Ladies and gentlemen, we will now begin NAVER's 2023 Q1 earnings conference call. In this conference call, we will first listen to the presentation prepared by NAVER, and then we will open the floor for Q&A. If you have any questions, please press Star followed by one. Without further ado, I'd like to hear the presentation from NAVER.
Good morning. I am Yonghan Choi from NAVER Capital Markets office. Like our investors, I used to work in the market before I joined NAVER this February. I'm very excited to be in charge of communication on behalf of the company with the investors and analysts. Thank you for joining the NAVER's 2023 Q1 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, financial highlights and new shareholder return policy. After which, we will entertain your questions. Please note that the earnings results are K-IFRS-based, provided for timely communications, and have not yet been audited by an independent auditor, and hence are subject to change after such review. With that, I will turn it over to our CEO to present on the business highlights.
Good morning. I am Soo-yeon Choi, the CEO. In the face of strong headwinds in 2023, NAVER is making strenuous efforts to improve profitability by further monetizing businesses and reducing costs. We will mull over and implement the right strategies and initiatives so that such endeavors can bear fruit in the mid to long term.
In this context, I would like to explain where each business stands today and headed tomorrow, as well as how NAVER's AI technology is married with other businesses, including search, to generate synergies. With that, let me go over the performance of each key business. First, let me discuss the search platform. In 2023, the company launched multiple projects aimed at sharpening the competitiveness of Team NAVER. Among Smart Blocks, which offer tailored search results for keyword searches based on user intent, UGC block, which takes up the largest share, will be further expanded. Also, from Q1 onwards, we plan to launch diverse types of blocks, including multimedia block and theme-based cafe block.
Furthermore, aside from the existing text-based, UGC content, images, short forms, the usual videos will also be displayed to enhance user readability and convenience, ultimately creating an environment where users consume more content. In the second half of this year, search displays will be upgraded so that users can be connected to the right search results after quickly identifying their search intent. To enhance user satisfaction, we will also have AI recommendations added to the results so that users can explore more content. On the business front, despite the global economic downturn and subsequent advertiser budget cuts, search ads increased around 5% YOY, backed by improved ad space exposure and expandable ads. In Q two, we will work on improving and expanding the existing services while undertaking new initiatives to sustain our growth.
For example, we will conduct a Smart Block beta test, where ads users might be interested in are added to the bottom of our link for certain traffic and integrate machine learning to optimize ad copies. Place Ads saw its sales more than double YOY, as all industries enjoyed even growth with the resumption of offline activity. As of late March, paying advertisers jumped 74% YOY to 112,000, sustaining a strong uptrend. We will further advance ad matching service per search keyword so as to improve the ad search quality and effectiveness and raise advertiser satisfaction. Display Ads, our revenue declined 13.1% YOY because of the base effects of the Olympic Games and the presidential election last year and economic slowdown.
Unlike our search and performance display ads, where performance is easier to measure, fixed ads for branding purposes, in particular PCs, are sensitive to economic cycles and measures are in the works to counter this. I will elaborate more later. NAVER has also developed a demo and is currently operating an innovative generative AI search service linked with its other services in line with the emerging trend of generative AI. We will expand Open Talk and Issue Talk categories to beef up NAVER's media power and also revamp NAVER app in the second half by adding short forms and home feeds to offer more interesting content in keeping with the trends. Communication ads, launched in Q1, was jointly developed with CLOVA, and it offers targeted ads by analyzing context and matching.
Communication ad is now available for cafe services and will be rolled out to services like Open Talk, where communication takes place via in exchanging comments. From late April, we started A/B tests, where various contents are shown as feeds at the bottom of NAVER Home. Going forward, we will explore new and ad inventory for the space and launch highly effective personalized ad products. You need to labor meeting the needs of both the users and advertisers and to boost their growth. Next, let me go over commerce. We consumer sentiments and increased offline activities dampened our domestic e-commerce market to record a stagnant or low growth. NAVER commerce GMV maintained a robust growth of 19.7% YOY to post KRW 11.6 trillion in Q1.
Without Poshmark annually added, the growth rate would be 13.2% YOY. Excluding affiliates on cell phone product GMV was up at 20.7% YOY to KRW 8 trillion, backed by brand and Smart Store growth. Service GMV rose 2.2 times YOY to record KRW 1.5 trillion, bolstered by increased offline activities and platform upgrade, which drove up market share. NAVER commerce ecosystem has evolved from mostly comprising of startups and small and medium-sized sellers to onboard large established brands and became a platform where sellers of all development stages grow together.
In the first half of this year, we will launch dozens of upgraded commerce solutions and features to attract new sellers and to address various issues sellers encounter to accelerate their growth and to improve profitability of shopping business. For brands, NAVER provides customized solutions, including effective branding, sales and delivery, and customer management, and is developing into an integrated D2C platform. In particular, its existing D2C logistics solution, NAVER Delivery Guaranteed, boasts 98% delivery success rate, which together with exclusive tags, help boost our purchase rate and brand reliability. It also helps brands refine their sales forecast and inventory management. In just three months since the launch, 20% of all Brand Stores adopted the Delivery Guaranteed solution.
