Naver Corp Ord

Good morning, we will now begin Naver's 2025 Q3 earnings conference call. For the benefit of our investors joining from home and abroad, we will provide simultaneous interpretation service for the presentation and switch to consecutive interpretation for the Q&As. Good morning, I am Choi Myung-hwan from the Office of Capital Market. I would like to thank the analysts and investors for joining NABIRS 2025 Q3 earnings presentation. On this call, we are joined by CEO Suhyun Choi and CFO Heechul Kim, and they will walk you through NABIRS business highlights and strategies and financial results, after which we will entertain your questions. Please note that the earnings results are KIFRS-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. Good morning, I am Jiwon Choi, the CEO. In Q3, NIOVA continued to strengthen its foundation for new growth by advancing its services and monetization through the integration of AI technology into content and data. In search, AI briefing has been expanded to 15% coverage leading to a notable improvement in user satisfaction and delivery, delivering a positive user experience. At the same time, the revamped home screen, along with expanded content supply through Click and Shopping Connect, as well as personalized recommendations, contributed to higher usability. As a result, the royal user base strengthened both quantitatively and qualitatively during the quarter. Supported by these initiatives, together with Naver's solid media influence and strong monetization capability, overall advertising revenue on the Naver's platform grew by 10.5% YOY. In commerce, Naver strengthened personalized experience, optimized for exploration and discovery-based shopping, while enhancing user benefits through services such as end delivery and membership. As a result, user engagement within the Naver Plus store app increased, surpassing 10 million downloads. In Q3, SmartStorm GNV recorded accelerated growth with a full quarter reflection of the revised commission structure, serving as a key driver of overall performance. Going forward, Naver will continue to enhance the customer experience through closer collaboration with NCURLY and expanded application of AI-driven personalization. Let me begin with Naver's differentiated AI-powered search services and the performance of the search platform. To strengthen competitiveness in informational search, AI Briefing launched in March expanded its coverage to 15% of integrated search queries as of the September end. It continues to enhance our usability by providing information to reinforce that we have highly reliable sources and improving answer satisfaction for long-tail queries. AI Briefing used by more than 30 million users offers a differentiated experience by enabling summarized information consumption as well as deeper exploration through research. using related questions displayed at the bottom of the main text, thereby expanding content consumption. Since its launch, the number of clicks on related questions has increased by more than five times compared to April, the early stage of the service. This allows users to explore more topics more deeply without entering new or complex queries, while naturally engaging with a wider range of neighbors, UGC, creating a virtuous cycle of content consumption. Starting in November, NAVER will gradually test personalization in both the answer text and related question areas. In particular, for shopping and local queries, the company plans to strengthen contextual connections with businesses and explore monetization opportunities. Ultimately, Naver aims to provide a differentiated search experience in which advertising and content are seamlessly integrated with the insert text, while also exploring revenue models for the emerging AI agent environment. The home screen revamped in August, along with the expansion of high-quality content supply, including Clip, and the enhancement of personalized content recommendation logic that led to higher feed engagement. As a result, in September, the average daily users of the home feed and clips stabilized at 10 million users each. With improvements in the usability and recommendation areas of the home feed, user activity indicators such as content impressions and clicks continued to increase. The resulting growth in feed consumption also translated into higher advertising revenue. The number of loyal users visiting Naver home feeds more than 20 days per month increased by over two times worldwide, while the proportion of such loyal users rose by five percentage points compared to the beginning of the year. This indicates that inactive users have been converted into active users, leading to the stable growth of the home feed. Also, Naver's high-quality UGC and advertising content, together with its more advanced recommendation technology, are being effectively exposed in the right placement, thereby strengthening user engagement and login. It is also expected to lead to further monetization opportunities, including advertising revenue growth. With a solid user base and stronger engagement, along with the expanded application of AI briefing, providing a differentiated search experience, Naver achieved a 10.5% increase in total platform advertising revenue, driven by improved AI-based advertising efficiency. In Q3, continued optimization of ad placements and services using Naver's proprietary AI technology enabled more efficient ad exposure within the same inventory, resulting in higher advertising efficiency, steady growth across key metrics, and an expanded advertiser base. Naver is also seeking ways to further strengthen its response to commercial queries, one of the key competitive areas of its search business. by delivering more satisfying search results for users while capturing additional advertising revenue. To this end, the company plans to expand efforts to identify new advertising services and optimize ad placements across its platforms, including commerce areas such as Plus Store and the entertainment section, which is gradually being transitioned into a feed format. The automated advertising campaign, AdBoost, has demonstrated proven advertising efficiency, contributing to both performance, advertiser growth, and overall advertising revenue expansion. AdBoost Shopping, which has successfully established itself, recorded a conversion performance in September that was more than 100 percentage points higher than standard search ads. Supported by this momentum, the number of Naver performance advertisers increased