Start-ups look past Korea

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Start-ups look past Korea

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Going global for local mobile application developers does not necessarily require prior success in the local market, especially for Jeong Sae-ju, co-founder and CEO of Noom Weight Loss Coach.

The app was launched in 2011 on Google Play, the Android app store, from its office in New York. It reached No. 1 in downloads in the health care category in the United States.

Noom has now launched its service in Korean, hoping to expand its presence here and elsewhere in Asia.

“Markets in English-speaking North America and the U.K. were attractive to me because I can attract more users with just one application in English,” said Jeong.

“I had the first-mover advantage when I came to the U.S. and started building a business as a Korean. I didn’t want to miss the same advantage in the Korean market as well.”

He believes that success in the Korean market can lead his company having some promising future in Asia, because people here are tech savvy.

“It hasn’t been digitized yet, but I think people here are keen on trends and accept new things faster given the fact that Korea’s e-commerce is the sixth-largest in the world,” said Jeong.

Before the launch of the app in Korean, up to 20 percent of Noom’s over 16 million downloads of the English version came from Korea.

While it helped users stay fit by suggesting low-calorie salads or smoothies in the U.S., its Korean app gives advice based on an everyday diet consisting of popular local dishes, such as porridge.

“It is important to evaluate what idea to use and what idea to exclude based on the need of each market,” Jeong said. “Our job is to initiate a lifestyle change through changing eating habits and encouraging more activity.”

Meanwhile, many industry experts doubt there will be more start-ups that succeed overseas and then come back to the local market like Noom in the near future.

“Noom is an extraordinary case,” said Rim Ji-hoon, founder and CEO of K Cube Ventures, a company he started with Kim Beom-su, one of the founders of KakaoTalk.

“But as more Koreans are studying in universities overseas, if they were to start businesses with local friends there, it wouldn’t be too rare to see more of similar cases.”

Although most Korean start-ups dream of going global, they also think of occupying shares in the Korean market as a must.

“The local market is a test bed to see if a company has the capacity to expand overseas,” said CEO Jeong Soo-hwan of Appdisco, which operates mobile advertisement application Ad Latte, in which users watch mobile ads and earn money.

It marked sales of more than sixfold of 500 million won ($465,000) in the fourth quarter of 2011 from 80 million won when it launched its service locally in July of 2011, according to the JoongAng Ilbo. It expanded to Japan in November that year.

It has finalized a deal to open an office in the U.S. and Hong Kong and now is in the process of getting approval for offices in Taiwan and Australia. It saw 5 billion won in sales in Q3 last year.

“Going abroad too quickly entails many risks, as many start-ups don’t know how to expand,” said Jeong of Appdisco.

Securing a source of continuing investment is vital to step into an unfamiliar overseas market. Yet, many venture capitals favor investing in start-ups that have been successful locally first.

Many start-ups agree that a sturdy local market base is a must, but it’s not everything.

“Facebook was only in the U.S., but after it overwhelmed the entire U.S., it took over the global market, while KakaoTalk still rarely gets the same recognition after sweeping the Korean market and making inroads abroad,” said an unnamed industry official.

“Globalizing may not be a must for local start-ups, but because the Korean market is small, they won’t be able to break the glass ceiling and enter the global market unless they have strong local demand, which will lead to good evaluations from local investors and then more investments coming in from overseas venture capitals.”

Despite the desire to globalize, many start-ups have limited resources to promote their products overseas. Deciding which country to expand into first often comes from passive observation. They simply release applications in other countries’ app stores and see where they get the most downloads.

“It is true that start-ups lack in research about how to promote their well-made applications to users,” said Rim of K Cube Ventures.

“To find their user base, companies should perform a variety of tests scientifically and analyze their marketing channels for better distribution.”

A mobile application for couples to share their private messages and photos, called Between, also relied on the number of downloads to see what overseas markets to target after its launch two years ago.

After it saw the most traffic from Japan, it has been preparing to open an office there later this year. It has since been actively researching the market further. “We have collected the newest trend to analyze overseas market activities from local developers or media reporters there,” said Park Jae-uk, founder and CEO at VCNC, which operates Between.

Park has learned that Japanese users often check the page which explains how to use the application.

“We received a more enthusiastic response from users there after we put more detailed information into what functions the app has” said Park.


By Lee Sun-min [summerlee@joongang.co.kr]

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