Business in Korea

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Internet, Mobile, IT and industry in Korea

Interview YunHo Chung, managing partner at Veyond Partners

I will start  with a really vast topic. Which are according to you the roots of Korea’s advance in telecoms ? The role of the successive governments, the large investments from the chaebols, the consumer habits ?

I think there can be several reasons of the Korean advance in the telecoms industry and I want to point out 3 things as the big factors. number 1 could be the role of the government, number 2 can be a strong telecom companies role, number 3 can be the very high demanding customers.

Number 1 can be the government sector. Government is very crucial especially for the telecoms related infrastructure. For 10 years, we have been thinking the broadband as a very utility kind of thing. It’s a very useful thing but at the same time we regard it as a social infrastructure. That means government should invest a lot of money and time and ressources and we thought that this kind of thing was very much led by the government. First, we developed our own technology, not only by the goal of the big companies but also by the Korean R&D organizations such as ETRI. ETRI is one of the leading telecom related R&D organization with very talented people. They created very strong technologies and provided them to the private sector. Another explanation is regulation. Regulation does not allowed many competitors to get to the market because it’s a very heavy investment. Every private company when they invest want to get a lot of ROI from there. So if there is a lot of players the investment will not be properly lay down. So for example in Korea we do not have MVNO. If there is a lot of MVNO out there the competition could be so tenace and not many people would be interested to lay down the infrastructure. In European arena there are such companies like Virgin Mobile, but in Korea, still MVNO is not allowed which means the private companies have the chance to make a lot of money and the government regulated to promote competition in a very efficient way.

Number 2 reason as  I told you can be the very active and strong role of private companies such as Samsung or LG. Those players sell a lot of handsets and new technologies. At the same time we got very big companies called KT and SK which are the service providers. There is a very good combination between the service providers and the manufacturers. Also Korea is a very concentrated country so it’s much easier to lay down the broadband infrastructure and make money from that.

The last thing can be the very high demand of the customers. Korean customers are well known for adopting new things compare to European or American people who are not very fascinated by the new technologies, Korean are very technology driven and at the same time we have the tendency to work very hard or very fast. In korean we have the word pali-pali. We have to work very hard and we are hastening in many ways, we dot no accept very slow things. This whole combination made Korea one of the leading country in terms of the telecom industry.

Recently Korea have seen KT, the leading landline phone operator, merge with its subsidiary KTF, the second mobile operator of the country, will we see more concentration in telecoms ?

I think that Korea is now nearly the ending stage of the consolidation. There is a very strong tendency that the telecom companies are trying to have everything under one roof, which means KT the biggest fixed line company is now embracing its subsidiary company KTF, the second largest mobile operator. Not only they have fixe et mobile, they also have IPTV, internet portals, things like that.

Number 2 group can be SK. They have a very strong presence in the mobile sector and also very strong in the internet sector because they have a subsidiary called  SK Communications widely known for its social network service named Cyworld. About one year ago they acquired a broadband company called Hanaro Telecom now renamed SK Broadband. So they have SK Broadband, SK Communications, SK Telecom, SK Telink for the long distance calls. These are the two big players.

The other possibility you can see is the consolidation of LG Group. LG has a very strong position in Electronics especially as a handset maker but at the same time they have the number 3 mobile network : LG Telecom, and they have a strong recent move to broadband using the bakcbone of the broadband called LG Powercom. What we can predict is these 3 big players will be competing and I don’t think there will be much more room for other players except KT, SK and LG will play a critical role and I think the consolidation is nearly done. Maybe there will be some new players, but they will be niche players, they cannot become the main driving force.

So this is about the operators, now what about the manufacturers ? Since the Wipi is not mandatory anymore in Korea, do you expect any significant change in the hierarchy of phone manufacturers in the local market ? Can Nokia or Sony-Ericsson gain significant market shares ? With traditional terminals or smarphones ?

I am asked this question very often by foreign experts, the correspondant of the Wall Street Journal asked me the same question last year. If I say the conclusion first, yes, I am sure there will be more possibilities for foreign players. When you talk about the 5 big handsets makers, Number 1 is Nokia, Number 2 is Samsung, Number 3 is LG, Number 4 is Motorola, Number 5 is Sony Ericsson. In Korea, Samsung and LG are dominating the market. There is no Nokia, there is no Sony Ericsson,  Motorola is in Korea but not that big.