more than two times worldwide. Looking ahead, Naver is building an environment that will allow smart store sellers to more easily experience AdBoost Shopping within the seller center. by continuing to incorporate advertiser feedback and expand exposure across various placements, including Plus Store. Furthermore, Naver has integrated advertiser billing accounts to enable advertisers to manage campaigns under a single account and has launched a customized consulting program for advertisers that operate their campaigns directly. Next year, Naver plans to introduce a new business agent that will design and execute growth strategies together with advertisers and business partners and evolve it into an integrated solution that analyzes business performance and competitiveness based on neighbors' high-quality data to propose practical solutions. Next, I will discuss the key achievements of the commerce business. In Tier 3, commerce focused on enhancing personalized experiences tailored for discovery and exploratory shopping, strengthening delivery competitiveness, and expanding membership benefits. As a result of this effort, SmartStore GMP grew by 12.3% YY. The WordPress store is rapidly evolving into a structure optimized for discovery and exploratory shopping through features such as Discovery Tag, AI Shopping Guide, and content integration. By serving as a core channel that enables a brand experience-driven purchase journey supported by each brand's unique data and content assets, along with their proprietary promotions and campaigns, the platform has helped brands achieve 40% or higher growth for five consecutive quarters. firmly establishing itself as a key growth driver. Naver plans to further refine its personalized recommendations and ranking algorithms within search to ensure that brand and SME product databases unique to Naver are more effectively surfaced. The company will also significantly expand the application of AI personalization of the Naver Plus store home screens from 31% to 80%. These efforts are expected to enhance the discovery and exploration experience by connecting users with popular products and UGC while maximizing user lock-in and improving both the time spent on the platform and purchase conversion rates. From a monetization perspective, GMV generated through AI recommendations within the Plus Store increased by 48% QoQ, supported by enhanced personalization and surface optimization. On some placements, conversion rates for personalized recommendations were more than 10 times higher than those of standard format. Going forward, Naver plans to further expand the application and coverage of AI recommendations by accurately identifying user intent, thereby driving meaningful growth in both adoption and GMV. Thanks to these efforts, Naver Plus Store app has surpassed 10 million downloads within six months of its launch. In-app activity also strengthened, with page views increasing by 19.4%, and average session duration rising by 9.7% QOQ, reflecting higher user engagement. Membership has become a core element that not only provides shopping benefits, but also connects neighbors' broader ecosystem and encourages users to stay longer on the platform. Following the partnership with Netflix, Naver expanded membership benefits in Q3 to include Microsoft Game Pass over membership and free delivery on purchases over 20,000 Korean Won at Curly and Mart. As a result, the number of active membership users increased by more than 20% YYY. In particular, the partnership with Microsoft Game Pass resulted in a 23% increase in male users in their teens and 20s compared to before its introduction, broadening the user's overall customer base. And in addition, fresh fruit purchases have also risen significantly, positioning membership as a key driver of commerce growth and a catalyst for greater content engagement across platforms. Following the partnership with Nexon in September, Naver announced a new partnership with Spotify, a global audio and subscription streaming platform, further expanding its content offerings. Through this partnership, Naver plans to integrate Spotify's extensive library, including 100 million songs and more than 7 million podcasts across various Naver services, enabling users to easily discover and enjoy audio content suited to their preferences and moods. Naver will share more details on this collaboration in the near future. Nibiru also continued its efforts to enhance user experience by strengthening delivery competitiveness. While with the rebranding of end delivery and the enhancement of free delivery and free return benefits for members, the purchase frequency of membership users increased by 13% YOY, while the membership purchase ratio rose by 1.3 percentage points YOY. These results show that stronger delivery competitiveness is driving higher purchase activity among world customers. Following the partnership with CJ Logistics in July, Naver introduced an early morning delivery service with Hurley in September, resulting in a significant improvement in overall delivery lead time. In addition, the implementation of cold chain system has allowed Naver to expand the share of low temperature product listings, which were previously restricted, thereby strengthening its product assortment competitiveness. And delivery GMV continued its strong growth with sellers that adopted end delivery in the previous quarter recording over 19 percentage points higher QOQ GMV growth compared to those that had not. This clearly demonstrates that enhanced delivery competitiveness is driving both a stronger user login and increased purchase activity. The CQC segment also delivered meaningful results. Cream and Soda achieved over 15% worldwide GMV growth in Q3, driven by strong sales of exclusive brand products and growing demand for training cards in Japan. In addition, both platforms are maximizing user experience and sales efficiency through content-driven planning and browsing enhancements aligned with evolving trends. Poshmark is expanding its app entry points through integration with the Naver search engine while enhancing user experience by improving auto-complete and search result layouts to deliver more accurate and relevant search experiences. Through the introduction of a new ad format and enhancement of ranking logic, Naver continued to achieve growth in first-party advertising revenue, while efficient marketing execution led to improvements in both platform profitability and traffic quality, resulting in double-digit growth in GMB and revenue. Regarding