CJ, Jijeon, LG H&H, Samsonite, and others who leveraged the solution saw intangible, saw tangible marketing benefits, with their GMV soaring 1.5-3 times YOY. Now that the benefits are evident, we will introduce a reasonable fee scheme for monetization. When it comes to commerce solution market applicable for all stores, AI targeting-based recommendation tool, Global MD, combined with auto-payment function, was officially launched as a paid subscription service in Q1 after beta test. The service is enjoying great number of users with high conversion rate and ROI far exceeding seller fees. B2C fashion platform, Poshmark, consolidated on January 5th, continued to grow leveraging high user retention and increased its market share even when most U.S. fashion C2C platforms exit.
Furthermore, optimized marketing and sales spending helped to quickly improve profitability to achieve 2024 target of EBITDA surplus ahead of schedule in Q1. The company will continue to drive cost efficiency and monetization going forward. A live commerce feature, Posh Shows Live, was introduced in April, and as a result, the annual live GMV jumped close to KRW 1 trillion, delivering stellar initial results. Also, IP-based search ads were launched recently to further expand profit model. Search word matching accuracy also improved and drove our conversion rate. We will continue to fuse technologies such as NAVER Shopping Lens, AI, and search to create more synergies. Since it already accounts for close to 20% of NAVER Commerce revenue, we plan to focus our resources to grow the service into one of the global commerce business pillars.
Finally, I'd like to note the rise of retail media network as a third big wave of digital advertising throughout the world. NAVER Shopping has a strong foothold and huge potential with solid user base, a seller ecosystem, and product DB. Other global ad market is reeling from economic slowdown and sluggish demands. NAVER will leverage its unparalleled product DB and advertiser base to expand into diverse platforms and seek growth drivers. For example, NAVER Shopping ran proprietary product DB ads on 20+ other platforms, including Danawa and Bungaejangter , and recently added Carrot Market, the largest C2C platform in Korea, to the list. In Japan, we integrated NAVER's technologies and know-how to Yahoo! Japan's shopping and local category after live verification test since last year.
Going forward, we will integrate our search and ad technologies to Poshmark and Wallapop to upgrade service quality and solidify our presence not only in Korea, but also in the U.S., Europe and Japan, and other overseas retail media markets. Next, let me provide updates on the Fintech business. Q1 NAVER Pay TPV reached KRW 13.4 trillion, up 19.2% YOY and 1.5% at QOQ.
Non-captive TPV, in particular, increased 32% YOY to KRW 5.4 trillion to drive the total TPV upswing backed by new merchants, including TMON and T-money, and a boom in overseas travel-related industries. Offline TPV also jumped 68% year-over-year to KRW 810 billion as we transitioned into the endemic stage and also as the number of outlets increased, including industry leaders such as CGV and The Shilla Duty Free and campus zones. In late March, we added Samsung Pay MST payment to NAVER Pay app on-site payment service, thus ramped up the number of offline current merchants to 3 million nationwide. Initial market response has been quite positive. The service ranking number one in Google Android app market. We believe the interlink between NAVER Pay and Samsung Pay will translate into visible TPV increase from Q2 onwards.
In the area of finance, we are boosting up efforts to showcase innovative services, some of which will be rolled out this year. In Q1, the proprietor and personal loan comparison service was joined by large financial institutions, increasing the number of financial partners to 60. In late May, we plan to introduce a loan conversion service and further expand lending product lineup for better service. The NAVER Pay Money Hana Account on beta last year also achieved 500K new accounts in just five months. With its depositor protection feature and point accumulation benefits, the product is attracting new and loyal customers. Besides such a fee to financial products, we are also preparing to launch an online deposit product comparison service, which was selected as an innovative financial service late last year.
We launched in Q1 this year, the industry-first NAVER Pay Claims service, which allows users to submit their claims to multiple insurers simultaneously. We will partner up with more insurers to broaden the scope of applicable products and also expand other insurance related services. Let me move on to WEBTOON's Q1 performance. Despite cutbacks on marketing on the heels of endemic and improved profitability, operation downsizing in certain regions, and increase in the number of Korean web novels on hiatus, global WEBTOON total GMV recorded KRW 412.2 billion, up 2.2% QOQ and 28.9% year-over-year buoyed by the integration of ebookjapan.
Increased the supply of quality content, including original series in Japan, as well as better usability, helped push up paying users in Japan by 16% year-over-year. From Q2, we expect S-grade WEBTOONs, both new and returning from hiatus, will hit the market in Korea, Japan, and the U.S. Also, in the first half, we plan to improve WEBTOON recommendation features on the platform to enhance user engagement and thus boost growth. Furthermore, we will focus on strengthening monetization by applying various tools proven in our Korea operations to convert users to paid users. We believe that WEBTOON still has low paid content ratio and ads are also in the nascent stage and thus has a strong monetization potential.
We expect, offer wall ads, which rake in over KRW 70 billion in annual ad revenue, has the potential to gain traction globally. NAVER WEBTOON, a global story tech platform with the most lucrative profit-sharing model for creators around the world, has made continued efforts to develop relevant technologies to protect and expand the creator ecosystem. 2,000+ creators featuring original works on NAVER WEBTOON make more than 6 figures a year on average, which is more than 20 times compared to $4,000-$5,000 top 5 select YouTube creators make. We also opened the Creators, an amateur creator-only system, to help diversify creator income source. WEBTOON authors can communicate with their readers via Creators and also enjoy a better creative environment while protecting their works from malicious comments. We will add additional income monetization features within this year.
