Naver Corp

KRX:035420

Q1-2025 Earnings Call

[Operator]

Good morning. My name is [indiscernible] from NAVER. We will now begin NAVER's 2025 Q1 earnings conference call. For the benefit of our investors joining from home and abroad, we will provide simultaneous interpretation.

On this call, we are joined by CEO, Soo-yeon Choi; and the newly appointed CFO, Hee-cheol Kim, and they will walk you through NAVER's business highlights and strategies and financial results, 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.

[Soo-yeon Choi, executive]

Good morning. I'm See-yeon Choi, the CEO. In 2025, despite a certain environment, NAVER achieved solid results by strengthening its core business of competitiveness and advancing its platforms. In the changing era of AI, NAVER has demonstrated its unique platform competitiveness with exclusive content and data, not only for search but also for content discovery and even extending to services like shopping and local places creating an ecosystem that AI cannot replace. Furthermore, through the launch of AI briefing, NAVER is progressively adapting to changing user patterns.

Recently through advanced personalization, NAVER has further strengthened its business ties, especially in shopping and local places. This is evident in the Y-o-Y growth of 11.9% in search platform and Y-o-Y growth of 8.2% in search advertising recorded in Q1.

In the advertising segment, NAVER Ads began to evolve as we enabled more efficient ad delivery within the advertisers' budgets through the phased rollout of the ad tech platform named ADVoost, which began testing in January.

Through the optimization of ad placements, particularly in the mobile phone feed and main page, we expanded the visibility of shopping search ads provided diverse advertising experiences and saw significant growth in commerce advertising as a result.

To further enhance content discovery, we plan to revamp the NAVER app and our main search engine within this year, focusing on advanced content recommendations and personalized search experiences. These progressive advancements in service and ad technologies will help blur the lines between search, display and commerce advertising across and beyond the platform, driving overall ad efficiency.

In commerce, following the launch of the NAVER Plus Stores stand-alone app in March, we have observed changes in user patterns and growth opportunities. Moving forward, we will introduce differentiated UX and services exclusive to the stand-alone app beginning with features designed to enhance the potential in the form of a commerce specialized AI agent while continuing to expand membership exclusive benefits to further invigorate NAVER's shopping ecosystem.

Moving on to our segment results, starting with Search platform. Search platform recorded steady growth in Q1, driven by continued enhancements in platform competitiveness and advertising efficiency. To strengthen the competitiveness of NAVER's Search platform, we are leveraging our company-wide analytics platform to assess the quality of search results by topic and identify areas for improvement, thereby enhancing overall search quality.

In parallel, we plan to further improve the quality of Search and related services by securing additional reliable public data and information to reinforce our data assets and essential component of search competitiveness. At the same time, discovery features have been further refined to increase user time spent on the platform.

In Q1, we enhanced our personalized recommendation algorithms, allowing content to better reflect the individual interest of users. Additionally, we expanded the feed space within vertical spaces like Cafe, creating more opportunities to deliver tailored content. Moving forward, we will introduce dedicated feeds for specific topics such as fashion, beauty, lifestyle, food and travel restaurants while enhancing the accessibility and visibility of recommended content.

We are also preparing a revamp of the NAVER app and our main search engine to ensure content is consumed more organically. Furthermore, by actively utilizing AI, the layout and structure of the NAVER app, we aim to personalize user navigation and lock in users to spend more time within the NAVER ecosystem.

Furthermore, we plan to apply personalization to our main search engine as well. Unlike the past where the same results were shown to all users, search results and its UI/UX will now be tailored to each individual's context by leveraging customization technology and unified data. We expect that this revamp, along with efforts to improve search quality and secure data will provide users with an optimal search experience.

NAVER is also focusing on UGC production to ensure that high-quality content alert to the interest of users is generated across various services and is exposed based on accurate targeting. Users are ranging from teens to their 30s who feel fatigued by fast consume content are migrating to blogs where they consistently create unique posts with images of videos in their personal space.

Meanwhile, Clip continues to attract high-quality creators providing meaningful synergy with local places and shopping services. In the first half of this year, the number of creators active over the Clip Creator Program has grown more than twofold compared to the end of last year with rapid content expansion across diverse categories, including local places, entertainment, sports and fashion and beauty.

