NAVER Corporation (A035420) Earnings Call Transcript & Summary

[Interpreted] Good morning, and good evening. Now we will begin the conference of the fiscal year 2021 third quarter earnings results by NAVER. Today's conference call will be consecutively interpreted for the convenience of domestic and international investors. The conference call will include a summary of the third quarter earnings followed by a Q&A session.

[Interpreted] Good morning. I am Kim Min, IR Director. Thank you for joining NAVER's Third Quarter 2021 Earnings Presentation. Joining our call today, we have CEO, Han Seong-Sook; and CFO, Park Sang-Jin. Earnings results are K-IFRS-based provided for the purpose of timely communications and are yet to be audited by an independent auditor, and therefore, are subject to change after the review. Let me now invite our CEO, Han, to present on the business highlights.

[Interpreted] Good morning. I'm Han Seong-Sook, the CEO. Thank you to our investors for joining our earnings release this morning. NAVER's efforts to bring growth for the domestic business based on our inclusive growth philosophy as well as our global endeavors has brought much to show for, including strategic partnerships. So let me first talk about our global business results, which is a key driver of NAVER's future. NAVER's Webtoon platform with its 6 million creators have entered full-fledged collaborations with partners who own global IPs. In Korea, in the second quarter, we launched Marvel's Black Widow Webtoon version, followed by Q3 release of Shang-Chi. While in North America, we released an original Webtoon based on Batman of DC Comics with raving responses reaching 500,000 readers in just 1 week since the launch. We also released original content from various different genre, including horror and mystery, bringing MAU of 40 million for Webtoon in North America, breaking the previous record. On cross-border content growth, GMV growth was seen evenly across all geographies, recording monthly GMV of over KRW 100 billion. As the influence of our domestic IP is gaining status on the global stage, we acquired equity of Moonpie, which is Korea's #1 web novel platform for fantasy and martial arts genre. And in Japan, once LDF, line digital frontier, completes acquisition of Ebook Japan, we will become Japan's #1 Manga platform with both the web and the apps space. For SNOW camera family app used by more than 200 million every month, we are offering tools to help creators to add effects and filters and launched Epic, which is a photo editing app to respond to users' different needs, thereby expanding the revenue model. For ZEPETO, with 240 million cumulative subscribers, we are adding new features like live and game feature and partnering with brands on the back of user growth and the top line is also up trending quite fast. With the monetization from global businesses that SNOW is tapping into as a company builder, its total revenue increased twofold year-on-year this quarter. And yesterday, there was an advanced opening of global Smart Store, following the onboarding of sellers from September in Japan. We will begin with connecting with LINE Messenger and also expand collaboration with Z Holdings so that we may expand our business model. Underpinned by NAVER's proven Smart Store technology, capabilities and our ecosystem model that includes the SMEs, we intend to bring this model to Japan, and Japan will serve as a good springboard for NAVER's commerce's global expansion. To talk a bit more about our strategic partnerships that help with competitiveness and efficiency. In August, we swapped shares with Cafe24, becoming Korea's biggest e-commerce platform in terms of GMV that caters to the needs of SMEs, brands and online sellers who are seeking to grow into a standalone mall in the end. With collaborations with CJ Express in quick delivery, 69 brands have joined our fulfillment platform as of third quarter end, and their GMV growth was 1.7x that of Smart Stores as onboarding of brands speeds up. NAVER grocery in E-Mart mall launched October 14 as scheduled. E-Mart's FMCG and Fresh Foods will be delivered same-day via NAVER, and we will sequentially offer traders, [indiscernible] delivery and early morning delivery as well. As such, by expanding cooperation with strategic logistical partners, we will complete nationwide delivery system that cover various product categories of NAVER's ecosystem. Next is on breakdown of each business area in greater detail. In search platform, has seen enhancements in terms of search technology and UGC ecosystem, driving of user satisfaction and creator support as we endeavor to evolve into a marketing solution platform from just advertising. We are seeing a positive loop of growth for both creators and advertisers. We've seen -- we've been running a project called Intense Search, which is more than just giving search results, but offering an expanded experience in regards to the user's domain of interest. This will be a new search experience and will be launched officially in the month of October. With more support for UGC's bloggers and their teams and [indiscernible] have been up trending for 3 consecutive quarters, nearing 40%, boosting the ecosystem. And the proportion of influencer search results have passed 15%. We also released brand connect in September, which is an official route for matching and platform for cooperation between creators and brand, and we will provide full-fledged support for development and professionalization of creators. To connect users, creators and businesses and expand discovery of content, products and new experiences, we are expanding our marketing solution offering as well. Place app, which opened in July, saw 40,000 new advertisers voluntarily join in just 3 months after the launch, thanks to our efforts around SME participation and giving greater opportunities for increased impression. We hence saw strong need around such localized search platform. Before the end of the year, we will enhance the platform as an integrated business solution for 2 million local SMEs to cater to such demand and we'll also consider global expansion. We're also testing various marketing solutions that use our commerce data and AI-based recommendation technologies. We plan to expand product lineup to help users and businesses to engage in effective communication along the entire online purchase [ group ]. In the third quarter, commerce revenue outperformed e-commerce market growth at 33% despite high base effect from Chuseok holidays and