Walled Garden: a Double-edged Sword

By Chang-Won KimEntrepreneur, and technology blogger at Web 2.0 AsiaWalled garden is a term that refers to a closed set of content or information provided by service providers. Japan's i-Mode mobile content service is a good example of a walled garden service: initself, i-Mode is a very compelling service, but as the service is not compatible to other carriers or mobile phones in general, i-Mode remains largely as an “island” to this date.In some cases, walled garden can be an effective way to get a product or service off the ground quickly.Apple is well-known for keeping things to itself, rather than working openly with the outsidecommunity, until the very moment of unveiling a new product. But since the outcome of such walled-garden approach is usually jaw-dropping awesome, Apple has worldwide fans who revere the high-techcompany almost fanatically.However, as creating innovation becomes a more and more complex process that requires opencollaboration among diverse parties, walled garden as a business model is facing challenges, andsometimes even criticism. Perhaps the best living example of a company going through this walled-garden paradox is Korea's number one web portal, Naver.

“The Republic of Naver”

Naver, the leading Korean internet portal, is so dominating in Korean market that some news mediacoined a new term: “Republic of Naver.” In the first quarter of 2008, NHN (the company that operates Naver) posted operating profit of 128 billion Korean Won, 15 times higher that that of DaumCommunication, the closest runner-up. The stark contrast shows in the market value as well: At some 9trillion Korean Won, NHN is worth more than ten times of Daum.But it actually hasn't been that long since Naver had this much of market dominance. As recently as in2005, Naver's internet search market share was just 36%, which today, in retrospect, looks surprisinglymodest. Compare that to Naver's current market share of around 76%, and one can appreciate howmuch of progress Naver has made throughout the recent years.

Knowledge Search: Naver's Killer Application

So what catapulted Naver into the country's top portal site? Among industry experts, there seems to bean almost unanimous consensus that it all started with Naver's introduction of Knowledge iN, aknowledge search service that enables web users to ask questions or answer ones posted by other users.Knowledge iN allows users to ask just about any question – be it the best French restaurant in Seoul,why toenails grow faster than fingernails, or how to dump boyfriends in a cool way. Then almostinstantly, answers come from other web users, often driven by Knowledge iN's internal reward system.When your answer gets chosen as the best advice by the asker, you earn 10 points; As your points goup, your level within Knowledge iN changes progressively, such as “Superhuman” level at 65,000 points.

Naver's Knowledge iN now has roughly 10 times more entries than Wikipedia and is used by millionsof Korean web users any given day. Some people say Koreans are not addicted to the internet, butaddicted to Naver.

“Oozing out knowledge in human brain to the internet”

The key success factor of Naver knowledge search is that it effectively models human behavior of researching. When we want to know more about something, usually the first thing we do is to ask people around. Want to buy a new digital camera? Chances are you will first turn to Tom, who amongyour friends is called “the gadget guy.”As the information overload continues, search has become the most important application of the web.But one limitation to search is that search engines can only return the results that already exist. This iswhere Naver's knowledge search outshines traditional search engines, which just index and organizeexisting web documents. Knowledge iN, by asking web users to provide answer to a question, fostersthe creation of new content. NHN CEO Choi Hwi-young says, “Naver knowledge search is like oozing out knowledge in human brain to the internet – people who know something better than others can present their know-how,skills, or knowledge.” If traditional search engines are “knowledge brokers”, Naver knowledge searchis a “knowledge broker

and

producer”.The market-proven success of Naver's knowledge search also inspired other web giants in the US andJapan. Yahoo Answer, launched in December 2005, is one of the fastest-growing service properties atthe rather slumping internet portal. Yahoo Japan's Chihe Bukuro (“knowledge pouch”) and NTT'sOshiete (“teach”) Goo both adopted the similar question-and-answer format and are rapidly growing interms of usage.

Naver, a Matrix?

So Knowledge iN has played a big role in making Naver a 600-lb. gorilla it is now. Google would bemuch more likely to be called a Goliath than a David in many countries, but at least in Korea, Google's2% search market share is sharply dwarfed by Naver's 76%.But the problem is that Naver has been putting a walled garden around its content database. Currently, Naver does not allow other search engines to index Naver's content. Often Naver users cannot embedcontent hosted on other services, either. It almost appears Naver wants to keep its users believe that Naver

the internet. Naver's proprietary database built through Knowledge iN and other services is now viewed as a threatas much as it is a success factor. As more and more Korean people realize Naver is not equal to theentire internet, however far-reaching the portal might be, they “switch” and turn to open web-basedservices, such as blogs running under their own domain names. Some compare this switch to the movieMatrix, where people start realizing there is a bigger space outside of the world they live in.“Naver should not dwell on its past laurel; It is required to find innovative services to remain ahead of the curve”, said Kang Rok-hee, an analyst at Daishin Securities, during an interview with Korea Timesin 2007. One way of remaining ahead of the curve, these days, seems to be to open up and leveragecollective intelligence of the many.