This has led to a healthy content consumption reflected in increased daily Clip views and time spent. Since its launch, Clip's average daily time spent has increased by 1.8x and we've expanded creator rewards and growing synergy with other NAVER services. Some top-tier creators are now earning up to KRW 20 million per month. Such UGC creation linked with NAVER's cyber services is driving a virtuous cycle that strengthens platform competitiveness. Content produced on Clip is being showcased through Clip reviews on NAVER Place, building a collection of valuable video assets.

In addition, Shopping Connect, which started testing in April, effectively thinks brands, Smart Store sellers and various creatures on the NAVER app and is set to evolve into a powerful marketing tool that will also drive branding effect on the then NAVER Plus store. These accumulated unique and diverse NAVER content assets will be leveraged to enhance differentiated AI search and commerce experiences and will serve as the foundation for developing our own AI agent.

Next, let me also provide a brief update on the progress of on-service AI. To meet the growing demand for AI-driven search, we released AI briefing in March starting with 1% of factual queries to provide users with concise summaries of the information they seek. Although the service has been live for only a short period with some positive indicators such as higher CTR and user time spent with AI briefing results compared to pre-implementation.

Going forward, we plan to expand our current coverage and enhance service quality through model improvements and usability analysis. Some features of ADVoost, our AI-based platform designed to automate ad campaign execution and optimize budgets for advertisers have also been replied. Currently, keyword generation and automated bidding features are in use. And by year-end, we plan to launch additional features such as creative generation and automated targeting to enhance ad performance and optimize budget utilization.

To elaborate further on our Q1 advertising performance within search and advertising, we continued efforts to improve our product while also expanding the application of expanded search or extended search of which automatically matches ads to search queries that are closely related to content on the advertiser site and exposes those ads accordingly.

In display advertising, we drove revenue growth by delivering high-performing ads and expanded feed inventory through more advanced targeting capabilities. In addition, to meet the growing demand for advertisers seeking broader search or broader reach, we continue to expand beyond the NAVER platform. As a result, a variety of NAVER's ad products are now being served across multiple external platforms and websites.

As mentioned earlier, in Q1, the optimization of ad placements led to commerce ads being served within existing display inventory, which resulted in a different growth distribution than in the past as inventory optimization and automation for ad delivery and budget optimization designed for advertisers advance, we expect the lines between search, display and commerce to blur even further.

Accordingly, we plan to communicate, in total, NAVER platform advertising metrics, which will encompass search, display, commerce, financial and Webtoon ads. For reference, in Q1, the total NAVER platform ad revenue achieved a steady growth of 9.6% Y-o-Y despite challenging conditions, demonstrating the resilience of the NAVER platform.

Next, I will provide an update on our commerce business. In Q1, the overall shopping market environment was challenging due to factors such as weakened consumer sentiment driven by political and social issues, persistent high inflation and interest rates stemming from uncertainties in the U.S. and fewer business days compared to the previous year due to the designation of temporary public holidays.

Despite such a challenging environment, we reinforced our platform competitiveness with the larger NAVER Plus store and achieved a solid 10.1% Y-o-Y growth in on-platform GMV driven by strategic efforts in delivery and membership. The NAVER Plus Store app launched in March enhanced shopping value by strengthening personalized features through the Smart Store database, focusing on exploration and discovery.

It also expands the benefits for our membership users, significantly increasing member activity. The outcome of these efforts was evident in the positive trends seen in customer activity and user behavior metrics. In terms of customer activity, the app showed higher levels than the web in metrics such as purchase frequency, purchase amount or conversion rate and the average GMV.

Notably, the activity of membership users within the app was approximately 26 percentage points higher compared to the web. Similarly, in terms of user behavior, we observed a significant increase in GMV in the discovery domains within the app, such as the shopping home, verticals and curated events, indicating changes in user patterns and growth potential as intended.

The launch of the NAVER Plus Store stand-alone app as part of a two-trick strategy to enhance user accessibility and convenience. It aims to retain general users who access through the NAVER app and mobile web while expanding the overall user acquisition channel by adding the app as a new channel to provide a more sophisticated shopping experience.

The app will also be positioned to gradually attract users according to their needs, focusing especially on the loyal customers who visit frequently and show higher purchase conversion rates. Going forward, we plan to progress the enhance differentiated UX and services exclusive to the app, including features like the AI shopping guide to improve retention. At the same time, we will continue to expand exclusive benefits for our membership users to further energize the Smart Store ecosystem.

