[KH Explains] Naver, AfreecaTV rivalry heats up as Twitch exodus begins

Competition depends on securing more female streamers who are key profit sources

The logo for the Twitch app appears on a smartphone in an illustration. (Bloomberg)

With Amazon-owned popular game livestreaming platform Twitch’s decision to withdraw from the Korean market, the competition to lure the market leader’s popular streamers and millions of users appears to be in full swing among local platform operators AfreecaTV and Naver.

Until recently, Twitch occupied more than half the market -- 52 percent -- with 2.32 million active users according to the monthly average of subscribers January 2022 through November 2023. AfreecaTV, the runner-up with a 45 percent market share, has high hopes to expand its presence with the archrival’s departure, while Naver, based on its unrivaled portal dominance, eyes its expansion into the lucrative market with its brand-new service.

Industry watchers remain mixed about the competition, saying that service quality and creator benefits will decide their competitive edge.

Naver started beta-testing its new streaming service, Chzzk, at noon on Dec. 19, by accepting applications from streamers who have more than 10,000 subscribers on other platforms, including Twitch, in a bid to secure popular creators.

Chzzk, the name of which comes from the sound when one changes TV or radio channels, features Naver-integrated services, convenient communication between streamers and viewers and a video-on-demand function. Among others, it boasts a higher maximum video quality of 1,080p compared to Twitch’s 720p.

"Naver has the competitive advantage of integrating multiple services once a user logs in with one account. This network effect is expected to provide more diverse and high-quality services for users," said Shin Min-soo, a professor at Hanyang University's business school.

Within 32 hours of its launch, Chzzk became the most popular app on both Apple's App Store and Google's Play Store. According to the viewership of Softc.one, a local internet broadcasting ranking site, Chzzk's number of viewers peaked at about 110,000 as of Thursday.

AfreecaTV is also bracing for fiercer competition as it revamps its overall operations. Its average monthly number of users was 2.15 million in the January-November period.

AfreecaTV has allowed streamers and users to synchronize information automatically when linking their Twitch accounts to its platform. It also decided to offer free one-month subscriptions to 100,000 Twitch-turned-AfreecaTV users, who can claim them on a first-come first-served basis.

Streamers who switch their accounts from Twitch to AfreecaTV service by the end of next month will also be recognized for up to 400 hours of Twitch broadcast time, allowing them to meet the 500-hour requirement to apply for the best streamer title.

AfreecaTV is also undergoing a major rebranding as it plans to launch a global platform in March next year. It will change the company’s name to Soop, as well as the platform’s currency and the way it calls streamers, in an attempt for a fresh new start.

Analysts say that it seems unavoidable for some user traffic of Twitch to move to Chzzk, depending on Naver’s marketing efforts in the nascent stage.

“AfreecaTV would have fully benefited from Twitch’s withdrawal, if it were five to six years ago, when there was no powerful competitor,” said Jung Ho-yoon, an analyst at Korea Investment and Securities. “The emergence of YouTube and Naver is a big variable.”

Daol Investment and Securities analyst Kim Ha-jung said that AfreecaTV’s growth largely depends on the influx of female streamers who make up almost 50 percent of its donation sales through its “star balloons” system, while many of the sports and gaming streamers are likely to flock to Naver’s Chzzk.

“If half the female streamers on Twitch switch to AfreecaTV, the Korean firm’s donation sales are expected to increase by 12.5 percent. Female streamers may prefer the AfreecaTV platform with lax regulations compared to Naver,” he said. “But if Naver and AfreecaTV divide the market share, it will be difficult for AfreecaTV to further elevate its valuation.”

Upon Twitch’s announcement of its departure from the Korean market on Nov. 6, AfreecaTV shares surged 26.95 percent, while Naver shares saw a modest 3.52 percent increase.

Currently, AfreecaTV and Naver are valued at about 1 trillion won ($771.5 million) and 35.81 trillion won, respectively.

By Jie Ye-eun(yeeun@heraldcorp.com)