Will Korean firms follow Facebook?

Home > Business > Industry

print dictionary print

Will Korean firms follow Facebook?

Social networking site Facebook filed to go public on Wednesday, seeking to raise $5 billion on Wall Street. This would make it the largest-ever initial public offering (IPO) by an Internet company, surpassing the $1.9 billion raised by Google in 2004.

Facebook reported a net profit of $668 million and revenue of $3.7 billion last year, the company said in its filing with the U.S. Securities and Exchange Commission. It had 845 million users. including 483 million active daily users.

“[Facebook] was built to accomplish a social mission - to make the world more open and connected,” Facebook Chief Executive Mark Zuckerberg said in the letter accompanying the filing. “There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future,” he said.

All of which begs the question, what effect will this have on Korea, one of the world’s most wired countries where social networking has been embraced for over a decade?

When the rumors of Facebook’s IPO resurfaced on Monday, shares of Korean Web portal and online game companies whose offerings take advantage of social networking services like NHN, SK Communications, Gamevil and Com2us, all rose notably.

NHN and SK Communications, the country’s No. 1 and No. 3 Web portals, both have a strong presence in blogging and mobile messenger services, while Gamevil and Com2us both offer online and mobile games in which people can socialize.

The surge came as some investors hoped that the value of these companies could be reassessed.

“It is true that the investors are keeping an eye on Korean Internet companies as there is a high chance that Facebook will go public at a high valuation,” said Choi Kyeong-jin, a analyst at Shinhan Investment.

When the market closed yesterday, however, these shares ended mixed, with some slipping.

“It’s difficult to say there is a cause-and-effect relationship between the high growth of U.S.-based SNS companies and the possibility of a hike in the value of Korean Web portal companies,” said Kang Lok-hee, an analyst with Daishin Securities.

Park Jong-seon, an analyst with Eugene Investment & Securities, said there are risks associated with being so dependent on advertising.

“SNS are still free of charge, and they lack a sound profit model beside ads. Also, there have been talks of possible restrictions [on the business].”

Experts have also expressed doubts about the possibility of Korean SNS companies aiming to list.

Apart from Coupang, Korea’s leading social commerce company which said last August that it is aiming to list in the U.S. by 2013, no domestic SNS companies have made similar overtures.

“We do not have any plans for an IPO,” one of the spokesmen for Kakao Talk, Korea’s top mobile messenger service, confirmed to the Korea JoongAng Daily after the news broke of Facebook’s IPO.

Rather, speculation has been mounting in the industry that NCsoft, a leading online game developer in Korea, may acquire Kakao Talk.

Although pushing for an IPO is likely to help Korea’s SNS companies secure funds and expand their businesses, such moves are not expected in the near future as most of these firms are quite young and have yet to prove their sustainability.

They add that most Korean SNS firms are financially unstable, as they are busy spending hefty sums of money on marketing and publicity in the initial stages of their businesses.

By Kim Hyung-eun [hkim@joongang.co.kr]

More in Industry

Soaring iron ore prices batter Korea's steelmakers

BTS among performers at Lotte Duty Free 40th anniversary concert

[TEST DRIVE] New Chevrolet Colorado can handle anything Korea throws at it

Tada tries again with new taxi ride-hailing service

Kia plant hit with infections for second time this month

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now