Internet Ads Market Lures Telecom Firms
By Cho Jin-seo
Staff Reporter
Feeling mounting pressure from consumers and politicians to lower their mobile and home phone fees, telecommunications firms are trying to make online advertisements an alternative profit source.
KT, the largest telephone and fixed-line Internet company, said last Friday that it decided to acquire Nasmedia, an online advertisement agency for 26 billion won. Nasmedia will sell ads for KT’s Internet Protocol TV (IPTV) and wireless mobile Internet platforms from next year, the firm said.
The acquisition will put KT on even ground with SK Telecom, the largest wireless carrier, in their upcoming showdown in the telecom industry. SK Telecom bought an ad company Aircross back in 2000, and increased its shares from 38 percent to 100 percent earlier this year. The two firms will engage in a fierce competition in the Internet TV and mobile Internet field next year, where the potential for advertisement revenue is also high.
“The purchase of Nasmedia is one of the steps KT is taking to transform itself from a telecom operator into a media and entertainment company,” said Lee Ok-ki, chief of KT’s business planning office. “With this, we want to provide tailored advertisements for new media outlets.”
Nasmedia’s online ads will be first provided to Mega TV, the Internet TV service of KT. The company believes that Mega TV’s subscribers will increase five fold to 1.5 million over the next 12 months and it will become a huge source of ads income.
Technically, the rosy plan looks legitimate. Earlier last week, the company demonstrated a new Internet-on-TV system, which was jointly developed with Naver. While watching TV, users can open Naver’s window onto the screen and search for Web sites, news and images relevant to the TV program. The interface is exactly the same as Naver’s PC version.
“We have already developed a technological platform for user-oriented advertisements, depending on his or her taste, favorite programs and so on,” said Chung Man-ho, executive vice president of KT’s Growing Business Group. “We are waiting for more users to make this system profitable.”
SK Telecom too has space to fill with its ad agency. The company is now waiting for the government’s approval of its purchase of Hanarotelecom, the largest Internet TV provider in Korea with some 800,000 viewers. Hanarotelecom’s Hana TV is airing some 15 seconds of advertisement before showing main programs, and the company wants to lure more users and more advertisers next year.
Merging of telecom and ads businesses has become a trend this year, as the barrier between the old and new media outlets have become obscured and the government has started to ease regulations. Google, which makes more than $10 billion from advertising every year, announced that it will start a mobile phone service that allows users to make free calls in return for watching advertisements on their mobile phone screens.
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