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For Line, size matters in fight with US rivals

Naver Chairman Lee Hae-jin

TOKYO -- "If Naver is a dinosaur, Google is Godzilla," said Lee Hae-jin, Naver's founder and chairman, at a data center in South Korea after its messaging app subsidiary, Line, went public in Tokyo on July 15. "I'm not sure how we take on companies like Google and Facebook. That would be most scary."

In South Korea, its home country, Naver is big. It controls over 70% of the online search market there. Outside its turf, however, it is a minnow. Google dominates the global online search market, and Facebook's WhatsApp chat service has 1 billion monthly users, more than four times as many as Line. The Naver brand is too weak, compared with the U.S. online leaders, Lee said. He acknowledged that Naver's finances and talent pool cannot match those of Google or Facebook.

At home, the growth of Naver's search-related advertising revenue has been dwindling. Line, though hugely popular in Japan, does not have much of a presence in South Korea, where KakaoTalk is dominant. Naver also lags rivals with its ride hailing and music distribution services.

With few cards left to play at home, Naver's growth now hinges on Line. These days, Lee divides his time between South Korea and Japan, a Naver official said.

Naver CEO Kim Sang-hun has said the head of Line is not Naver, but its Tokyo office. Naver has kept a low profile in Japan because the company feared the "made in South Korea" label might hurt Line's business due to anti-South Korean sentiment among some Japanese.

Now that Line has grown sufficiently to list on both the Tokyo and New York stock exchanges, it is gradually overtaking its parent. Line accounted for more than 30% of Naver's group sales in the first three months of the year, according to a financial statement released April 28. Naver's new digital comic book service is marketed under the Line brand, rather than Naver, despite the latter's high name recognition in South Korea.

Lee looks is looking beyond South Korea and Japan, setting his sights on Thailand, Indonesia and the rest of the world. Still, Naver chose Seongnam in the South Korean province of Gyeonggi as home for Line Plus, the company's overseas business department. The office has around 700 employees from South Korea, Japan and other Asian countries. It remains to be seen how Naver, with its wonder child Line, plans to fight the U.S. giants.

(Nikkei)

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