Next, I would like to briefly touch upon Team NAVER's approach to build a competitive hyperscale AI ecosystem in Korea in the face of rapidly changing technology paradigms centering on generative AI. As a first step, we plan to debut this summer the next generation hyperscale AI titled HyperCLOVA X, which will serve as the backbone of generative AI. It is the third in the world and the first and the largest in Korea in terms of the amount of Korean language learning. HyperCLOVA X will be our response to GPT-4. It will have superb performance and run on only one-fourth of the cost compared to its peers. It can understand both images and voices and generate replies by using diverse APIs, including calculator and map. NAVER is number 1 in Korea in terms of the number of AI engineers.
Utilizing such resources, we will apply HyperCLOVA X to overall NAVER services, including B2B services. On the search front, we're preparing for an in-house beta test of a generative AI search service, which will optimize search per user sometime in the first half. In the second half, we will be able to release an upgraded model to actual users. Lately, we see a growing number of commercial use cases of AI in the global market for tools needed for content creation and work.
We believe such a paradigm shift will provide NAVER opportunities to make a leap forward in the B2C area, where it already has a leadership position in Korea. For example, the hyperscale model which we have invested in to enhance the search service for the past several years, can be applied to NAVER Shopping recommendation and seller tools, blogs, Knowledge iN service, travel and booking services to upgrade them and to enhance user experience. B2B, we plan to offer customization and data protection services that global players cannot deliver. We can marry customer data with HyperCLOVA X to upgrade CLOVA Studio that can create generative AI services and offer them over hybrid cloud. In Japan, in particular, we plan to launch our B2B services that have HyperCLOVA X fused into productivity tools such as LINE WORKS and NAVER Works within this year.
To that end, we have a project ongoing where NAVER's corporate softwares are extended to AI-based platforms. More updates on the project will be shared when we release HyperCLOVA X. NAVER is also committed to fulfilling its responsibilities in creating a sound AI ecosystem by working closely with industry and academia experts to address controversial AI issues such as ethics and data protection. Next, our CFO, Nam-Sun Kim, will walk you through Q1 financial performance.
Good morning. I'm the CFO. First and foremost, I will explain three changes that became effective from Q1. Two have to do with changes in accounting policies and one with the deal closure and subsequent consolidation. First, the depreciation amortization period of servers and other key equipment has been extended from 4 to 5 years.
This is to reflect the company's average equipment lifespan of 5.4 years and to align with the trend where most IT and tech companies, both at home and abroad, extended from late last year the D&A period of their server, CPU, and other assets from 4 to 5, even up to six years. Extending the D&A period is more than just an accounting measure. It represents the will to effectively utilize assets such as the global tech businesses have declared so in their earnings call starting from Q1 this year. Since the costs of AI and hyperscale model learning as well as inference are projected to rise going forward, it is essential to effectively use our resources. By so doing, we expect to save around KRW 22.5 billion in D&A costs, or rather, I should say cost deferral rather than cost reduction.
Second, is the gradual shift toward the growth method for revenue recognition, which we adopted from the previous quarter for WEBTOON. In the past, our payments to authors and app store commissions were recorded as net, depending on countries and businesses. To ensure alignment with industry global practices and consistency among WEBTOON subsidiaries, we are in the process of switching to the growth method. The sales and cost impact of this will be KRW 48.7 billion respectively. There's an impact on OP and net income, both margins will decline. Third is the effect of consolidating Poshmark. Poshmark acquisition closed on January 5th and is reflected in NAVER's consolidated financial statements from Q1 this year. As our CFO, here mentioned earlier, Poshmark's EBITDA returned to the black one year ahead of our targets.
We were able to deliver on our promises made last October when we signed a contract to raise cost efficiency earlier than expected, thanks to the cooperation of CEO Manish and the team. We reduced our public company costs as planned. Growth marketing efficiency was raised faster than anticipated. As a result, EBITDA, which posted around -$7 million and $4 million in Q3 and Q4 2022, recorded +$20 million. Let me now walk you through our earnings results. NAVER's Q1 revenue rose 23.6% YOY and 0.4% QOQ to KRW 2.28 trillion. Without Poshmark consolidation effect, revenue was up 17.1% YOY. Despite the external uncertainties, commerce, fintech, and content business led the growth.
Q1 Adjusted EBITDA, excluding variables such as stock-based compensation and asset GNA expenses, recorded KRW 488.1 billion, up 16.2% YOY and 0.3% QOQ. Adjusted EBITDA rate was flat QOQ despite Poshmark consolidation. We will continue to work on improving profitability while optimizing controllable cost items this year. Operating profit was up by 9.5% YOY, but down 1.8% QOQ to KRW 330.5 billion, while OP margin dropped 0.3 percentage point QOQ to record 14.5%. Next, let me discuss revenue by each business area. If you look at our Q1 revenue by business, search platform was up 0.2% YOY, but down 7.1% QOQ to KRW 851.8 billion.