In terms of delivery, we rebranded the guaranteed delivery service as end delivery in line with the app launch while also enhancing the service by providing more detailed delivery dates as well as offering free shipping and returns benefits for membership users.

We also expect the same day and Sunday delivery, reducing lead times and increasing user satisfaction. Also, ad delivery coverage grew by 90% compared to the same period last year. Furthermore, to enhance our competitiveness in the fresh food sector, where fast delivery is crucial, we plan to launch a service in partnership with Curly in the second half of the year, expanding our selection of high-quality products and improving price competitiveness.

With this partnership, we expect to accelerate customer acquisition and purchase frequency in the rapidly growing fresh food category, which holds a significant share of the commerce market while also strengthening the overall competitiveness of our commerce platform. The Plus membership is strengthening the ecosystem by expanding benefits both within and outside the NAVER platform.

Following the Netflix partnership, the trend of increased daily new sign-ups higher shopping expenditure compared to pre-membership has continued. Active and paying, user growth has also accelerated, further contributing to the vitality of NAVER's commerce ecosystem.

This core value of Plus membership's line and offering a differentiated enjoyable experience unique to NAVER beyond simple discounts and rewards. We will continue to expand user benefits and evolve the service to deliver consistent delight in users' daily eyes.

Lastly, let me highlight the remarkable growth achieved in our commerce advertising business. With the app launch, we expanded our content inventory and optimized ad placements across the board while enhancing personalization features to help users discover more relevant products.

We also improved ad visibility within integrated search results and enhanced the recommendation ads in non-search areas to boost efficiency. AI power creative optimization and expanded matching technology were applied to help advertisers more effectively expose their DVs. These combined efforts generated a strong synergy, driving commerce ad revenue to an all-time high and marking a robust growth.

Next is an update on our fintech business. In Q1, NAVER Pay's TPV reached KRW 19.6 trillion, representing a 17.4% increase Y-o-Y and 1.4% increase Q-o-Q. Of this, non-captive payments grew 24% Y-o-Y, surpassing KRW 10 trillion, driven by enhanced payment usage and expanded network of merchants. This now accounts for 52% of total NAVER Pay payments, highlighting the continued expansion of our payment ecosystem.

For our platform business, NAVER Pay's loan comparison service is now available on the K Bank app through our partnership with K Bank. This enables keeping users to easily compare loan products from 70 financial institutions already partnered with NAVER Pay, and we expect this to attract a broader range of users to the NAVER Pay Platform.

The launch of our securities web trading system has increased the convenience, allowing users to access investment information and trade stocks through their securities accounts directly within the NAVER Pay app. We will continue our efforts to strengthen competitiveness across various financial services.

Now moving on to Webtoon. In Q1, Webtoon revenue was KRW 422.7 billion, up 10.1% Y-o-Y but down 1.2% on Q-on-Q. For reference, our Webtoon Entertainment will release its earnings report on May 13 in U.S. time. Please refer to Webtoon Entertainment's earnings call for a more detailed information.

Finally, I would like to provide an update on the performance of the Enterprise division. Starting from this quarter, we plan to rename the Cloud division to the Enterprise division taking into account the characteristics of the business segment. Please note that the detailed composition of the division remains the same as before. The B2B business in the Enterprise division is slightly growing, supported by LINE WORKS ongoing efforts to acquire paid users.

Through campaigns targeting the conversion of free users to paid ones. The number of paid LINE WORKS IDs has consistently increased by over 10% for 4 consecutive quarters, ensuring stable growth. The number of paid clients is also steadily increasing, laying the foundation for future customer acquisition.

Moreover, by utilizing the AI capabilities through the integration of LINE AI in 2023, we plan to launch various services in conjunction with LINE Work. In Q1, we launched Roger, a real-time voice communication service. In April, we also introduced the paid version of AI note, which has been well received by a variety of corporate clients. Looking ahead, LINE WORKS have plans to expand its product offerings beyond messaging with a focus on evolving into an AI-powered platform. In the B2B AI sector, we sufficiently secured contracts for a NeuroCloud powered by HyperCLOVA X, including a contract with the Bank of Korea in the first quarter following our successful partnership with KHNP at the end of last year.

