Good morning. We will now commence NAVER's 2023 Q2 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&A. If you have any questions, please follow the instructions. Good morning. Thank you for joining NAVER's 2023 Q2 earnings presentation.
Joining our call today, we have CEO, Soo-yeon Choi, and CFO, Nam-sun Kim, to 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 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 now turn it over to our CEO to present on the business highlights.
Good morning, I am Soo-yeon Choi, the CEO. In the first half of 2023, NAVER strategically solidified the foundation of the AI investments made over the past few years and continued efforts to expand monetization of each business segment and carefully control costs to improve profitability. As a result, NAVER achieved its highest ever Operating profit in Q2 on a company-wide basis, driven by WEBTOON's re-entry into positive EBITDA in Q2 and Poshmark's increased adjusted EBITDA compared to the previous quarter. Going forward, we will continue to mull over and implement the right strategies and initiatives to ensure that the results of these efforts yield significant long-term achievements.
Now let me explain where each business stands today and share with you how NAVER's AI capabilities drive the growth of various businesses, including search. First, I will discuss the search platform business. Despite the ongoing decline in the online advertising market since the second half of last year and the slow recovery of the Korean economy, NAVER's initiatives to fortify its platform continued, and as a result, the search platform saw a growth of 0.5% year-on-year. Our global search platforms are only recently recovering from a negative growth in the second half of last year. NAVER's search ads maintained a steady growth trend to post a quarterly growth rate of 4% YOY, following a 5% increase in second half last year to Q1 this year.
Smart Blocks, which provide customized keyword search results, are based on user intent, showcase A22 high-quality images of local and international landmarks, multimedia blocks, such as short forms, as well as best-selling books, must-read books, and fictional characters in diverse Smart Blocks, and enhance the search results satisfaction. Technologically, to provide personalized search results for each user, we applied a deep matching, which displays results based on the user's input and intent. We expanded the number of Smart Blocks shown per search query and optimized the search order of Smart Blocks by using personalized ranking technology, resulting in a 70% increase in CTR for the results. In addition, we have newly introduced paragraph and image paragraph snippets within the UGC blocks, enhancing the ease of content exploration and enabling users to consume more content.
Going forward, we plan to leverage generative AI to predict and provide the next search query as Smart Block, further enhancing our search services. On the product side, we utilized machine learning to optimize ad copy by displaying ad features with higher CTR among the additional titles and descriptions provided by advertisers. This led to improved advertiser efficiency and had the effect of expanding the Place Ads and also third-party media. Place Ads saw a 92% in-revenue growth, year-on-year, thanks to holidays like Children's Day and Buddha's Birthday, amid the resumption of offline activities, improved user experience backed by the expansion of AI snippets, and the integrated search discovery feature introduced in Q1.
As of the end of June, the number of paying advertisers increased evenly across all industries, reaching 124,000, a significant growth of 61% compared to the same period last year. Going forward, we will focus on improving local search experiences and enhancing ad matching based on search queries to ensure relevant ads are well displayed to users, aiming to enhance ad quality and effectiveness. On the other hand, NAVER continues its efforts to leverage its rich database, advertiser base, and also technological capabilities to expand into various platforms. NAVER currently runs its proprietary product, DBX, on the other platforms, with other user traffic, such as Karrot Market, Danawa, and Banggood. Ad efficiency of the model was further enhanced through improved ad content, page placements, and also advanced keyword matching to better target related markets.
Based on our success in Korea, we plan to apply NAVER's search technology and advertising expertise onto the platforms we have secured in Japan, the US, and Europe in the mid to long term, to discover new growth opportunities in the global markets. In the case of display advertising, despite the base effect from last year's local elections, certain industries, such as apparel, fashion, health and medical, and gaming, showed signs of recovery, resulting in a slight improvement compared to the previous quarter.
However, the distribution, finance and construction sectors continue to face a downward, resulting in an overall bearish market. In this slide, in order to facilitate the recovery of product sales of the big brands susceptible to economic conditions, often used for branding purposes, we introduced a premium product on the Time Board and Voting Board in line with the PC main page revamp in late May. Moreover, in the NAVER's app E section, we tested new full screen ads with large scale campaigns of well-known brands and received positive feedback from advertisers. Taking into account the characteristics of product and advertiser industries, we plan to enhance the branding effect of advertisements and officially launch the service.
Furthermore, in line with the NAVER's apps revamp schedule, in the second half of this year, we will introduce new ad products with high advertising effectiveness and information delivery, and explore new and new ad inventory so as to drive revenue growth. Next, I will provide an update on our commerce business. Despite the slowdown in the growth of the online shopping market, dampened by prolonged sluggish consumer sentiment since the beginning of the year, NAVER's Commerce GMV in Q2 recorded KRW 11.9 trillion, representing a growth of 14.8% YoY. Excluding Poshmark, which was consolidated in Q1, the YoY growth was 8.6%. Among these, the on the platform product GMV, excluding affiliates, amounted to KRW 8.3 trillion, showing a YoY growth of 19.6%. Without Poshmark, the growth was 10.3%.
Meanwhile, the service GMV soared 40.1% YoY, recorded KRW 1.6 trillion. Product GMV was buoyed by Brand Stores as their GMV grew 57% YoY, following the expanded adoption of Neighbors delivery guaranteed service and other commerce solutions. They are increasing their shares in the overall GMV and driving growth. Service GMV jumped 40.1% YoY, continued to build expectations for sustained growth with rising post-COVID travel transactions. The number of Brand Stores increased by around 290 Qo Q. Steady growth is witnessed in sectors such as digital electronics brands, which take up a big part in GMV, as well as lifestyle, food, and health categories, where the delivery guarantee service proved appealing.
