Naver Corp

KRX:035420

Earnings Call Transcript 2023-Q4

[Operator]

[Interpreted] Good morning. We'll now begin NAVER's 2023 Q4 Earnings Conference Call. We have Soo-yeon Choi and Kim Nam-Sun here with us, and they will walk you through NAVER's business highlights and strategies and financial highlights, after which, we will entertain your questions.

Please note that the earnings results are K-IFRS based, provided for timely communications, and have not yet been audited by an independent auditor and hence, are subject to change after such review.

With that, I will turn it over to our CEO to present on the business highlights.

[Soo-yeon Choi, executive]

[Interpreted] Good morning. I am Soo-yeon Choi, the CEO. NAVER constantly striving for new challenges to make a leap as a global company, is devising various strategies to enhance platform competitiveness by leveraging technology and data capabilities in line with users' content consumption behaviors and is focusing on strategically executing them.

In particular, this year, we plan to enhance our services by providing hyper-personalized content based on generative AI technology, ensuring the content of interest to users is mostly easily -- more easily discovered. We will endeavor to enhance user experience and also to translate it into revenue.

With the overhaul of integrated search in October at the NAVER app at the end of November, we have equipped our platforms with UX and UI, [ tune it ] to discovery-oriented content such as home feed -- search feed and Clip. In addition, we have been making efforts to secure high-quality content in lifestyle areas, including fashion, beauty, outdoor, leisure and places.

In addition, we plan to leverage data from various services such as shopping places and webtoons to offer personalized recommendations to [ alert ] user interests, enabling them to consume more content. We expect that these improvements in user experience will also be extended to the advertising space, ultimately leading to expand the monetization opportunities.

To more actively implement these changes, in November, we welcomed Mr. Bom-jun Kim as our new COO, who will brings with him extensive experience and achievements in technology services and overall management from various IT companies such as Woowa Brothers, NCSoft and SK Planet.

Going forward, we expect Mr. Kim to bring a new perspective to NAVER's overall technology operations, enhancing productivity. He will take a lead in bridging data from the various service platforms such as NAVER Pay, Webtoon and SNOW to strengthen service and business competitiveness. We anticipate that he will inject our vitality to NAVER's continued global expansion efforts.

First, I will discuss the Search Platform business. Search revenue increased by 4.8% year-on-year, driven by the revamp of [ mobile ] integrated search and improvements in app product UI, which resulted in increased CTR. On the other hand, display continues to face revenue declines due to negative growth in sluggish sectors such as construction, retail and finance as well as prevailing trends of reduced marketing expenditure on [ impression ads ].

Lately, there's been a noticeable shift among many small and medium-sized advertisers towards preferring performance-oriented marketing campaigns. In response, NAVER have been rolling on new services like [indiscernible] Shinsegae to strengthen its platform competitiveness. NAVER is introducing premium products as part of its efforts to expand revenue streams. On November 30, Cue:, a new generative AI search service based on HyperCLOVA X, was partially implemented in PC integrated search.

In line with the year end and the early New Year season when demand for galleries and gift increases, we have applied local reservations and shopping, gift recommendation scenarios. These initiatives have garnered positive feedback, particularly for the convenience they offer in seemless transitioning from search to follow booking and purchasing.

In the first half of this year, we plan to expand our services to mobile platforms and corporate multimodel technology to enhance the search experience for more users. After the [ presentation ] at the end of November, the NAVER app saw a significant increase in home feed users, growing 2x within just 1 month, thanks to the advanced hyper-personalized recommendation technology powered by HyperCLOVA X.

Also, the home feed ad efficiency is more than 2x higher compared to ads that are placed on the main mobile page, which is another noteworthy aspect. The short form [ service quick ] is experiencing solid growth after achieving an annual user and engagement targets ahead of schedule.

Recently, the recruitment of [ creators ] has seen an influx of 36,000 applicants, indicating a solid foundation for enhancing both the quantity and quality of content. In December, we launched the better service of our streaming platform, [ CHZZK ], to further sharpen the gaming community that we have been building. In just 1 month after its launch, we secured over 1.3 million MAU and sophistically attracted top streamers from Twitch, demonstrating a positive progress.

Until the official launch, we plan to incorporate features such as video sponsorship, channel subscriptions in addition to voice sponsorship and ads. We also aim to provide a solution migration program for Twitch streamers and viewers, actively gathering user feedback to support more streamers in settling on [ CHZZK ].

