A Presentation for
Prospective Investors
& Partners
Aug 2004
Overview
Financial Highlights
Services & Products
2004 Outlook
Company Profile
Shareholding Structure
Neowiz at a Glance
Management
Company Profile
Company Profile
 Summary of Company History
Balance Sheet
(KRW billion)
2002
2003
- 1997 Neowiz Founded by Sung-Kyun Nah
Assets
90
111
- 1998 Modem dial-up ISP business launched
Current Assets
78
86
Investment
5
16
- 2000 Introduced Avatar business
Others
7
10
- 2001 Acquired M-cube Corp
Total Liabilities
12
18
Total Shareholder’s Equity
78
93
- 1999 Online Community Sayclub.com launched
- 2000 KOSDAQ Initial Public Offering
- 2002 Web-board game business launched
- 2003 Acquired Ntix Soft Inc. Corp
- 2003 Dedicated game publishing portal Pmang.com launched
- 2003 Online Music Streaming Service Jukeon.com launched
Income Statement
 420 Employees as of Aug 2004
(KRW billion)
 Stock Info.
2002
2003
- Common stock of 7.6 million shares outstanding
Sales
42
81
- Major Shareholders: Sung-Kun Nah (17.3%), Byung-Ku Chang
Gross Profit
17
48
Operating Income
9
25
Pretax Income
9
22
Net Earnings
8
16
(15.5%), Sae-Yeon Choi (10.2%)
 Management
CEO: Jin-Hwan Park
CFO: Kwan-Yong Song
COO: Kwan-Ho Choi
Shareholding Structure
Shareholder
# of Shares
%
Sung-Kyun Na
1,350,000
17.67%
Byung-Kyu Chang
1,137,900
14.89%
Sae-Yeon Choi
779,750
10.21%
Local Institutions
131,831
1. 73%
Foreign Institutions
669,169
8.76%
Treasury stock
18,000
0.24%
Others
3,554,070
46. 51%
Total
7,640,720
100%
(December 31, 2003)
Sung-Kyun Nah
17.67%
Others
46. 51%
14.89%
8.76%
10.21%
Byung-Kyu Chang
Sae-Yeon Choi
Foreign
Institutions
Neowiz at Glance
 Integrating “Online Community” service with developing and publishing on line game
 Strategic initiative to develop into online entertainment group through focused & diverse
portfolio of businesses
Online Entertainment
Revenue Sources
11 million active online community users with highest loyalty
SayClub.com
Avatars
Web Board Games
Pmang.com
Quality Web Board
Games with
NO.1 market share
Networked arcade games
starts from 2004
Advertising
+
Game Publishing
Online Music
Jukeon.com
Getting ready for the emergence of online music market
MMORPG
2005 Upcoming
Revenue Streams
Revenue Maximization
Ve r t i c a l I n t e g r a t i o n
2004 Revenue Streams
Foundation for future
online businesses
Management Team
CEO Jin-Hwan Park
Seoul National Univ (BA in Management)
COO Kwan-Ho Choi
Nexon
Seoul National Univ (MA in Mgmt)
Strategic Planning Manger
Chaeil Communication
CTO Seong-Kyu Oh
KAIST (MS in Computer Science)
Hangul & Computer
Serome Technology
CFO Kwan-Yong Song
Seoul National Univ (MA in Management)
PriceWaterhouseCoopers / CPA
Director Seung Hwan Park
George Washington University
Harvard University, MBA
Midas Asset Auditor
DB Interactive Director
Director Gae-Hyun Cho
KAIST (PhD in Management)
Kino Net Managing Director
Overview
Growth & Profitability
Financial Highlights
Revenue & Net Income
Services & Product
Cost Structure
2004 Outlook
Sales Breakdown
Growth and Profitability
Except for two quarters, the company has stayed in the black, maintaining
a minimum 20% operating margin over the past five years. Profitability is
improving (from 20% in 2002 to 31% in 2003) based on increasing scale
and a frugal management team.