But the point is the handset industry is changing a lot recently with the arrival of the iPhone. We are now moving away from the traditional handset to the smart handset. In Korea RIM (Blackberry) arrived and some specific smart handsets companies like HTC or Sony Ericsson with Experia. I think there is a good opportunity for the foreign players. But having said that, you have to understand that Samsung and LG are really strong players and having doing this business for many years and they do have also the bargaining power, they know the very demanding Korean consumers. There is not a very high possibility for players who are not able to fill their needs. Samsung and LG are testing their very good handsets in Korea while Nokia is competing in Korea with a very old outdated model. Why should koreans get interested in this old fashioned model. If they want to come to Korea, they have to come in a more appropriate way and I am sure for that reason, and this is my personal opinion, that RIM and the iPhone will make some good impact because they have very specific technologies edge and at the same time very good features. I don’t think others will be very powerfull especially Motorola, Sony Ericsson, or Nokia are not anymore sexy to people.

Between their high investments in Wibro and the little success of the service, Korean operators are in an uncomfortable position. What is the future of Wibro according to you ?

Wibro, in other words mobile Wimax has a mixed outcome in different countries. I think that Wibro will no perform very well in Korea because there is already good infrastructures. We have already FFTH, we are in the stage of 3.5G with HSDPA/HSUPA and also very strong connections with broadband, Wifi is very much deployed, so why should we use the Wibro ? Wibro is a Korean developed technology so the governent wants to make it a success but the private companies are not anymore interested by it because if they want to lay down the infrastructures it will cost a lot and it will not give the required ROI.

But when we talk about the emerging countries, such as India, China, Russia, Southern America many countries lack the broadband infrastructures. Using traditional bradband infrastructures cost a lot but Wimax is a relatively cheap and easy to use and already commercialy proven so it’s much better than LTE. LTE is still evolutionary and can’t be in the market before 3 or 4 years time. Wibro is growing very fast especially in countries of central Asia like Kazakhstan, Afghanistan so I think that even if it is not a success in Korea, it will work very well in other countries.

Despite a very high adoption rate, mobile TV can be considered as a commercial failure in Korea. According to you, what is the appropriate business model : subscription or advertising-based and why ?

Korea is well known as a pioneer of mobile TV and among the different technologies standard like DMB or DBBH, we adopted DMB. DMB technology can be divided in two categories. One is the satellite DMB operated by TU Media, again a subsidiary of SK Telecom and another which is terrestrial DMB operated by the traditional broadcasters.

S DMB and T DMB are operated under different models : T DMB uses the advertisement model which is quite natural for broadcasters but S DMB cannot rely on advertisment because mobile TV is a relatively new medium and not may advertisers will trust this one and in order to make the ROI they have to charge a lot subscribers. Mobile TV was successful in terms of the deployment but not in business terms because the companies who are operating the DMB are not making good money. The reason is that there is many alternatives out there. DMB is good when you are out on the move but mobile TV doesn’t provide you the full experience because it is a very small thing. The quality is very great but at the same time this has limits. I can use T DMB without paying so why people should use the S DMB which is at least 10 dollars a month.

I think the advertisement model will work well. One good example of success is American, even not from the mobile TV sector, it is the growing power of Hulu.com which is an advertisement based model. Hulu is free, driven by advertisement and provide really good content which is the good combination. People are becoming more and more picky so they are not going to pay. I personally think the advertisement model will work much better.

Even in a period of crisis when advertisers are cutting their budget ?

I have been studying in UK so I know the situation in UK quite well, people who wants to watch the English Premier league they cannot watch on BBC, they have to buy the SKY satellite and they pay a lot of money, but people are watching that because there is content. Content is always the king and if I am a big fan of English Premier League either I go to the pub or I buy satellite TV.

So paying model might work with very specific high quality content ?

Of course. There is someting very interesting in Korea. Koreans are very fascinating by baseball, TU Media had the exclusivity of the World Baseball Classics this year. At that time people subscribed a lot which means for exclusive content, people are willing to pay. I can predict that contents such as adult contents, such as specific news, let’s say Bloomberg will work as you cannot see on T DMB.