Furthermore, we aim to enhance our service competitiveness by integrating with various NAVER services such as search, NAVER Games, NAVER Cafe and Clip, introducing new features powered by AI technology. NAVER's such endeavors are anticipated to result in the expansion of advertising inventory, based on the growth of session duration and traffic, along with the introduction of new [ creative ] products, thereby expanding revenue opportunities.

On January 11, we joined hands with Nike and initiated pilot testing for a new form of advertising called CLOVA for AD for the first time in Korea to utilize generative AI to seamlessly connect the brand's needs with the users' information consumption flow, thereby providing personalized experiences through buttons displayed at the bottom of brand's searches and branding DA.

Users can now experience brand chat, initiating their conversations that extend from search results to product recommendations and purchases, providing an expanded user experience.

During the testing period, the advertisement featuring entry points for CLOVA for AD showed approximately 20% CTR compared to those that are without, and we observed that 30% of the users engaged in product exploration after they checked. We plan to carry out the CBT within the year to analyze user patterns and incorporate advertiser feedback to further improve the product.

Next, I will provide an update on our Commerce business. In Q4, NAVER's overall Commerce GMV achieved KRW 12.4 trillion, marking an 11% growth year-on-year. The growth rate stood at 4.9% year-on-year, excluding the effect of the Poshmark acquisition. Similar to Q3, there was a noticeable increase in service GMV.

Excluding [ Vietnam ], the on-platform product GMV reached KRW 8.7 trillion, representing a 14.3% year-on-year growth, driven by the steady increase in the number of registered brand store and GMV. The service GMV recorded a growth of 34.3% year-on-year, reaching KRW 1.7 trillion, driven by the impact of the year-end holiday season.

The Brand Store witnessed even growth across digital, electronics, which constitute a significant portion of GMV; and health, food brands are focusing on guaranteed delivery; moreover, the growth in the number of brands that was comparable to the previous quarter.

Bookings, order payments, including MST, continue their growth trend, with offline payment transactions reaching KRW 1.9 trillion, more than -- and despite remaining committed to improving rather the brand solution package, which was launched and began to be charged from October last year, has received positive feedback and for various pay solutions such as Brand Store tab, [ brand ] solution and brand CRM contributing to revenue growth.

The year 2024 is anticipated to be a challenging year as economic uncertainties and high interest rates put a damper on consumer sentiment.

Amidst such circumstances, NAVER plans to strengthen collaboration with brand partners by enhancing solutions and expanding coverage of guarantee delivery services, at the same time, leveraging highly sophisticated AI-based recommendation and search, we aim to provide a more precise and including hyper-personalized shopping experience, enhancing NAVER's shoppings competitiveness.

Poshmark posted EBITDA positive in Q4 and also maintained growth in all aspects, including revenue, GMV and market share, solidified its position as the #1 to our C2C platform in North America.

We're working on further strengthening its business competitiveness through the growth of existing business, increased revenue from IP advertising and expansion of the revenue share of the live streaming show Posh Show. We will strive to achieve a growth in GMV and top line revenue through initiatives such that it creates synergy with NAVER.

Next, let me provide updates on the Fintech business. In Q4, NAVER Pay achieved a TPV of KRW 16.3 trillion, representing a 23.9% increase year-on-year and a 7% increase Q-o-Q. Non-cap [ TPV ] in particular, recorded KRW 7.7 trillion, marking a 50% increase year-on-year. This growth was fueled by the continued expansion of offline payments and the addition of major new mergers like [ Line of Life ], further enhancing NAVER's external ecosystem.

Looking [ towards ] payments, including MST, continued their growth trend, with offline payment transactions reaching KRW 1.9 trillion, more then 2.7x higher year-on-year. We launched the NAVER Pay MoneyCard and diversified the payment methods to allow users to enjoy the benefits and convenience of NAVER Pay anywhere in the world. Cross-border payment services, either UnionPay and Alipay, have expanded coverage to [ 65 ] countries, enhancing usability and strengthening the offline payment ecosystem.

In the Platform business, the loan product lineup has been expanded with the introduction of mortgage loan comparison service and rental deposit loan switching service.

In the case of mortgage loan comparison service, we have strengthened our competitiveness by securing the highest number of partnerships with commercial banks in the industry, only providing related real estate content. Just 6 weeks after its launch, the compares increased or passed KRW 3.9 trillion in terms of value.

The auto insurance comparison service, launched in January, has secured partnerships, with the most number of insurance companies on the Platform. And it provides differentiated services through quick and easy premium comparisons, leveraging integration with existing NAVER Pay services like NAVER Pay [ My Car ].

We will continue to expand our lineup of loan and insurance products as well as partnerships with financial institutions to further strengthen our competitive edge in comparison at recommendation services.