Wallapop, whose acquisition was announced last quarter, the transaction process is proceeding as planned, and Naver will provide a more detailed update on the global C2C business performance following the completion of the acquisition. In Tier 3, the core pillars of discovery and exploration-based app experience, brand membership, delivery, and advertising were organically connected, creating strong synergies that reinforced a virtuous cycle from traffic inflow to purchase conversion, and monetization, thereby advancing the overall growth of the platform. Going forward, Naver will continue to leverage those organic synergies across the platform to further strengthen its solid position in the commerce market. Next, I will provide an update on the fintech business. In Q3, Naver Pay's QPP reached 22.7 trillion won, representing a 21.7% YYY increase. Non-captive payments, which accounted for 55% of total TPV, grew 31% worldwide to reach $13.91, driven by higher payment activity and continued merchant expansion. In addition, through the partnership with Nexen and us at the end of September, including account and payment integration, Naver is continuing to expand its third-party ecosystem across both online and offline channels. In the platform business, Naver completed the acquisition of Securities Plus Unlisted in September, In line with Korea's FinTech policy direction, the company aims to evolve into an integrated platform that enhances accessibility and reliability for investors in the OTC market. Next, I will discuss Webtoon's results. In September, Webtoon Entertainment signed a global content partnership with Disney through which more than 35,000 titles from Marvel, Star Wars, Disney, Pixar, and 20th Century Studios will be introduced for the first time on a new digital platform. The development operation of this platform will be led by Webtoon Entertainment, and it will feature not only iconic titles from Disney portfolios spanning several decades, but also a selection of Webtoon original series. The new platform represents the results of unprecedented collaborations combining Webtoon's product and technological expertise with Disney's unrivaled IP portfolio, allowing users to enjoy Disney's iconic content all in one place. This initiative is expected to broaden Webtoon's reach beyond its existing user base, expand engagement with new global audiences, and serve as an important stepping stone for global growth, while also laying the foundation for an even deeper partnership with Disney in the future. Please note that Webtoon Entertainment is scheduled to announce its earnings on November 12th, U.S. local time. For more detailed information, please refer to Webtoon's earnings release. Lastly, I will discuss the performance of the enterprise business. The B2B business within enterprise achieved new revenue generation through the monetization of GPU as a service contracts secured in the first half of the year. For lineworks, the number of paid IDs continue to record double digit growth worldwide despite the high base effect from the same period last year. Services integrated with lineworks such as AI Node and Roger are also growing steadily as planned. In October, LionWorks launched its service in Taiwan and is now seeking to expand into global markets by leveraging its experience as the leading business chat platform in Japan. Leveraging its full-stack AI capabilities, Naver is building a stronger track record in Korea by providing AI transformation solutions and industry-specific products tailored to both the public sector and the private sector. The company's global sovereign AI initiatives are also progressing as planned. At the end of October, Naver signed an MOU with NVIDIA to capture physical AI opportunities which operates in real industrial environments and systems. Also, it secured an additional 60,000 latest GPUs and strengthened its AI capabilities. Nibiru has been building industry-specific references, including the financial and energy sectors, by providing NeuroCloud and customized AI services to clients, such as Bank of Korea and KHMP. In a similar vein, the company is engaging in discussions with multiple partners across the manufacturing industry, including the semiconductor, shipbuilding, and defense, to explore further collaboration opportunities. Miever also plans to develop specialized AI models tailored to major industries and seek diverse use cases and additional business opportunities within the private cloud market, ensuring that optimized AI technologies can be swiftly adopted across sectors. Following the launch of the new administration, large-scale national policy projects are being promoted to accelerate Korea's AI transformation, including initiatives for independent foundation model development, GPU leasing projects, and the establishment of SPCs for AI data centers. And NIVA is actively participating in three projects under these initiatives. In Saudi Arabia, NIVA is finalizing the establishment of a joint venture with the Ministry of Housing, aiming to expand into Super App, a digital twin, data center, and cloud businesses, with the goal of commencing operations next year. The company is also pursuing various global collaborations and opportunities, including the development of an AI agent for tourism and a sovereign LLM in Thailand, participation in GPU as a service, and AI data center projects for Europe based in Morocco, and humanoid research collaboration with MIT to secure future robotics platforms. Any plans to share further updates as these initiatives begin to take shape? Going forward, Naver will continue to strengthen the competitiveness of its core businesses through AI, while also adding new growth drivers for me to long-term expansion and being the groundwork for global growth. Now, CFO Heechar Kim will discuss the financial performance. Good morning. This is CFO Heechar Kim. I will now walk you through Q3 financial performance. Revenue in Q3 increased 15.6% YOY to $3.138 trillion, driven by solid growth across neighbors' core businesses, including advertising, commerce, and fintech. Building on the previous quarter, AR-driven enhancement of advertising efficiency continued, resulting in advertising revenue growth outpacing the market rate. The full quarter impact of the revised commission structure in the commerce business further accelerated over revenue growth, while seasonal effects from the choose-up holiday peak period also contributed to the increase. Operating profit increased 8.6% YY to 570.6 billion