Naver, mobile firms launch app store

Korea’s three mobile carriers and Naver, the No. 1 search engine in Korea, have teamed up on an app store called One Store to crack the current market, which is heavily dominated by Google and Apple.

The new app store, which was released on Android-based gadgets Wednesday, aims to claim 40 percent of the market share in three to four years. The service is not available on iPhones.

SK Telecom’s T Store, LG Uplus’ U+ Store and KT’s Olleh Market have already been operating a joint app market since last year, and Naver recently joined the team by investing 2.7 billion won ($2.3 million).

The partnership signals the companies’ desire to take on Google’s Play Store and Apple’s App Store, which hold market shares of 51.4 percent and 33.4 percent each. The app markets operated by the three mobile carriers, Naver and other midsize businesses account for only 12.8 percent.

The integrated app store has set distinctive strategies to compete against its rivals.

Most notably, the partnership with Naver, the No. 1 search portal in Korea, enables app market users to log in with their existing Naver IDs and purchase apps with Naver Pay, the search engine’s payment service. It also allows users to search in the app store with the Naver database.

The three telecom companies will minimize the inconvenience of users having to shift from one app store to another. The new store will also feature purchase points and coupons.

The combined app market will not only provide a user-friendly experience but will also be more convenient for the app developers, as the store will have unified standards.

Courting developers

The four entities participating in One Store are either fostering app developers or supporting midsize companies through diverse programs such as those organized by the government-led Contents Korea Lab.

If One Store is successful, the platform will serve as a distributor for fledgling app developers.

Naver CEO Kim Sang-heon said in April that he hopes to inject about 10 billion won in a string of his company’s new programs in less than three years. If app developers succeed in launching their apps on One Store, a new revenue model could be easily built.

According to data from App Annie, a mobile market researcher, the international size of the mobile app market is expected to reach $101 billion by 2020. Its senior vice president, Danielle Levitas, said that the market is expected to grow at a rate of 20 percent annually.

Apple’s own developed app market has generated $20 billion last year, with 70 percent of the revenue going to developers. Since Apple’s app market was launched in 2008, app developers have seen profits of about $40 billion. This market has also created jobs for more than 1.9 million people.

A competitive landscape

Despite some promising aspects of the new integrated app store, there is skepticism about its benefits and if it will be groundbreaking enough to change the existing market structure.

“One Store is a late mover, but it doesn’t have enough competitiveness to differentiate itself from existing players,” said No Sang-kyu, a professor of business administration at Seoul National University. “There are not enough merits for app developers to make an app that is specifically for One Store.”

For most app developers, who are targeting a global audience, One Store, which is highly focused on domestic consumers, may not have enough reach.

“Most domestic users are already using Google Play or the Apple App Store,” No said. “Will developers really feel the need to pave the way for a new distribution channel?”

Others don’t find the new platform appealing as a profit generator.

“One Store takes 30 percent of the profit generated from app sales as commission,” said an industry insider who did not want to be named. “That is the same rate as other app stores such as Google and Apple. It is highly questionable if developers will be motivated to develop an app for the new platform.”

Industry insiders agree that to secure app providers, which is crucial in the development phase, One Store should lower the commissions they receive from app sales.

“In order for One Store to grow into a competitive player, they will need to provide exclusive content, which would be possible if they form a business relationship with developers,” said Hong Won-kyun, a researcher at KT Economics & Management Research Lab. “For users, they will need to consider having price competitiveness and expanding discount benefits.”

BY KIM KYUNG-MI [jin.eunsoo@joongang.co.kr]