This marks an important step towards expanding our specialized AI services for the financial sector. Through this contract, we plan to implement AI power solutions to enhance the productivity of employees living in Korea including basic functions, such as document search, summarization as well as developing specialized tools for research and analysis of various economic issues. We expect revenue to start generating from both KHNP and BoK contract beginning in Q2.

As businesses continue to advance AI technology and its applications, demand for GPU as a service is expected to grow, allowing companies to utilize GPUs within cloud environment without the need to establish a separate infrastructure. Given NAVER Cloud's experience in building Korea's largest data center, supercomputer infrastructure and expertise in operating LLM and AI services ,we expect to offer highly conservative services.

In Q2, we will secure the first case of GPU as a Service and obtain a meaningful reference. Moving forward, we plan to build more references, not only in Korea but also internationally. Although the overall advertising and commerce market is expected to remain weak due to recent economic downturn, so NAVER will focus on enhancing its AI power service platform and business capabilities working with our various stakeholders to outperform market growth.

Next, our CFO, Hee-cheol Kim will walk you through Q1 financial results.

[Hee-cheol Kim, executive]

Good morning. I'm the new CFO, Hee-cheol Kim. This earnings call is my first opportunity to address our investors and analysts. In the future, I will work to ensure more opportunities to connect with you beyond these calls. I kindly ask for your continued support and encouragement for NAVER. Now let me present the financial results for the first quarter.

NAVER's Q1 revenue totaled KRW 2.7868 trillion, up 10.3% and Y-o-Y, driven by strong double-digit growth in core businesses such as search platform, commerce and Fintech but down 3.4% from the previous quarter. Despite the challenging macroeconomic environment, we saw weakened economic outlook and consumer sentiment, along with uncertainty in the advertising and commerce market, NAVER has continued to drive strong growth in its core competitiveness by strengthening its service offerings and exploring diverse monetization strategy.

Costs were carefully executed with a focus on each business unit strategy and the company's mid- to long-term direction. As a result, operating profit increased by 15% Y-o-Y, but decreased by 6.8% Q-o-Q, reaching KRW 505.3 billion. The operating profit margin was 18.1%, up 0.7 percentage points Y-o-Y.

Adjusted EBITDA, which excludes the volatility of stock-based compensation expenses and depreciation increased by 20.7% Y-o-Y and decreased by 6% Q-o-Q, reaching KRW 701 billion. Adjusted EBITDA margin was 25.2%, up 2.2 percentage points Y-o-Y.

Next, I will explain the revenue by business segment. In Q1, the Search platform revenue increased by 11.9% Y-o-Y, but decreased by 4.9% Q-o-Q, totaling KRW 1.0127 trillion due to the seasonal offtake period. Search ad revenue totaled KRW 753.7 billion, up 8.2% Y-o-Y but down 1.9% Q-o-Q, driven by the expansion of expanded search improvements to place ads and the added effect of expanding to external media.

Display ads experienced a slight slowdown in Y-o-Y growth due to the downturn in the advertising market, the impact of seasonality and the exposure of commerce ads within the feed pages due to placement optimization. However, thanks to our efforts such as expanding new feed placements, increasing high-efficiency feed coverage and instructing targeting, Revenue recorded KRW 217.2 billion, up 7.3% Y-o-Y and down 13.8% Q-o-Q.

As mentioned earlier, the demand from advertisers for the most efficient ad placements regardless of pace or product lineup is increasing. The boundaries between the various ad products are displayed across NAVER as placements are gradually being blurred. Accordingly, starting from the Q2 earnings call, the revenue classification within the Search platform will be adjusted. Going forward, please note that communication will focus on the total advertising revenue growth of NAVER's platforms as explained earlier.

Commerce revenue recorded KRW 787.9 billion, up 12% Y-o-Y and 1.6% Q-o-Q. Commerce advertising saw an accelerated growth rate of 16.4% Y-o-Y and increased by 0.2% Q-o-Q contributing to overall revenue growth. With the optimization of ad placements and the advancement of recommendation ads, we applied AI based creative optimization and expanded matching technology to help advertisers more effectively expose their databases.

Going forward, we expect us to be more efficiently displayed on shopping placements with high growth potential contributing to growth. Despite the deconsolidation of AMUSE, our commission and sales revenue was up 8.6% Y-o-Y and 2.5% Q-o-Q backed by GMV growth from Smart stores, including brand stores and services, greater adoption of brand solution packages and enhanced delivery competitiveness.