life with COVID schemes. There are now 470,000 smart stores, continuing high-growth versus pre-COVID, whilst the GMV increased 29% on year. Brand stores posted high-growth of more than 3x on year with cumulative GMV breaking KRW 1 trillion in Q3. Together with volume growth, we focused on merchant solutions in order to support SMEs digital transformation and their growth, laying the ground for profit improvement mid to long term. Brand analytics plus under beta testing in Q3 offers various in-depth analytics for the brand and has received better-than-expected feedback, while subscription solution usage for both the users and businesses is up trending around household, food and consumer appliances. We will launch new solutions in Block content showcase, smart message and Merchant Solutions center in December in order to bring full momentum behind this business next year. Shopping LIVE!, which became #1 in just 1 year since its launch, saw more and more brands report 1 million views in the third quarter and grossing in KRW 10 billion in a single quarter, setting its position as a major channel for new product launches. Quarterly GMV was up by 13x on year. And thanks to active participation of SMEs, number of vendors running more than 1 live sessions per week grew by 40% Q-on-Q, and we are adding more product categories as we speak. Q3 NAVER Pay GMV was up nearly 40% year-on-year, reporting KRW 9.8 trillion on expanded noncaptive on and off-line merchants like [indiscernible] and on higher user activity rate. In particular, noncaptive payment was up 61% on year and off-line payment volume was up 7x, driving the overall growth. NAVER Pay app launched in August with better usability and features, now account for 35% of in-store payment, while NAVER Hyundai card received raving feedback from users in their 20s and 30s, thanks to its unique benefit offerings. After the card issuance, Smart Store payment of current membership users was up by 40%. Driven by expanded merchant base and diversified payment method, number of transactions per person in September was up 14% year-on-year, while average ticket size increased 18% on year on average. NAVER Financial's alternative credit scoring model development is well underway. And following our partnerships with Mirae Asset Capital, in July, we launched first ever unsecured loans, specifically for online merchants partnering with [ Woori Bank ], which is first-tier financial institutions. And total loan originated surpassed KRW 100 billion in just 10 months into the launch for Smart Store merchants as we become a financial bridge for online SMEs. Recently, NAVER Financial was registered as the first distribution agency for lending products, and we will continue to broaden fintech business by getting the requisite licenses within the bounds of regulation. NAVER's cloud platform is used by 55 company out of the top 100 revenue-making company and has a strong position as #2 in terms of its sales volume. Based on voice recognition technology, underpinned by hyperscale AI Clova, we launched Clova Note last November, which recorded 1 million downloads in 11 months, proving the potential of the voice recordings market. By further advancing our AI technology, we will offer strong features on data analysis, including keywords and paragraph summary, statistics and meeting data analysis and also adopting new business models so that we may go global. Success of user facing services like the Clova Note as well as OCR, facial recognition, AI call center that adopt Clova and AI have been successfully brought on to the cloud platform as we pioneer into the B2B segment. Clova's AI Tech also supports inventory management based on demand forecasting per product category, marketing via automatic promo generation and quality management through keyword analysis of comments and reviews, which all help Smart Store sellers drive up business efficiency and bring value creation. As a major digital infrastructure business, NAVER is fully taking its social responsibility that accompany our investments into technologies, which took place over many years. In June 2019, we launched NAVER certificate with user base reached 20 million this month. It's accepted as a key mode of authentication underpinned by safety and security in public, financial and education sectors, and we plan to increase e-signature partners to 200 and will provide a platform to more than 40 different My Data service providers. We were also the only domestic cloud service provider that took part in the build-out of the booking system for vaccines, which started in August, supporting a stable process of vaccination and made a best practice of public-private collaboration together with Korea's CDC. We will continue to fully support companies and public institutions so that they may successfully migrate to cloud. Lastly, on our ESG activities. NAVER has placed utmost priority on making a healthy organization culture. We engaged outside experts to conduct diagnostics on the current assessment on organization and culture and collected meaningful data by running a survey on 2,937 employees, which account for 72% of our total head count. We're currently analyzing the results very closely and will communicate points for improvement to all of the staff in a transparent manner. We're also coming up with advanced human rights and business framework, which includes users and business partners in the scope. We set out 10 principles on business and human rights by referring to global guiding principles of ILO and United Nations and policies of companies with advanced standards. We will take this opportunity to revisit NAVER's ethical business principles and keep things under good alignment. We also set up a human rights office directly under the CEO and plan to operate it as a control tower for corporate-wide human rights-related risk. We have clear commitments on forming a desirable org culture and will be transparent along the way, both internal and external communications. I believe in Q3, we were able to build an ecosystem where users, creators, SMEs, brands and partners, all were able to grow together. And NAVER's competitiveness underpinned by early investments into technologies was clearly accentuated. We will show that our domestic competitiveness can also work on the global stage. We ask for the support and encouragement of our staff, partners and investors and help NAVER live up to that very challenge. With that, I will now turn it over to our CFO, Park Sang-Jin, for the financial highlights.