Furthermore, in Q4, we launched the Brand Tech Search, a dedicated search area for brand products, and introduced the Lounge service or solution, which enables brands to operate their exclusive memberships and offer various benefits and events to their members. We plan to release over 80 solutions by the end of the year by further reinforcing our in-house commerce solutions and identifying additional external store solutions. Through these efforts, we aim to set them apart from Smart Stores in terms of display and transform them into a one-of-a-kind D2C platform. The delivery guarantee service offered by NAVER is meeting the demands of both sellers and buyers, resulting in a significant growth in the number of participating vendors and the overall GMV.
Compared to Q1, the number of enrolled sellers has increased by 1.7% or 1.7x , with around 30% of all Brand Store now utilizing the delivery guaranteed feature. A significant growth in GMV has been observed, especially in stores actively utilizing the feature, resulting in increased revenue and also enhanced brand credibility. This has further strengthened our NAVER Shopping's competitiveness. In addition, through continuous improvement of recommendation services, shopping GMV generated from AI recommendations accounted for approximately 13% of the total Smart Store GMV as of June. It has also contributed to the expansion of shopping products, CTR. Especially 4U, which utilizes AI technology to provide users with optimized shopping information, has shown continuous success since its launch last year.
In Q2, we added customized blocks offering 4U content and shopping history-based personalized product recommendations and reasons for the recommendation. Recommendation blocks are suggesting additional shopping interest, thereby providing more tailored and expanded shopping experience. We expect that the continuous expansion of new personalized shopping smart blocks will also contribute to the improvement of CTR for shopping products. Poshmark, which achieved an EBITDA profit earlier than the market expectations in Q1, continued its marketing and operating cost rationalization and prudent hiring efforts, and further expanded the adjusted EBITDA margin in Q2. Despite the cost rationalization drive, thanks to a loyal social base, user base, coupled with a competitive shipping service, Poshmark has expanded its market share within the US fashion resale market, solidifying its position as the leading fashion C2C platform.
This was in contrast to the declining market share of major competitors, highlighting Poshmark's competitiveness in the North American market. Posh Show, the live commerce service, launched last March, hasn't grown rapidly within a short period of time. There are high expectations for the live commerce industry in the North American market, and the growth has been fast-paced. Therefore, the plan is to further develop Posh Show into a key driver for revenue growth in the future. In July, we launched Posh Lens, which integrates NAVER's Smart Lens-based AI image search technology. This provides our users with search results that match or resemble the images that they capture, ultimately increasing purchase to conversion rates. For sellers, we expect it will offer various product exposure opportunities and help them grow.
Furthermore, we plan to introduce Neighbors search technologies and test measures to improve product discovery and conversion rates. All in all, we will strive to maximize synergies by utilizing Neighbors diverse technologies and services in multiple fronts. The ads introduced in Q1 were further rolled out in Q2 with 1P seller ad products, and we expect them to grow as a meaningful new revenue source in the future. Next, let me provide updates on the fintech business. In Q2, NAVER Pay TPV recorded KRW 14.6 trillion, representing a YoY growth of 21.2% and a QoQ growth of 1.2%.
Among them, non-captive TPV recorded KRW 6.3 trillion, showing a significant growth of 41% YOY, driven by the implementation of Samsung Pay MST payment feature, the addition of large new merchants, such as SK Stoa, Samsung Fire & Marine Insurance, Netflix, and the positive performance of shopping and travel booking-related industries. As such, NAVER continues to expand its external ecosystem. With the integration of Samsung Pay MST to NAVER's NAVER Pay's on-site payment, offline TPV increase became prominent starting from Q2 to post KRW 1.4 trillion, or twice the amount compared to the same period last year. We will continue to improve usability based on high persistility and further promote on-site payments. We're also continuously expanding our financial business, solidifying our position as a financial platform.
The recent revamp of the NAVER Pay tab in Q2, which now includes finance, securities, and real estate, in addition to existing payment and asset management services, has generated significant interest from users. When it comes to expanding our loan service portfolio, the loan conversion service, launched in Q2, has now partnerships with 60 companies and offers a wider range of product lineups. This also contributed to the growth of the credit loan comparison service. Furthermore, the proprietor and personal loan comparison service, launched at the end of last year, continues to attract users by providing differentiated convenience and also loan limit search results despite interest rate hikes. As part of its efforts to promote inclusive finance, NAVER, together with Industrial Bank of Korea and Korea Credit Guarantee Fund, launched the Smart Store Guarantee-Backed Loan for small business owners using non-financial information.
NAVER Pay Money, Hana account, launched last year, also secured 1 million additional openable accounts. With its deposit protection feature and attractive savings benefits, that is expected to contribute to the growth of the new and loyal customer base, especially the MZ generation. Last but not least, NAVER was newly designated as an innovative financial service provider in the insurer's product comparison and recommendation service segments. We will prepare and launch the services in accordance with the relevant regulations. We will continue to expand the NAVER Pay ecosystem by launching various financial product comparison and brokerage services. Next, let me move on to WEBTOON's Q2 performance.
Despite the ongoing challenges posed by the pandemic and the drive to improve operational efficiency, Global Webtoons total GMV recorded KRW 444.8 billion, up 8.6% YoY and 5% QoQ. In Japan, there was again a significant increase in the proportion of original content in Q2. The number of paid users rose by more than 20% YoY, thanks to the Golden Week campaign. In the U.S., despite significantly reducing marketing expenses compared to the previous year, ARPPU jumped by more than 20% YoY and posted a record high GMV, continuing the growth trajectory, thanks to service improvements and refined recommendation logic. Let me elaborate on this recommendation logic.
Currently, AI technology is applied to WEBTOON and web novel services in 6 countries, including North America, to offer highly personalized results based on the user's preferred art style. Since its implementation, CTR recommended works across all service areas, has shown a significant increase of over 30%. In Korea, MAU rebounded with the addition of new short play services, such as AI-based Toon Filter and Webtoon Fortune, as well as the introduction of a new content format called Mini Novels. Going forward, we plan to roll out these services internationally as well. Furthermore, we have strengthened the CRM efforts. The user session length and loyalty have increased, resulting in an expansion of ARPU and the highest weekly GMV in our history.