won, maintaining a solid growth trend despite higher expenses related to mid- to long-term business expansion and competitiveness enhancement supported by accelerated line growth. The operating profit margin reached 18.2%, a slight increase from the previous quarter. Next, I will explain the revenue by business segment. In Q3, Search platform revenue increased 6.3% YOY to 1.0602 trillion won. Total neighbor platform advertising revenue, which includes Search, Display Commerce, FinTech, and Webtoon ads, grew 10.5% YOY. This reflects the combined impact of ad-based ads and service optimization to advancements in personalized ad recommendations and the continued expansion of the advertiser base. In Q4, although the long holidays in October may have some impact due to fewer business days, Libra will continue to enhance advertising efficiency through AI, expand monetization of non-commercial queries, and broaden ad inventory, thereby strengthening its competitive edge in the advertising market. Commerce revenue increased 35.9% YY to $985.5 billion. The enhanced discovery and exploration experience within the Libra Plus Store app, expanded membership benefits, and the revised commission structure all contributed positively, drawing balanced YY growth across all segments. Commission and sales revenue grew 39.7% YY as the enhanced discovery and exploration experience within the Neighbor Plus Store app led to brand purchase growth, driving an increase in SmartStore GNV. The food quarter impact of the revised commission structure also contributed with SmartStore revenue increasing 102% YY. Commerce advertising revenue grew 31.2% YY, driven by advancement in AI-based recommendation ads and the full rollout of ad boost shopping in the Q3. Membership revenue increased 30.5% YY, supported by a broader user base and higher active user numbers, following the addition of new benefits, such as partnerships with Microsoft Game Pass and Uber and free delivery at Curly and March. FinTech revenue increased 12.5% YY to 433.1 billion won. At the end of September, Naver launched the beta service of the Connect Terminal, which seamlessly links online and offline merchants. This enables Naver to provide not only payment services within its ecosystem, but also data-driven customer management functions. Going forward, the company will focus on building an integrated online-offline ecosystem and creating new value for both users and merchants. Content revenue increased 10% YOY to $509.3 billion. Within this, Web10 revenue, based on neighbors' consolidated results in grant one terms, grew 11.3% YOY. For more details, please refer to Web10 Entertainment's earnings announcement scheduled for November 12th local time. Now revenue increased 24.3% YOY, driven by the continued growth in paid subscribers of its camera app, integrated with AI content features. Enterprise revenue increased 3.8% YY to $150 billion. The number of paid line works IDs continue to record double-digit growth in Q3, and GPU as a service contracts secured in the first half have begun generating revenue. The year-over-year comparison reflects the base effect from one-off revenue related to well-booked deliveries to the Jeonbuk Office of Education in the same period last year. Next, I will discuss the detailed cost items. Development and operations expenses increased 14.2% YOY, mainly due to higher headcounts from new hires, increased stock-based compensation following the rise in share price, and one-time severance payments related to Poshmark's workforce optimization initiative. Partner expenses increased 17% YOY, while infrastructure costs rose 22.7% YOY, driven by higher depreciation expenses from the acquisition of new assets, such as GPUs. Considering model training and inference for AI integration across all businesses, as well as the expansion of new initiatives, including government projects, Naver expects large-scale infrastructure investments to continue. Marketing expenses increased 20.3% worldwide, driven by promotional activities in the commerce of fintech and webtoon businesses. Through the end of the year, Naver plans to efficiently execute various marketing initiatives aimed at enhancing competitiveness across business units, and strengthening the foundation for top-line growth, including content expansion to boost engagement with the Naver app ecosystem, and promotions for Curlie and Mart launched in September. Next, I will explain Naver's operating profit by business segment. First, the integrated search platform and commerce segment maintained a stable profit margin of over 30%. Despite a slight year-over-year decline due to AI integration within services and shopping promotions, while continuing to deliver solid top-line growth. In the FinTech business, despite continued growth in payment revenue, profitability declined slightly YOY due to delayed purchase confirmations caused by summer vacation seasonality and expanded promotional activities. In content, operating losses widened due to increased production costs related to Web2IP business development and higher marketing expenses to strengthen global competitiveness. In the enterprise business, losses also expanded, driven by increased infrastructure investments for AI model training and inference. Going forward, Naver plans to continue investing to secure future growth drivers, including investments in global platform development for Web2 and expanding infrastructure investment in the enterprise business to support project acquisition. In the mid to long term, however, the company will work to narrow operating losses. Q3 consolidated net income increased 38.6% YY to $734.7 billion, driven by the overall increase in investment gains of affiliated companies, including higher equity method gains from AA Holdings, following the consolidation of Nine Men into LYC. Operating cash flow remained on a stable growth trend, while Q3 free cash flow decreased by $185.2 billion YY to $201.9 billion due to increased infrastructure investments. We will continue to make capital expenditures to strengthen the competitiveness of each business unit while maintaining financial soundness through stable operating cash flow driven by top-line growth and disciplined debt management. This concludes the overview of our Q3 financial results. We will now move on to the Q&A session. Before we begin the Q&A session, let me make a brief announcement. Tomorrow, NIBR will unveil its detailed strategic direction at I-25 and integrated conference through both on-site participation and live online streaming.