[Interpreted] Good morning. I'm Park Sang-Jin. NAVER's Q3 consolidated operating revenue was up 26.9% on year and 3.8% on quarter, reporting KRW 1,727.3 billion, once again, breaking historical record. Accordingly, consolidated operating profit was up 19.9% on year and 4.2% on quarter, reporting a new high of KRW 349.8 billion. Adjusted EBITDA was up 30.9% on year and 6.2% on quarter to KRW 510.1 billion. Consolidated net profit was up 37.1% on year and down 40.3% on quarter to KRW 322.7 billion on the back of lower nonoperating profit from valuation losses from equity method companies versus last quarter. Looking at the breakdown of revenue for Q3. On the back of boost to the UGC ecosystem, improvements in search tech and growth and performance ads, search platform revenue was up 16.2% on year and down 0.1% on quarter to KRW 824.9 billion. With the adoption of performance ad on the PC platform, display ad revenue within the search platform was up 33.2% year-on-year. Commerce revenue was up 33.2% on year and 4.1% on quarter to KRW 380.3 billion, as we are growing market share through Shopping LIVE! and brand store expansion. With noncaptive partner expansions, we saw GMV growth for Pay and fintech revenue, therefore, was up 38.9% on year and 3.9% on quarter, reporting KRW 241.7 billion. On cross-border content expansion, Webtoon revenue was up 79% on year and SNOW up twofold, driving content revenue up 60.2% on year and 27.2% on quarter to KRW 184.1 billion. As the second largest player, cloud revenue continued its top line up trend, growing 26.2% year-on-year and 1.4% Q-on-Q to KRW 96.2 billion. On expense items, as stock-based compensation expense was limited following share price declines in Q3, development and operation expense was up 24.8% on year and down 2.6% on quarter to KRW 389 billion. With top line growth, revenue-linked expenses, such as payment and sales commissions, Pay's basic points and content fees increased, and so partner expense was up 33.2% year-on-year and 4.7% on quarter to KRW 608.8 billion. Infrastructure expense was up 23.1% on year and 4.4% on quarter to KRW 178.2 billion, majority of which was depreciation expenses for global server infrastructure. Despite the continuing promotions and NAVER Pay points to grow our membership base [ rise ] and marketing expense slowed going up 29.4% on year and 14.5% on quarter, reporting KRW 201.5 billion. Despite the base effect from Chuseok holidays, NAVER managed to report record-high revenue and operating profit as well as adjusted EBITDA this quarter, attesting to the fact that we are on the right track in terms of business expansion. We achieved second half operating margin targets communicated last quarter as our costs are being controlled efficiently. Until the end of the year, we will continue to keep a good balance between investment and management and be well aligned in terms of the objective of our revenue growth. This ends the financial highlights for Q3. We will now take your questions.