Adjusting for the deconsolidation of AMUSE in Q3 last year, revenue rose 12.3% Y-o-Y. Membership revenue rose 15.4% Y-o-Y and 3.5% Q-o-Q driven by sustained growth in average daily new sign-ups following the partnership with Netflix in November. Fintech revenue grew by 11% Y-o-Y but declined 2% Q-o-Q, totaling KRW 392.7 billion. TPV reached KRW 19.6 trillion, up 17.4% Y-o-Y and 1.4% Q-o-Q led by increased payments on Smart Store and the continued expansion of NAVER's third-party ecosystem. Non-captive payments now account for 52% and is leading the growth.

Content revenue increased by 2.9% Y-o-Y, but decreased by 1.7% Q-o-Q, totaling KRW 459.3 billion, Considering the deconsolidation of NAVER Z in March 2024, this represents a 6.7% increase Y-o-Y. In Q1, Webtoon revenue increased by 7.1% Y-o-Y based on NAVER's consolidated results in Korean won, but decreased by 1.2% Q-o-Q.

For more details, please refer to the Webtoon Entertainment earnings call scheduled for May 13 in U.S. local times. Webtoon Entertainment earnings and also NAVER's results may vary because of the different accounting regulations. SNOW's revenue dropped by 33.9% Y-o-Y and 8.9% Q-o-Q due to the continued deconsolidation effect of NAVER Z.

However, excluding this effect, the increase in paid subscribers for the camera app driven by the content integration resulted in an 18.4% increase Y-o-Y. Enterprise revenue total of KRW 134.2 billion, up 14.7% Y-o-Y but down 24.4% Q-o-Q. B2B revenue increased by 7.5% Y-o-Y, driven by steady growth of LINE WORKS in Japan and revenue recognition from NeuroCloud. Other revenue grew by 156.2% Y-o-Y supported by revenue recognition from the Saudi Ministry of Housing Digital Twin project. For reference, excluding the onetime revenue impact of approximately KRW 30 billion from the LINE Yahoo! settlement recognized in Q4 last year, total enterprise revenue decreased by 8.2% Q-o-Q. Next, let me walk you through the breakdown of expenses.

Development and operation expenses increased by 8.1% Y-o-Y due to essential hiring to support growth in areas such as shopping, but remained stable Q-o-Q declining slightly by 0.2% due to a reduction in stock-based compensation. Partner expenses rose 6.7% Y-o-Y but declined 4.7% Q-o-Q due to lower revenue-linked commissions and a base effect from the recognition of costs related to the under-service contracts with LINE Yahoo! In Q4.

Infrastructure expenses increased by 11.4% Y-o-Y and 2.3% Q-o-Q driven by higher depreciation costs from the acquisition of new server assets, including GPU use. Marketing expenses rose by 17.1% Y-o-Y due to strategic commerce promotions aligned with the launch of the separate Plus store app as well as increased our promotions in the Fintech and Webtoon segments.

However, they declined by 3.9% Q-o-Q due to a base effect from year-end promotions. Looking ahead, we plan to drive sustained growth in core businesses such as search, commerce and content by executing strategic and proactive marketing as needed. While closely evaluating its effectiveness through internal validation. Next, let me discuss the P&L by business.

First, in the integrated search platform and commerce segment, margin improved Y-o-Y despite increased hiring in the shopping business and expanded promotions. This was driven by steady growth and a favorable shift in the revenue mix led by strong growth in high-margin commerce ad sales.

The Fintech segment saw improved profitability Y-o-Y, driven by continued growth in payment, revenue and the execution of strategic marketing, while the losses in the content and enterprise segments slightly widened Y-o-Y we are committed to identifying new business opportunities, enhancing competitiveness and improving profitability to contribute to NAVER's overall profitability in the mid- to long term.

In Q1, consolidated net income was KRW 423.7 billion, down by 23.8% Y-o-Y, primarily due to a base of effect from the gain on the disposal of subsidiaries, including NAVER Z in Q1 2024. Next, I will discuss cash flow and shareholder returns.

In Q1, free cash flow totaled KRW 471.9 billion, down by KRW 21.5 billion Y-o-Y but up by KRW 34.2 billion Q-o-Q. This was due to an increase in CapEx as driven by expanded investments in facilities to secure AI competitiveness despite stable growth in operating cash flow.