Search ad revenue grew 5.3% in Q1, despite advertisers budget downsizing amid concerns over global economic slowdown and seasonality, sustaining a solid growth in NAVER search, surpassing the growth rate of major global search ad businesses. Display ad revenue declined 13.1% YOY due to the base effect of the Olympic Games and the presidential election last year. We break down by segment. Retail sales, including clothing and fashion, increased following the announcement of endemic, but construction and distribution advertisers are vulnerable to economic conditions cut back their marketing spending. Commerce revenue was KRW 605.9 billion, up 45.5% YOY and 24.5% QoQ. Without Poshmark consolidation effect, the revenue would be up 16.7% YOY and flat at QoQ.
By sector, platform was up 1.4% YOY but down 4.4% QoQ. Despite weak consumer spending over global slowdown, the search ads increased YOY to maintain commerce ad growth. Commission and sales revenue jumped 129% YOY and 75.2% QoQ. Revenue growth exceeded that of our GMV with the consolidation of Poshmark and the increase of higher commission service ratio. Without Poshmark, the revenue was up 39.7% YOY and 6.9% QoQ. We will continue to grow commission and sales revenue this year by further monetization of services, including solution businesses. Subscription revenue from memberships went up 64% YOY and 3.5% QoQ as the number of subscribers increased more than 35% compared to last year.
Fintech revenue posted KRW 318.2 billion, up 16.8% YOY, but slightly down at QoQ. Non-capped TPV led the growth with KRW 5.4 trillion, and offline TPV recorded KRW 810 billion, up 68.4% YOY backed by an increase in booking and order payments following endemic and expansion in merchants with on-site payments. Content revenue was up 94% YOY, but down 6% QoQ to KRW 411.3 billion. Despite cutbacks on marketing and withdrawal from certain regions, global WEBTOON GMV posted KRW 412.2 billion, up 28.9% YOY and 2.2% QoQ.
WEBTOON revenue, which accounts for 86% of the total content sales, jumped 115.5% YOY, but fell 7.8% QoQ. Without the effect of accounting changes, WEBTOON sales climbed 43% YOY. Meanwhile, Snow revenue rose 35.5% YOY and 16.7% QoQ, thanks to the launch of AI avatar feature in Snow camera and other monetization efforts, as well as Plato's sales uptick overseas. Cloud revenue came in at KRW 93.2 billion, up 1.2% YOY and down 16.1% QoQ. B2B revenue was up 6.6% YOY but down 9.1% QoQ, as Q1 was off-season for the public sector. Future tech R&D revenue declined due to some product device sales impact.
Next is on expense items. Development and operation expenses, including labor costs, increased 34.6% YOY and 13.2% QoQ with Poshmark consolidation and stock-based compensation following stock price increase. Without Poshmark, the headcount stayed flat QoQ. Partner expense dropped 7.4% QoQ due to the base effect of the one-off World Cup fees last quarter, but increased 33.4% YOY due to WEBTOON accounting changes after the previous quarter. Infrastructure expense remained flat YOY and decreased 14% QoQ. As explained before, in line with the global trend, we extended the D&A period of server and other supplies from four to five years for the actual useful life of the assets. As a result, there was a savings of KRW 22.5 billion QoQ.
Other global big tech companies are working on raising CapEx efficiency, thereby extending their server life from 4 to 6 years. Likewise, we will continue such efforts. We will maintain appropriate level of investment in AI and Superapp to lay the foundation for future business opportunities. This year, we expect a KRW 130 billion increase in CapEx and depreciation booked based on useful life. For many years, NAVER has made preemptive investments in data centers and AI technologies, so we plan to keep infrastructure expense to revenue ratio to the current level. Last but not least, our marketing expense was up 11.1% YOY and 8.8% QoQ due to Poshmark consolidation. Without it, our marketing expense fell 6% YOY and 4% QoQ due to reduced marketing in the content segment.
Next, let me discuss the P&L by segment. First, combined segment margin of search platform and commerce edged up QoQ. Without Poshmark, core margin improved by more than 3 percentage points at QoQ due to the base effect of one-off expense related to the World Cup broadcasting rights and year-end bonuses, as well as D&A period expansion of infrastructure assets and transfer of Papago and Whale to NAVER Cloud. Fintech margin rose 1.2%. Due to a making effect in one-off severance pay and operating expenses in the second half of 2022. Without it, our regular OPM remained flat QoQ. Content deficit narrowed QoQ, driven by efforts to optimize operating expenses, including marketing expense.
Among others, our WEBTOON posted a loss of KRW 21.3 billion, down at KRW 7.9 billion QOQ, while maintaining global total WEBTOON GMV growth. We have painstaking cost-cutting measures in place to ensure speedy and successful IPO of WEBTOON, and our target is to achieve a positive EBITDA by Q4 this year. From KREAM, which falls under commerce, Snow and its affiliated services recorded the largest deficit within the content segment, with a total loss of KRW 45 billion. We will focus on enhancing overall profitability of the Snow business through diverse strategic and business initiatives. Without the effects of increased stock-based compensation expense following higher stock price, our Q1 cloud B2B profit fell QOQ due to a bearish seasonal demand from the public sector and a subsequent downward impact on NCP revenue.