[Interpreted] [Operator Instructions] The first question will be presented by Eric Cha from Goldman Sachs.

[Interpreted] I'd like to ask you 2 questions. First question relates to your search platform. We've seen your top line growth quite strong. The market has a question with respect to the sustainability of this very high-growth rate. If you look at search, shopping surge is reflected on your commerce, so considering that there is a very strong growth. So we would like to understand the key driver behind such strong growth as we've seen starting from Q1. Is it due to a product launch -- a product launching of a specific category? Or is there a structural reason behind this? And based off of that, what is your outlook for Q4 and next year? In terms of display ad, I would think that performance ad is the main driver behind that. You've launched this product back in 2020. So we'd like to understand what the outlook will be for next year with respect to performance ad. Second question relates to content and Webtoon. You've mentioned monthly GMV has reported 100 billion. So on a quarterly basis, that's 300 billion, and the run rate for year is slightly higher than 1 trillion. So what is your projection for GMV trend for next year? And if you could give us the mix between domestic and [ global ] would also be quite helpful. And for what Wattpad, I understand that the Wattpad business' performance is fully reflected in Q3 numbers. We'd like to understand what the monetization picture looks like for Wattpad going forward as well as the GMV projection.

[Interpreted] Responding to your question on search platform, NAVER has been continuously improving the quality of our search, and we've adopted our AI technology to drive up advertisement efficiency. And also by leveraging the activities of the bloggers and influencers, the level of quality for user-generated content is also going up as well. And there is the immense amount of commerce data that is generated at the same time. And also, we've seen users prefer the localized-based services. And thanks to all of these factors, we've seen overall improvement in the quality of our search. On top of that, we've been launching new products as well as the performance ads that you have mentioned. So all of these assets have brought about a quite solid growth on our search platform business. We basically bring together our capabilities in search, commerce, local and content and aggregate them into one model, and we utilize that model to drive other areas of business, especially in Q4, that it's a high season for advertising. So we believe that mid-teens growth on a per annum basis would also be possible. Also from a mid- to long-term perspective, basically, if you look at our search ad and display ads, we do differentiate between the 2, but we do try to find a good linkage between the 2 in order to bring about synergies. And we've looked at the advertisers who have various different types of needs and requirements. Advertisers would want to purchase search ad as well as shopping advertisement from us. And at the same time, and mostly around big brands, there are specific solutions that they also require. For instance, Shopping LIVE! had really catered to the big brand's needs for new product launches. So it's not just on the advertisement itself, but we also have quite a bit of commerce related-data based on which we can run analytics and come up with a comprehensive solution that really caters to the needs and requirements of the big brand. So NAVER has capability in providing a very differentiated product offering, and we will continue to leverage that capability going forward. And I've mentioned that for our NAVER local services, in terms of monetization and profitability, we are seeing a very positive trend because already 40,000 sellers have onboarded. And they are happy to provide us and share with us their own commerce data, which we utilize to provide relevant data to the user base, which is also helping improve the overall quality of the -- of NAVER's database.