Finally, in accordance with the shareholder return program, a cash dividend of KRW 168.4 billion was paid on April 16 following approval at the regular shareholders' meeting in March. The shareholder return program for the past years will conclude with the cancellation of 1% of the company's treasury stock within this year. In a new 3-year shareholder return policy, which will take into account NAVER's investment plans, liquidity and debt ratio will be shared with the market within this year.

This concludes our overview of Q1 financial performance. So we now welcome any questions from the investors.

[Operator]

[Operator Instructions] The first question will be provided by Jin-Gu Kim from Kiwoom Securities.

[Jingu Kim, analyst]

I would like to ask you two questions. The first question relates to the synergies that you were able to see with the adoption of AI solutions into your commerce business. I would like to also gain an update as to the B2B solution sales to the third-party sellers. If you have any plans or strategies for the future, it would be appreciated if you could share that with us.

Second question relates to a recent issue on a global basis. The people are saying that with the emergence and adoption of AI services, basically the search quarries and the user engagement metrics are actually coming down. So there's a bit of an issue or a global issue that had recently emerged, I would like to understand whether you believe that AI service is pushing down on the overall search quarry metrics?

[Soo-yeon Choi, executive]

So responding to your question about the impact of AI solutions into our commerce business, at this point, NAVER shopping currently provides around 100 different solutions to our sellers and most of these solutions are AI-powered in terms of making recommendations, marketing, transactions and also facilitating the inflow of users and the sellers can make use of such trends and data and can benefit from the use of such solutions.

So our strategy at this time is to provide some of these solutions, free of charge to the sellers so that we can onboard as many sellers as possible. So from a short run, this may bring down to the top line slightly but it also means that the number of sellers who will be making use of such solutions are going to rise as we go into the future, and that will, we believe, contribute to the GMV growth.

And regarding the Commerce B2B solution business, we are looking into this opportunity from many different aspects, but no confirmed decision has yet been made. We will come back to you in due course.

Responding to your question about the recent search query trend, we, based upon our internal data, do not yet see any negative or bad impact on our query trend coming from the use of the Generative AI, the current trend is maintained at a quite steady state.

The key characteristics that you see from NAVER search is that our strategy has always been focused and enhancing user satisfaction, especially around the UGCs as people search for where to shop and where to go eat. So it's mostly focused on the discovery aspect rather than a simple factual-based search queries. .

So I believe that the application of the generative AI, which -- and the impact from it is going to be more bigger for our peers that focus more on the noncommercial and factual-based queries. For us, it's always been focused on discovery and also providing people with information in terms of the commerce and the business. So queries that don't necessarily have one single answer to. So I think in that sense, we are impacted less.

But with the continued use of generative AI, we see that the generative AI usage is being tied up with, for instance, shopping experience and may replace as well. With the continuous evolution and development of generative AI into the future, we believe that we will be able to see more diversified consumer behavior when it comes to use of such services.

And hence, it's going to be more important for us to be able to provide the content and information that individuals seek based upon their interest and their preferences and it would be very important for us in that sense to be targeting that as well.

So underpinned by NAVER's data and technology. Hence, we've decided to revamp the application as well as our main search of neighbor, which will be further enhanced so that we can provide a way for the consumers to basically use these different types of search and also really cater to their need for search, shopping and other services that we can provide.

[Operator]

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

[Minuh Cha, analyst]

First off, congratulations to the CFO for your debut earnings release call. My first question relates to the AI briefing, which was released in the first quarter. It seems like the quarterly coverage is not that big. Was it your intention to actually control the cannibalization that may take place in terms of the number of clicks or was the intention to control cost? And so I would like to ask you that question.

Second has to do with the NAVER Shopping app. What are the pros and cons related to the launch of this application? I understand that there is a strategy to revamp this as you go into the future. So when do you think is the timing for us to be able to see an accelerated trend in terms of GMV growth for NAVER Shopping? And another aspect of the question is that your competitor had said that the overall macro headwind is not really impacting their business, what about NAVER commerce?

[Unknown Executive]

Yes. Internally, we've decided to apply AI briefing to 1% of the factual related quarries. Basically, we've done that with intention because search really has a big impact across the overall Internet ecosystem of Korea. So we've decided to take a small portion and apply this future first so that we can steadily gradually expand this into the future within the control of the impact that may be generated during this process. So before the end of the year, our plan is to expand the coverage to double digit.