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Interview Jinsoo Kim – Representative director Yahoo! Korea

dsc04235Do you receive directions from the USA ?

Yes, for some part. I have to comply with the corporate direction, so I have to take it into consideration when I make the local strategy. But as you know, in order to succeed we have to consider the local users needs.

And they don’t know much about this at Sunnyvale, right ? I guess you have quite a lot of freedom in your everyday decisions ?

There are some constraints as you know but I have some degree of freedom to run the business here. About 2 years ago, we set up regional office so I don’t directly communicate with the guys in the US but through the regional office in Tapei.

Which are the main differences between Yahoo ! Korea and its main competitors like Naver or Daum and which features are specific to Yahoo ! Korea ?

First of all, I took my new role in 2007 and I had three different strategies :
-openness : in order to compete on this market, we need to have more good quality content so I tried to get some content from outside, from partners and from individual users, from the bloggers.
-another is globalization. Yahoo ! is known as a global company but we haven’t done that much in that regard so I tried to get some content from outside and put it into our network. For example, we are running a top of bloggers and some of them are getting content from Japan, US, China and translate those contents in Korean to provide them to Korean users.
-third one is personalization. Even if we have a lot of contents, these contents are not relevant to every user, that is why I emphasized on personalization. One personalization method is called implicit personalization. In order to use My Yahoo ! you have to set preferences but I think the reasons we are not succeeding with My Yahoo ! in the Korean market is because people are not willing to do that.

So it has to be automatic ?

Yes, automatically. For example, if you visit Yahoo ! Korea there is a news module and when a user click some content then  we can automatically push relevant content next time. It is not for everybody. We don’t know users behaviour if they don’t visit frequently. For frequent visitors, we provide one tab called personalized news so that they can find more relevant content there.

Do they have to login or do you use cookies ?

No, just by cookies. Other thing I’d like to add is that editing is very important as there are more and more content, too many content, so we have to select quality content. Before, editors do that work by intuition. I asked engineers to make a tool to track the clicks. If there is a low number of clicks during a certain period of time, they can switch for new content. That is different from our competitors and from Yahoo ! in other countries.

And which are the features people are using the more ?

The most frequently used module is news, people click a lot and we update frequently.

Which kind of news ?

The most popular are entertainment news and sport news. Sometimes political and economic news. These days people are very sensitive to economic news. Most of the clicks are made on the frontpage. News is number one and second one is search. Third one is blogs. The second module below news is for blogs. We give money to individual bloggers to keep posting 2-3 times a week. One blog can attract more than 100,000 visits a day. We selected bloggers in 2007 under the project named 100 top bloggers to be come Yahoo ! top bloggers

Which subjects are popular ?

Sometimes historical contents, artistic ones…

We talked about User Generated Content. It is an opportunity for you to have free content, but at the same time, quality can be very uneven and sometimes users can feel overloaded ?

When we think about web 2.0, UGC, we have to think from two different perspectives : the reader perspective and the content generator perspective. We are dealing with 4.3 millions users but only couple of thousands are really generating their own quality content. So first of all , we figured out who are the top bloggers, we payed them. We have also blog search which ranks bloggers based on queries and an algorithm, every day. By using blog search, readers can easily find which bloggers are the best. Also I’d like to further emphasize we filter the quality and divide blogs in categories so  that users can easily access to contents.

Do you take into account votes or comments from readers ?

We are not doing that yet, but we are thinking about such features for blogs selection. We have Buzz running in the US and my plan is to add this feature to Yahoo ! Korea.

Is it working well in the US, because we mainly hear about Digg ?

I heard that Buzz is working better than Digg, that is good news. But users have to login to access this buttons. We would like to get rid of this.

Recently Google and Yahoo ! seal a deal here in Korea on Maps. Here, Google and Yahoo ! are not the big players, is it the only reason ?

I think the reason is quite obvious. Some engineers from Google and Yahoo ! came to us to have this kind of deal. We reviewed the proposition. They are very good with Youtube and video contents and we are very strong in local contents. So by exchanging we can better work.

You easily got the OK from Sunnyvale ?

Some peope had concerns, but it went very well.