Consolidated net profit dropped 66.9% QOQ to KRW 43.7 billion, primarily due to increased FX rates and increased FX loss on foreign currency-denominated debt and decreased equity method valuation gains. Q1 free cash flow was up KRW 1.1 billion QOQ to KRW 319 billion on the back of increased Adjusted EBITDA and decreased CapEx QOQ. For your information, borrowings increased due to $800 million of loans taken out for Poshmark acquisition in January. $230 million were paid back in Q1 using the FCF, and we plan to pay the additional $200 million within the first half. Lastly, I will present on our new three-year shareholder return policy reflective of mid to long-term business plans.
For shareholder return for each fiscal year from 2022 to 2024, we will pay out 15%-30% of our prior two-year average consolidated FCF as cash dividends. As usual, the plan is subject to change depending on business and market conditions. There are two differences to the policy compared to the past. First, whereas the size of return was fixed at 30% in the past, the new policy has a more flexible range of 15%-30% for the next three years. This is to manage the debt ratio by paying back some borrowings, which soared following a sharp increase in investments for the past several three years.
As a matter of fact, during the past five years, our NAVER built a Paju data center and a new headquarters and procured infrastructure equipment and including GPU to sharpen AI capabilities, which led to a surge in CapEx. Also, NAVER sealed several M&A deals which required a huge investment. Large-scale construction projects such as Paju and HQs are complete, and we plan to hold back on making strategic investments in significant M&A for some time. Infrastructure equipment investment for AI is inevitable. Even so, we will ensure efficient use of them so that total CapEx to revenue ratio stays where it is today. We have a debt payment plan aimed at keeping the debt to EBITDA ratio at 2-2.5 times incorporated into the shareholder return policy.
Second, whereas a portion of shareholder return was carried out via treasury stock buyback in the past, 100% of return will be done by cash dividend payout for the next three years. In 2020 and 2021, there were occasions where the plan to acquire shares got interrupted and could not buy back the treasury shares at all and had to pay back dividends instead. The reason was because the stock-based compensation scheme, or SBC, NAVER adopted for all its employees, which is unheard of in other Korean companies. The Capital Markets Act has rigid restrictions with rather long lock-out periods before and after treasury stock buyback or disposition, posing operational challenges to the SBC scheme.
With the new policy this year, the total shareholder return for 2022 is expected to be around KRW 62 billion-KRW 120 billion, which will be paid out in Q3 as interim dividends after BOD resolution. Separately, the company decided to retire 3% of the treasury shares it currently holds. NAVER's treasury shares represent around 8% of the total outstanding shares, they were utilized as useful strategic resources to fund important deals such as M&As and strategic alliances. Even so, to minimize confusion and possibility of misperceptions towards NAVER's use of its treasury shares, we decided to cancel around 1% of them each year for the next two years. They're worth more than KRW 1 trillion in total based on today's share price.
NAVER still will maintain the amount of treasury shares of within 5% of the total shares issued and outstanding to fund the SBC scheme for its employees in line with the company HR principles. In 2022 alone, the treasury shares NAVER used for the SBC scheme was equivalent to approximately 1% of the total shares. This ends Q1 financial performance update. We will now take your questions.
지금부터 질의응답을 시작하겠습니다. 질문을 하실 분은 전화기 버튼의 별표와 일번을 누르시기 바랍니다. 질문을 취소하시려면 별표와 이번을 누르시면 됩니다. 원활한 회의 진행을 위하여 질문은 한 분당 두 가지 이내로 부탁드리겠습니다.
Now Q&A session will begin. Please press star 1, that is star and 1 if you have any questions. Questions will be taken according to the order you have pressed star and number 1. For cancellation, please press star 2, that is star and 2 on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only 2 questions per participant.
처음으로 질문해 주실 분은 골드만삭스의 에릭 차 님입니다.
The first question will be presented by Eric Cha from Goldman Sachs. Please go ahead with your question.
질문 감사합니다. 두 가지 질문이 있습니다. 첫 번째는 그 Smart Blocks이나 뭐 전반적인 검색 개편 또 앱 개편을 하시는 등 그 코어 서비스 개편에 이제 집중을 하시는 것 같은데, 서치 플랫폼이 또 주요한 그 코어 매치 중 하나인 만큼 이 여기에 이제 성장률을 터널하는 수가 중요할 것 같은데, 그 매크로 개선 효과 이상으로 성장률이 가속화될 수 있다고 생각하시는지, 그리고 그 시점이 언제쯤이라고 생각하시는지 궁금합니다. 두 번째 질문은 그 WEBTOON에 대해서인데요. 글로벌 그 WEBTOON의 그 주요 시장에서의 경쟁자는 아무래도 그, 뭐 WEBTOON이 아니라 그 여러 콘텐츠 플랫폼일 것 같은데, 이 경쟁사들을 상대로 그 타임 스펜드 쉐어가 어떤 식으로 지금 트렌딩되고 있는지 궁금하고요. 앞으로 이제 장기적으로 이를 늘리기 위해서 어떤 전략을 가지고 계시는지. 여러 전략 말씀해 주셨지만 이미, 그 가장 중요한 포커스가 어디인지 궁금합니다. 감사합니다.
Thank you for taking my question. I would like to ask you two question. First, relating to your efforts to revamp and improve your core services, including search and application revamp, as we've seen through your you know, your efforts behind Smart Blocks . I would like to understand as to what you consider key aspects that will help you drive a growth and turnaround in your search platform business. Do you believe that you will be able to outperform in terms of growth vis-a-vis compared to the overall improvement in the macro backdrop? When do you think that timing will be, is the second portion of that question. My second question relates to your WEBTOON business.
