NAVER's Core Ad Business Wavers... Personalized AI Agents as Its Big Bet

Record-high quarterly revenue despite a sharp drop in operating profit
AI search's impact: users read the answers and stop searching
Strengthening commerce and AI factories: a "two-track" strategy

"Given the competitive and mature nature of the advertising and commerce markets, it will not be easy to restore a 30% profit margin in the short term." - Kim Hee-cheol, Chief Financial Officer (CFO)

NAVER posted record-high third-quarter revenue of KRW 3.4724 trillion, but operating profit fell by more than 20%. This has made a swift shift from its existing advertising-centered revenue model to new growth drivers such as B2B (business-to-business) and cloud services its biggest challenge.

On the 13th, Lee Jun-ho, a researcher at Hana Securities, lowered his target price for NAVER following its earnings announcement, saying, "Its core advertising and commerce businesses performed worse than expected. Although the company is trying to monetize repeat visits to its AI tab and conversions to transactions, rapid growth will be difficult in the short term." Jeong Hae-chang, a researcher at Daishin Securities, also said, "Apart from the company's projection that margin pressure will ease in the fourth quarter, we need to see further evidence that infrastructure investment will lead to long-term growth in areas such as personalized AI agents."

During an earnings conference call the previous day, CFO Kim Hee-cheol was asked about the decline in the platform margin. He replied, "In the third quarter, NAVER's platform profit fell somewhat sharply year over year due to investments in major sports intellectual property for events including this year's World Cup and Asian Games, as well as stepped-up marketing to strengthen our competitiveness in commerce and expand offline payments." He added, "These effects overlapped in the third quarter, resulting in a significant decline in the profit margin, but we expect the pressure to ease in the fourth quarter."

The so-called "AI paradox" has confirmed that AI is weighing on NAVER's advertising business, as the margin on its platform, previously a core source of revenue, has narrowed. This has emerged as a common challenge for giant platform companies. As generative AI search services become widespread, efficiency-minded users are increasingly reading only the answers provided by AI and ending their searches—a phenomenon known as "zero-click." Amid growing concerns that this could erode existing advertising businesses, Google and others are also working on alternatives.

NAVER's planned response is an app featuring "personalized AI agents." The company plans to launch new B2C (business-to-consumer) agents by the end of the year, along the lines of Muse, Instinct and Pickle. These agents will provide access to external services through browsing while also connecting NAVER's own search, commerce, maps and payment features through application programming interfaces (APIs).

NAVER's plan to invest nearly KRW 1 trillion by 2030 and establish a logistics subsidiary to strengthen its push into the commerce market is also part of a strategy to secure a reliable source of cash generation through commerce growth. The plan is to keep as many users as possible within the NAVER ecosystem and enable them to complete everything in one place, from searching and recommendations to actions such as payments. This can be seen as a "two-track" strategy: generating stable cash flow from existing businesses such as search, advertising and commerce, then using it to pursue AI factory projects that require bold investment.

NAVER CEO Choi Soo-yeon said, "Our key competitive strength is that we are the only platform in Korea that connects search, shopping, Place and payments." She added, "While preparing a range of action-oriented AI services, we will create new user experiences and revenue opportunities by enhancing our existing businesses."

This content was produced with the assistance of AI translation services.