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The ‘portal saga’ in South Korea

South Korea's Emergence as a Digital Economy Powerhouse: The Success of Portal Companies and the Foundation for Data Capitalism
Former President of Korea Kim Dae-jung and Bill Gates
© https://www.pa.go.kr/

In South Korea, the foundation for digital economy in which a business model becomes increasingly and fundamentally dependent on information and communication technology and Web data (Tapscott, 1996; Brynjolfsson & Kahin, 2000) was laid arguably when the former president Kim Dae-Jung’s administration took initiative to construct infrastructure for fostering such emerging technologies, with a view to resolving the IMF financial crisis from which the country was suffering (Kim, 2017). 

The Kim administration pushed for policies to nurture start-ups (for instance, enacting the special Act for start-ups in 1997), and in conjunction with the then-worldwide financial trend to plough into ICT industries, it resulted in a craze for ‘start-up investment’. 

The number of start-ups rose steadily from around 500 in 1995 to more than 10,000 in 2001; however, with the bursting of the dotcom bubble in the early 2000s, such investment over a decade ended up being a failure. In 2002, the government instead pushed for a ‘healthy policy’ that aims to restore and stabilise the market (ibid.).   Regarding the platform economy, what we should pay attention to here are the start-ups that managed to survive such a crisis. 

naver and kakao

Two portals – Daum Communications (Kakao’s predecessor company) and Naver -which were launched in February 1995 and June 1999, respectively, have created an oligopoly where South Korea’s information and communication industry has virtually been predominated by themselves to date. We can find the secret recipe of such success from their nature as a ‘portal’. 

The portal, also called the ‘web portal’, refers to a default site built to pass through when users access the internet on the Web. This created a fierce competition situation inSouth Korea from early on. Initially, both Daum and Naver were focused on providing a search engine, games, and email service, but they have gradually expanded their business model and scope, adding a plethora of services encompassing not only online database and news (KDPC, 2006) but also cultural contents such as shopping, blog, webtoons and web novels, and more recently even fintech and AI-powered services (Naver, 2021; Kakao, 2021). 

In fact, their initial business model was already diversified to the extent that they received commissions and part of sales profits from the content creators and e-commerce companies selling goods and services facilitated by their main platforms (Kim & Yu, 2019). This great success in platform-based businesses has been increasingly influential in the Korean economy.   Noteworthy here is that through pursuing such diversified business models, these two portal companies managed, from the outset, to collect and process data that were generated as a consequence of both corporate and individual activities. In other words, it laid the foundation for data capitalism as a system in which the commoditisation of users’ data enables an asymmetric redistribution of power that is weighted towards the platforms that have access and the capability to make sense of information (West, 2019). 

Data has become ‘big’, as new users have continued to flow into the portals thanks to the network effects.  By the end of 2000s, Daum and Naver had already grown greatly, almost to a maximum possible degree in the South Korean digital economy and market.  To the extent that they first achieved a near-monopoly position in their core business and went on to expand their business through M&As and build a business model transcending specific industries, such process of becoming a ‘giant’ corporation may resemble a shift to a ‘ur-platform’, where, according to Srnicek (2017, p. 111), platforms take on a rhizomatic form of integration, as with the case of GAFAM, for instance.

References:

● Kim, J. H., Yu, J., Sya, K., & Son, S. H. (2021). K-Culture Glossary: 100 Terms to Get You Started with Korean Popular Culture. Jikim Publishing Limited.

● Tapscott, D. (1996). The digital economy: Promise and peril in the age of networked intelligence. New York: McGraw-Hill.

● Brynjolfsson, E. and Kahin, B. (2000). Understanding the digital economy. Cambridge, MA: Massachusetts Institute of Technology.

● Kim, M. H. (2017). Creating the second start-up boom’ through the fourth industrial revolution [4차 산업혁명·스타트업으로 ‘제2의 벤처봄’ 조성]. ET News [Online]. 20 November 2017. [Viewed 18 July 2021]. Available from: https://m.etnews.com/20171120000206

● Naver (2021). Naver. [Viewed 18 July 2021]. Available from: www.navercorp.com/

● Kakao (2021). Kakao. [Viewed 18 July 2021]. Available from: www.kakaocorp.com/ page/service/service/ Kakao Talk?lang=en

● Kim, J. H., & Yu, J. (2019). Platformizing webtoons: The impact on creative and digital labor in South Korea. Social Media+ Society, 5(4), 2056305119880174.

●West, S. M. (2019). Data capitalism: Redefining the logics of surveillance and privacy. Business & Society, 58(1), pp. 20-41.

● Srnicek, N. (2017). Platform capitalism. John Wiley & Sons.

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