In Q2, EBITDA returned to the black, ahead of expectations, thanks to our efforts to grow revenue, such as expanding advertising and cross-border content, along with various operational efficiency measures, including resource reallocation to core markets, non-strategic asset divestments, and workforce optimization. In Q3, we plan to execute strategic marketing aligned with the peak season of summer vacation to expand our user base. We will strategically maintain the optimal balance between profitability and growth. Webtoon continues to increase the value of original IPs through the expansion of creator and user ecosystems and other various activities. For example, one of the major comebacks in Korea, Return of the Blossoming Blade, achieved a GMV of KRW 1 billion in just 15 days, becoming a major hit.
The American serial, Lore Olympus, has won the Will Eisner Award for two consecutive years. The new work, I'm the Villain, entered the U.S. Top 10 charts in its launch week, adding to the build-up of exceptional local artist IPs. WEBTOON originals adapted into videos, such as Bloodhounds and also See You in My Nineteenth Life, ranked in Netflix's Top 10 series, once again proving the excellence of our platform IPs. After the release of the videos, our WEBTOON GMV increased by 14x and 4x , respectively, showing a strong influx of viewers for the original works. In the second half of the year, there are more than 10 production lineups scheduled in Korea, and over 300 products, projects are in preparation globally.
We will continue to leverage our strong story IPs and global number one platform, and build a robust ecosystem in collaboration with key partners in the production and content market.... to promote diverse IP projects, including video adaptation, MD games, and many more. The cloud market in Korea has been affected by economic slowdown and budget constraints in the enterprise sector. In the long term, however, companies are eyeing on the opportunities that digital transformation will bring in the cloud-native environment, such as improved productivity backed by AI, greater insights using data analytics and automation. As a result, we believe the demand and market for cloud centering on PaaS and SaaS will see a sizable growth.
To prepare for such changes, our NAVER Cloud is strengthening its capabilities in the PaaS products, such as Data Box, which enhances user experience or convenience based on NAVER's search, shopping, and purchase data. At the same time, we are supporting various partners within the cloud ecosystem, expanding the solution company ecosystem. Also, we are leveraging NAVER's core competencies to develop new products and improve services so as to strengthen our fundamentals and eventually to compete effectively in emerging markets. In recent years, NAVER focused on infrastructure investments for advanced AI capabilities, development of backbone models, to support generative AI, integration of backbone models into NAVER's own services, and various other AI-related initiatives to ultimately foster a broader AI ecosystem. Such AI-related efforts have been progressing smoothly. Today, I'd like to touch upon four key priorities.
The first is to establish global-level backbone technologies. NAVER plans to unveil at DAN 23 conference, slated for August 24th, HyperCLOVA X, the next generation backbone model for our generative AI strategies, and also CLOVA X, the conversational AI service. CLOVA X is a user-friendly conversational chat platform that also boasts scalability with seamless connection with external services through the skill system. We anticipate CLOVA X will allow various experiments. The second is to enhance our business and creativity productivity. I believe one of the areas where generative AI is expected to make the most contribution is productivity. We are actively working on developing generative AI solutions for creators, entrepreneurs, and sellers within NAVER, as well as tools to assist various activities within companies such as collaboration, coding, design, and development. Third, third is to provide customized AI solutions for our customers.
Many companies wish to adopt AI, but it is also true that they face challenges due to factors such as cost, security, and lack of technical expertise. We have built a diverse lineup of solutions, ranging from the skill system that can easily integrate with small sample data to a full fine-tuning model based on dedicated infrastructure and neural cloud, ensuring physical independence. With this range of offerings, we can provide solutions tailored to our customers' needs. In this era, AI-driven era, where AI is becoming a key competitive factor, we anticipate building collaborative partnerships with numerous companies and governments who may be concerned about losing control over autonomy. Last is to offer new experiences where next-generation models and NAVER's core services are seamlessly integrated.
Large language models, or LLM, are indeed remarkable technology, but they are not a magic bullet. We believe that when LLM is integrated with NAVER's rich data and features and used at the right time and place, we can maximize user value. In this context, we are preparing to offer a converged experience in various verticals, such as shopping, local, and advertising, through our AI-based next generation service, CUE:. CUE: is currently under preparation for a PC beta launch in coming September. I will talk about its services and future evolution at the coming conference. Today, I would like to share with you why NAVER believes it can offer both users and businesses a new experience.
NAVER is the only platform in the world where consumers can experience their entire journey from discovery and universal search to purchase, booking, and ultimately payment, all within one platform. This also means that NAVER has access to an extensive collection of high-quality data unavailable to others. Furthermore, NAVER's unique hyperscale user behavior model, which combines a multidimensional preference data such as user search, reviews, and purchases with HyperCLOVA X model, we can generate highly personalized recommendations that are closely aligned with users' interests, lifestyles, and life stages, and thus offer highly effective advertisements. As such, NAVER can provide unique values to the consumers, even from a global standpoint. NAVER will leverage the rich databases of various vertical services such as advertising, commerce, local, and travel, to provide a unique generative AI experience that only NAVER can offer.
Furthermore, the presence of diverse vertical services within the NAVER platform means that it can fulfill various needs of advertisers all at once. NAVER provides all stages of the consumer journey, including exploration, search, and purchase decisions for a single brand purchase on a single platform. Not only that, it is a rare advertising platform that encompasses display, search, and commerce, and it can also track conversions from advertising to purchase, making a powerful business channel and partner for advertisers. We're aware that some may have concerns about potential disruptions in the advertising market with the advent of the era of generative AI.