I believe that, in a, in a global, against the worldwide or global backdrop, your competitors would not necessarily be other WEBTOON providers, but other content, platforms. If you could just share with us as to how your time spent, share is trending versus these peers, and what are your key strategies to bring about a long-term growth?
네, 질문 감사드립니다. 말씀 주신 대로 NAVER는 검색 서비스라든지 NAVER app 개편을 통해서 저희의 핵심 사업인 광고 사업에서 성장을 극대화하려고 노력을 하고 있는데요. 그 이유는 당연히 NAVER의 핵심 사업이 검색이고, 또 저희의 매체의 파워를 기반으로 한 광고 시장이기 때문입니다. 말씀 주신 대로 저희가 Smart Blocks를 통해서 검색 광고의 효율을 개선하는 한편, NAVER app 개편을 통해서는 저희 NAVER Home 영역을 개설해서 저희가 그동안 좀 잡지 못했던 좀 개인화된 추천 피드 광고의 영역도 잡으려고 노력을 하고 있고요. 저희는 연내에 적용을 해서 연내에 조금 더 유의미한 성장률을 보이려고 노력을 하고 있고, 저희 올해 좀 발표했었던 메인 광고라든지 브랜드 광고의 경우에는 아무래도 좀 실황을 타기 마련이지만 저희는 시장이 회복되면은 가장 효율성 높은 매체가 NAVER이기 때문에 저희가 가장 빠른 속도로 성장률이 개선될 것으로 예상을 하고 있습니다.
Thank you for that question. As you've mentioned, within NAVER, our key business, of course, is the advertisement business and our search services. We've been bringing about and applying some upgrades to our search services and improving and revamping our app as the advertisement business makes up a very important basis. We are putting in efforts to maximize that. Search and advertisement business being our key, we've been putting efforts to further drive up the efficiency by adopting and introducing Smart Blocks as well. We've also been improving the main page and also increasing the surfaces for the feed. Through these efforts, we've also been trying to personalize and provide a more customized feed to the user base. Our objective is to drive a meaningful level of growth before the end of the year.
Of course, our main and brand-related advertisements are subject to market movement. Since NAVER advertisement really has or enjoys higher level of efficiency, we believe that we will be able to bring about a faster growth compared to the market.
두 번째 질문에서 답변드리겠습니다. 그 WEBTOON과 TikTok 같은 경우에는 광의에서 모두가 경쟁 플랫폼은 맞고요. 광의에서는 time share에 대한 경쟁을 하고 있는 건 맞습니다. TikTok은 YouTube하고 오히려 더 직접적인 경쟁자이기 때문에, WEBTOON 같은 경우에는 직접적인 time share로 생각하지는 않고요. 다만 WEBTOON 자체의 time spent는 꾸준히 증가하고 있고요. 가령 미국하고 일본 같은 경우에는 작년 연초 대비 올해 연초가 벌써 10%씩 증가했다고 생각하면 될 것 같습니다.
Thank you. Responding to your second question, this is the CFO. Yes, from a broader perspective, basically, WEBTOONs do compete with TikTok on a, on a timeshare basis, but a direct competition to TikTok is more like YouTube. We don't think that the WEBTOONs will be in direct competition in terms of the timeshare. Having said that, if you just look at the timeshare figure for WEBTOON on a standalone basis, the time spent has been showing a sustained uptrend. If you look at the U.S. market and the Japanese market, at the beginning of the year, actually, we've seen the time spent actually grow by about 10% compared to the beginning of the previous year. Also, in order for us to further increase the time spent, we will be adding features such as social, community and communications.
We will explore and develop original IPs in regards to the movies or Netflix. As we develop these source content, we will try to really place an effort behind increasing the users' time spent. Last but not least, compared to our competitive WEBTOON platforms, the number of titles that are loaded on our paywall is much, much smaller. Going forward, hence, we will be able to further expand our opportunity to monetize from our WEBTOON platform, and we will take on a little more aggressive approach towards the ad using our ad product, which we've been quite unaggressive up to date. Based on not just the time spent, we will try to focus on increasing the revenue from these platforms.
The next question will be presented by Jin Gu Kim from Kiwoom Securities. Please go ahead with your question.
Thank you for taking my question. I also have two questions. First relates to your advertisement business. Can you provide us with some color on the overall advertisement, advertiser-related trend and also impact from the high seasonality? What is your take on the current overall market backdrop in light of the economic slowdown that we've experienced? Second question is on your AI business. Compared to other global big techs, what do you consider to be your competitive edge? I see that this quarter, your infrastructure spending had been quite flat. What was the impact from AI? Also from a long-term perspective, how do you foresee your infrastructure expense to actually rise, especially in relation to your AI and also your cost efficiency measures?
Responding to your first question, this is the CEO.
As you've mentioned, during the first quarter, the advertisement market overall had been quite slumped, of course, which was of course not very good, this actually was the same market backdrop on a global basis. We expect during the second quarter, uncertainties will persist, it will be quite difficult for us at this point to give you an exact forecast and projection with regards to the ad market in the first half and the possible growth in the DA display ad. However, NAVER as a company will really endeavor to further solidify its power as a media, we have by introducing premium advertisement product for big brands, we are currently executing on those efforts.