Next, let me move on to Webtoon's Q4 performance. In the Fourth quarter, NAVER Webtoon achieved additional improvement in profitability and reached EBITDA positive for the year 2023. This is thanks to various efforts such as continuous resource optimization, expansion of cross-border content and the introduction of new business models.

Despite remaining committed to improving profitability, consolidated GMV of global Webtoon has still increased by 9% compared to the previous year, driven by platform enhancements such as AI recommendations and the success of new stories. Compared to the previous quarter, however, we saw a decrease of 8% to KRW 444 billion due to Q3 peak season base effect.

Webtoon in Japan maintained a high growth trajectory, thanks to increased portion of original series and numerous hit IPs such as Teenage Mercenary, which achieved an annual GMV of JPY 1 billion in 2023 for the first time in online manga. As a result, we solidified the growing position among Japanese manga apps in Q4 in terms of the user count.

In addition, in 2023, the annual GMV within Japan surpassed JPY 100 billion, once again, breaking the previous record through the synergy of creating cross-border original series and the expansion of the local creator ecosystem.

Also in the U.S., there has been a steady growth driven by platform enhancements, such as strengthened AI recommendations, along with the success of local original IP that achieved record-breaking launch-date sales. France also saw a rapid growth by the popularity of new releases, leading to an expansion of paid users.

On a platform level, we are expanding reward events and other new revenue models globally while working on enhancing the convenience of search and personalizing the user experience through events, recommendation technologies by AI curator.

In addition, the community service creators, who we introduced last quarter, is actively running with [ 1800 writers ], engaging with 2.4 million of [ feed ] users that's in November. Additional features like reader comments were introduced, resulting in increased user engagement and product comparison.

We're also expanding new interactive services like photo carve creation based on generative AI and the Year in Review event, leveraging history-based recommendations to enhance user retention. In Q4, numerous blockbuster hits were produced from the rigid store portfolio of Webtoons, leading to the expansion of [ IP ] business revenue and performance.

The Webtoon originals [ Doona ] and Death's Game found success in their video adaptations. After the release of these adaptations, their original story GMV increased by over 10x, reflecting the notable impact of original content.

The series [indiscernible] has been adopted from a web novel, has also gained substantial attention in viewership since it release in January. The [ MDA ] merchandise pop-up stores held 3 times in 2023, achieved record breaking sales at each venue and collectively attracted around [ 170,000 ] visitors.

These events garnered significant popularity and led to successful collaborations with major brands, underscoring the expanding value of Webtoon IP. In 2024, we plan to sustain our [ video ] adaptation initiatives and expand it diverse ventures like merchandise, publishing and gaming to amplify the influence of our IPs.

Last, but not least, I would like to share NAVER Cloud B2B business performance. In November, we completed the delivery of NAVER Cloud products equipped with HyperCLOVA X, securing our first reference for providing hybrid cloud solutions to customers who require internal generative AI services for security reasons.

In December, we signed an MOU with the Bank of Korea, aiming to integrate the expertise, know-how and technological capabilities of its organization in IT, finance and economics as well as to expand the application of hyperscale AI models to the finance economics, fostering new technological innovation.

More specifically, we plan to leverage HyperCLOVA X to deliver convenient public services that search, summarize and recommend various data held by the Bank of Korea. Also, we plan to integrate NAVER's IT technologies such as AI, big data, IoT and cloud into the operations of the Bank of Korea to enhance productivity and pioneer various innovative financial services.

In October, we released the HyperCLOVA X model in API format through the AI development to CLOVA Studio, which can be customized for enterprise needs. Subsequently, we also observed successful integration of [ LLM ] into various services such as in Hong Kong and Paris office.

In late January, we released the HyperCLOVA X [ HCX-003 ] model, which features enhanced performance in following system prompts more accurately and generating natural-sounding [ syntheses ]. The model has improved understanding of information and context as well as writing capabilities. It can perform the various types of tasks, and we aim to create more use cases for businesses.

Going forward, we will utilize [ at times ] underlying technologies and NAVER's mixed data sets to offer users, creators and businesses the necessary tools and [ tailor ] services to enhance productivity and efficiency while also exploring new opportunities for revenue generation.

In the face of significant headwinds both domestically and internationally, 2023 was characterized by resilient revenue growth and diligent efforts to enhance profitability through prudent cost management. Given the challenging domestic, international environment expected this year, NAVER plans to focus its efforts on strengthening the inherent competitiveness of core businesses, such as Search and Commerce, through the use of AI and data-driven strategies.