However, for NAVER, which provides the entire consumer experience journey from discovery to purchase and even payment, generative AI could actually enhance our strengths and offer both NAVER and our business partners greater revenue generation opportunities. In addition, we worked closely with Seoul National University AI policy initiatives since 2018, and led the way by announcing in 2021 the AI ethics guidelines. There are many more, but unfortunately, I'm prevented from sharing them all with you today due to limited time. There are many, I ask for your kind understanding, and stay tuned for more at the DAN conference on August 24th. The conference will also serve as the first ever investor day for NAVER since its founding. We kindly request your active interest and participation of our shareholders. Next, our CFO, Nam-sun Kim, will walk you through Q2 financial performance.
Good morning. I'm the CFO. I will present Q2 financial results. NAVER's Q2 revenue recorded KRW 2.4 trillion, a 17.7% increase YoY and a 5.6% growth QoQ. With the effect of Poshmark's inclusion-- Without the effect of Poshmark's inclusion, it grew by 11.7% YoY. Despite continued external uncertainties, our major business sectors, such as commerce, fintech, and content, maintained robust growth. The adjusted EBITDA for Q2, excluding the volatility of stock-based compensation and asset depreciation, reached KRW 515.1 billion, increasing 19.1% YoY and 5.5% QOQ.
Amid ongoing efforts to optimize our controllable cost items across the company, the adjusted EBITDA for Q2 achieved a historic high, driven by Webtoon's positive EBITDA and Poshmark's expanded positive earnings. Operating profit increased by 10.9% YoY and by 12.8% QoQ, reaching KRW 372.7 billion. The OP margin also rose by 1 percentage point from the previous quarter, reaching 15.5%. In Q3, we may experience a slight decline in profitability due to the typical off-season in the advertising market and the strategic expansion of marketing in the content sector with the start of summer vacation. We will strive to show gradual improvement in our performance. Moving forward, we will continue to expand the principle of more rational resource allocation.
Our goal is to recover and achieve an operating profit margin to at or above the level of 2022 by the year 2024. Next, let me discuss revenue by each business area. If you look at Q2 revenue by business, search platform recorded KRW 910.4 billion, up 0.5% YoY and 6.9% QoQ. Despite the sluggish online advertising market in Q2, the search ad revenue grows 4.3% YoY, driven by improved ad efficiency through machine learning-based product optimization and robust growth in place partner ad products, demonstrating the steady growth of NAVER's search business. As was mentioned by our CEO earlier, in contrast to the weakening performance of global search platforms over the past 6-12 months, NAVER's search ads have consistently shown growth and never experiencing a downturn.
Even in the most challenging macroeconomic environment, NAVER search ad revenue continued to grow at a remarkable rate of 4%-5%, unmatched by its peers. Display ad revenue decreased by 9.8% YoY, due to the ongoing economic slowdown and the base effect from the local elections in the previous year. The economic impact is most evident in big brands, premium impression ads, which represent the top of the funnel in the advertising market. While retail sectors, including apparel and fashion, showed a gradual recovery amid the pandemic, construction and distribution advertisers have continued to tighten their marketing spending. Such a decline is more likely to be the result of spending cuts rather than a structural issue with NAVER's platform, and it is also expected to bounce back quickly as spending resumes.
The commerce revenue recorded KRW 632.9 billion, up 44% YoY and 4.5% QoQ. Without Poshmark, the revenue posted a growth of 16.2% YoY and 5% QoQ. By segment, commerce ads showed 2.5% growth YoY and 6.1% QoQ, driven by advanced recommendation advertising powered by AI technology, despite consumer sentiment downturn and continued marketing cost optimization. Commission and sales revenue jumped 118.3% YoY and inched up 2.4% QoQ. The inclusion of Poshmark and Brand Stores, travel, KREAM services, with higher commission rates contributed to the revenue rise.
In particular, KREAM's commission rates rose as much as 8% recently, rose to as much as 8% recently and steadily expanded its revenue, maintaining its position as a leading premium C2C platform in Korea. Poshmark has displayed above average growth with a steady increase in its market share in the U.S. fashion re-commerce market. Without Poshmark, the commission and sales revenue rose 33.4% YoY and 2.6% QoQ. The subscription revenue from membership fees climbed 77.4% YoY and 8.8% QoQ, with the number of subscribers increasing by over 30% compared to the previous year. The Fintech revenue reached KRW 339.7 billion, up 14.9% YoY and 6.7% QoQ.
Non-captive TPV recorded KRW 6.3 trillion, up 41% YoY, leading the overall growth. The offline TPV recorded KRW 1.4 trillion, more than doubling compared to the previous year, backed by the active offsite payments, with the addition of Samsung Pay MST feature and the growth of booking and order payments. Content revenue recorded KRW 420.4 billion, up 40.1% YoY and 2.2% QoQ. Global WEBTOON GMV reached KRW 444.8 billion, up 8.6% YoY, and 5% QoQ, despite the impact of the pandemic and withdrawal from certain regions. Japan has led the GMV growth with an increase in paid subscribers through the expansion of original and serial works.
Korea, North America also experienced a growth driven by enhanced AI-based recommendations and the release of bestsellers, pushing up ARPPU. SNOW's revenue also jumped 30.4% YoY, driven by the success of AI profile products within the SNOW camera, which generated new sales. Cloud revenue remained flat YOY, while rising 4.1% QOQ to record KRW 104.45 billion. B2B revenue in particular, increased 8.2% YoY and 8.7% QoQ, driven by growth in the public sector sales. Next is on expense items. Development and operation expenses, including payroll, that showed only limited increase compared to the previous quarter, with continued tight hiring control. As a matter of fact, the consolidated headcount of NAVER decreased by 1.5% QoQ.
