‘Invasion of mobile local business, is there a solution?’

‘Invasion of mobile local business, is there a solution?’

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DaumKakao (currently Kakao) and Naver recently released a new mobile service, Kakao Hello and V app today.

On the 7th, DaumKakao revealed that the number of users for its integrated phone application‘Kakao Hello’ exceeded 500 thousand within 5 days from release. Kakao Hello’s users exceed 500 thousand… various features including spam blocks, Kook Je News

On the 3rd, Naver revealed that the number of downloads for ‘V’ android version, released on August 31st, reached 61 million in 170 countries just on the day from release. Naver’s live video app ‘V’ exceeds 610 thousand downloads on day of release, YonHap News

Naver released ‘V app’ which allows users to view live broadcastings of programs run by celebrities. Following their release of Kakao Taxi, DaumKakao released ‘Kakao Hello’ which combines users’ address books and call features.

It is not uncommon for new services to be released, but there are times when one first thinks that ‘Huh? Isn’t this similar to something else?”This is the very case for the two services mentioned above. ‘Kakao Hello’ is similar to ‘Moya this number’ serviced by Evain, which allows users to check spam numbers. Kakao Hello has an address book feature added on top. It is also the same for ‘V app’. It seems similar to the mobile video platform ‘Plup’ run by Pandora TV, and game video services ‘Game Duck’ and ‘Street Gamer’.

A lot of mobile services based on videos such as Plup, Game Duck, and Street Gamer are being released.

Pandora TV’s Kim KyongIk Representative had a word to say regarding such phenomenon.

“I am against Naver servicing a video sharing feature. The portal currently holds a great power. If the portal begins to take part in all of these other vertical areas, there isn’t much left to do for other Korean venture. Portals are already a large enterprise and should give opportunities to venture companies and create an ecosystem for them.

I hope that portals would stop doing what venture companies should be doing. In foreign countries, for example, large companies continue to grow the market using M&A. I am not saying this because Naver’s new service directly affects Pandora. I am saying this because this should become the correct and advanced venture culture.

What portals should really do is to take part in things more meaningful, and to put in more effect for trying things that no one else has done before. This would allow domestic venture companies to become global companies and hopefully one day, Korea to have companies like Google or Facebook. This was just my opinion on portals.”

As so, large IT enterprises often release services similar to those released by small-scale start-up companies. Why is this so? The reasons will be outlined around 3 main points.

Structures of companies that seek short-term results

Releasing a new service is not as simple as one might think. A lot of time and effort is required to develop a service, and analyze the related markets and user responses. Even so, the success is not guaranteed either. If the new service, after so much preparation, does not have good short-term performance, it will be immediately reflected to the related teams and personal performance ratings.

It is especially intense in Korea. A friend of mine who works at a large enterprise once said.

I told my boss while dining together that “our team needs to plan a service that thinks 10 years ahead.” He replied “it makes my heart stop whenever you guys say something like that. I’m not even sure about making it until next year, but to think about 10 year” and sighed.

The easiest thing to do in situations like this is ‘imitating a well-established service’. Th is is due to the supporting evidence that it had already been approved by the market. When mass human resources, infrastructure, funds, and influential power are added on top, it becomes even easier to gain a place in the market as a fast follower.

Easily identifiable benefit structure

When the reason behind ‘why imitation is possible’ is tracked down, there is a simple conclusion to be found. ‘It is a service that can easily be imitated’.

In mobile market, the influence of successful services on spread quickly to the public, but possible competitors can easily enter as well. For instance, after the huge success of ‘Anipang’ in the mobile game market, various other pang type games appeared and other pre-existing pang type games gained steady popularity.

When you search for Anipang on Google Play, various other games ending in ~pang can be found.

Releasing new services not just by imitating the service’s feature itself but also by benchmarking the service’s benefit structure can often be observed in the mobile market. Not only are large domestic IT enterprises benchmarking successful foreign services, but also start-up companies are doing the same.

In the same way, while the car sharing service Uber was at a pause due to conflicts with the Korean government early this year, various call-taxi apps such as ‘Lino Taxi’, ‘BaekGisa’, ‘T Map Taxi’, and ‘Kakao Taxi’ which imitated Uber’s business model appeared. The call-taxi apps that were released then did not differ by much from each other in terms of the service featured and the benefit structure. While there may be slight differences, it is because they were all services similar to Uber.

While Uber was on a pause, Kakao Taxi absorbed the domestic call-taxi market using large scale marketing.

On last 14th, Kakao Taxi reached accumulated number of calls at, daily number of calls at 300 thousand, and number of drivers joined at 150 thousand. This is a success thanks to Kakao Talk with monthly average users at 38 million. – The 1 year anniversary of the merging of Daum Kakao, Kakao Taxi is on the ‘run’… O2O benefit creation being the key, Korean Economics

If ‘Limo Taxi’ and ‘BaekGisa’ had released a differentiated service that Kakao Taxi could not benchmark, the call-taxi app market might have looked very different today.

The size of the market

50 million.As can be seen from the population, the Korean market is small. It is nowhere as nearly large enough as China with 1.3 billion or the United States with 300 million. This makes a difference in the standard from which attention is brought. Typically, in the foreign market, users’ attention is drawn when at least 1 million downloads is reached. But in the case of Korea, it becomes an issue even with just 100 thousand downloads.

The difference that comes from such a number difference is huge. As the standard from which attention is drawn is different, it is not easy to imitate popular mobile services in China and the United States. This is because there are too many users already used to the pre-existing service. Even if imitations were made, due to the large population, there is a large possibility that each of those services would continue to survive. Moreover, as M&A culture is popular, it is common for companies to invest in other companies with ‘hot’ services to gain influential power rather than imitating the service, in the United States.

[The reason why American large enterprises are enthusiastic about taking over other companies] – Jo SungMoon’s story of Silicon Valley

In Korea, on the other hand, it is easy for large IT companies to rank the top in the business even if they release a new service much later on. Therefore, it is common to find them in the position of fast followers rather than first movers. Large IT companies’ new services are born with what is like a ‘golden spoon’. As ideas of M&A, combining human resources with the service, are not widely spread, this kind of ‘imitation’ would often be the best logical solution.

There is always voices that claim ‘isn’t it an invasion to mobile local business?’ about large IT companies using the fast follower strategy with large funds, but it is not easy to find a solution. I think that anyone could say ‘one shouldn’t invade local business’. What we should focus on at this point is how to stop the negative cycle.

How about seeking answer in what No JungSuk KipCo Chief Strategy Officer(CSO) at the ‘Open Discussion for continued growth of Korean start-ups’ organized by Google Campus a few days ago.

Picture:No JungSuk CSO Facebook

”Business should now be expanded into global units, going beyond the boundaries of Korea. I think American and Chinese Bidders should be brought into the Korean market to change the market structure (in a way that allows more M&A to occur).”

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