The goal is to provide more accurate and personalized content recommendations to increase content consumption and usage duration within the NAVER ecosystem and eventually, to enhance user experiences and monetization opportunities.

Next, our CFO, Nam-Sun Kim, will walk you through Q4 financial performance.

[Nam-Sun Kim, executive]

[Interpreted] Good morning. I am the CFO. I will present our Q4 financial results. Before delving into the specifics, I would like to discuss the accounting method changes in Commerce and in Fintech.

In Q4, we have transitioned certain revenue recognition practices related to user [ discount ] permissions in Commerce and Fintech from gross revenue to net revenue, and the transition has been reflected in both revenue and expenses for the period. I will provide more detailed explanation regarding the impact of these changes as I discuss each business.

NAVER recorded quarterly revenue of KRW 2.537 trillion, an increase of 11.7% year-on-year and 3.8% Q-o-Q. NAVER posted annual revenue of KRW 9.67 trillion, an increase of 17.6% compared to the previous year.

Without the effect of shift toward the gross method post 2022 and the net method in Q4 2023 as well as the consolidation of Poshmark, NAVER sales increased by 8.3% in Q4 year-on-year and 11.8% for the full year of 2023 compared to the previous year.

NAVER's Q4 operating profits increased by 20.5% year-on-year and by 6.7% Q-on-Q, reaching KRW 405.5 billion. The OP margin also inched up compared to the previous quarter, reaching 16%. NAVER's annual OP recorded KRW 1.48 trillion, up 14.1% from the previous year, while the OP margin fell slightly compared to the year before to record 15.4%.

The Q4 adjusted EBITDA, excluding the volatility of stock-based compensation and depreciation, reached a record high of KRW 580 billion, up 19.2% year-on-year and 5.3% Q-o-Q, that by improved profitability in Webtoon, increased tick rates in Commerce, including [ KREAM ] and Brand Store, and enhanced profitability in Poshmark.

EBITDA margin, meanwhile, saw an improvement of 1.4% points year-on-year despite the consolidation of Poshmark. For the entire year of 2023, EBITDA rose 18.4% year-on-year to record KRW 2.13 trillion, and the EBITDA margin edged up compared to the previous year to record 22.1%.

Next, let me discuss revenue by each business area. The Search Platform revenue in Q4 increased by 1.3% year-on-year and by 3.3% Q-o-Q, reaching KRW 928.3 billion. In Q4 search ad revenue saw a steady growth, rising by 4.8% year-on-year, as a result of the revamp of mobile integrated search and improvements in the [ prompt ] UI, leading to enhanced CTR.

Display ad revenue in a year-on-year decline of 8.1% in Q4 due to continued weaknesses in sectors such as construction, retail and finance in Korea, but it saw a growth of 11.1% Q-o-Q reaching KRW 229.7 billion. In 2023, annual revenue of Search Platform recorded KRW 3.58 trillion, an increase of 0.6% year-on-year, and this is the [ stiffness ] in advertising market.

At the end of November last year, we partially implemented the generative AI search service, Cue:, into our PC integrated search. Also in mid-January, we began pilot testing CLOVA for AD with Nike to accelerate the application of generative AI services.

In Q4 of 2023, Commerce revenue recorded KRW 660.5 billion, up 35.7% year-on-year and 2% Q-o-Q. Excluding the effects of Poshmark consolidation and accounting changes, revenue grew by 11.8% year-on-year.

The commission in sales revenue surged by 93.3% year-on-year, fueled by the introduction of brand solution package in October and the monetization of the guaranteed arrival service along with the growth of [ KREAM ]. Excluding the effect of accounting changes and Poshmark, the growth rate was 28.3%.

Membership revenue saw solid growth, up 23.5% year-on-year and 5.2% Q-o-Q, led by a steady growth in the number of subscribers. Annual Commerce revenue for 2023 recorded a robust growth of 41.4% year-on-year, reaching KRW 2.54 trillion, driven by growth across Smart Store, [ KREAM ] and travel vertical services.

Fintech revenue in Q4 recorded KRW 356 billion, up 11.3% year-on-year and up 4.5% Q-o-Q. Excluding the effect of accounting changes, it grew by 12.2% year-on-year. Q4, TPV came in at KRW 16.3 trillion, up 23.9% year-on-year and up 7% Q-o-Q.

Among this, non-captive TPV surged by 50.1% year-on-year, driving the overall growth. Offline payment volume also surged by more than 2.7% year-on-year, driven by the expansion of MST payments and the continued growth of booking and order services.