For Q3, we anticipate a slight increase in payroll, likely less than 1.1% due to new hires. However, on an annual basis, we expect the cost to be in line with the rationalization plans set earlier in the year. Partner expense increased 4% QoQ, due to higher commission fees linked to pay payments and other revenue, and jumped to 20.2% YoY, due to Webtoon accounting changes since Q4 2022. Infrastructure expense increased 7.1% QoQ, due to investments in new AI equipment and higher IDC rental expenses. While we extended the useful life of servers and equipment in the DNA period in Q1, in line with the global trend, and this helped to keep it to the same level as the previous year.
In the second half of the year, we will continue to invest in new AI equipment, at an appropriate level as we launch AI models and services, such as HyperCLOVA X and CUE:. Please understand that it is difficult to predict the scale of inference-related costs, as the service has not yet been launched. We will carefully monitor user behavior and user volume to develop appropriate billing policies and monetization strategies in the future. As mentioned in Q1, this year's total CapEx is expected to decrease slightly compared to the previous year, despite additional GPU expenses for enhancing AI capabilities. We plan to manage the costs so that CapEx to revenue ratio stays below 7% for this year as well as the next.
Lastly, marketing expenses increased 15.1% YOY, and 9.6% QoQ, primarily driven by the growth in payment rewards, due to increased TPV and the expansion of overseas marketing efforts in the content segment. Without Poshmark, however, marketing expenses remained at similar levels as to the same period last year. Next, let me discuss the P&L by segment. First, the combined segment margin of search platform and commerce dipped slightly QoQ, primarily because of the high growth in external media advertising in the search platform, which has a relatively lower contribution margin. The commerce margin rose 0.7 percentage points QoQ, mainly due to KREAM and Poshmark's improved profitability.
Fintech margin decreased slightly due to strategic marketing expenses aligned with the peak consumption season, such as the family month, but still some percent compared to the same period last year. When it comes to content, efforts to expand monetization and cut marketing expenses to enhance operational efficiency helped to reduce our losses by nearly KRW 15 billion compared to the previous quarter. Among them, Webtoon's operating loss improved by around KRW 26 billion, YOY, recording a deficit of KRW 13 billion. This is the result of achieving positive adjusted EBITDA earlier than planned. Webtoon indeed posted a positive EBITDA for the first time in three years.
We streamlined our marketing expenses by cutting the spending raised during the pandemic period, in line with the extraordinary increase in online content consumption, worked on payroll and OPEX rationalization, and divested domestic loss marketing affiliates for this. In Q3, however, we plan to strategically expand our marketing spending and to acquire more users, while carefully maintaining the optimal balance between profitability and growth. SNOW and its affiliate services have been reducing its deficit through efforts to expand monetization, such as AI products for cameras and increasing paid subscribers, as well as cost saving measures in marketing. In the second half of the year, we plan to continue optimizing NAVER's business portfolio, including narrowing the deficit of SNOW, from the perspective of appropriate capital allocation across the entire company.
Without the impact of the decreased stock-based compensation expenses, Cloud's loss in Q2 narrowed slightly compared to the previous quarter, due to the integration of Korean and Japanese technology businesses to strengthen the B2B business. Consolidated net profit in Q2 surged YOY and QOQ to record KRW 266.7 billion, mainly due to the expansion of equity method, valuation gains and gains from the disposal of certain consolidated subsidiaries. Q2 free cash flow decreased by KRW 25 billion QoQ. This decrease was attributed to an increase in cash outflow due to corporate tax payments, despite the increase in adjusted EBITDA. A total of $800 million in loans were taken out for the acquisition of Poshmark in January of this year.
However, during the first half of the year, a cumulative amount of $400 million was repaid, resulting in a significant decrease in the outstanding loan balance. In addition, since the second half of the year, we have been rebalancing our non-core investment asset portfolio, including direct and indirect funds, investment stocks and beneficiary certificates. So far we have liquidated approximately KRW 400 billion worth of assets, and by the end of the year, we aim to sell an additional KRW 400 billion worth assets, totaling around KRW 800 billion. Finally, I will discuss cash dividends. According to the shareholder return plan announced in Q1, the resolution for cash dividends for the 2022 fiscal year was passed during the board meeting in August.
The plan is to pay cash dividends of approximately KRW 62.4 billion, which is around 15%, 15% of the average two-year consolidated FCF to shareholders at the end of August. The dividends will be distributed to shareholders based on their ownership as of the end of June. As mentioned before, the payout ratio was decided at 15%, taking into account the target year-end debt ratio to maintain our credit rating and the appropriate liquidity levels needed to respond to macroeconomic uncertainties. Furthermore, we plan to improve the dividend payout process so that the shareholders eligible for dividends can be determined after the dividend amount has been finalized.
Since the change of this to the dividend record date requires an amendment to the articles of incorporation, we plan to propose this as an agenda item for the next year's shareholders meeting. The treasury stocks that we have decided to retire at a rate of 1% annually over the next 3 years, we plan to proceed with the retirement plan. This ends the Q2 financial performance update. We will now take your questions.
Now CUE:&A session will begin. Please press star one, that is star and one if you have any questions. Questions will be taken according to the order you have pressed star and number one. For cancellation, please press star two, that is star and two on your phone. In order to allow as many CUE:&A chances as possible within the restricted time, we would appreciate only two questions per each participant. The first question will be presented by Eric Cha from Goldman Sachs. Please go ahead with your question.
Thank you for taking my question. I would like to ask two questions. First question is that I understand that it, it will not be easy for you to provide us with the, I guess, an accurate outlook, but would like to get some color as to what the executive views are regarding the advertisement environment and the outlook for the second half of the year. What do you project to be, will be the revenue from the search platform business of NAVER?
Second question is: What will be the focus of the revamping or the refreshening of the NAVER app going forward? Would the focus be on streamlining the user interface, or would you focus more on bringing up the engagement? I think in this process, short-form will play a quite an important role. Would like to understand as to what your view is when it comes to the creator's perspective, what is the value proposition that the short form will provide them?