We believe that in terms of the DA, our display ad, we will be able to see a solid, a better performance compared to the first quarter.
네, 뭐, 지, 아까 제가 뭐 컨콜에서도 말씀드렸듯이 뭐 저희가 AI 관련해서는 꾸준히 기술 투자를 지난 2017년부터 해왔었고, 세계에서는 지금 세 번째로 초대규모 그 생성형 AI들을 위한 초, 그, 빅모델을 가지고 있습니다. 따라서 뭐 특히 한국어에 있어서는 글로벌 빅테크 대비해서도 능가하는 경쟁력을 갖추고 있다고 저희는 판단하고 있고, 또 앞으로도 그렇게 해야 되는 것이 저희의 어떻게 보면 책임감이라고 판단을 하고 있습니다.
Regarding AI, we've been continuously making investments into AI and related technologies since year 2017.
We are the global number three in terms of owning an AI model, a hyperscale generative AI model, that is, and we believe that it is part of our responsibility and a must for NAVER to continue to develop our capabilities, especially in terms of the Korean language-based generative AI model. I believe that we surpass our global peers.
인프라 비용에 대해서 말씀드리겠습니다. AI의 특성에서 저희가 GPU 구매를 한 2년 전에 처음 했었고, 올해도 또 구매를 할 예정입니다. 하지만 아직까지는 전체 인프라 관련 감가상각비용 중에서, 뭐 한 10% 미만 정도 차지한다고 보시면 될 것 같고요. 향후의 CapEx 역시 저희가 GPU 등 AI 들어갈, 더 많은 장비 구매를 위해서 기존 AI와, 그, 에는 꼭 할당되지 않는, 나머지의 CapEx에 대해서는 효율화할 계획이어서 앞으로의 CapEx 총량은 올해 같은 경우 작년보다 늘어나지는 않을 예정입니다.
This is the CFO responding to your question about infrastructure expenses. Starting two years ago, we started to purchase GPUs that was required for our AI technology, and we will continue to add on more GPUs going forward. Out of the total infrastructure expense, the depreciation cost AI currently accounts for less than 10%. Going forward, there will be CapEx requirements as we will need to further purchase GPUs and other AI related equipment. Aside from AI investment in terms of the remaining CapEx, we're continuously going to make that spending much more efficient. This year our infrastructure expense will not be much more than what we've seen previous year.
Despite our AI investment demand increasing, our infrastructure costs in previous years were approximately 7% of revenue.
Our infrastructure expense was somewhere around 7% against our revenue and that we expect is going to continue this year.
다음으로 질문해 주실 분은 CLSA의 Seungjoo Ro 님입니다.
The next question will be presen-
Our infrastructure expense was somewhere around 7% against our revenue and that we expect is going to continue this year.
다음으로 질문해 주실 분은 CLSA의 노승주 님입니다.
The next question will be presented by Seungjoo Ro from CLSA. Please go ahead with your question.
예, 질문 기회 감사드립니다. 그 해외 사업 포트폴리오에 대한 질문 두 가지인데요. 일본 하나, 미국 하나 드리겠습니다. 그 첫 번째로는 지난 분기에 그 네이버 쇼핑 검색이 그 야후 재팬에 상반기에 탑재되고, 어, 광고 상품도 준비 중이라고 발표해 주셨는데요. 이에 대한 계획은 변함이 없는지 궁금하고요. 그 라인과 야후 재팬에서도 지금 경영 통합이 진행되고 있는데, 이로 인해 일본과의 협업에 대한 계약도 변화가 있는지도 궁금합니다. 어, 두 번째 질문은 제가 Poshmark 마켓셰어 상승, EBITDA 흑자 언급해 주셨는데요. 좀 더 구체적으로 그 거래, 매출, 영업이익, 뭐 올해 계획 등을 좀 공유해 주시면 도움이 많이 될 것 같고요. 어, 이와 추가로 그 웹툰하고 밴드를 포함해서 그 미국 사업 포트폴리오의 현재 경영 지표하고 성장 추이가 그 경영진분들이 계획하고 계신 대로 진행이 되고 있는지, 어, 미국 사업에 대한 현황을 좀 더 포괄적으로 설명해 주시면 감사드리겠습니다.
Thank you. I would like to ask questions about your overseas business, in particular relating to Japan and the U.S.. First question, you've mentioned previously that you will be including NAVER Shopping search features onto Yahoo! Japan in the first half of the year. Would like to understand whether that plan still holds. Also, what are some of your advertisement related planning for that market? Since LINE and Yahoo! Japan is undergoing integration, will there be any changes to the collaboration that you engage in with your Japanese entities? Also you talked about Poshmark. You said how the market share has gone up and EBITDA has turned around. Can you provide a little more color as to what the GMV, the top line revenue, and OP looks like?
Also regarding your, including your WEBTOON and Wattpad business, can you give us an update on what your U.S. business is looking like? Are the business indicators and growth in line with your previous plans?