We invite everyone to join and tune in. We will now begin the Q&A session.

To ask a question, please press star and number 1 on your phone. To withdraw your question, please press star and number 2. In consideration of all participants, we kindly request that you limit your questions to 2 per person. The first question will be provided by Stanley Yang from JP Morgan.

Please go ahead with your question. I wonder how much the capex of the GPU is and how much the capex of the whole is. Next, there will be a figure of 60,000 for NVIDIA cooperation, and I wonder if that is included. And now, if the GPU is used a lot, there will be a margin pressure because the price-to-price ratio increases. I would appreciate it if you could share your thoughts on that management. The second question is, as you said earlier, you are continuously spreading the vertical AI strategy in various ways. How much vertical AI is being applied in the area of advertising, shopping, and B2C, and the effect of sales is still in the early stages. I have two questions.

Number one is related mostly to CapEx. So I understand that GPU CapEx will be increasing this year, and so I'm curious about any guidance on GPU CapEx for this year and next year, and also a guidance on the total CapEx that you forecast. And also, I'm curious whether the 60,000 GPUs in the partnership with NVIDIA is included in this GPU capex. And along these lines, also, I'm curious about management spots on the potential pressure on net margin that the increased depreciation expenses can bring about. My number two question is largely about the vertical AIs. I'm sure that you are engaging in a myriad of different strategies in terms of your AI verticals. especially on the B2C side in ads and shopping. I'm curious about how the extent to which AI is integrated into your services, and also along that line, the revenue contribution. I know it's early days right now, but what do you expect for this year and in the future?

Yes, to answer the first question, AI briefing or ad boost, our AI, the on-service AI strategy, To answer your first question, our AI integration efforts have resulted in very fruitful and meaningful outcomes.

in terms of boosting our revenue and monetization strategies with our AI briefing and also add boost amongst other commitments and efforts. We have also communicated to investors and markets our commitment to keep on investing in the infrastructure and therefore cap us in terms of increasing the competitiveness of our services.

It would be difficult to open very accurate numbers, but we are already expecting about 1 trillion total investment in infrastructure including GPU this year.