This is the CFO. I will respond to your first question, and then I'll hand it over to our CEO to answer the other question. You asked about what our projection is going forward in the second half of the year. We believe that we will be able to continue on with the growth rate that we've seen during the first half of the year, in light of the fact that there's been a seasonality factor that is involved. If you look at the performance up to date when it comes to our search platform business, we've been able to maintain our growth rate at a low single digit.
We expect that level will be able to be sustained as we go in, into Q3 and Q4 as well. Also for the fourth quarter, although cautious, we do project that there could be a economic slight rebound, and once that takes place, we will be able to expect to see, even although marginal, some rebound in our display ad. Once again, we think the growth rate for the second half of the year will be quite flat on compared to the first half.
Yes, this is the CEO, responding to your question about where our focus is when it comes to revamping the NAVER app. Basically, our focus is to further bolstering user engagement. Based upon people's behavior when it comes to consuming content on the NAVER platform, basically, we are very much focused on providing an experience where they could receive personalized and customized recommended feeds, which will be determined based on the user's various different types of interest, as well as their consumption behavior with regards to their search and the click track record.
We want to be able to also provide additional opportunities for the users to make use of our shopping and places, which will help them discover their interest. Of course, that does not mean that we will not look at the UI and the UX aspect. We will continuously make improvements on our user interface, so it could be much more conveniently used by our users, which could also trigger additional consumption of the content.
As we enter into the second half of the year, we are expecting a slight rebound in the economic cycle, and once that time comes, advertisers will be able to spend a little more in their marketing and ad spending. We will, at NAVER, do our utmost to make sure that we solidify NAVER as the most optimal advertisement platform. Regarding the value proposition on the short forms, we believe that through these creators created short forms, we will provide a solution whereby people could really experience a uniform and streamlined experience across the whole cycle of purchasing, making bookings, and up until writing reviews.
Especially in the NAVER's main scene, main segment or the main screen, by providing the impression of the short-form content, we expect that the users will be able to, or the creators will be able to experience a very unique traffic, which they have not been able to experience in the past. We are also looking at various ways for us to revenue share together with the creators. Also in this process or through the short-form content, I believe that they will be able, we will be able to provide appropriate services that had not been experienced by the creators, especially various different types of long form, I guess, long tail companies, that is.
The next question will be presented by Jeongin Kim from Kiwoom Securities. Please go ahead with your question.
Ne, Jeongin Kim, 감사드립니다. 두 가지 질문을 드리도록 하겠고요. 첫 번째로, 커머스 사업 부문의 솔루션 도입 성과를, 뭐 seller login, 뭐 GMV gross, 시장 점유율 확대, take rate 증가 등 다양한 관점에서 좀 설명을 해 주시고요. 향후 중장기 전략적 방향성과 목표가 있으시면 추가로 좀 말씀을 부탁드리도록 하겠습니다. 두 번째 질문은 AI 도입에 따른, 검색과 커머스 등, 주요 서비스와 플랫폼에서, 사용자들이 경험할 수 있는 변화와, 그리고 이를 통한 트래픽 개선, 그리고 재무적 성과에 대한 변화에 대해서 어떻게 바라보시는지 말씀을 부탁드리도록 하겠습니다. 이상입니다.
...Thank you for taking my question. I would like to pose two questions. First, I would like to get some color as to what were the impacts of adopting solutions to your commerce business, for instance, in terms of the customer lock-ins, the market share, and the take rate increase? Also, what would be your mid to long term strategy or direction forward? Second question is on your AI. Would like to understand as to what changes your user base will start to experience in terms of AI powered search and commerce, and what outcomes do you foresee its potential impact on the overall traffic improvement and your financial impact?
This is the CEO. Responding to your question about the commerce solution and some of the improvements that we've seen in the overall metrics. At this point, we are still in the midst of implementing the strategies and also further scaling up these solutions, so it's hard to give you a definitive answer. Please understand that I won't be able to provide you with a specific number behind these improvements in our metrics. Now, having said that, about 100,000 Smart Store sellers are currently making use of these services, and even if we migrated to a paying model, we are still seeing a good retention. In the second half of the year, we plan on providing more diverse solutions. Regarding AI, I did mention this in quite a bit of a length during the presentation. Aside from search, we have many different verticals. For instance, commerce, local, and travel.
Once all of these verticals are powered by AI technology, we will be able to better satisfy the needs of our consumers and also be able to have a superior capability in interpreting the search prompts that the users actually use. As a result, we believe that in each of these verticals, we will be able to significantly enhance the performance when it comes to users search or retrieval, or their decision to make a purchase. We'll be able to influence that much better compared to the past. Also already for advertisement and for travel segments, we have adopted AI technology to a certain extent. Yes, we are focusing on innovating the user behavior, user experience, but what is also important is the experience of the producers, the advertisers, the sellers.
We will be able to significantly, we believe, enhance their experience during this journey. We have access to the data that the users generate during their product search phase, and, and search phase and exploration phase, as well as the purchase related data, we will be able to interpret those data in the most optimal way, based on which we will be able to curate the advertisement and provide recommendations when it comes to travel products or other merchandises. All in all, generative AI is going to work to further strengthen NAVER's competitive edge, and in so doing, it will have a very positive impact on many different metrics, including traffic.
Foreign language. The next question will be presented by Seungjoo R o from CLSA. Please go ahead with your question.
Foreign language.
Thank you for taking my question. I see that the biggest contributor behind your annual OP growth was the profitability that you were able to drive from your content business. Looking at your WEBTOON business, its growth rate is still a single digit, so it seems you are overly focused on the bottom line, the profitability aspect. Can you provide us with a breakdown as to what the growth percentage of each of the geographical markets are, markets are in terms of the GMV, looking at Korea, overseas, including Japan and US, and how are the growth rates differ across these different countries? Second, does the company still have plans to list your WEBTOON business in the US? If that is the case, even if it requires spending, would you then focus on continuously attracting more users and more artists?