질문 감사합니다. 일본 부분에 대해서는 제가 답변드리겠습니다. 저희가 작년부터 Yahoo! Japan 내에서 라이브 테스트를 시작을 했었는데요. 그 테스트에서 성과가 굉장히 검증되게 나와서, 지금 4월에 저희 쇼핑 검색과 로컬 검색에 저희의 기술과 노하우가 접목이 이미 되었습니다. 말씀주신 대로 NAVER의 가장 강점은 Google과 차별력 있는 검색 결과를 버티컬 부분, 특히 쇼핑과 로컬에 잘.
This is the CEO responding to your question. If you look at Yahoo! Japan, we've mentioned that we will go through the live test and we were able to validate the positive results that we've seen from that. Already in April, we have applied our shopping search on shopping search and locals, our technology and our know-how. What really differentiates us against Google search is that for each of the verticals, like the shopping and the local categories, we are able to really play out and leverage our competitive edge, and we can also provide search ads based off of those services. We therefore plan to further complete the adoption of these relevant services up until the end of this year.
With regards to the business integration between the two entities in Japan, there aren't going to be any changes to the terms and structure of the agreement or the overall framework of the agreement that we have. It will more likely be a revenue share structure where we will take certain portion from the search ad revenue. Currently the details are being discussed as we speak. Since the integration process is led by Mr. Shin Jungho of LINE, we believe that through this integration we will be able to see a much more streamlined decision-making process.
This is the CFO responding to your question about Poshmark. In Q1, we've seen the overall trend quite similar as we've seen previous year. For Poshmark, we're seeing an year-on-year growth about 8%. If you were to compare that to our peers, which are Etsy, eBay, Depop and Mercari, their GMVs are actually dipping, and we are seeing in terms of Mercari, they've dipped for more, about more than 10%. The reason, the only company that is posting a growth in terms of revenue is Etsy. The reason for that is because they're driving up their take rate in order to offset the decline in their GMV. If we were to compare Poshmark with its peers, Poshmark is the actually the only company that is showing a solid growth.
Basically our stance is that we will continue on and sustain our positive EBITDA position, but we will also try new experiments and test new things, for instance, such as using the paid marketing approach. We have talked with Poshmark, and we, for the first time, added the 1 P advertisement, after which, you know, we will be able to see a bigger possibility of growth going forward. We will continue to reduce our overseas losses, and if we really focus on the products that we offer, we believe that our big, and our target is that we will be able to sustain our profitability while growing more compared to our competitors.
Regarding WEBTOON growth, we do not separately carve out the U.S. market. We look at it from a global perspective. Our growth in terms of the WEBTOON business, I can tell you is well on target. In recent year or two, you know, we've experienced quite a bit of change in terms of the demand for Korean content. In terms of content IP development and Korean content, we've seen significant rise in the interest that we're getting from Hollywood and other OTT platforms. If we focus a little more on the marketing side, we believe and we expect that we will be able to drive up our share of the usage time.
As I mentioned before, if you look at our WEBTOONs, we have small pool of titles where we are, you know, re- billing for, and also the advertisement that we are using for WEBTOON business is still very low. If we continue to drive the current growth rate in terms of the user base and the GMV, and if we are able to turn profitable, by the end of this year, I believe that come next year, we will be able to, have a brighter, prospective for listing. For growth, excuse me. Due to the time constraint, we will take the final question.
The last question will be presented by Stanley Yang from JP Morgan. Please go ahead with your question.
Thank you for taking my question. I would like to know the combined GMV between your combining your Smart Store and your non-captive malls, the external malls, and also for your commerce revenue. If you were to take out Poshmark, we see that your sales and commissions growth was actually higher than the growth that you've seen from GMV. Do you think that this impact from the take rate hike will continue and what is the source of this growth?
Regarding the question on the combined growth of Smart Store plus the external malls, our Smart Stores are posting a very robust growth while the external, the non-captive mall GMV has dipped. On a combined basis, there's been a slower growth.
Regarding the specific breakdown, we will make sure that we can provide you with the relevant answers through our IR department after the conference call. Regarding the outlook in terms of the growth, since we are seeing quite positive growth from our Smart Store, Brand Store, the booking, traveling, and KREAM, we expect to see GMV growth above and beyond the market growth rate. In terms of the question on your take rate, of course, the impact of the hike and the take rate will of course show differently depending on the timing and different quarter. I believe that the uptrending will continue.
I say that because we still have ample leeway to further up our take rate because we start off from a relatively low base of take rate to begin with. Secondly, in terms of the models, there are products like KREAM and Poshmark, where we could actually apply a higher rate of take rate. And also we are making preparations on various different verticals, which include travel, life commerce, groceries, and gifting. Another point that I would like to mention is that our Guaranteed Delivery and CLOVA MD, and these products are also open to further monetization as we go forward. I can tell you that we do have quite a bit of upside. This is the CFO.
Just to add a little more color on that, is the reason why we're seeing a higher growth from our top line versus the growth in GMV is not because of any meaningful rise in the take rate. It's just a simple or simple increase in the weighted average, for instance, increase in the mix from the Brand Store because our base of the take rate where we started was quite low to begin with. Once again, just want to emphasize that this growth is not attributable to any meaningful increase in take rate. This brings us to the end of Q1 2023 earnings conference call. I would like to thank everyone for joining us this morning. I look forward to your support and encouragement going forward. Thank you.