And although I can't speak to the exact figures right now, as of this year, we expect our GPU CapEx to, including GPU CapEx, our entire CapEx, to stand around the $1 trillion, one range. And from 2026 and onwards, Considering our new business expansion strategies and plans, we expect about $1 trillion in capex to go into GPU investments alone.

However, we expect that there will be a considerable amount of investments related to income, such as public institutions and private companies, in the future for such GPU investments. So, considering this in general, we will continue to invest actively in the field where financial capacity is allowed.

And in terms of our GPU investments, although it is, of course, a proactive move on our part, this also includes our endeavors into increasing profitability, as well as it includes GPU as a service provided to the government, also public sectors as well. So with the purview that we have, we will continue to actively invest in GPU.

with our CapEx and also this figure will include the 50,000 NVIDIA GPUs that you mentioned. We expected 10% coverage, but we found out that this is more effective in enhancing the loyalty of our loyal users and strengthening the existing search business, so we are expanding the coverage to 20% and increasing the speed.

And to address your second question, when we first released the AI briefing service earlier this year, our initial goal for coverage was in the 10% range within the year closing out. However, as the business has progressed, we've come to realize that this has actually been very effective in boosting not only our loyal user base, but also our existing search business as well. And therefore, we'll be accelerating our efforts to bring this figure up to the 20% range.

If you compare us with a global platform, you'll see that we have a very three-dimensional understanding of users.

And you'll know if you compare with our global platform competitors that we at Naver have an all-around and comprehensive understanding of our users, which we will lean into in terms of providing a numerous

services, including payment services, reservations, shopping, so on and so forth, which will make sure that we can be a lot more flexible in terms of the AI agent services that we provide. You'll be able to hear more announcements about the exact timing and features at tomorrow's fan event.

However, by spring of next year, we plan on rolling out our AI shopping agent as well as the AI tab and integrated AI services that will be providing a lot more integrated approach to what we provide in terms of our services.

The on-service strategy applied to our communication agents and services is already being found to be helpful in increasing sales related to search ads, commerce, and local. As you said, sales are still in the early stages, and we expect it to be very positive for our profits.

The integrated AI agent is part of our on-the-service strategies, and we've begun to come to the realization that this has a significant boost in our revenue with search ads, commerce, and also the local business side as well. And so as you've mentioned, it is still early days in terms of revenue contribution, but we expect strong contributions to monetization and revenue moving forward.

The next question is from Kim Joon Hyun of HSBC.

The following question will be presented by Joon Yoon Kim from HSBC. Please go ahead with your question.

Thank you for the question. I have two questions. The first one is about enterprise. Until now, there was a change in each event such as Works or Mailbook. I see that you have set up commercial departments such as GPU as a service business expansion and recently digital twin AI, but from a medium-term point of view, I wonder if there is an outlook that sales growth can go up. Recently, it seems to be emphasized in terms of physical AI and robots, but I would appreciate it if you could explain our strategy on what part of the monetization potential we think there is. The second question is about the cost. When we consider the margin plus when we build the GPO infrastructure, I think the initial sales will be a little low, but I would appreciate it if you could comment on this part.

So I have two questions for you. Number one is about the enterprise side. I know that there has been some variability until now with works and so on and so forth. However, it seems that you are really doubling down on your commercialization efforts with the commercial divisions for GPU as a service, AI, and also digital twins on the move. So I'm curious about how you expect revenue to pan out moving forward. It seems that physical AI and robots are one of your focus areas, what will be some of the major key monetization pillars moving forward? And number two, speaking to the commerce marketing expense, when can we expect these expenses to start going down? Until when do you think we will expect these expenses to be executed? And also, on the GPU side, we talked about the GPU CapEx investments that will be going into infrastructure. When do you think that the GPU business will begin to turn a plus margin?

So I'll answer your first question first and then speak a little bit more about the color on the R&D that we have for digital twins and robots. You'll know that in 2017, which was quite a while before the terminology or concept of physical AI really began to come to the fore, we established Naver Labs to that end. It is a standardized OS platform that allows us to manage robots of various manufacturers. In the robot field, we are aiming to be able to play the role of Windows and Android. Also, Alike is a software that allows robots to recognize the exact location even indoors, where GPS does not reach with ultra-precise 3D digital twin technology.

And our core competitive, of course, we assess lies in not hardware, but on the software side. So our focus has really been on developing our softwares, Arc and Alike. Arc will be providing management services in an integrated and comprehensive manner that can bring together robots that are from various different manufacturers, playing a role like Windows or Android of sorts. And Alike will be able to provide accurate location delivery services.