In 2023, annual Fintech revenue reached KRW 1.354 trillion, marking a growth of 14.2% compared to the previous year, driven by sustained expansion of the external ecosystem.

Content revenue in Q4 reached KRW 466.3 billion, up 6. 6% year-on-year and 7.2% Q-on-Q. Webtoon's global consolidated GMV in Q4 amounted to KRW 444 billion, up 9.3% compared to the same period last year. The success of IP adaptations into video content has led to an influx of users to the original works and increased our production revenue. Moreover, platform enhancements like AI-based personalized recommendations and CRM features have driven higher user engagement.

SNOW's Q4 revenue increased 28.7% year-on-year, driven by the global popularity of AI products like EPIK Yearbook. Additionally, the expansion of the camera app lineup attracted more heavy users, leading to an increase in paid subscribers. In 2023, Content's annual revenue reached KRW 1.733 trillion, up 37.4% compared to the previous year, driven by Webtoon revenue growth in Korea and Japan, as well as the global success of the [ SNOW ] camera app.

Cloud revenue in Q4 recorded KRW 125.9 billion, up 13.3% year-on-year and 1.8% Q-o-Q. B2B revenue increased by [ 13.7% ] year-on-year and by 3.3% Q-o-Q driven by revenue generated from HyperCLOVA usage fees and the expansion of paid [ IPs ] in [ applying ] works.

The revenue increased by 9.8% year-on-year, with the additional revenue from Whale's contract with [indiscernible]. But it declined by 10.6% Q-o-Q due to a decrease in [ corporate ] device sales. All in all, annual cloud revenue in 2023 recorded KRW 447.2 billion, up 11% compared to the previous year.

On the Cloud front, we secured the first new cloud customer in November last year and started service provision. We also signed an MOU with the Bank of Korea to offer new cloud services and to develop a HyperCLOVA X model befitting the financial sector.

Next is on expense items. Development and operation expenses, including payroll, increased compared to the previous quarter due to the recognition of year-end bonuses and other incentives. Excluding the effects of accounting changes and consolidation of Poshmark, marketing expenses decreased by 0.5% year-on-year, owing to ongoing efficiency-improvement efforts.

Partner expenses increased in line with the growth of IP production revenue and payment revenue. Infrastructure costs increased compared to the previous year due to the recognition of depreciation expenses for the full quarter related to investments in GAK Sejong data center and new AI equipment.

We will continue to make adequate level of investments in AI equipment in line with the launch of new AI models and services, but we plan to keep this year's infrastructure costs within approximately 7% of revenue, similar to 2023.

Next, let me discuss the P&L by business. First, the combined margin of Search Platform and Commerce saw an increase compared to the previous quarter, driven by the monetization of brand solution packages and guaranteed delivery service as well as increased tick rate in [ KREAM ] and the growth in Poshmark's EBITDA.

In particular, Poshmark adjusted EBITDA improved from a loss of KRW 5 billion in Q4 of last year to a gain of KRW 6.5 billion this year.

Achieving a margin level of 5.1% of revenue, Fintech's profit margin decreased compared to the previous quarter due to the base effect of the seasonal peak in Q3 and strategic marketing expenses related to year-end promotions and new service launches.

Content business saw its losses narrow compared to the previous quarter, thanks to the optimization of resources and expansion of monetization efforts in Webtoon and SNOW.

In particular, efforts such as optimizing resources, including labor costs and marketing expenses in Webtoon, focusing investments on core services and regions and expanding cross-border original content, have enabled us to achieve EBITDA surplus both in Q4 and for the full year 2023. Webtoon's successful turnaround from minus KRW 20.2 billion in Q4 2022 to plus KRW 600 [ billion ] in 2023 helped to reduce the deficit in the Content business.

To our P&L [indiscernible] [ Q-on-Q ] excluding the accounting adjustments from Q3. Consolidated net profit in Q4 rose 129% year-on-year, but dropped to [ 15.3% ] Q-on-Q to record KRW 301.8 billion due to decreases in equity method valuation gains and financial [ insurance ] valuation gains. The consolidated net profit for the full year of 2023 increased 46.8% year-on-year reaching a rigid KRW 88.4 billion.

Next, I will discuss the cash flow and balance sheet. Q4 free cash flow came in at [ KRW 382.5 billion ], up KRW [ 219.1 ] billion Q-on-Q, backed by the growth in adjusted EBITDA and a decrease in CapEx. Thanks to such cash flow generation, we managed to pay back a total of USD 800 million in loans taken for the acquisition of Poshmark in January last year.

