordination Wireless mobile contents, SMS, Hancion <Table 3: 5C Analysis of NHN> * 5C Analysis: One of the way of analysis for e-business using 5-Cs (Communication, Contents, Community, Commerce, Coordination) by Allan Afuah, Christopher L. Tucci. It speaks that e-business model should satisfy these 5 concepts.
  • 18. Coordination Commerce Contents Community Communication Coordination Commerce Contents Community Communication <Figure 13: 5C Analysis of NHN> 3.1.6. Critical Success Factor *Differentiated and specialized Differentiation, Prof service base essionalization *Customer attraction *Enter wireless contents market *Provide various New service area contents 진입 능력 High loyalty 고객기반 확 Multi-medi a portal sit *Keep customer loyal On-going R& e D 기술개발 능 *Continous development of 력 core technology Business model 창출 능력 *Develop profitable business model <Figure 14: Critical Success Factor of NHN>
  • 19. 3.1.7. Financial Analysis ① Financial highlight The purpose of visiting NHN is following; 6 out of 10 visit for searching and 3 out of 10 for game. It concentrates on search and game, while Daum.net focuses on mail, café and transaction. Here is the main difference of revenue source. Although Daum.net can’t make money except from transaction, NHN can derive revenue from search and game. These kinds of premium services play the role of cash cow. The portion of premium service in the revenue is on the increase. Refer to the Figure 13. Others Marketing Service Transaction 350 Premium service 300 250 200 150 100 50 0 99 00 01 02 Others 1 20.6 9 6.3 Marketing 17.1 67.8 70 67 Service Transaction 0 0 10.4 17.2 Premium 0 0 153.3 206.2 service
  • 20. <Figure 15: The Structure of NHN Revenue> Even though NHN secures the profitable revenue model, it tries to diversify the revenue sources. It especially is going to strengthen entertainment service and charged contents which are the core competences of DAUM. Nowadays, NHN launches ‘ENTOI’, entertainment service, personal homepage service and photo album service. These kinds of services are enforced premium services. Figure 16 illustrates revenue diversification. Others Marketing 2% Service 23% Transaction 6% Premium Service 69% <Figure 16: Revenue Diversification> Since 2001 the income has been raised as the result of revenues from premium services. In the game sector, new launched RPG is expected to draw revenue growth in the future. Income from search advertisements also seem to increase, but the growth rate will be decreased because of fierce competition among rivals. Trends of operating income and net income are illustrated in the Figure 17.
  • 21. 200 Operating Income 178.8 173.4 Net income 150 137.1 127.4 100 53.3 50 25.6 0.9 1.7 0 99 00 01 02 03 -50 -79.2 -82.6 -100 <Figure 17: The Income Performance> ② Stock information Current Price: 109,110 (`04/06/25) PER: 5,815 Par Value: 500 It is very uncommon fact that e-business has higher turnover in Korea. Even though NHN is the second in terms of traffic measurement when compared with DAUM, it has more potential and profitable financial structure. The company’s 2004 sales and EPS should rise 47% and 37% y-y, respectively, thanks to an expanding premium search ad market and sales generated by a new combined knowledge-search and shopping service, though its growth momentum has slowed somewhat due to aggressive marketing activity in 2H03 and rising labor costs. Recently, NHN started launching game portal in Japan and China. Its solid performance in the foreign market should make up for its stalled growth in the domestic market. 2000 2001 2002 2003 2004F 2005F Sales revenue 88.4 242.6 746.1 1,674.8 2,356.3 2,957.6 Operating -79.2 53.3 302.3 740.4 1,033.6 1,256.5 Income OP margin -89.6 22.0 40.5 44.2 43.9 42.5 EBITDA -57.1 92.0 350.4 811.4 1,141.9 1,403.2 EBITDA margin -64.6 37.9 47.0 48.4 48.5 47.4 Net Income -82.6 28.6 229.5 602.2 746.4 917.7 EPS -2,212 551 3,988 8,097 10,038 12,339
  • 22. PER N/A 173.3 23.9 11.8 9.5 7.7 EV/EBITDA N/A 55.0 18.5 7.5 5.0 3.6 ROE -36.6 7.5 31.0 44.1 36.6 32.0 Net cash flow 68.5 78.0 614.7 981.7 1,404.8 2,020.5 <Table 4: Financial Information of NHN, LG Investment and Securities> 3.2. SK Communications 3.2.1. Company Overview Starting with LYCOS Korea and NATE.COM, SK Communications established in 2002. It’s currently operating NATE, a general portal site, CYWORLD, the largest community site in Korea, DDANGKONG, newly opened game site, and so on. SK Communications is definitely latecomer in Korean portal market than competitors; DAUM, NAVER, YAHOO Korea, etc. However, they have got success with the construction of top 3 portal sites (DAUM, NAVER, NATE) in 2004, benchmarking strategically competitors’ successes and failures. Even if there was a support from SK Telecom, a mother company of SK Communications, they have driven the strategy, integration of fixed and mobile, with slogan, ‘Post Portal Nate.com’. Company Name SK Communications CEO YOO, Hyeon Oo Headquarters Seoul, Korea Proprietary Sites Portal Sites Community Sites Game Sites Searching Sites <Table 5: Introduction of SK Communications> Business Area