As a result of this choice and concentration, our technology is now at the highest level globally. In fact, 3-4 years before the establishment of the 1784, which is the main building, we used it as a test bed in the actual environment, free movement based on RoboCity Digital Twin, and building a real-time controlled environment in Naver Cloud to secure global reference.

And we have continued to make endeavors to make sure that if you look at our technology through our efforts in R&D, our technology competitiveness and capabilities, competencies are truly global number one and at the top. And three or four years ago when we began the testbed at the 1784 headquarters of NAFER, we were able to make sure that we can go ahead with more speed and also make sure that we can use and accelerate compile more global references with those efforts. Although it is still early days to really speak to the entire global market size that we can forecast, As per our expectations, we expect that our market share in terms of global robots will stand at about at least 30% in the international arena, and we are making sure that this can serve as our next growth driver moving forward.

And the fact that we are already internalizing these core technologies and the fact that we have a full-stack AI foundation through cloud services is especially important for Korean manufacturers

And we are continuously working to make sure that we can create these technologies in-house and internalize these core competencies in terms of the technology that we have. And especially given that we are a full-stack AI service provider based on our cloud competencies, We are working to make sure that the potential that we see in opening up new markets in Korea for tailored and customized cloud to manufacturers can really serve as a growth driver moving forward, and we will continue to focus our efforts in this area.

In addition to Korea's nuclear power plant, we are also working with various Korean manufacturing companies to implement this customized private cloud at a practical level. If these things are a little more specific,

With the Bank of Korea and also Korea Hydro KHMP, we are continuously in negotiations about these types of customized private cloud services that we can provide, and we will be coming to you with more details and color once we can provide them to you.

Speaking to your second question on commerce, you'll know that we've revamped our commission structure and we are planning on fully leading into the changes that we have made. However, our focus on marketing in this arena is not just as a one-off initiative in order to boost GMV.

It will be an all-around comprehensive strategy that focuses on increasing loyalty as well as other aspects, and management will continue to focus on this aspect.

And we did touch upon this topic when we were talking about GPU CapEx guidances.

We will continue to make sure that our investments are very active and aggressive on the GPU side, and this will also lead into revenue contributions and growth as well. So we will be taking into consideration the growth and revenue as well as we decide upon our investment plans in GPU.

Yes, there is a part of the investment that is directly related to sales, but most of it is an investment for the future, so we assume that there may be a temporary impact on the earnings.

And as is with all infrastructure investments, the direct revenue contribution in the early stages especially is quite minimal. So this really is in the term of a long-term view with a long-term lens. And so maybe in the temporary time, there might be a slight dip in revenue because of this. However, in the mid to long term, we are more than certain that this will be able to turn a plus.

Sorry, just a revision about one of the interpretations that was provided

The market share of 39% when we're speaking about Naver's robot initiative wasn't Naver's market share. It is the OS control platform market within the robot market that is expected to account for about 39% of the global market moving forward.

Next question.

Next question is from Eric Cha of Goldman Sachs.

The following question will be presented by Eric Cha from Goldman Sachs.

Please go ahead with your question. I would like you to tell us about the changes in user behavior and more detailed achievements and indicators. The second is related to commerce. As the take rate goes up this year, the sales growth rate is quite high. So I have two questions for you. Number one is about AI briefing.

I know that you aren't into really pushing full monetization strategies yet with AI briefing, but I'm curious about the user behavior or pattern changes that you've seen after the release, and also any updates on the performance or results in a more detailed manner would be very much appreciated. And question number two is about the e-commerce side. I know that the uptake and take rate has really pushed up revenue this year. What do you expect for take rate next year and moving forward? Will there be some meaningful growth in take rate continuing on moving forward? And also, if you can provide us a little bit more update about any recent changes or any results regarding the Curly partnership.

Yes, what we were most looking forward to when we introduced AI briefing was actually First of all, to answer your question about AI briefing, when we launched AI briefing service, it really wasn't geared towards monetization side.

It was more towards really ramping up our weaker side comparatively compared to our competitors that was pointed out in terms of the information-seeking queries in order to increase the quality.

Therefore, at the beginning, we provided coverage based on the information and knowledge queries, as well as long-tailed queries with more than 15 characters. The results we found at that time were that users were very satisfied with the search results, and the maximum storage time was maintained stably, and the long-tailed UQC found the effect of 70% growth of YY.

