NAVER

21 August 2023

Dear NAVER Shareholders:

This is my second letter to you since the first this past May, and I thank you again for your continued support.

First, we are excited to meet you all at our inaugural ‘DAN (\ 'dän \) 23 Conference’ and ‘Investor Day’ in Seoul on August 24^th. We look forward to sharing with you our latest developments, the status of our investments into and our capabilities regarding Artificial Intelligence (“AI”), and how we envision AI will further power our business going forward. The event will also be live-streamed. Log-in details will be provided separately.

Before diving into a full day of AI topics, I thought it would be helpful to reflect on how NAVER has successfully navigated three previous secular waves, and how those have collectively better prepared us to ride the next and fourth secular wave of AI.

The competitive dynamics during each previous wave had involved much deeper-capitalized and better-resourced global tech giants, and presented challenges that at times may have appeared to be existential. But each time, NAVER successfully seized the opportunity to emerge as a stronger platform.

We enter the AI wave better prepared than ever, having assembled and trained a 500+ team of Korea’s most talented AI engineers and scientists; as one of the first five companies in the world known to have developed a 100+ billion parameter LLM; and as the uniquely integrated digital advertising / engagement / e-commerce platform that we have evolved into following the last three waves, which we believe AI will only make much more compelling.

THE FIRST WAVE: SEARCH [1999 ~  ]

Korea’s Internet industry was highly competitive and fragmented during the early days of search, where NAVER was in fact a latecomer to a crowded market, which at one time had included Yahoo, Daum, AltaVista, Lycos, Empas and Google. However, we successfully emerged from this highly competitive field as the dominant player by employing a strategy focused on three key areas: 1) localization; 2) user intent; and 3) community and hosted user generated content. This was a highly differentiated approach that our competitors failed to emulate, despite the massively greater resources many competitors had available to spend toward crawling billions of pages across the web.

1) Localization

NAVER’s search algorithms were far better grounded in the Korean language, NAVER’s local map was far more accurate, and NAVER’s local reviews far outnumbered that of any other competitor. This resulted in the ability to deliver more accurate and relevant search results, not only lexically, but also from the perspective of cultural and regional context.

<NAVER’s Map and Local Service SmartPlace>

2) User intent

The quality of NAVER’s search results exceeded that of competitors, a result of earlier adoption and utilization of vertical search – i.e., search where relevance is not only ranked horizontally but also vertically within each topic category, such as news, blogs, images, etc. NAVER integrated this approach into our main page since 2000, several years before Google launched a similar service (Universal Search).