Also, through the rebalancing of non-core investment asset portfolio, such as direct and indirect funds, investment stocks and income security, is initiated in the second half of 2022. We have completed securitizing approximately KRW 800 billion worth of assets cumulatively.

Lastly, in accordance with the shareholder return plan announced in May 2023, we retired the treasury stocks equivalent to 1% of the total issued shares as of November 7 last year.

We also find to pay out cash dividends worth around KRW 119 billion, which is equivalent to 20% of the average consolidated FCF over the past 2 years, following the approval at the shareholders meeting in March of this year. The size of this year's cash dividend is 91% larger compared to the dividend for the 2022 fiscal year.

Going forward, we will manage dividends effectively in accordance with NAVER's liquidity, debt ratio and future investment plans.

At the upcoming regular shareholders meeting, we will propose amendments to the articles of incorporation to separate the record day for voting rights and a result day for dividends in line with global standards to allow shareholders to make investment decisions based on the dividend amount. This will help to enhance predictability in shareholder returns.

This ends the Q4 financial performance update. We will now take your questions.

[Operator]

[Interpreted] The first question will be presented by Eric Cha from Goldman Sachs.

[Minuh Cha, analyst]

[Foreign Language]

[Interpreted] I would like to ask two questions. First relates to the recent trend, where we've seen a quite steep growth of GMV from China-based cross-border platforms. Would like to understand as to what mid- to longer-term impact this will have on NAVER Shopping and if you could also elaborate on NAVER's strategy to counter against this trend?

And do you really think that the advertisement spending that's done by these Chinese platforms will have positive impact on NAVER?

Second question is, I understand that NAVER has focused on revamping your existing apps in order to further drive up engagement of your users. Can this have a direct impact on your service platform or even the revenue growth of your Commerce business?

[Soo-yeon Choi, executive]

[Foreign Language]

[Interpreted] Responding to your first question regarding the steep growth of the Commerce GMV that we see from the Chinese platforms, they provide a very clear-cut value to the consumers, and that is why we are seeing such a growth trend.

But in terms of the information regarding the products and the price range and if you consider the product coverage that NAVER Shopping offers, at this point, it is too early to determine as to what the quantitative impact is on NAVER Shopping, and we believe that, that impact is going to be quite limited.

If we think about the fact that NAVER Shopping is underpinned by the advertisement and also we play as a role of an aggregator, these other Chinese platforms are our competitors. But at the same time, they are our partners. Hence, we will continuously keep a close eye on what -- how the trend plays out, and we'll keep a close tab on what the repercussions or impact from those platforms on our business.

[Foreign Language]

[Interpreted] Regarding the amount of ad spend, it is our policy not to disclose each of the ad spend per different advertisers. Now having said that, Ali has connected to our database, upon which they are expanding and making their advertisement spending. And Tmall has recently increased their interest into the domestic market. And we believe that this would drive a further growth of their ad spend. So we believe, all in all, this will have a positive impact.

[Foreign Language]

[Interpreted] Regarding the second question on our application revamp, which is geared towards further driving our user engagement, I can tell you that we are on a smooth sail at this point. We are very much focused on applying the hyper-personalized recommendation, features to our home feed.

And after that application, we have seen the user count actually double, which has shown a very positive trend. And also, we see -- on an ad efficiency or CTR basis, compared to the existing products, we've seen a double-fold growth. And that has played a positive role on the time spent by the users on our platform, and we believe that this will have a positive impact on the ad revenue as well.

So rather than looking towards a short-term gain on the Commerce business, we believe that this will have a long-term effect of extending the time spent by the users and also driving up the engagement of these customers.

And all in all, this will also have a positive impact on our advertising conversion rate, which will, at the end of the day, be a positive force behind the growth of our Commerce business.

[Operator]

[Interpreted] Your next question will be presented by Jae-min Ahn from NH Investment & Securities.

[Jae-min Ahn, analyst]

[Foreign Language]

[Interpreted] I am Jae-min Ahn from NH Securities. My first question relates to -- if you look at some of the global big techs like Google, we are seeing them quite flow in terms of monetizing the AI technologies, and their search ad performance has also been quite sluggish. On the other hand, Meta has shown quite good performance in terms of the short form and their advertisement business. And NAVER seems to have a very good mix of these two elements.

So can you provide us with an update as to how you view this advertisement business, going forward? If you could also share with us the outlook, that would be helpful.

Second part is, I would like to understand as to how you're going to actually bring that AI capabilities to your advertisement and Commerce business in terms of driving the top line revenue from these 2 businesses? Can you share with us your strategy? And timing is...

