Naver’s Strategy to Diversify Revenue Streams Gains Traction, Momentum with Strong Q2 Financial Results


    • Sales growth in new business sectors—e-commerce, fintech, content services and cloud—continue to improve, exceeding 50% of the total revenue for the first time
    • Search platform business, Naver's primary revenue source since its establishment, also shows steady growth
    • Increased revenue in new business sectors proves that Naver's business diversification strategy is on the path to success

    SUNGNAM, South Korea, July 26, 2021 /PRNewswire/ -- Naver Corporation (KRX:035420) reported its financial gains for the second quarter of 2021 that reflect strong growth beyond its primary revenue source, its search platform, in four new business areas: e-commerce, fintech, content services and cloud business.

    In Q2, the company recorded revenue of KRW 1.66 trillion (USD 1.44 billion) with KRW 335.6 billion (USD 292 million) of operating income and adjusted EBITDA of KRW 480.4 billion (USD 419 million).

    "Naver has established sustainable growth model based on its technological R&D and innovations in services and business models," said Han Seong-sook, Naver CEO. "By laying a solid foundation with our domestic business, we plan to build on our success to date and deliver tangible results with our diversified businesses in the global market."

    Consolidated revenue totaled KRW 1.66 trillion (USD 1.44 billion), a 30.4% increase year-on-year (YOY) and an 11.0% increase from the previous quarter, showing stellar performance in all business sectors. Naver's quarterly sales growth YOY increased for the fifth consecutive quarter. Consolidated operating profit rose to KRW 385.6 trillion (USD 335.6 billion), an increase of 8.9% YOY and 16.2% from the previous quarter, despite the increase in stock-based compensation expenses compared to the previous year.

    The adjusted EBITDA, which mean the company's ability to generate cash flow, rose 19.5% YOY and 9.0% from the previous quarter, hitting a quarterly high of KRW 480.4 billion (USD 417.9 million). The consolidated net profit rose 496.1% YOY to KRW 540.6 billion (USD 470 million), based on the equity law profit of A Holdings, a joint venture that Naver established with Softbank.

    In addition to its search platform, which has been a major source of Naver's revenue since its establishment, the revenue of ventures in four new business sectors—specifically e-commerce, fintech, content and cloud—exceeded 50% of total revenue, proving the success of Naver's business diversification.

    By business sector, Naver's search platform reported a revenue of KRW 826 billion (USD 718 million), e-commerce reported KRW 365.3 billion (USD 318 million), fintech reported KRW 232.6 billion (USD 202 million), content services reported KRW 144.8 billion (USD 126 million) and cloud business reported KRW 94.9 billion (USD 83 million).

    The search platform's revenue of KRW 826 billion (USD 718 million), is an increase of 21.8% YOY and 9.7% from the previous quarter as a result of the application of AI to search services, which improved search quality through user-generated content (UGC) activation and increased advertising efficiency.  Display sales also saw an increase of 48% YOY due to continuous growth of performance advertisements that target consumers' purchase intention.

    The revenue of e-commerce recorded KRW 365.3 billion (USD 317.7 million), up 42.6% YOY and 12.6% from the previous quarter, driven by the growth of NAVER Brand Stores, NAVER Smart Store and SMEs. The number of Brand Stores expanded to around 450, and transaction volume increased by five times compared to the same period last year. NAVER Shopping Live is leading the live e-commerce industry in Korea, growing 17 times compared to the same period last year based on the unrivaled video live streaming technology and the largest small and medium-sized enterprises (SMEs) participation in Korea.

    Fintech recorded a revenue of KRW 232.6 billion (USD 202 million), up 41.2% YOY and 11% from the previous quarter. As for Naver Pay, the Q2 payment amount recorded KRW 9.1 trillion (USD 7.9 billion), up 47% YOY. The number of users and the amount of payment per person increased as well as the expansion of large external affiliates and the growth of existing affiliated malls.  

    Content reported a revenue of KRW 144.8 billion (USD 826 million), up 28.2% YOY and 10.7% from the previous quarter, resulting from the growth of Webtoon and the SNOW video camera app. Webtoon's sales grew 53% YOY, from paid subscriptions from loyal users and the expansion of cross-border content. Wattpad Webtoon Studio, which launched in the second quarter of this year, plans to roll out a global content business in earnest based on more than 1 billion source content IPs. Camera app SNOW's sales also more than doubled compared to the same period of the previous year owing to the introduction of advertisements in camera service and the monetization of the Naver's global metaverse platform, ZEPETO. 

    Cloud recorded a revenue of KRW 94.9 billion (USD 82.5 million), an increase of 48.1% YOY and 16.2% from the previous quarter following the continued growth in public cloud demand. Naver Cloud Platform (NCP) sales grew by more than 77% YOY. Next-generation B2B solutions, such as the supersized AI language model Hyper CLOVA and cloud-based Robot System, which were first introduced in Korea, are also scheduled to begin full-scale testing.

    Financial analysts also positively evaluated Naver's second quarter business performance after Naver's earnings call. Analysts highlighted that the search accuracy and advertising efficiency, which were enhanced through Naver's investment in AI, were reflected in the outstanding performance of the search platform this quarter. New e-commerce services, such as beta tests for merchant solutions and the launch of Naver Fulfillment Alliance (NFA) as well as the enhanced performance of brand stores and live e-commerce, were notable contributors this quarter. Naver's "prioritizing revenue growth" business strategy also received attention as the company closes the trend of downward profit margins.

    Credit Suisse commented, "Naver is expected to show strong growth in the second half of this year based on gains made in robust top-line business areas, such as the constant expansion of advertiser pools, Smart Store's Gross Merchandise Value (GMV) growth by expanding categories, the launch of a fulfillment service and enhanced monetization from Webtoon."

    Goldman Sachs also commented, "It is positive that Naver shows strong growth on its search platform and new business sectors while recovering its operating profit to 20%. Based on the expansion of its advertiser pool, Naver's growth is expected to continue next year."

    Naver expects the strong growth in revenue and the increased value of key business sectors will continue to lead performance in the future.

    About Naver

    Founded in 1999, Naver is Korea's largest Internet company with hundreds of millions of users worldwide. As a global technology company, it operates the No.1 search engine in Korea, Naver, as well as other online services, such as LINE mobile messenger, Webtoon and Webnovel publishing, SNOW video camera app and ZEPETO metaverse platform. Naver recorded sales of KRW 5.3 trillion (USD 4.6 billion) in 2020 and is pursuing changes and innovations in technology platforms through continuous research and development of future technologies, such as artificial intelligence, robotics and mobility.

    For media inquiries, please contact Weber Shandwick Korea, Naver Corporation's global PR agency, at wswselnaverglobalusers@webershandwick.com.

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