And in the initial stages, we were able to find that with the coverage on information-seeking queries as well as long-tail queries, which comprise 15 words or more, that the user satisfaction was very high, and we found that the duration time spent was going up as well as YOY increase in UQC.

From the perspective of a search engineer, we are very careful about how much new related search words we continue to search while being satisfied with the search results of users. In particular, the number of re-searches of related questions that we are presenting at the bottom of the AI briefing is increased by more than five times compared to the initial launch time.

And the search result satisfaction is, of course, important, but also tying that in with the relevant information or relevant questions is extremely important, something that we continue to monitor. And if you compare the relevant questions that people click on at the bottom of the AI briefing service, Compared to the initial launch days, it has expanded to about five-fold. So that is one of the changes that we have seen. And the fact that it's creating a virtuous cycle where it really is encouraging users to use the search results but also explore upon their search results and to build upon that and also to consume content as well.

Also, as I mentioned in the previous session, we are gradually expanding our coverage and applying AI briefing in business-based queries related to our core business. We are carefully observing how this part is connected to our revenue. The most positive thing is that these things also lead to the achievements of our entrepreneurs.

And with the increase in query coverage, I also mentioned about how we will be integrating more and more AI into the business queries as well, the commercial queries. And we're continuing to monitor very closely how this impacts our monetization strategies and also how this will impact the merchants and businesses as well.

So, 예를 들면 식당이나 맛집 같은 것을 노출하는 저희의 클레이스 정보에 지금 AI 브리핑이 적용되고 있는데 도입 전후에 CTR이 한 2.3배 증가하고 Also, I think that we have found that it is possible to expand this part more actively because of the positive impact of our place achievements, such as the increase in the number of visits, the increase in the number of orders of reservations, and so on. I think that these will have a positive impact on the introduction of various AI agents, such as the AI tab that will be continued next year.

And at Neighbor Place, which comprises of restaurants and other places to go out and eat, we've integrated AI services. And as a result, we've seen our CTR go up 2.3 fold and conversion rates increase 15%. So these are some of the positives that we've seen throughout the release that has made us really have a much more stronger confidence in expanding these services moving forward. And these will be really panning out in our AI agent services that we'll be rolling out such as AI tab and so on and so forth next year.

Yes.

And in terms of the shopping side, as you will know, the big boost to our revenue in terms of the shopping side has really been two-fold. Number one is the increased shopping revenue that came after the release of Plus Shop, and also the increase after we've integrated our services with AI.

In terms of transactions, there was an increase in sales of brand stores, especially brands, and there was also an increase in transactions through mBeson. In addition to our shopping fee, these parts also act as a lever that significantly increases the take rate with various vertical fees, so I think that our take rate will contribute positively to the increase in our take rate even after the existing effect of our shopping fee impression is reflected.

And with the change in our commission structure as well, that has been a big boost to our revenue. We can look on the GMV side where it's been a big boost for brands, stores on shopping as well as well as end delivery. And we will be leading it to these AI verticals and looking at the commission structure revamp. We are very certain that this will be a boost in terms of increasing take rate moving forward as well.

country to do it up so you can do it up to do up to do something about you have to have a quick week when didn't do that I don't have to do it didn't make a book into only K do you like us you don't think that I wish and since the launch after any request to work out we've been in talks with many factors about the ad inventory and placement of restores that we have and this will also be a meaningful contribution to revenue monetization as well they don't call you they don't mean so we got And next, speaking to the Curly side, our shopping strategy has really been

leveraging the lead and edge we have in AI technology and also the shopping product listings that we have in order to provide more personalized recommendations, boosting this side as well as making sure that we make improvements onto the logistics side, which has been pointed out as one of our weaknesses.

And in this area, Curly will be able to provide more competitors. It is certainly days, so we can't talk to the exact figures.

However, it is on par and progressing well as we have initially planned.

The last question will be presented by Minju Kang from Bernstein.

Please go ahead with your question. My question is related to the commerce side, especially the marketing expense.

I am curious about the incremental increase in commerce that accounts for in the YOY increase in marketing expense.

On a YOY basis, as of Q3, our marketing expenses increased 85 billion, and about half of that is commerce.

And from that commerce marketing expense, which is half of $85 billion, half of that again is from the increase in the provisions that came from the increase in GMV as on the backdrop of the increase in commissions as per the structure revamp. And another half will go to the strategic promotions that will be provided.

Thank you very much for joining us, and we look forward to your continued