[Nam-Sun Kim, executive]

[Foreign Language]

[Interpreted] Regarding how to monetize the AI-driven advertisement products, it seems like no one yet clearly knows as to how to go about doing that. NAVER, however, is focused on improving and enhancing the advertisement efficiency and also enhancing the search-related experience.

If you look at Meta, it seems like Meta has now been able to neutralize the cannibalization effect that it experienced from its short-form ads. It's cannibalizing to the existing ad product because previously, they have been reporting about $0.5 billion per annum and a minus impact from this approach.

Now NAVER has, through its home feed and the introduction of Clip, now activated its endeavors to really go into the video advertisement segment. And we think that in terms of the advertisement market outlook, it will be more or less flat on a year-over-year basis. Korea market, we think, is going to post about a mid- to early single-digit growth in the ad market.

And NAVER believes that once the domestic economy starts to rebound and is more activated, we think that, that will be the timeline in which the advertisement revenue will start to show a more solid growth.

[Soo-yeon Choi, executive]

[Foreign Language]

[Interpreted] In inside NAVER regarding the AI strategy, we have that strategy well defined for all of our business portfolios. It just has a different timeline. And also, as we apply the appropriate strategies, we will be able to drive good results from that approach. Basically, in terms of the AI, we will be using that to further strengthen the core fundamentals of our businesses, search advertisement and Commerce, especially focusing on hyper personalization.

I believe that bringing that AI capabilities is going to help us further maximize the efficiencies of our recommendation in our ad business. And in terms of the content, including the Webtoon and SNOW, we have already seen very good performance from AI stand-alone products. The B2C revenue is being generated from the Yearbook product that we have launched.

For the Cloud business, the B2B service is still at its very infant stage of the market development. And we think that we are, together with other partners, creating this market as we go along. And we will set up different reference sites, and we will accelerate that speed.

[Operator]

[Interpreted] The next question will be presented by Stanley Yang from JPMorgan.

[Stanley Yang, analyst]

[Foreign Language]

[Interpreted] My first question relates to what the CFO mentioned about the advertisement market outlook. Can we continue to expect that NAVER is going to outperform in terms of its advertisement business versus the advertisement market growth, the overall market that is? Can we expect that, going forward? And I believe that as you further fine-tune your targeting capabilities that's going to make bigger contribution to the advertisement revenue growth, what is the extent of that contribution?

Second question, in terms of your operating profit margin, can we also continue to expect that your margin is going to uptrend as we go forward? And last year, you were driven by cost savings. And is cost cutting still a viable option for you this year? Or would that improvement mainly arise from the operating leverage?

[Nam-Sun Kim, executive]

[Foreign Language]

[Interpreted] If you look at NAVER, we have a very solid search ad product, which is unrivaled within the market in terms of its market positioning. So we believe that we will be able to do above the market average growth. And recently, with the absence of any targeting-related, I guess, improvements or upgrades in terms of our display ad, we've seen in our display ad dip in terms of its performance.

So we believe that with the adoption of a sophisticated targeting approach, even with a slight increase in CTR rate, is going to directly translate into an improvement in advertisement revenue. Hence, we think that we will be able to outperform the overall market.

[Foreign Language]

[Interpreted] Now, relating to the question on whether we will be able to drive improvements in profitability, up to now, yes, we admittedly focused on cost savings, meaning removing the unnecessary cost drivers. But from now on, going forward, we will focus more on enhancing the productivity and strengthening the fundamental resilience of the company and the business.

For example, the company has about -- more than 60% of our headcount is in the technical, the engineering skills. And if you look at the -- in terms of their performance, we will continue to scale them up. And with the joining of Bom-jun Kim as the new COO, he will look after the technology, the operations, the product related, the productivity aspect. So he will make that contribution.

To date, myself and the CEO has had a priority on focusing on the strategy and the finances of the company. But from now on, you will see that we will see a full-fledged focus on the productivity improvement.

[Foreign Language]

[Interpreted] Also, in terms of marketing, our approach to date has been to downsize on the unnecessary marketing program. So it was more of an inactive approach and a simple approach, if I may say that. But NAVER, going forward, is going to equip itself with a more growth-driven or growth-oriented marketing approach, which is going to help us further enhance our ROI.

So up till now, we have not yet been as aggressive in terms of our marketing endeavors. But with the take of a new approach, we will be able to see some new, meaningful approaches and pillars put in place in terms of marketing.

[Operator]

[Interpreted] The next question will be presented by Kim [ Gugen ] with [ TM ] Securities.

