hankyoreh

With a few large and deep-pocketed Internet portal companies dominating the market, small and medium-sized online service providers are struggling to keep their businesses alive.

Industry-wide concerns come as several portal sites such as Netian, which once boasted 7.3 million subscribers, are on the verge of having to suspend their services due to a liquidity crunch.

Experts say that the landscape of the local portal market is undergoing significant change, as some portal juggernauts are wielding unrivalled power over the industry.

"If we unveil a new service, executives of large portal companies usually come up and make proposal such as, ’Are you interested in going in on a joint venture, since we also plan to unveil a similar service?’ " said an official of a small-sized Internet firm, declining to be identified.

Even if a smaller company goes ahead with its own service, it is very likely to lose market dominance to larger firms as they quickly copy the service.

A case in point is the uploading and downloading service for video clips, which was unveiled last year by such small companies as PandoraTV and Damoim. The successful launch by the smaller firms lost its luster in less than a year as Naver and Daum, the nation’s No. 1 and No. 2 portal sites, debuted similar services.

According to KoreanClick, a market researcher, Naver maintains its industry dominance, boasting the largest number of visitors, which grow at an average 1 million to 2 million every year. This marked growth, however, stands in stark contrast with smaller firms, which see the number of visitors remain stagnant.

Even specialty sites such as dcincide, a popular Internet site offering tips for digital camera use, are dwarfed by the large portal firms, and some of them are seeking joint ventures with the big players in a bid to survive.

As some large portal companies dominate the market, their oligopoly is also impacting customers, who are finding it more difficult to find a diversity of service.

Though it has promised to continue its services for the time being, the closure of Netian would have a significant impact on customers by making obsolete years of information and data valuable to individual subscribers. Many other Internet-based businesses are feeling the pinch, with many worried they will end up in failure, as well.

"As several Internet giants monopolize services, other smaller firms, which have survived by providing specialized services to customers, have been reduced to a link on the food chain for them," an official of an Internet company said.

Under such market polarization, smaller firms are also having difficulty recruiting a talented workforce, as many prospective hires are lured by more appealing job offers from deep-pocketed firms.

As of Monday, NHN Corp., the operator of Naver and Hangame, is valued at 4.44 trillion won and Daum Communications Corp. has an estimated worth of 632.1 billion won; all smaller firms can offer is growth potential.

"When we offer, for example, 50 of something to a job seeker, Daum would in turn offer 70 of the same thing and Naver would then offer 100. People naturally prefer to leave for such large firms," a CEO of a smaller Internet firm said.

"Even if we nurture talented workers, they snatch them with high wages, making it tougher for us to secure a growth engine," he added.