Regarding the shopping application, its development is ongoing as per our plan and our intention, and it is very quickly gaining its solid market positioning. So there are positive impact. For instance, if you look at casual visitors to our services who use NAVER app and the mobile web, they would come to have price comparisons and also to discover the products that they wish. On the other hand, we have a highly loyal customer base, user base who are more frequent users of the services for them, our intention is to have them come to the stand-alone shopping application. So our intention was to increase and expand the channel through which these consumers can visit us and we believe that, that will have a positive impact and driving up the number of users.

So as I've explained, we are taking on a two-track approach for the NAVER app and the NAVER web, Basically, we have not seen any cannibalization in terms of the users that come through this channel, we're maintaining the previous metrics and for more highly loyal users in terms of people who visit us more frequently and whether there is more higher level of conversion, basically, they are coming through the application, the stand-alone application. So our intention is to not just recklessly try to channel everybody through the stand-alone application. We will continuously enhance the application as well as the services that we provide, that is well in line with the consumer behavior pattern. And if you look at the initial metrics, although it's only been 2 months since the release in terms of the number of downloads and the number of user metrics, we are seeing quite positive results.

So our take of the external macro environment that it is quite bad in terms of -- therefore, the [ outlink ] partner ecosystem where -- and if you look at the GMVs, basically, we've seen negative growth from there. However -- and so we cannot say that we are completely insulated from these external negative macro headwind. Now having said that, we will continuously further enhance our shopping application and also strengthen our partnership ecosystem through ways of providing stronger benefits to our user base so that we can really meet the bold and aggressive growth target of driving double-digit growth this year.

In terms of the competitive landscape, we believe that the macro environment is having its toll on specific categories such as groceries. And as you know, groceries -- it's an area that we've decided to partner up with Kurly.

[Operator]

The following question will be presented by Dongryun Lee from Macquarie Securities.

[Danny Lee, analyst]

NAVER recently unveiled your open source large language model, what is the ecosystem you're envisioning underpinned by the LLM? And what is the monetization model for this?

[Unknown Executive]

Under the overarching strategy of on service AI, we will be using our HyperCLOVA X to upgrade the search and the commerce, which are the key business areas that NAVER is in and this language model that we've developed, we want to make sure that this also makes its contribution to the greater ecosystem, especially on the areas of commerce. So we've decided to open source it.

So we believe that this move is going to help with the more vital growth of the AI ecosystem within Korea, and we hope that it will contribute to that progress. The partnerships that we've entered into with Bank of Korea and Korea Hydro Nuclear Power, these are not just simply a partnership with a public entity but it is important in that we will be able to provide more specialized AI services for each of the verticals, including the financial as well as the natural resources industry. So by winning such B2B reference points, that will be one of the ways in which we will go ahead with monetization.

So the recently unveiled open source model is very light compared to the high level of performance that it offers, and it really has strength in terms of Korean language and also in terms of context aware service delivery. So we believe that the usage will be quite high in terms of, for instance, recommending certain advertisement or commercial copyright messages or providing a travel-related guide for domestic travels. And we believe that helping with the creation of such ecosystem eventually is also going to help with NAVER ecosystem as well.

So once the AI ecosystem takes route within the domestic market, we believe that companies will start to adopt AI much more quickly, and that will, in turn, have a positive impact on our cloud business, including NeuroCloud and GPU as a services. And give us or ensure us a good success in terms of monetization and business model.

[Operator]

The following question will be presented by Dong Hwan Oh from Samsung Securities.

[Donghwan Oh, analyst]

Even with the emergence of DeepSeek and using less number of GPUs, still DeepSeek, I understand use of tens of thousands, and it owns tens of thousands of GPUs, so I would presume that NAVER would need more number of GPUs going forward. What's the CapEx implication for this?

[Hee-cheol Kim, executive]

Yes. Regarding CapEx, as we go forward, we're going to see more use of AI in our core services like Search, Commerce and other key verticals. So we believe that there would be more CapEx investment that will be required for GPUs and CPUs. So compared to the top line revenue, our infrastructure spending is expected to increase.

Having said that, that does not mean that we will just recklessly mimic the past. The global big techs are going, NAVER will be fully considering our capabilities, our strategic direction and the resources that are available for us, we will make appropriate assessment in terms of financials.

Thank you very much. With no questions in the queue, we would now like to close.