[Unknown Analyst]

[Foreign Language]

[Interpreted] I have a very overarching question. In terms of this AI trend that we see from the big techs and also China's e-comm players making entrance into the domestic market, there seems to be heightening competition within the market. When you look at this as a potential risk, what are your strategies and plans to counter that?

And I think the best way is to make use of your internal data in order to unleash the value that the company may be able to employ. So I would like to know as to what your plans are, and how things are going in terms of this data-driven business approach? So in terms of Commerce, using user data to actually further drive your Commerce business and also using the sellers' data to facilitate that aspect of the business. So any update and plan on this?

[Soo-yeon Choi, executive]

[Foreign Language]

[Interpreted] So after the DAN conference, which was held in August, we sent out a shareholder letter, specifying that we have a very strong full funnel-based channel strategies. And in order to employ our business strategies behind the platform, there are multiple things that have to happen, because the users who actually search for information on our platform, will be able to access the content, they write reviews, they look at reviews. And when they engage in shopping behavior, all of this behavior actually translates to a buildup of a data.

So over the past year, we focused on how we could enhance the data literacy regarding the data that we house within the company and how to best utilize the data that we have.

[Foreign Language]

[Interpreted] So we have been -- at those, we've been endeavoring to prepare for that last year. And this year, I think we will be able to see some visible results come forward. As I mentioned from the very beginning, we will focus on search as well as content recommendation, all of these aspects will be equipped with hyper personalization capabilities.

And as you've mentioned in your question, regarding Commerce, there will be a lot of value that could be unleashed, for instance, helping the sellers with what types of products that should be recommended to the consumer base and providing a tool for the sellers so that they could better sell their product. And also, advertisement recommendation would be another aspect that could benefit the sellers. So through these integrated solution packages, we believe that we will be able to create value.

[Foreign Language]

[Interpreted] And also to note is that starting this year, for some of our major brand stores, we would use this integrated data that we have in-house and use that to make product recommendations as well as advertisement recommendations. So more integrated data-based recommendations and approach -- Commerce approach will be put in place starting this year.

[Nam-Sun Kim, executive]

[Foreign Language]

[Interpreted] Well, thank you. We are almost at about an hour since the beginning, so we will take the last -- the final question.

[Operator]

[Interpreted] The last question will present you by Dong Hwan Oh from Samsung Securities.

[Donghwan Oh, analyst]

[Foreign Language]

[Interpreted] I have two questions. We've recently seen some slowdown in your Commerce GMV growth. What is your strategy for GMV growth in 2024? Will you focus on the growth -- increasing the GMV or would it be a top line revenue focus? Regarding Shopping Live!, with the launch of the new platform like [ TDD ] and the Clip product, what -- how are you going to bring that together with your Commerce business, your long-term perspective, that is?

[Nam-Sun Kim, executive]

[Foreign Language]

[Interpreted] So looking at domestic retail and commerce market, the domestic consumption sentiment has been quite weak, and that is why we've seen some slow performance from these markets. As we look out into next year, we think that the commerce market will show about a mid to top single-digit growth.

If you look at NAVER specifically, we've -- in terms of GMV and revenue growth, because revenue has been driven by increasing the take rate, we are expecting to see double-digit growth.

Now, as the domestic market, the domestic consumption sentiment was quite weak, on the flip side, in the North America, if you look at Poshmark performances, it's been quite solid. So compared to the domestic performance, we think that the GMV and the top line revenue growth from these overseas markets, Poshmark will be quite positive. So we will continue to have a strong focus on both of these pillars.

[Soo-yeon Choi, executive]

[Foreign Language]

[Interpreted] So looking at the LIVE Commerce business, we have a very strong market, #1 position, and the growth is also taking place quite smoothly. And looking at the growth of Q4, it was 11% Q-on-Q growth. Y-o-Y basis, it was about 18.8%, very close to 20% growth.

The [ Short Life ] and Clip has already a very close combination between the two. And just like we are seeing creators on TikTok platform, we want to have the Clip creators to really actively engage with the Commerce segment. So we're even looking towards or expect -- or hoping for creator-Commerce ecosystem to come out of -- rise out of these approaches.

Now [ TDD ] was only in the closed beta. So -- but in terms of the technical similarities with LIVE Commerce, it is quite similar in terms of the platform that is being used. So we will -- through the [ TDD ] platform, we will look forward to have a more stronger connection to the streamers and also be able to provide more entertaining elements in terms of the content.

[Nam-Sun Kim, executive]

[Foreign Language]

[Interpreted] So we will be happy to take any unanswered questions through the IR division. This brings us to the end of the Q4 earnings presentation of NAVER. I look forward to your continued support. Thank you.