Korean Internet companies picked the boom of online advertising and increasing overseas sales of Korean-made online services as the two biggest issues of 2005.
In a year-end report, the Korea Internet Corporations Association said that the Internet is encroaching on traditional newspaper, magazine and radio-television advertising coverage, accounting for almost 10 percent of the market.
Online advertising may reach 630 billion won this year, up from 480 billion last year, while advertising in traditional print and broadcasting media drops. Newspapers are expected to see an annual drop of 3 to 4 percent in their ad revenues as big companies reduce their television advertisements.
"South Korea's online advertising market is still in the early phase of the development. It is expected to have an average annual growth of 30 percent until 2008," the association said in a statement. The total market for this year's advertising is expected to stay almost unchanged at 6.5 trillion won.
That would mean Korean firms¡¦ budget on traditional media -- TV, radio, and newspaper -- will end up dropping about 150 billion won this year, after seeing a 5 to 8 percent decrease in the 2003-2004 period.
The Internet is the third largest advertising field in South Korea after TV and newspaper. Last year, TV accounted for 33.5 percent of the total market and newspapers 26.4 percent. Radio and magazines have shares of only around 4.5 percent and 3 percent, respectively, far less than the Internet.
Furthermore, the Internet firms predict that online advertising will grow in years to come.
Reflecting such favorable market conditions, Web portal operators are raising the price of their banner advertisements.
NHN, the operator of leading portal Naver, announced that it raised the price of banners by up to 30 percent this month. The company recorded 34 billion won in sales of the banner ads last year, but it already exceeded the figure this year by selling 39 billion won in the first three quarters of the year.
What is more encouraging to NHN is the rapid growth of its keyword advertisement service, which account for around 75 percent of the total ad sales.
The keyword service allows paid firms to be listed on the top of the searching result. For example, a flower shop can pay 900,000 won to NHN per month and a link to their Web site will be seen on the top of the screen when people search Naver with the keyword "Flower."
The keyword advertisement business has grown by 80 percent annually, the association said. NHN earned 119 billion won with it until September.
Booming online advertising is not only a local trend.
The online advertising market in the United States is estimated to have grown 28 percent last year, $11.9 billion this year, and $13.6 billion next year, according to research firm Jupiter Research.
In a survey by Credit Suisse First Boston, about 45 percent of chief marketing officers in U.S. firms said they are intending to increase their budgets on Internet advertising by an average of 30 percent next year.
Leading the trend is Google, a California-based search engine giant. Google dominates the fast-growing market for keyword-search advertising, growing by around 100 percent a year.
Google may make the pie bigger next year in South Korea as well, when it expands its business by opening a subsidiary in Seoul.
Along with the astonishing growth in online advertising, Internet firms responded, in the survey that 2005 was a milestone year for them in overseas sales.
According to the association, more than 50 percent of Chinese online gamers are playing Korean-made computer games.
Japan's Web game market is also dominated by Korean firms. NHN's Hangame Japan, and CJ Internet¡¦s Net Marble Japan were ranked the first and second most visited game portals in the country.