  • 23. Communications Service Community Service NATE-On, Mail, SMS, M(Music) Club, ID Card, Avatar, Chatting, My home, BBS, Card/Letter CYWORLD Entertainment Service Information Service Cinema, Theme park, Searching, News, Finance, Education, Women, Music(broadcasting), Performance, Photo, Travel, LBS, Car, Ticker, Employment, Star, Meeting, Game, Fortune, Adult, Headhunting, Foundation, Health, Yellow Page Cartoon Mobile Contents NATE Mall Decoration of Mobile Handset(photo, Shopping, Cooperative buying, SOHO mall, music) Color Ring, NATE Air Mobile shopping <Table 6: Business Area of SK Communications> 3.2.2. Brief History SK Communications CYWORLD 1999 5. LYCOS Korea 8. CYWORLD 7. http://www.lycos.co.kr open 9. http://www.cyworld.com open 8. Tripod Service Open 2000 4. LYCOS Shop Service Open 2001 5. Korean e-Government Site Develop 9. Minihompy Service Open 10. Nate.com Open 10. Gift Shop Service Open 2002 10. Nate.com Renewal 7. Music Shop Service Open 11. mall.nate.com Service Open 11. SK Communications established 12. Nate.com + Lycos.co.kr 2003 1. NATE-On Service 2. Nate.com, 4th Largest Visitors 8. SK Communications + CYWORLD 8. Blog Service Open 2004 5. Nate.com, 3rd Largest Visitors <Table 7: Brief History of SK Communications>
  • 24. < Figure 18: Brief History of SK Communications > 3.2.3. Value Chain Analysis Contents Contents SK Comm. Infrastructure End Owner Provider (Contents Aggregator) Provider User Formulating Handset idea Provider Packaging Repackaging available Fixed Internet Acquiring right Internet data information Users Users Service Supplying Finalizing contents Mobile Internet themselves Provider (CYWORLD) contents Value Chain Integrator Users Network Operator <Figure 19: Value Chain Analysis of SK Communications> 3.2.4. SWOT Analysis
  • 25. - Serving integration service of fixed and mobile - Marketing with over 18 million subscribers of SK Telecom - Depending on CYWORLD too much (traffic, - High technology and accumulated know- sales, etc.) how - Not very stable operation of their server and - Integrating various contents services by M&A (killer app.) - Creating new business model S W O T - Fast growth of wireless Internet market - Lower brand identity due to the frequent - Fast development of digital device (digital M&A camera, handset, etc.) - Possibility of temporary trend or bandwagon - Fast growth of IMT-2000(3G) service (CYWORLD) market - Competitor’s chase <Figure 20: SWOT Analysis of SK Communications> 3.2.5. 5C Analysis Communication NATE-On(Mail, SMS, Chatting), Phone Number Mail, Avatar Contents Portal: Searching Service(LYCOS), News, Finance, Entertainment, Game Mobile: Decoration of Mobile Handset, NATE-Drive, Multimedia contents(Music, Movie) Community Minihompy(Blog), Club(Community) Commerce NATE Mall, Gift Shop, Avatar Shop Coordination Interoperation of NATE-On and CYWORLD, Mobile CYWORLD, SMS Notice <Table 8: 5C Analysis of SK Communications>
  • 26. Coordination Commerce Content Communication Coordination Community Commerce Content Community Communication <Figure 21: 5C Analysis of SK Communications> 3.2.6. Critical Success Factor ① M&A Strategy In 2001, NATE started to provide wireless date service as a part of SK Telecom which chares over half of Korean mobile communications market. However, it is merged with NETSGO which is also subsidiary company of SK Telecom and provided Internet multimedia online service. In 1999, LYCOS established its Korean branch LYCOS Korea which provided Internet searching service and after 3 years, it is merged with NATE and established SK Communications. In 2003, next year, SK Communications is reborn as a general portal provider of fixed and mobile by the acquisition of CYWORLD which served Internet community site. M&A strategy of SK Communications integrated distributed capabilities of each small venture firms via large firm’s capital. Also, it made them easily charge market volume by relatively less marketing efforts than new brand launching. SK Communications emerged the sites having been evaluated as dead ones, and then made NATE develop top-three structure of Korean portal following DAUM and NAVER. ② Integration of Fixed and Mobile Strategy There is definitely a support of SK Telecom which owns over 17 million subscribers of mobile
