Feature... The new media plan in Korea

Online is already South Korea’s third largest advertising medium after TV and newspapers, and is still growing fast — by more than 37 per cent last year according to the country’s largest agency, Cheil Communications.

The main recipients of Korea’s motoring online adspend are its two dominant web portals: Naver, the current king of the hill, and the portal it dethroned, Daum, which is now mounting a comeback (see panel). The prize is a rich one. Naver, owned by internet company NHN, or Next Human Network, commands as much as 70 per cent of South Korea’s 779 billion won (US$850 million) online advertising market.

Naver, a one-stop portal which takes its name from a suitably Web 2.0 mash-up of the English words neighbour and navigator, offers the usual suite of services from email to news but its knowledge search database, Knowledge iN, is the application that is pulling consumers in. Knowledge iN, with 60 million questions and answers, has helped propel NHN to a market capitalisation of six trillion won and a market position so dominant that more than half of all Koreans surveyed by the Federation of Advertising Associations have Naver set as the start-up page for their browser.

Naver’s income is set to grow further by the emergence of a relatively new phenomenon in Korea, Google-esque targeted keyword ads, which already count for more than half of NHN’s sales. The keyword ads market in Korea is expected to reach 700 billion won this year, and surpass one trillion won by 2010 .

Naver’s stake in the news space, lifting page views from Korean newspapers, has sparked a reaction from established print media who are aggregating their content at similar portals, and wooing advertisers with multi-channel buys. JoongAng, a major Korea paper, has diversified its media stable, and now boasts a popular portal and cable network, as well as a stable of magazines. Such package deals combine digital’s reach with the prestige of a newspaper ad, notes Eliot Kang, who recently stepped down as CEO of LGAd holding company GIIR. As the internet matures, brand managers are increasingly starting their campaigns online, often virally, before migrating the push to television or print, Kang adds.

South Korea’s advances in wireless broadband and mobile phone TV may be grabbing the headlines around the world, but after years of relatively stasis the country’s media scene as a whole is experiencing the biggest change in a generation.

Driving the industry is the continued growth in ad dollars going on new platforms, principally cable television and online media — which grew 38 per cent year-on-year over 2005 and is now one-fifth of total spend. According to figures from Cheil, media adspend overall grew by a little over eight per cent last year, exceeding an expected 6.5 per cent growth, to reach US$8.4 billion.

Print has felt the effects of the rise of digital media most keenly, although print titles still have the greatest prestige with the upper end of the market, and remain a major advertising medium for a number of categories, including services, retailing, publishing, and government and public agencies. Magazines, meanwhile, retain the largest share of adspend in the fashion sector.

However, a worldwide trend towards free tabloids has intensified in Korea, with evening editions, sports-only tabloids and male-oriented tabloids for young men launched recently, cutting into the circulation of paid-for dailies with advertising shifting to this increasingly targeted end of the market, notes Sung Woo, media planning director with Diamond Ogilvy. Newspaper adspend, still dominated by the ‘big three’ dailies — Chosun, Joong-Ang and Dong-A — grew by just two per cent last year and is forecast to slow further.

By contrast, year-on-year adspend on Korea’s analogue cable networks and the internet surged forward by 38 per cent and 37 per cent respectively. Alongside online, cable TV is the source of much of the current dynamism in Korean media. In a watershed moment last year, South Korea’s three leading drama channels, KBS Drama, MBC Drama Net and SBS Drama Plus, sold out their inventory of adspots on cable for the first time. “Consumption of traditional media has been decreasing, and consumption of new media has been increasing,” explains Seman Oh, media director with Lee & DDB.

Since the first broadcasts in Korea 12 years ago, cable TV has grown to a market penetration of about 85 per cent, a reach of more than 13 million households, and a nine per cent share of total adspend. The cable boom has also provided advertisers with access to niche audiences, a targeted alternative to the mass market buy offered by terrestrial channels.