Do you have any other project of partnership ?

No. But the basic principle is to think from a very pratical perspective, instead of political reasons. We need the market. This is the biggest goal. So we can continue to do this kind of things. And they are not exactly competitors in the market, so we work together and increase our market share.

How do you think the average Internet starting page will look like in couple of years ?

I have to talk from two different perspectives. One is visual/design and the other is content. From the visual/design perspective, if you remember when Yahoo ! opened it just had links, no images, except for the logo; that changed a lot. We are trying to meet users’ needs. I don’t know if we are meeting users ‘ expectations as much as they would like but we try to do that. Also, the frontpage is considered as the corporate brand identity so we have a quite similar look and feel as the US version. And from the content point of view, we introduced images and video modules at the bottom of the page. Contents are getting richer. Also the contents are getting more and more relevant to individual users by applying personalization features. But the evolution is different from country to country. In Korea, the Internet infrastructure is good so we can put more on the frontpage compare to other countries.

Finally, what are your plans for the mobile version of the site ?

We have to prepare for that, but I don’t have much room to think about that. For now we have to focus on PC, and after we have succeeded, we will have to gradually migrate to other devices like mobiles or IPTV.

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Interview Gen Kanai, director of Asia business development, Mozilla Corporation

genGen Kanai is the director of marketing of Mozilla Japan and the director of Asia business development for the Mozilla Corporation.

Can you give us some figures about users of Firefox in both Korea and Japan ?

For Korea, the only information I have is from internettrend.co.kr, which says .65%.  Less than 1%. For Japan, again there is no perfect data but we believe the market share for Firefox in Japan is around 15% (at the end of 2008.)  This comes from an annual survey done by ASCII (a major technology publisher) and is corroborated by our own estimates.

What is the strategy of Mozilla to gain market share in Korea ?

The strategy for Mozilla to gain market share in Korea is similar to the rest of the world.  We rely on our users and word-of-mouth.  In fact, we have a very strong user community in Korea led by Channy Yun who works at Daum Communications. However, because Korea is unique in the world in that Korean websites do not use SSL, and therefore secure transactions cannot be supported on any browser or operating system besides Microsoft’s IE and Windows, we are also supporting the efforts of Dr. Keechang Kim who is trying to use the Korean courts to break the monopoly of the browser in Korea.

For more information :
http://www.mozilla.or.kr/ko
http://www.slideshare.net/Channy/the-history-and-status-of-mozilla-korean-community

I could read that Law Professor Keechang Kim was filling suits against the government of Korea for not preventig the monopoly of Microsoft especially concerning Internet Explorer, what was the decision of the justice ?

The first decision was denied.  Dr. Kim has appealed and we are awaiting news of the appeal.  I am not sure when to expect the decision- perhaps by this spring?

Is the open web movement growing in Korea or is it still a very low minority of people ?

I would say that it is certainly growing but still has a long way to go.  The vast majority of web pages are designed only for Internet Explorer and of course every site that requires secure transactions uses an Active-X control for that process.

For more information :
http://web20asia.com/299

Can you give us some informations about the next Firefox version?

The next version of Firefox is 3.1, code-name ‘Shiretoko’.

For more information :
https://wiki.mozilla.org/Firefox3.1

What about Fennec ?

The big news that was recently announced by Christian Sejersen who is Mozilla’s director of engineering for mobile is that we will have launched a port to Symbian for Fennec.  So now we will be supporting Linux (Maemo at first but others as well), Windows Mobile, and Symbian.  We cannot build Fennec for the iPhone as it would conflict with Apple’s terms and conditions (note that Java, Flash, etc. are also unavailable for the iPhone.)  We do not plan to build Fennec for Android at this time.

For more information :
https://wiki.mozilla.org/Mobile
http://www.christiansejersen.com/blog/2008/12/10/fennec-mobile-firefox-for-symbian

Firefox is obviously the big success of Mozilla, but can you tell us some fresh news about Thunderbird or other applications developped by Mozilla?

Thunderbird is now managed by Mozilla Messaging which is a new entity created solely for the purpose of supporting and developing Thunderbird.  There is a new team and Thunderbird 3 Beta 1 was released in early December 2008 for review and testing. The Rumbling Edge is a great blog that is covering the changes and updates and fixes to Thunderbird.