  • 27. communications service that has made SK Communications easy to expand its business using relatively stable way. However, based on these subscribers, they created synergy effects very much by strategy of integration of fixed and mobile. Actually, it is a main strategy that providing third services using this integration. Currently started services such as Phone Number Mail (giving mail account like ‘phone number’@nate.com) and Mobile Cyworld (a mobile community which is interoperable with its fixed community) are really popular, and that fact gives us the success of NATE. Fixed Internet and mobile Internet have already certified their values and potentiality, so they can open new market, if they provide killer contents by integration of fixed and mobile. ③ Blog, as a Relational Community, Strategy What are the major factors which explain CYWORLD’s fast development with over 6 million subscribers for just a few months after mergence with SK Communications? Let us find differences with competitor’s community. Before Minihompy, or blog service of CYWORLD, DAUM’s Café was most powerful community in Korea. However, Minihompy is a relational community rather than Café which is groups of people who want to share same kinds of information. CYWORLD is formed by human relationships and is using real name than ID. That fact means higher user loyalty than Café in DAUM. Also, Minihompy has pursued individual media; not ‘our’ café, but ‘my’ blog. By help of such digital media as digital camera and camera- enabled mobile handset, this kind of service became popular much. Frankly speaking, they caught new trend of individual media very well. 4. Future Prospect of Korean Portal Model 4.1. Mobilization 4.1.1. Integration of Fixed and Mobile SK Communication, a subsidiary company of SK Telecom which is largest mobile carrier in Korea, has succeeded with integrated services between fixed and mobile using close relationship with its mother company. This fact signifies that integration of fixed and mobile will create worthy synergy effects leading new paradigm. The fact that NAVER concluded MOU (Memorandum of Understanding) with KTF, which is second largest mobile carrier in Korea, can support this trend. In past, Clicks-and-Mortar is derived from Bricks-and-Mortar, as a new trend in e-business,
  • 28. but now Clicks-and-Mortar will evolve into Clicks-and-Mobile*. Retail market is not important issue any more especially in portal market, because online business can easily establish a close connection with retail market by outsourcing or partnership. Now, integration of fixed and mobile is, however, more meaningful. Currently, mobile contents providers, usually only-mobile companies, have lots of constraints due to lack of the connection with fixed Internet. Portal for both fixed and mobile can solve this kind of problems and create high-leveled killer application which is able to appear to customers. It is not only for entertainment, but for business fields and other applicable fields. For example, classroom based education business already evolved into e-learning, but now we can expect that m-learning, as a next version of e-learning, will give new business opportunities integrating with e-learning. Additionally, as DMB (Digital Multimedia Broadcasting) service called fusion of broadcasting and communications will just start, this issue will be more significant to improve the contents quality. 4.1.2. Open up Wireless Networks** Unlike fixed-line Internet services that allow all content providers to freely access the network, Korean mobile phone operators enjoy exclusive control in selecting specific content providers for their wireless Internet services. Under the existing law, a content provider and its wireless carriers have to share profits from the provider’s service at the ratio of nine to one. The opening of wireless networks is expected to improve the volume of wireless Internet service. Currently, an estimated 3,000 online content providers, including major portals such as DAUM Communications, NHN and SK Communications, are planning to jump on the bandwagon of wireless Internet services. Additionally, even if total size of market will be definitely enlarged through2 open up wireless networks, existing operator including network operators and some contents provider don’t want to open wireless networks because they may lose market power in this market. However, this open will be realized soon with issues like interoperation between WLAN (Wireless Local Area Network) and wireless Internet. 