You know, should that, would that mean then you should further increase your global GMV?
Foreign language.
I will respond to your question about Webtoon. During the pandemic, a lot of internet companies, platform-based companies, had experienced significant erosion in their cost efficiencies. For us, what we really focused on was to separate between the investments that would give us ROI and the spending or the investments that would not give us an ROI. We made that very clear distinction, and we have made our allocations in a very efficient manner. We have adjusted the structure to enable that. What our approach is, that we're not saying that we're not going to not invest in any investment, even if it brings us a good ROI. We have been able to really downsize on the ROIs that does not give us any return, but still continue on to invest.
Foreign language.
In Q3, we will continue to make investments into effective marketing means, and we'll also make appropriate investments that's required for our operational purposes. In terms of the GMV breakdown across different countries, we don't provide that quarterly breakdown information. If you consider the growth rate that you've seen more or less, you'll be able to get some feel as to what the mix looks like. Japan actually accounts for half of this GMV, and Korea above about, you know, 30%, and then the rest is taken up by North America and other countries. For growth rate, Japan has the best growth rate, above slightly 10%, and then there's North America that follows Japan at around 10% as well.
Foreign language.
Regarding the plan to be listed, yes, we are continuously progressing with that preparation, we're preparing to, you know, end that process or, or we're, we are continuously preparing into that up until next year as well. As you've mentioned, the global GMV growth, of course, that is important, but that does not mean that we will just recklessly spend money to drive that growth. We will focus on scaling up the level of services, and at the same time, for the WEBTOON, the advertisement revenue.
At this point, we're quite passive in terms of playing on that monetization opportunity. We believe there is quite a bit of a big potential going forward for monetization relating to the ad revenue in WEBTOON. Aside from the in-app purchases, we believe that there is a big upside for advertisement revenue from WEBTOON. It is not just the traffic, or it's not just, based on that, because currently there is a lot of aspect of the traffic that is not being leveraged for monetization. It's not just a GMV, but we still see there's a big upside in terms of top line revenue.
Foreign language. Your next question will be presented by Susie Lee from Merrill Lynch Securities. Please go ahead with your question.
Foreign language.
Thank you for taking my question. I know that the CEO provided, provided us with very detailed explanation before, but I just want to ask some more questions relating to your AI initiative. You've been preparing for AI over a long period of time, just like your global tech peers, but whereas your global IT companies have received benefit through re-ratings of their stock prices, NAVER yet hasn't. Would like to know as to what, how much of an earning upside do you expect from this AI-powered business? If you could give us a breakdown between revenue and cost impact, that would be helpful. Especially if you look at B2C business, I think the AI technologies will further drive and have positive impact on your ad revenue growth.
Would that mean that you will be able to further, you know, adjust your search platform business revenue guidance going forward? For B2B, you could probably envision some of a subscription model, and I wonder whether that is the case. On the cost side, there seems to be some, a bit of a prejudice or a bias that if the number of population of a nation is not big enough, then the cost and the investment that goes into AI is not really going to translate into a good profit. I know even, maybe not at a granular level, can you at least provide us with some overall color as to what your assessment is in terms of cost versus benefit? Foreign language.
Just to tackle your question, just briefly, NAVER actually was a company that from very early on made investment into the LLMs, the large language model. I think even based upon the global standard, I think we were third in line to make that investment. The reason why it's not yet been reflected in the ratings or the equity prices of the company is because we have not yet been able to showcase to the world the sophisticated level or the scaling up of the ChatGPT-3.5 or 0, and the strategies that we have. I think come August 24th, after that, we will be able to provide you with a more detailed explanation regarding our strategy, the products as well as the business model, and we'll, you know, implement based upon those plans.
Regarding B2C, because we are a search engine service company, if we were to adopt a large language model to the services, we would be able to better interpret the query, query, queries, that the search queries that the users enter and also be able to better summarize the responses and really link it up, interlock it with all the internal services that NAVER provides. Once that happens, we believe that we will be able to further enhance user experience, which will then translate into a positive impact on our advertisement revenue, as well as service satisfaction. Having said that, it is still too premature for us to provide you with the specifics, you know, to the extent that we, you know, adjust our, our guidance.
In terms of B2B, we think that we will be able to gain revenue impact much earlier compared to the other domain, B2C. We are focusing on that aspect. As you've mentioned, subscription is one model that we are considering. API-based billing and monetization, of course, is going to be an effective way. In this B2B area, we will focus more on collaborating with the industry, the companies. We will make use of the neural cloud capabilities that we have and link up with the existing industries. I think that will provide us with an earlier revenue or or any performance impact.
Foreign language
If I may further elaborate, regarding the upside potential from commercializing the AI technology cost versus benefit, I can tell you that, you know, there is no company in this world who could actually give you that quantified figure. Maybe except for one company that is currently providing a package software, there is no other company I'm sure you could appreciate, would be able to provide you with that quantifiable figure. Well, then, having said that, then what is the size of the upside? If we look at this from our organic business, NAVER basically provides advertisement and commerce opportunities, and which all starts with our search business. If you assume that our advertisers are able to bump up their ROAS by about 5 percentage points, then that will, of course, have an impact on our, NAVER's profitability and our financial performance.
Based upon couple number of assumptions that you can also probably think of, I think, you will be able to make an appropriate projection going forward from there. Looking at the B2B model, I think that some people are concerned about the possibility that if a company makes too big of an upfront investment and market isn't there, the size of the market is too small, then would the company not be able to recover that investment? I think this concern arises from a lack of understanding on the commercialization of these different AI solutions, including GPTs or be it a subscription model. None of the companies are, have adopted a business model where they're looking to make investment and recover that investment through this AI solution. These are all equipment related expenses, so they are variable costs.