[Interpreted] Responding to your question on our content business. As our CEO mentioned at the opening presentation, yes, on a monthly basis, we surpassed 100 billion in total. Next year, regarding the GMV guidance for the Webtoon, our global -- on our global side, we are expecting more than 50% growth. We think that this high-growth trend will continue. In terms of the mix between domestic versus global, as of Q3, GMV for domestic is higher in terms of the mix. But from a long-term perspective, we think the global portion is going to overtake that. Next on Wattpad, as we completed the acquisition process of Wattpad from Q3, its revenue and expenses are now included in our consolidated account. The size, however, is not that significant at this point. Basically, we have completed the traffic exchange testing between Wattpad and Webtoon, and we'll continue to gradually increase the size of that. And with the launch of Wattpad Webtoon Studio, we are also raising KRW 100 billion of fund, and we will be able to, with speed, introduce and develop already proven IPs for Wattpad and Webtoon. And in terms of monetization, unlike Webtoon, Wattpad has a very strong community element to it. So in line with that, we will strengthen the business model to maximize the monetization abilities.

[Interpreted] The next question will be presented by Stanley Yang from JPMorgan.

[Interpreted] Yes. My first question relates to your global strategy. We've seen quite solid growth in terms of content revenue. And a lot of investors are interested in your Webtoon, SNOW and ZEPETO. So has there been any change to your original plan on your global content platform and taking that into public? So any plans relating to IP would be helpful. And you've mentioned you started to consolidate Wattpad and include -- consolidate Wattpad into your accounts. Aside from monetization, what is your overall strategy? For instance, your strategy to take and expand on the use of the Webtoon IP and Wattpad IP and make like dramas, motion pictures and games, convergence as well as expansion strategies will be helpful. And then also, do you plan to do any M&A or entering global alliances? Second question is on e-commerce. Your Smart Store GMV growth rate has slowed to 29%. Is that because of a specific market reason, for instance, on the back of COVID, there was a base effect? Is that the main reason? Or are there any reason behind the slowing of the growth rate of Smart Store? The third question is, so with respect to your NFA Alliance strategy, you now have E-Mart onboard and other brand stores growth this has been supported by NFA. What's your outlook for Q4 and next year in terms of growth in this e-commerce area?

[Interpreted] So first, yes, we've seen a significant rise in year-on-year growth for our content revenue. And in terms of the growth that we're seeing from Webtoon and SNOW, the growth rate is actually higher than the overall content category growth. For any IPO-related schedule, at this point in time, we do not have any confirmed schedule, specific schedule in place. But in light of the future business growth as well as stabilization of our business model and revenue model. From a long-term perspective, it is an area that we would be able to consider. In terms of the next question on Webtoon. I use Webtoon and Wattpad IP basically through our Webtoon -- Wattpad, Webtoon studio currently, there is about 100 different filming project that is ongoing. In Korea, there was a release of Yumi's Cells, which is a popular drama that is there at this point as well as other titles such as Lovers in the Red Sky, had received -- is receiving good responses. And so in Korea, we will work through Studio end. And in the global market, we will work through Wattpad, Webtoon studio. So underpinned by this extensive amount of IP ownership, there will be other derivative work that will take place. And it is taking place at this point like publications and making motion pictures. And we will be taking this IP and use that in-game development for making audio dramas and merchandising and exhibitions as well. We could also think about collaborations with ZEPETO and add on to this -- all of this effort, the metaverse element, and the Remarried Empress is another IP title that's a good case in point that shows our collaboration with ZEPETO. And also, we have a very close partnership with CJ Group as well. Currently, Studio Dragon, which is the production house for Yumi's Cells is running this drama. And we're also in discussions with respect to use of other types of Webtoon IPs as well as in the making of dramas. And in June, after we made equity investment into TVing, we have a very close cooperative framework in place. Recently, there was an event TVing Connect to 2021. And they've made an announcement that there would be very close collaboration with NAVER with regards to the IP that NAVER owns in its Webtoon and web novels. So all of those will be used to come up with a more creative content going forward.

