KOREA: Internet firms race to tap China market

Korean Internet firms have jumped into a race to snatch a share of the Chinese market, which boasts the world's second-largest Internet community

The Korea Herald
Monday, April 12, 2004

By Yoo Soh-jung and Kim Tong-hyung

Korean Internet firms have jumped into a race to snatch a share of the Chinese market, which boasts the world's second-largest Internet community.

The move includes Internet portal group NHN Corp., which signed a cooperative agreement last Friday with China's largest game portal, SeaRainbow Holding Corp.

NHN said it would invest 120 billion ($100 million) to advance into China, the biggest overseas investment ever by a domestic Internet or venture firm.

Both companies will launch a joint venture called Ourgame Assets, in which NHN will hold a 50 percent stake. They plan to penetrate Asia's second-largest economy and neighboring countries by exchanging technical advances and market experience. They also plant to jointly develop new game content for the world market.

China is the most rapidly growing online market in the world. Its number of Internet subscribers last year reached 80 million, trailing behind 140 million in the United States.

NHN's move is a reaction to a recent decision made by rival Plenus Inc., operator of the popular online game portal www.netmarble.net. Plenus agreed to share its services with China's largest Internet portal, Sina, beginning in July, in a strategic bid to enter the Chinese market. Plenus stressed that it would not allow NHN to consume the whole overseas market.

In addition, Plenus last Thursday forged ties with the local food and entertainment giant CJ Group with the conglomerate acquiring a controlling stake in the online game company. Plenus sees the team-up as an opportunity for expansion backed by CJ's huge capital.

But NHN says it is determined to rise as a global leading Internet company based on a profitable business model that encompasses Korea, Japan and China.

"With the joint venture, our company is now positioned to secure new revenue sources by building the largest online game network in Asia covering Korea, Japan and China," said an official from NHN's public relations bureau.

SeaRainbow Holding operates China's largest online computer game portal site, www.ourgame.com. It has more than 100 million subscribers and expects this year's revenue to reach $16 million.

NHN is Korea's second-largest portal site with about 31 million subscribers. The company says it earned more than 160 billion won in revenue and 65.7 billion won in net income last year through its online games network, information services and advertising.

Over the past few years, it has been expanding operations overseas. The company's Hangame Japan is the most popular online computer game portal in Japan. Also, NHN invested $3 million last October to create a joint venture with PCCS, an affiliate of Hong Kong telecom operator PCCW.

Meanwhile, Plenus said it plans to strengthen its presence in Japan through the operation of Netmarble Japan, which was established in 2002. The company added that it will use the CJ Group network to capture foreign markets.

As the Korean corporate community aggressively seeks influence in Asia's fastest growing economy, Internet cafes are no exception. Entertainment marketing firm Istar Network (www.istar.co.kr) announced yesterday that it is building the world's largest Internet cafe in Beijing that is scheduled to open in June.

Named "Read China," the cafe will span 2,541 square meters and have seating for 750. Currently, the world's largest Internet cafe is in New York's Times Square. It holds 648 seats. NHN established business ties with Istar Network in March 2002 to co-produce celebrity content services.

Date Posted: 4/12/2004