For more information :
http://www.mozillamessaging.com/en-US

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Interview Benjamin Joffe, CEO of +8* and founder of Mobile Monday in Beijing

Benjamin Joffe is the CEO of +8*, a Beijing-based strategic consultancy focused on Internet and mobile innovation in Asia. Clients include Microsoft, Deutsche Telekom, China Mobile, Sands Capital and Adidas. Benjamin is also the founder of Mobile Monday in Beijing.

Do you think Facebook, Google and other big western Internet players will eventually gain more market shares in Korea?

No… A little bit, since Facebook does not have a local equivalent (Cyworld’s DNA and target population is quite different). Google possibly a bit as they hired some pretty good guy, including my friend Kim Changwon with their acquisition of TNC. However, Naver = search in the mind of Korean users, and Google looks like an old toy for kids compared to Naver’s search.

What is the main model of monetization for social networks on mobile in Korea and Japan?

Cyworld monetizes via virtual goods and advertising. Mixi in Japan uses mostly advertising. Mobile Game Town and Gree in Japan monetize on mobile and mostly via digital goods, associated with in-browser mobile Flash games.

Do you think there are limits to the advertising based model on mobile in general?

Yes. Advertising does not scale rapidly, has very little network effects. Essentially, advertising is a B2B play, while virtual goods is B2C.
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Are there still barriers to the development of mobile Internet in China?

Yes, huge ones. The main barrier is that China Mobile makes life hard for content providers, who have to find ways to generate revenues outside of the operator’s influence. Innovation comes from constraints, so some companies have already found interesting service concepts and revenue models, but overall life is tough. Another barrier is the absence of good flat-rate data plans, which was one of the main catalysts for the market growth in Japan once 3G was introduced. Last, 3G is just starting, at about the same level the Japanese market was at the end of 2001 and other advanced markets were in 2005, so there is still a long way to go.
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What are the big lessons to be learnt by European mobile players from the Asian experience to build a better ecosystem for mobile Internet?

Europeans invented SMS+, which was a good idea to monetize content. Now SMS is slowing them down, as they cannot get rid of it since most of their profit comes from it. Japan has had push email since 1999 and messaging is now a very small percentage of their data revenue (data ARPU is about 30%). Basically, improving on SMS instead of going all-IP is like improving on candle technologies instead of using electricity. In terms of ecosystems, Japan has done an amazing job for which the closest model is Apple’s iPhone with its application store + revenue share on data. I think most telcos worldwide did not understand what is an ecosystem and saw that as “suppliers” or “contractors” and tried to squeeze content providers instead of helping them thrive. I think their vision is unlikely to change and that the market will simply pass them by.
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When it comes to the revenues who are the biggest earners in Asia : telcos, manufacturers, Internet portals?

Telcos make billions in revenues and profits. Manufacturers have low margins and generally struggle. Internet portals make hundreds of millions and have decent margins. The big winners are the online game companies, the social networks and some e-commerce players. This is going to continue.
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Finally, what are the main innovations and trends in the mobile area for 2009 according to you?

The iPhone raised the bar for all mobile phone manufacturers, so one big trend is the touch screen and wide screen. Another trend is GPS – Nokia is especially keen on that. I don’t expect much technical innovations aside from displays and multi-touch, but the spread of services (most of them already successful in Japan) such as mobile music, mobile advertising, mobile commerce, mobile social networks, possibly mobile books (already a hit in Japan), casual free games as well. Mobile video should be more and more popular but the revenue models are still very unclear. Personally, I find the most interesting is the combination of SNS with location and gaming – a field I worked in back in 2003. Combined with GPS, electronic compass and databases, you can also “point” at things and receive information on them. This will lead to “pervasive” things – somewhat “seeing the Matrix”. Later you’ll be able to point your phone at people or just “detect” them around you, and get info about them (with more or less disclosure). This will change our lives and is not even technically difficult, this is more a business model and service design problem.

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Internet Explorer in Korea

There is an obvious lack of competition on the Korean Internet Browsers market:

Source Trend.logger.co.kr

Do you have explanations to that ? Do you think Chrome can succeed where Mozilla Failed ?

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