Obviously, through a subscription, pricing model, the price would eventually be, have to be, transferred. There should be a pass-through mechanism for these, investment costs. For example, like you probably know of Copilot GPT, that is the, the case in point as well. We, you know, have no intention to actually generate losses, in light of the fact that, you know, these are the variable costs. That is not the business model that is inherent in these AI solution business.
The next question will be presented by Stanley Yang from JP Morgan. Please go ahead with your question.
AI inaudible. The scope AI inaudible CapEx inaudible. Trend, last year, inaudible, next year. Inaudible equipment investment, what is going to be the trend like past and future? When you make these equipment investments, you first capitalize them and recognize them as expenses and cost over a certain period of time. What is that period? Also for AI cost burden, I can really see that the executives are really putting in efforts to control the cost burden and make it more efficient. If you give us a number to this, that would be helpful for us in analyzing and understanding. If you look at your past endeavors with Japan Line, you've made -- you've done co-development. Of course, that was the previous version, CLOVA. If you do these types of joint developments, does that really help you in AI cost, making that more efficient?
Well, thank you for that explanation on AI investment. I just have a follow-up on AI investment. Would like to understand the scope of that AI investment, which includes labor cost, and CapEx. What is the, has been the trend, in, for instance, labor costs last year, this year, and your projection next year also for CapEx? You talk about equipment investment, what is going to be the trend like past and future? When you make these equipment investments, you first capitalize them and recognize them as expenses and cost over a certain period of time. What is that period?
Also for AI cost burden, I can really see that the executives are really putting in efforts to control the cost burden and make it more efficient. If you give us a number to this, that would be helpful for us in analyzing and understanding. If you look at your past endeavors with Japan Line, you've made, you've done co-development. Of course, that was the previous version, CLOVA. If you do these types of joint developments, does that really help you in AI cost, making that more efficient?
In terms of the total capital spending on a cumulative basis for our AI initiative, we've started back in 2017. We started hiring AI talent. We've been developing AI models since then. Then in 2020 and 2021, as we move into developing HyperCLOVA with more than 100 billion parameters.
All of this, take in account, in a cumulative basis with more than KRW 1 trillion, per year basis, looking at our AI CLOVA organization, we basically spend about KRW 150 billion on a per year basis to the workforce. For CapEx, you probably know these numbers, but our infrastructure will be above KRW 300 billion. Since 2021, we've been making investments in buying up graphic GPUs, and so that and buying new GPUs, so that would have consumed about KRW 150 billion annually. Moving to the depreciation period for the equipment.
We told you previously that it's a 5-year period depreciation, and we've made quite a bit of significant number of GPU purchases in the past, spending about KRW 150 billion in a yearly basis. For next year, we expect that that level of purchase for GPU requirement is going to be much lower. The investments that's going to take place in the future will not be as big as what we've seen this year and the previous year. We, we have the, you know, the, the GPUs and the chips that in place to develop the current models that we are working on. When it comes to the sizing of the AI investment, I think a good reference point for you would be a North American-based company whose revenue is 3 times bigger than NAVER.
They already have an AI-based LLM solution and, you know, they, they have already monetized from this model. So if you were to compare NAVER's equipment, CapEx and labor costs and R&D costs all put together and compare it to this other company, you will be able to find that the level of investment that we are making is not excessive, nor is it lacking. So I can tell you that we are making a sound level of investment.
Foreign language.
Yes, due to lack of time, we will take the final question.
The last question will be presented by Seyon Park from Morgan Stanley. Please go ahead with your question.
Yeah.
Yes, as I mentioned at the very beginning, there's been an overall economic slowdown. Because of the slowdown in the e-commerce growth rate, as well as the monetization movement that we are seeing from our partnered or affiliated malls, that may look like it had driven down our GMV. If you look at our vertical services, meaning the on-platform services, the GMV growth has been quite robust at about 19.6% year-over-year.
Yes. As I mentioned at the very beginning, there's been an overall economic slowdown, and because of the slowdown in the e-commerce growth rate, as well as the monetization movement that we are seeing from our partnered or affiliated malls, that may look like it had driven down our GMV. If you look at our vertical services, meaning the on-platform services, the GMV growth has been quite robust at about 19.6% YOY.
I think another aspect of your question had to do with the overall competitive landscape, particularly vis-a-vis Coupang. NAVER's key, some of, some of the weaknesses that people have pointed was our delivery capabilities versus Coupang. In order for us to overcome that, we have introduced the Naver Delivery Guarantee Service, which we believe had really driven a meaningful revenue, upside potential. Also currently, Sunday delivery is under test, and the feedback that we are getting, the responses have been quite positive to date. Once we complete that testing phase, we would then decide as to whether we will formally adopt this service.
Despite the fact that we are taking on a light asset-based approach, we will be able to enhance our competitiveness and also leverage all the strong capabilities that NAVER has in terms of its membership programs, as well as Brand Store-based B2C services, live commerce, and bringing of AI solutions. Through this, we believe that we will be able to further improve and drive up shopping and Smart Store competitiveness. NAVER Shopping is all about the entire journey, from searching to shopping, to making payment, and then coming back to that whole repurchase. We offer a very flexible flow of this shopping experience, and once we bring AI technology to this flow, we will be able to maximize the benefits.
However, although since we, NAVER, started off as a search engine application, there were some feedback that our convenience when it comes to the shopping experience, like personalized recommendations, have been weak compared to some of our peers. In the second half of the year, we have an upcoming facelift on the UI of the shopping main, the main shopping screen, and also that where, where the shopping services are being provided.
Once we have that refreshing or the, or the revamping of the user interface, we will be able to enhance our competitiveness in the shopping business. Once that happens, it will have a positive impact on our GMV trajectory as well. We will be able to, we believe, further increase the market share in, in the market, in the greater market. Although in the second half, we think the overall market growth rate will be quite flat, we hope to be able to, you know, further the GMV growth versus market average.