4.1.3. The Change of Market Situation Traditionally, 3 Korean mobile phone operators surpass lots of content providers. However, with the advent of wireless network open, the power of 3 operators will be decreased. Because they have to compete with portals, customers can enjoy various kinds of services and the 2 * Clicks-and-Mobile: A term describing Internet companies that are taking advantage of the Mobile it has introduced. The term derives from bricks and mortar and clicks-and-mortar. ** Open up Wireless Networks: A term describing the opening of wireless internet network, currently operated by mobile carriers themselves, to other vendors who want to provide services in wireless Internet.
  • 29. market competition will be fierce. As time goes, portal’s business will move from wireless Internet to Web-to-phone. In addition, the content price will be lower since it is impossible operators to form a cartel. Therefore, the important thing is not the channels but the quality of contents. Content provider power in the market will be stronger. 4.1.4. The Evolution of Mobile Handset Digital camera: In June 2004, major handset manufacturers roll out 200 million pixels camera phone. These mobile phones are equal of the performance of low price of digital camera. Digital camera phones are yet imperfect for replacing digital camera in terms of technology. According to the Softbank research, however, until convergence is realized, functional diversity of digital camera phone will be continued. In addition, when 300 million pixels camera phones are released, existing digital camera market is expected to be eroded. Game device: Cellular phone tends to be game device. High level of CPU performance and expansion of memory capacity make possible play station game to be embodied. The final goal is to realize play station game 2 on the cellular phone. Gateway to the real world: Cellular phone began with communication tools and transformed into personal device. Nowadays, it becomes gateway to the real world, that is, it is used for several tools always maintained by the people. Addition of state-of-the-arts technologies such as infrared light communication, digital camera and recognition of fingerprint to the mobile phone enables to link real world with the device. 4.2. Personalization 4.2.1. Blog, Next Community Until now, community was focused on sharing common interests or information. However, next community tends to personal oriented so called publication of private area. As the desire for expressing private life is increasing, personal community such as blog appears. Blog can be defined as personal media and enable users to edit easily. Although it is personalized, the reason it can be also community is that individuals who have similar disposition build network effect. 4.2.2. Location Based Service (LBS)
  • 30. LBS is the services that provide mobile users with location related information by fixed or wireless communication. This application is expected to be the most personalized services. There are several arising backgrounds. From the social perspective, 5 days work emperor boosts the active leisure. As it started from July 2003 in Korea, individual mobilization will be enforced, thus location information will be more important. In addition, customers want more personalized services rather than general services. Suppliers want take advantage of this trend in order to increase revenues and create new market because voice data markets are almost saturated. Moreover, they can provide push services. In the technical point of view, appearance of wireless Internet, increasing mobile network transfer and development of handset devices prompt the need of LBS. Especially, Ministry of Communication and Information supports LBS as the next generation export industry following CDMA. 4.2.3. Private Secretary NAVER and YAHOO started with Internet searching service, and DAUM, FREECHAL did with e-mail or community. Now, these sites became general portal sites and have combined everything what they can provide in Internet. By the way, services of portal are changing individual-focused services. It is because they are distributing appropriately along with personal interest within the flood of information. Indeed, the trend of service is becoming like private secretary, such as customized news by topic, personal financial portfolio, scheduling, local information, and so on. Future portal should take into account how much they aggregate and distribute information interesting by each customer well, in contrast to existing portal which usually focused on how much they provide available information. 4.3. Presentation of Future Portal Business Model New business model what we will present is based on mobilization and personalization, that is ’Personalized Mobile Portal’, as we already considered. Before the presentation, we would like to specify the model using value chain analysis, SWOT analysis, and 5C analysis which are used to analyze NHN and SK Communications. 4.3.1. Value Chain Analysis