[Interpreted] Now in terms of the commerce growth in Q3. Yes, there were base effects like the COVID pandemic and Chuseok holidays. But still, our Smart Store reported a 29% growth, which outperforms the overall market growth as well as if you look at the new services that we have introduced, brand store, Shopping LIVE! and plus membership, all of these areas have driven very good performance. So all in all, our commerce revenue on a year-over-year basis actually outperformed the overall GMV at 33.2% growth. Q4, of course, there are some variables like how the COVID situation will play out and the weather conditions. But internally, we really do have a high potential growth levers like our plus membership and our brand store growth as well. Leveraging off of this, we would further solidify our merchant solution and our logistical solutions as well. So really using the growth levers, which is very unique to NAVER, we believe that we will be able to bring about meaningful long-term growth and also health support at the bottom line as well. In terms of the new services and businesses that we have embarked on, like the brand store and Shopping LIVE!, the growth is quite meaningful. On the fulfillment side, we have just started on NFA alliance. So it's only in an infant stage, so we are not yet ready to share any specific numbers, but I could tell you that we have 5 major logistical performance companies onboarded as well as 2 fashion-related [indiscernible] based companies onboarded as well. And we're receiving a lot of inquiries at the same time. We have close cooperation with CJ Express, and we were able to see and we were able to prove the strength of such collaboration because our branded stores' top line growth was 1.7x that of the Smart Store. So we now have a lot of brands that are coming on board at a quite fast speed. And by the end of the year, we believe that about 150 brand stores will be able to provide next-day delivery. Already, we are in discussions with CJ Express, and we've made decision to make investment into the capacity so that we could actually grow the capacity by tenfold, the fulfillment capacity that is. And next year, this is an area that we will continuously focus, which will really bring about an improvement in the delivery qualities and really help prop up the GMV of the Smart Stores. And in October, we launched a grocery service together with E-Mart providing same-day delivery and designated time delivery. This model is currently being tested around fresh foods delivery. We will run the test until the end of this year and come next year, we will be able to place more momentum for this. So NAVER's differentiation point in commerce is that we do not just look at the logistics aspect. We combine our marketing solution as well as our search capabilities in providing a differentiated and unique service offerings to the users. And next year, we will have a strong focus around further enhancing our merchant solution because businesses, depending on which phase or which level of development they're in have different requirements in terms of the support and the requirements that they need. So these merchant solutions will help the merchants grow further with speed. And this year, for our Plus Membership program, we've seen a very strong subscription. And that trend we expect is going to continue. So Plus Member users, their purchase frequency is much higher, and their portion out of the total pie is also increasing as well. So all in all, next year, we also expect quite solid growth.

[Interpreted] Our next question will be presented [indiscernible] from KTB Investment & Securities.

[Interpreted] My question relates to your business on the content side. Going forward, do you have plans to enter into either JVs or make investments with global production houses so that you could leverage your IP and develop more derivative content and more secondary, for instance, like motion picture and other filming projects? And when do you think that, that business is going to contribute to your performance? Second, on ZEPETO. Do you have a time line as to when you will be expanding the functions and features of ZEPETO as a metaverse platform? And also, can you share with us some of the measures, such as MAU and top line revenue of ZEPETO and share with us year-on-year growth trend?

