| Google Buying Its Way Into Korea | ||||
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Google, the world’s leading search engine, is suspected of having guaranteed a substantial amount of payment in an agreement on keyword advertisements in Korea. A source familiar with the issue yesterday said Google pledged to offer the money to secure growth momentum in Korea, where the online search giant is struggling to find its feet. ``Google promised to give approximately 70 billion won every year to Daum Communications in addition to revenue sharing based on keyword advertisements over the next three years,’’ said the source, who declined to be named. ``This kind of guarantee is unprecedented in inking keyword ads pacts. This means Daum has nothing to lose even in case Google fails to attract keyword ads much while Google can be hit hard by big losses,’’ he said. Late last year, Daum, Korea’s No. 2 Internet search engine, made an agreement with Google on online promotions for selling ads related to query keywords. Under the contract, Google currently attracts advertisers who will buy search keywords from Daum, which then produces query results in a way favorable to the advertisers. When contacted, Daum officials declined to confirm the guarantee citing a non-disclosure agreement clause so did a spokesperson at Google. But Daum President Seok Jong-hoon insinuated in a conference call last month that Google made such a guarantee to compensate Daum’s possible loss caused by the hook-up with Google. Previously, Daum teamed up with Overture Korea, which accounts for roughly 90 percent of the market and the partnership change to Google is expected to hurt Daum’s keyword ads business. ``Google offered good conditions. Under the terms, we will be able to garner more growth in keyword ads than the market average of around 30 percent,’’ the journalist-turned-chief executive said. As Daum earns about 70 billion won a year through the keyword ads, his remarks means the turnover would be more than 100 billion won this year. ``It is a very easy calculation. In consideration of the firm’s weak market presence, Google cannot enable Daum to earn 100 billion won through keyword ads a year,’’ Woori Securities analyst Wayne Lee said. ``The market consensus is that Google promised to give a guaranteed sum a year on top of revenue sharing of keyword ads,’’ he said. As the nation’s top agent, Overture Korea has sold keyword ads to more than 40,000 advertisers. The figure for Google is estimated at less than 5,000. ``Google seems to think of the guarantee as an investment to make inroads into the Korean keyword ads market, which is rapidly expanding,’’ Lee said. The country’s keyword ads market was just 40 billion won in 2002 but the figure snowballed to 320 billion won in 2005 and 550 billion won last year.
01-26-2007 | |||