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Wednesday, March 8, 2006

What is Google Doing Wrong in Korea?

Posted by @ 11:25 pm
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Google is synonymous with search engines and paid search adverting (pay-per-click ads) all over the world. All over? No, there’s one country in which Google, despite its best efforts, is failing to establish a foothold: Korea. So what is going on there, and what is Google doing wrong?

South Korea has a population of 55.6 million and produced a gross national income per capita of US$12,030 in 2003, which puts it in 49th place, just behind countries like New Zealand and Greece (source: Worldbank). South Korea is an extremely well developed Internet nation. 67% of the population are using the Internet, and in 2005 the country lead the world in terms of broadband connections per capita, with 75% of households subscribing to broadband services.

The Korean search market is dominated by a number of home-grown search engines and portals, with names that people in other countries might have never heard before. According to some rankings from May 2005, the search engine Naver (NHN) held over 62% of the search engine market, followed by Yahoo! Korea (15%), Empas (10%) and Paran (6%). Google came fifth with a tiny 1.6% share of searches – and these figures ignore searches done through the country’s popular portals such as Daum, Cyworld and Nate.com (source: webmasterworld.com).

Industry watchers seem to agree that Google’s lack of success can be attributed to the fact that they “don’t do things the Korean way”, and instead go contrary to the Korean preference for very busy, visual portals. The clean, sparse look that has made Google so popular in the Western world simply doesn’t seem to appeal to Internet users in Korea. Google therefore faces much stronger competition from the popular portal sites like Daum that have been able to create a loyal following of returning visitors. Finally, Google was also a relative latecomer to the Korean market; by the time they moved into Korea, local search engines were already well established.

Google has launched a Korean version of its AdWords program, but holds only a miniscule share of approximately 5% of the paid search market in Korea, which is dominated by Yahoo!’s Overture (or Yahoo! Search Marketing) pay-per-click program. Overture, on the other hand, commands a market share of over 90% in the Korean paid search market.

To make things worse, one of only two of Google’s major AdWords distribution partners, KTH, deserted Google for Overture, and the second partner, Empas, is threatening to do the same. If that does happen, Google’s market share would be virtually negligible. Google has tried to reverse its fortunes by appointing an official AdWords reseller for Korea, but even that does not seem to have been able to stem the negative tide (source: Korea Times).

Google has been highly successful with its uniform approach to marketing worldwide and has displayed great timing in entering new markets at the right time and securing significant market share. Korea seems to be a case where they got it wrong – they had already missed the boat when they entered the market, did not gain traction with their “no localization” marketing approach and weren’t able to secure major distribution partners they urgently needed. While the column “Korea” is only a tiny spec on Google’s balance sheet, I could imagine that this defeat irritates the heck out of Sergey and Larry!









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