[Interpreted] I think this question is quite related to the previous question that we received. Regarding making our content into -- and putting that on the screen, we are considering different types of partnership, but we don't have any specific plan as of yet in terms of acquiring a certain production house or a studio. But we are open to many different options, and we can consider various different possibilities. We have in place close cooperation with CJ Group and other studios. We are raising funds so that we can invest into making these content into a motion picture or a film. Regarding its revenue contribution, at this point, it's not that significant. But not that significant, but we believe that so it's going to be difficult for me to give you a specific time line and the size as to its contribution -- meaningful contribution. Now having said that, if you look at our recent experience with Yumi's Cells, we see that once the dramas are made, there is a positive loop impact on the original titles, original form of content with the web novel and Webtoons. We see many visitors come and read these content. So separate from a stand-alone impact, there is also this impact back to the original IP. So there is that positive aspect as well. On ZEPETO, we share only the global subscriber number [ 240 million ]. We do not disclose the MAU or the top line revenue number. Year-on-year, the growth has been more than 40% for ZEPETO subscriber base. For Q3, once again, although we don't disclose the MAU figure itself, it's been continuously up trending and reporting 60% year-on-year growth. Revenue year-on-year growth was above twofold. So all of these indicators show that we are growing very smoothly, although the size may be small. In terms of the user behavior, we see that they mostly use ZEPETO world and photo booth. And we also work together with brand companies like Ralph Lauren and Dior. And we also started live broadcasting on the PC platform. And also, we have released -- we've released different tools on a unity basis so that the developers can actually experience different content and create different experiences. And in Q4, we are planning to release a mobile live broadcasting and also provide more tools to the creators so that they could better make animations, et cetera. So we were focused on developing tools and services for the time being. In Q3, there was significant rise in the revenue, and that's attributable to a high level of sales in fashion items as well as the advertisement -- or alliance-based or partnership-based advertisement, which brought about year-on-year growth of more than twofold growth. Going forward, we would also introduce more functional items on top of the fashion items and think of different revenue models such as subscription product as well.

[Interpreted] The next question will be presented by Dong Hwan Oh from Samsung Securities.

[Interpreted] Our CFO mentioned that you would be able to sustain a very strong revenue growth trend. What about next year? And do you think that you'll be able to maintain the 20% operating profit margin going forward?

[Interpreted] I've mentioned at the very beginning in the presentation, our focus would be on top line, not on the profit or the bottom line because we see our new business growth and the mix out of the total pie is really growing and becoming really big compared to our search platform business. We think that very strong revenue growth trend will continue, supported by our global business expansion and new business expansion. Of course, we would have to close our accounts at the end of Q4, but we expect that on a consolidated top line revenue basis, we will be able to bring about more than 25% growth. However, it will be quite difficult to predict exactly what the next year's growth trend would look like, but I can tell you that we will be able to sustain the growth and be well in line with the target that we have in line. For our operating profit, NAVER's business portfolio previously based off of search, which entailed high level of margin. We are now moving into new areas like commerce, cloud, fintech, search of content, et cetera. And these are the areas that are quite necessary for NAVER's growth, and that's where our emphasis will lie. It's -- once again, our direction is not focused on bringing about short-term gains or short-term profit. We think that this year, for Q2 and Q4, we will be most likely able to maintain the first half operating profit margin level that we've reported. For next year, there are many different factors that will come into play, how we devise our business plan, what this compensation would look like and our investment plan would look like. So I cannot say either way, whether we will be able to continue the 20% op margin or not. But I can tell you that overall, direction will be more or less the same.

[Interpreted] The next question will be presented by Moonjong Lee from Shinhan Investment.

[Interpreted] 2 questions. First is for your global Smart Store launching, what is the take rate that NAVER takes? And as NAVER has strengthened your search and so -- in the domestic market, you had an upper hand in price comparison. So you had a very advantageous positioning for the Smart Store business. But I think LINE -- for LINE, the strategy would be different. So could you also give some color there? And when would you be expanding into the Yahoo! space as well? Second is on ZEPETO Studio, when -- or do you have plans to open the game feature to the general public? I ask this question because if you do, then there may be some issues that the game commission may take with -- as it regulates the overall game industry. Or if in Korea, by regulation, if you cannot open the game feature to the general public, what are some of the ways for you to actually stimulate creativity of the users?