OnMedia, for example, a seven-year-old operator and Korea’s biggest programme producer, offers OnStyle for the fashion conscious and youth segments, plus StoryOn drama channel for women.
Airtime prices for cable have also been kept low by aggressive competition within the sector. Cable TV is outside the remit of the Korea Broadcasting Advertising Corporation, or Kobaco, a government body that acts as a sales intermediary for all terrestrial TV, giving cable channels more freedom to set their own rates, and enabling them to undercut terrestrial rivals. Operators are also offering advertisers a broader range of opportunities, with branded content becoming increasingly common.

Cheil recently helped develop a reality television show aired on OnStyle to promote one of Samsung’s high-end plasma display panels, the Bordeaux. The brand and the product were exposed throughout four 30-minute episodes of ‘Bordeaux Fashionista in Paris’, to help position it as a fashionable television set with younger viewers who prefer surfing the web and cable TV. The reality TV programme put contestants through a series of fashion challenges. An integrated strategy boosted by press and outdoor spots collected more than 100,000 hits at an interactive website.

However, with competition already fierce, life could get even tougher for cable, with the advent of new digital technology combined with the trade liberalisation effects of a recently-signed Free Trade Agreement with the US set to deliver a double whammy and uncertain future for many channels. At this year’s annual Korean Cable Television Association seminar in June, heavyweight CJ Media, owned by Samsung and controlling 11 networks, warned that few operators would survive the transition to digital broadcasts and an open market. The content provider’s chief executive and president, Seok-Hee Kang, said 10 million subscribers are needed to deliver the necessary critical mass to attract sustainable adspend.

C&M, the second-largest multi-system cable TV operator and the largest in metropolitan Seoul, has just two million subscribers. The full impact of the FTA, which lifts foreign ownership caps in telecommunications and on content, is unclear but industry rationalisation seems likely, particularly with Hollywood poised to increase the share of content it provides to Korean networks.

Moreover, despite cable’s popularity and ability to offer a more flexible sell, terrestrial still commands the biggest prime-time audiences. Demand for a standard 15-second slot on terrestrial far exceeds supply.

“Cable television faces a limit in consumer reach as the adspend increases. This means that major Korean brands still view the three major broadcasters — KBS, MBC, SBS — as the primary advertising media to reach the broadest audience,” says Hak-ik Hwang, a manager at Cheil Communications’ Institute of Strategic Media Planning. “Nevertheless, smaller niche brands are adopting a cable-only approach to reach their target demographics. Some foreign brands also choose cable channels that they feel can better reach their target consumers.”

Cable TV has proved to be a successful challenger to Korea’s traditional media heavyweights but other media channels are becoming part of the mix. IPTV is also emerging to challenge traditional TV, its roll-out held back by wrangling between telcos and broadcasters over who would control the hybrid platform.

Although not full IPTV, online search giant NHN launched MegaTV with telco KT in June. Using KT’s broadband reach, NHN operates a real-time TV search service, and pumps its dominant portals Naver, Hangame and Junior Naver across Korea’s biggest broadband network. “We expect IPTV can be the best alternative medium to terrestrial TV in the future but IPTV has just launched, so it has very low penetration now,” says Lee & DDB’s Oh.

Meanwhile, SkyLife, Korea’s only direct-to-home digital satellite operator, offers 110 video channels, 60 audio channels, 20 pay-per-view offerings and 28 interactive channels. The broadcaster has more than two million subscribers and has started to turn a profit but faces a hard time convincing consumers already wired up to analogue cable services to switch to satellite. The service claimed a 12 per cent market penetration but just a sliver of of total adspend last year. “There really is no better benefit for advertisers and it is difficult to convince people to install a satellite dish,” says Diamond Ogilvy’s Sung Woo.

Korea is also a world leader in the broadcast of television to mobile handsets, but so far advertising revenue is falling short of expectations. The government granted free licenses to KBS and MBC, the country’s top two terrestrial broadcasters, to send terrestrial digital multimedia broadcasting to mobile devices, with services commencing earlier this year.

A third operator, TU Media, has already been broadcasting to mobiles via satellite for two years on a subscription base. However, it is currently haemorrhaging money badly, with fewer than 1.2 million clients.

For both satellite and terrestrial mobile broadcasts, the adspend is negligible. Whether mobile television develops into a must-buy for advertisers remains to be seen.