Korean internet firms to face challenges as growth stagnates

Korea Broadcast Advertising Corp. CI

South Korean internet companies are expected to face significant challenges in the latter half of 2024 due to declining consumer spending and heightened competition, according to an analysis by Shinhan Securities Co.

In a report released Tuesday, researcher Kang Seok-o predicted slower growth for domestic platforms, stating that new advertising products from platforms such as YouTube and Instagram are proving to be highly effective. “With lower consumer spending and increased competition in commerce, online shopping transaction volumes are expected to continue to stagnate,” the report added.

The Korea Broadcast Advertising Corp. (KOBACO) reported that the Korea Advertising Index (KAI) for September is 102.8, above the baseline of 100 and suggesting an increase in advertising spending. But this figure is notably lower than the typical KAI of over 110 seen in September in previous years, which includes the Chuseok holiday.

Statistics Korea’s data on the internet service industry index showed a 4.4 percent increase in July 2024 compared to the same period during the previous year, with single-digit growth rates observed in every month in 2024 to date except January. Online shopping transaction volumes grew by 5.4 percent in July, the lowest growth rate since 2022.

“A virtuous cycle of increased advertising spending driven by rising consumer spending is unlikely. Enhanced content competitiveness and traffic growth are also insufficient to boost advertising share,” Kang said.

The report also highlighted that the entry of Chinese companies into the commerce sector has intensified the competition, and the failure to adapt to influencer-based content trends has resulted in decreased traffic, reducing the competitiveness of domestic internet companies relative to their foreign counterparts.