Tech & Gadgets

Check Out Naver's AI Strategy from the CEO's letter to Shareholders.

by Philip Lee

Updated August 22, 2023

Check Out Naver's AI Strategy from the CEO's letter to Shareholders. — Photo by Álvaro Serrano / Unsplash

Seoul, South Korea - Naver (KRX: 035420) aims to become a dominant player in artificial intelligence (AI).

In a recent letter to shareholders, the company provided insights into its strategic journey across four technology waves.

Why it matters:

Naver's evolution in the tech landscape is a prime example of innovation and adaptability in South Korea's tech ecosystem.

From its competitive edge in search to its embrace of AI, the company's growth trajectory provides insights into broader digital transformation and the strategic choices that enable success in a competitive global market.

The Key Points

The CEO's letter to shareholders defined his wave in 4 parts: Search, Transition to Mobile, eCommerce vs. Social, and AI.

First Wave - Search (1999 - present): Specializing in Korean-language search algorithms, user intent, and community-driven services, NAVER emerged as the dominant player in a crowded market.

NAVER began its competitive advantage by focusing on three critical areas:

Localization: Providing culturally relevant search results.
User Intent: Delivering superior search results through vertical search integration.
Community and User-Generated Content: Increase user engagement with community-driven services such as NAVER Café and NAVER Blog.

This laid a solid foundation for NAVER's eventual transition to AI.

Second Wave - Transition to Mobile (2007 - present): NAVER launched multiple mobile applications and services, leading the global transition to mobile advertising with significant revenue and operating income growth.

In the face of potential disruption during the mobile transition, NAVER performed strongly, growing at a CAGR of 24% in revenue and 20% in operating income between 2006 and 2012.

The successful entry into Japan with the messaging app LINE further strengthened NAVER's reputation and enabled it to achieve 76% penetration of the Japanese population by June 2023.

The third wave - eCommerce vs. social (2014 - today): Instead of investing in social media, NAVER expanded into eCommerce, serving millions of search users and shoppers.

NAVER's expansion into eCommerce with Smartstore made South Korea one of the world's leaders in eCommerce penetration.

The platform now serves 48 million search users and 22 million weekly shoppers.

And the fourth wave has begun.

The Big Picture

The fourth wave will be the big picture of its future. NAVER has begun integrating AI into its core services, investing in foundational technology, business and creative productivity tools, custom AI solutions, and generative AI-infused platform experiences.

AI drives over 80% of user purchases on the platform, accounting for 13% of Smartstore's GMV as of June 2023.
A cumulative investment of approximately KRW 1 trillion in AI research and applications has led to HyperCLOVA, a large-scale language model with more than 100 billion parameters.

NAVER's AI investments are diverse and include the following:

Core technology: HyperCLOVA, focusing on the Korean language.
Business and Creative Productivity: Tools like Connect X and CLOVA for Writing.
Custom AI Solutions: Offerings such as CLOVA Studio and Neurocloud.
Generative AI-powered platform experiences: Investments in new AI-powered search experiences.

The company will unveil its AI strategy and roadmap at Thursday's DAN 23 conference in Seoul.

The convergence of AI with existing platforms marks a promising journey for NAVER, with past successes providing a solid springboard for future growth.