  • 31. Contents Contents Mobile Portal Infrastructure End Owner Provider (Contents Aggregator) Provider User Provider for Handset original Formulating Provider contents idea Internet Unique Users (news, Distributor for Acquiring right Service (mobile and information, applications Provider fixed) digital Network products and Operator services) <Figure 22: Value Chain Analysis of Mobile Portal> 4.3.2. SWOT Analysis - High entry barrier due to over saturated - First Mover Position; Winner-Take-All fixed portal market - Personalized and Just In time Service - Continuous creation of qualified contents S W O T - Prospective for technology integration - High expectation for mobile device development - Increase in customer needs for mobile contents - Resistance of existing mobile carrier <Figure 23: SWOT Analysis of Mobile Portal>
  • 32. 4.3.3. 5C Analysis Communication SMS, MMS, Mobile mail Contents Personalized news, Mobile broadcasting, m-Finance, LBS (offer same quality level of service for fixed and mobile Internet), Entertainment Community Mobile community, Mobile blog Commerce m-Shopping mall, Avatar, Mobile adapted contents Coordination Contents provider, Operator, Handset provider <Table 9: 5C Analysis of Mobile Portal> 4.3.4. Personalized Mobile Portal <Figure 24: Current Model of Wireless Internet Market> As we observed from existing wireless Internet market, there are split sectors providing contents. Even if users want to access to the different contents, they have no choice. This current business model is depicted in Figure 24. New mobile portal will realize the true meaning of portal, that is, gateway accessible any place and any time. Contents providers in wireless Internet are concerned with distribution. They want to ensure that their contents reach the public by as many as possible. What is important to contents providers is not to place contents at
  • 33. specific sites, but to make them in high quality. Mobile portal is direct customer interaction channel which links users with any devices and contents from any contents providers. New mobile portal functions as container which can put any contents. Therefore, what is important to mobile portal is how to attract users like current NAVER or NATE. In the future lots of users visit to mobile portal, but each user’s portal is different. That’s because users can have freedom to choose what they want and need from mobile portal. As the power of contents providers grows like access provider, mobile portal plays important role in the mobile Internet market. Figure 25 illustrates the new model. <Figure 25: New Model of Wireless Internet Market> 5. Conclusion As customer needs and preferences change, new mobile portal opportunities become important. These new channels have direct contact with the buyers and access to how customer preferences are changing. Also, the new portals can identify unmet customer needs, develop new types of value-added services, and interpose themselves between suppliers and customers in creative ways. The result is a profusion of new ways to bring content, information, community, and commerce to customers. Currently, the mobile portal business is characterized by rapid, chaotic change. This will continue for several years, stimulating the emergence of radically different types of companies. New portal companies whose services add value to their customers' lives are poised for
  • 34. significant growth. As in any new market, new portal players will see their power and importance rise, fall, and rise again as the market dynamics of the m-economy fluctuate. Mobile portals are still young and plagued by several significant but surmountable problems such as unproven business models and insufficient kinds of contents in Korean market. However, the customer access that mobile portals offer may be worth the wait for companies looking to reach new audiences and build new revenue streams.
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