Naver and Kakao are witnessing a surge in revenue from their cloud services, solidifying their positions as domestic cloud providers. However, they still lag behind Amazon Web Services (AWS), the dominant player in the South Korean cloud market.
Naver Cloud reported an 11% increase in revenue, reaching 447.2 billion won compared to the previous year. Quarterly revenue growth was evident, with earnings of 93.2 billion won in Q1, 104.5 billion won in Q2, 123.6 billion won in Q3, and 125.9 billion won in Q4.
Leveraging Naver’s generative AI ‘HyperCLOVA X,’ Naver Cloud introduced ‘CLOVA Studio,’ enabling businesses to develop AI services through the cloud without high-performance computing infrastructure. Additionally, Naver Cloud launched ‘Neurocloud,’ its first hybrid cloud service, in Q4. Agreements were signed with the Bank of Korea for Neurocloud supply and finance-specialized HyperCLOVA X model development. Discussions are also ongoing with Korea Hydro & Nuclear Power regarding the adoption of Neurocloud for generative AI development.
Despite these advancements, Naver Cloud’s revenue remains around one-fifth of AWS’s estimated 2 trillion won domestic revenue. In this regard, Naver CEO Choi Soo-yeon acknowledged on Feb. 2, following the announcement of the company’s fourth-quarter results, “Naver Cloud’s B2B services are still in the early stages of the market, so we need to co-create the market. However, having already established significant references, we plan to accelerate further this year.”
Kakao’s platform revenue, including cloud services, reached 1.1217 trillion won last year, a 17% increase from the previous year. Kakao Enterprise recorded sales of 163.3 billion won in 2022, marking a growth of about 2.5 times compared to two years ago when it totaled 68.1 billion won. Nevertheless, performance falls short of competitors like AWS and Naver.
Last July, Kakao Enterprise underwent a restructuring, reducing its workforce by 30% and transitioning to a cloud service-centric organization. Kakao is now transitioning its subsidiaries’ computing infrastructure from global cloud service companies like AWS to Kakao Enterprise services, viewing this as a significant opportunity.
In the latter half of last year, Kakao Enterprise migrated some servers of Kakao Games’ ‘ArcheAge War’ from global cloud services to Kakao Cloud. Plans are in place to transition additional global cloud services within Kakao affiliates to Kakao Cloud this year.
Kakao CEO Hong Eun-taek said on Feb. 15, after announcing fourth-quarter performance, “Given the essential need for high performance and stability in game servers, we consider this a demonstration of Kakao Cloud’s technological prowess.” He added, “We anticipate the optimization of Kakao community infrastructure costs by actively leveraging Kakao Cloud, which operates with competitive pricing policies, within the community.”
A cloud industry source attributed the growth of domestic cloud services to the expanding public cloud market that was previously accessible only to domestic companies. They said, “With the public sector now open to global companies, domestic enterprises must compete on cost-effectiveness.”