[Interpreted] Responding to your first question on our global Smart Store and what our take rate is, we cannot, at this point, provide you with a specific number. But having said that, Japan's commerce market is 3x the size of Korea and its e-commerce penetration is less than 10%. So I can tell you that the potential is big. You also asked that NAVER has strengthened search but LINE is a Messenger-based. So how would Messenger-based commerce actually play out was another question. The Smart Store that we will be launching in Japan is called My Smart Store. It's -- we've already visited an advanced opening of My Smart Store. And basically, this allows businesses to very easily and quickly set up their store on the platform. And it also connects with the businesses, official account and the LINE Messenger, allowing a one-on-one or one-to-one communication with that business as usual. So these businesses, as they have LINE official account, they could use this account. And on top of that, have the store -- and set up a store, which could really help them easily reach out to their user base and communicate more easily. And we have strength in providing analytical data to these stores to help them better sell and market themselves. So we will bring all the technology and know-how that we were able to build in the Korean market through NAVER Smart Store vis-à-vis the SME. We will bring that, and we will be able to provide a one-stop service for these stores and businesses from the setup of the store up until the customer service. So My Smart Store, basically, we will start with connecting with LINE. And also in terms of when we will actually expand that to Yahoo!, the search platform, we cannot say at this point. But in terms of search as well as -- in terms of search as well as all the connections with the different areas, we are currently in discussion with Z Holdings to further expand on that positioning. So we wish to provide an inclusive and an ecosystem where we will be able to build together with the Japanese vendors and sellers as well.

[Interpreted] You asked about the game element and ZEPETO. We plan to configure ZEPETO as a user participatory platform. We received similar question on game elements during the second quarter earnings call. And at that time, I said that -- I know before the end of the year, we will most likely open our game element to the creators. But at this point, we don't have any specific time line in place. In regards to the metaverse map itself, the user map currently does not have any gaming element, but the official map does. But just because it has the gaming element of the official map, I don't know whether that one can say that, that actually is subject to the game category-related guidelines or guidances. ZEPETO going forward, we will not just provide items to the creators, but we plan to add on more fun experiences, such as concerts and karaoke and add those aspects onto our platform.

[Interpreted] The next question will be presented by Dong-ryun Lee from KB Securities.

[Interpreted] My question relates to profitability of your commerce business. I would think that the merchant solutions at the very onset, there will be some labor costs and advanced investments. But later on, as it generates revenue, its profit contribution would be quite high. On the other hand, fulfillment business, it was different depending on the type of contracts you have with your partners. But I think fulfillment business will entail high level of op expense. So under this situation, do you think that you'll be able to continuously improve your profitability of your commerce business? I understand that you have your focus on top line sales, but how do you plan to keep an attractive profitability from commerce business?

[Interpreted] Under commerce, we are trying many new different initiatives. For merchant solution, as you've mentioned, merchant solution will be a new stream for us in terms of revenue and profit stream. Fulfillment because it entails initial investments, so there would be some expense that would be incurred. However, if you look at our commerce business, it's underpinned by shopping search ad. So it's more of an advertisement model. So as we run these fulfillment processes, our overall fulfillment experience is going to actually improve in terms of its quality, as well as merchant support, which will feed into further enhancing and supporting our advertisement model, our advertisement business model and help with the profitability as well as top line or maintain that profitability of our advertisement model. So we think that commerce as is, we will be able to at least continue or even grow the profitability of this business. And especially NF Alliance, basically, that's what we call our fulfillment services. This whole model is supported by our strategic partners, collaboration with those partners. Our partners have infrastructure, and they already -- they engage in co-investments together with us. So in terms of expense structure, it's quite efficient. So I cannot say that from NAVER, there is no expense on our part. I cannot say that, of course. But on a consolidated operating profit basis, actually, this business doesn't really have a -- it's not that onerous on our business model or business structure. Thank you. We will now close our Q3 2021 earnings release presentation by NAVER. We look forward to your continued support and encouragement. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]