South Korea: Naver Provokes Push for Portal Regulation

When a country's leading Internet search provider offers additional services like news and online shopping, how does it affect user rights? Recent expansions by South Korean portal service Naver, which dominates the national market, have triggered controversy around this question for lawmakers and users alike.

Tensions came to a head last week at The Yeoido Research institute, South Korea's incumbent conservative party think tank, where party members held a public hearing on Korean Internet industry market regulation entitled “Internet Regulation for Fairness and Win-Win.” Participants discussed why and how the government needs to regulate dominant popular search portals, in particular NHN‘s Naver service.

For Search and Online Content, Naver Rules

Founded in 1999 by former Samsung employees, Naver has become South Korea's most popular search engine, having captured over 70% of the market share since 2011. But Naver offers much more than just search services. It provides its own curated content ranging from news, to real estate, to shopping, to webtoons. Considering the lack of the supply of Korean content online that lasted through the late 1990s, this business scheme is understandable. It was natural for Naver to become a major content creator. But today its growing influence on the market raises serious questions. Can a search engine provide neutral, unbiased search results when it is also a major online content provider?

Screenshot of Naver search. Naver displays its own content at the top of the search, followed by sponsored links.

Screenshot of Naver search. Naver displays its own content at the top of the search, followed by sponsored links.

Many have criticized [ko] Naver for taking an imbalanced approach to content presentation. For example, if you search the term “lung cancer” on Naver, the first result shows [ko] an entry on lung cancer in Naver's encyclopedia [ko]. This is followed by paid advertisements for hospitals that specialize in lung cancer. In contrast, a search for “lung cancer” on Google yields the Wikipedia “lung cancer” entry as a first result.

Some have accused Naver [ko] of deliberately distorting its real-time popular search queries. Given that Naver has not offered a detailed public explanation on their search criteria, concerns about this allegation persist. In general, Naver's opponents argue that the “walled garden” bias in search results not only threatens free competition, but also hinders users’ ability to conduct neutral searches for information online.

Naver. Photo by Flickr user Joongi Kim. (CC BY-SA)

News Navigation In Naver

Critics also argue that Naver's structure and market dominance has created a biased online media environment [ko] for South Korea. Most Korean Internet users find news online not by visiting a news organization's homepage, but rather by doing a search, typically through Naver's news cast service [ko]. This has forced news organizations to compete not only with each other, but with Naver's news content. Many believe this has triggered a decline both in the quality of online news and the diversity of media outlets publishing online.

Leading newspapers that traditionally held the majority market share for advertising in Korea, such as The Chosun Ilbo, JoongAng Ilbo, and The Dong-a Ilbo, have been the loudest critics of Naver's dominance online. With Naver rapidly outpacing them in profits [ko], they are struggling to compete both with Naver's technical advantage and its often low-brow but eye-catching news coverage. Long known for its obscure editorial policies, Naver has made efforts to increase its accountability and to prioritize users’ ability to choose from a diverse range of news sources online.

Nevertheless, for news organizations that have played an important role in shaping the nation’s political opinion throughout modern Korean history, these changes have been difficult to confront, particularly as their profits continue to decline.

Stealing Start-Up Ideas?

Naver has also been accused stealing business ideas from start-ups in Korea. This has provided ammunition against the corporation for media power houses such as The Chosun Ilbo, JoongAng Ilbo, The Dong-a Ilbo as well as Maeil Business Newspaper, who are seeking to make Naver not only the enemy of Korean news corporations but Internet and innovation communities in general. Some of these entities have taken this as an opportunity to promote [ko] their own interests, targeting and arguably disproportionately criticizing Naver's abuse of power.

Blogger Lee Jeong Hwan has commented [ko] that the mobilization of public opinion by major news corporations aims to shrink the influence of Naver in news industry, while at the same time pushing to establish pay-walls for their news content and enhance their profits:

“언론계에 유료화라는 유령이 떠돌고 있다.” 한 언론사 관계자의 말이다. 조중동 등 보수 언론이 네이버에 융단폭격을 쏟아 부은 이면에는 조선일보 등의 뉴스 콘텐츠 유료화 전략이 깔려 있었던 것으로 드러났다. 포털에서 공짜 뉴스를 없애지 않고서는 유료화가 성공할 수 없다는 판단 때문이다.

A news business stakeholder said that pay-wall idea is spreading in Korean news contents industry. The major conservative news corporations throw out their verbal attacks on Naver because they assume that without eliminating the free news contents of Naver, their pay-wall strategy will struggle to succeed.

Although this prediction hasn't been confirmed by these news corporations, Yonhap News Agnecy, the Korea's largest news agency, recently laid out [ko] such a plan in an informal memo distributed to politicians and academics.

Regulatory Reform and Party Politicking

These shifts have also created opportunities for politicians. South Korea's current government has been keen on promoting both creative economy [ko] and economic democratization, stressing a “fair and win-win” relationship between big and small businesses intended to bolster both innovation and growth.

In this context, Saenuri [ko], the ruling conservative party, plans to propose several new bills intended to tame Naver. Last month's hearing was a first step in this process. By targeting Naver and making search portals subject to stronger regulatory power, conservative politicians may also gain greater control over Daum, South Korea's second-largest search portal, which has shown some bias in favor of the nation's political left.

In contrast, South Korea's democratic party [ko] has criticized these moves, suggesting that they are merely a political maneuver designed to regain conservative power over the media in the online realm. Although the party initially had a negative view [ko] of Naver’s monopolistic and non-transparent behavior, party representatives now say that current fair trade laws provide sufficient regulatory limitations for large corporations like Naver. Earlier this week, the democratic party held a public hearing aimed at “re-thinking” the benefits and drawbacks of search portal regulation.

In late July, after receiving harsh criticism from major newspapers and some politicians, Naver announced [ko] its plans to strengthen its social responsibility by increasing transparency and stakeholder benefits, and promoting Korean-made applications, webtoons, and games on the global market. Despite this announcement, political debate and tensions between the two parties persist and the economic regulatory challenges raised by Naver's unique model remain seriously entangled with the political agendas of politicians and businesses alike.


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