Revenue Trends
90
Net Profit Trends
Operating Income Trends
(KRW billion)
82
60
30
(KRW billion)
15
25.1
10
20
42
7.3
31
30
10
Y2001
Y2002
Y2003
15.6
(KRW billion)
6.8
Y2001
8.7
Y2002
7.7
5
Y2003
Y2001
Y2002
Y2003
Quarterly Revenues & Profits
Quarterly Operating Income Trends
Quarterly Revenue Trends
(KRW in billion)
(KRW in billion)
22.5
20.0
21.4
21.5
19.1
18.4
17.1
11.4
8.3
7.2
9.0
5.7
6.1
4.7
3.4
2.9
2.6
0.3
2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04
2Q04
2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04
2Q04
[Unit: KRW in billion]
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
Q-Q
Revenue
7.2
11.4
17.1
20.0
21.4
18.4
21.5
22.5
19.1
15%↓
Op
0.3
2.9
6.1
8.3
9.0
3.4
4.4
5.7
2.6
55%↓
Ordinary
Income
0.6
3.2
5.7
8.5
9.0
3.5
0.6
4.8
1.7
64%↓
-0.5
2.4
4.9
6.1
6.4
2.3
0.8
3.2
1.2
62%↓
Net Income
Annual
Total
2002 revenue 41.5bn, OP
8.7bn, OP margin 21%
2003 revenue 81.3bn, OP 25.1bn OP
margin 31%
Sales Breakdown
Quarterly Sales Breakdown
(KRW in billion)
24
22.5
21.4
22
21.4
20.0
20
19.1
18.4
17.1
18
16
14
12
11.1
10
7.5
8
Others
Advertising
Sayclub
Game
6
4
2
2Q02
Wbn
3Q02
2Q02
4Q02
1Q03
3Q02
4Q02
2Q03
1Q03
3Q03
2Q03
4Q03
3Q03
1Q04
4Q03
2Q04
1Q04
2Q04
Q-Q
Game
N/A
2.6
7.6
10.6
11.1
9.0
11.4
14.7
12.8
13 %↓
Sayclub
5.9
6.7
7.6
7.8
8.7
8.0
8.3
6.6
5.3
21 %↓
Ad
0.3
0.7
1.1
0.9
1.3
1.1
1.5
1.2
1.0
12 %↓
Others
1.3
1.1
0.8
0.6
0.3
0.3
0.2
-
-
-
TTL Sales
7.5
11.1
17.1
20.0
21.4
18.4
21.4
22.5
19.1
15 %↓
Cost Structure
Default
Neowiz benefits from a high operating leverage as most of its expenses are fixed
costs. Wages, depreciation should account for about 54% of its expenses. Although
labor cost are rising, this is justified by strong business expansion, and impact on
profitability should not be excessive.
(KRW in billion)
Cost Structure
Y2003
%
System
12.0
21%
3.0
18%
3.5
21%
Marketing etc
10.5
19%
2.4
14%
2.2
13%
HR
19.0
34%
7.1
42%
7.4
45%
1.4
2%
0
0%
0
0
42.9
76%
12.5
74%
13.1
79%
Others
TTL Fixed Cost
1Q 04
%
2Q 04
%
Marketing &
Others
Human Resource
Default
Commission
5.5
10%
1.5
9%
0.7
5%
Profit Sharing
4.5
8%
1.7
10%
1.7
10%
Bad debt Exp
3.4
6%
1.1
7%
1.0
6%
TTL Var. Cost
13.4
24%
4.3
26%
3.4
20%
Total Cost
56.3
100%
16.8
100%
16.5
100%
(KRW in billion)
Y2004 2Q
- Capex: 3.4
- Marketing: 1.6
- Depreciation: 2.4
- Employee: 360
Human Resource
Marketing &
others
Y2003
- Capex: 10.0
- Marketing: 12
- Depreciation: 7.4
Overview
Financial Highlights
Service Portfolios
Services & Product
Game Portal Landscape
2004 Outlook
Sayclub.com
Pmang.com
Avatar
Online Music
Online Service Portfolios
 Game Portal with No. 1 Traffic Market Share in Korea.
Pmang
(www.pmang.com)
 Provides web-board games for more than 7 million adult
game users each month.
 Starting game publishing business with 10+ titles produced
by domestic game software developers.
Revenues:
Game Currency Refill
Game Items
Monthly Subscription Fee
Online Advertising
 MMORPG game ‘Yoguruting’ to be released in 3H04.
SayClub
 Korea’s leading chat site & online community.
(www.sayclub.com)
 11 million monthly visitors, regularly ranks among the
top 20 in Alexa.com’s top 500 global website traffic rankings.
 The company’s core platform for future business expansion.
Revenues:
Avatars
Online Advertising
Mobile Services
 Generate revenues via sales of avatars & online advertising.
 Online music portal.
Jukeon.com
 Provides online music streaming services.
Revenues:
(www.jukeon.com)
 Concurrent users base has reached 50,000.
Monthly Subscription
 Music content download service opened in 2H04.
Pmang: #1 Web board games
Web board games Revenues Trend
14.7
15
(KRW in billion)
12.7
11.5
11.1
Game Avatars:
Users pay W950-W6,500 to buy
game avatars that grant varying
amounts of virtual cash that can
be used for betting.
10.6
10
5
2Q03
Revenue is generated by:
3Q03
4Q03
1Q04
2Q04
Monthly Subscription:
Users pay a W12,000 monthly
subscription fee that grants a
larger amount of cash for
betting and a daily cash refill.
This service was launched on
Feb 15, 2004.
Game Items:
Users can purchase a variety of
special skills and ‘hire’ virtual
tutors to enhance their win ratio.
(Pmang’s Porker Game)
Korean Game Portal Landscape
[Source: Koreanclick]
Facts
 More than 11 million Korean
adults are estimated to visit
game portals every month.
 More than 1.5 million people
are paying monthly fees for
web board game services.
 Pmang is the most popular
game portal in terms of
traffic. More than 5.1million
people visit the site everyday.
 Pmang’s traffic market share
stands at 23%, the company
has widened its lead over
competitors
Daily Unique Visitors Trends
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
Pmang
Hangame
Netmarble
2,000,000
1,500,000
1,000,000
500,000
0
[Source: Ranky.com]
30
25
20
15
10
5
0
Traffic Market Share
Pmang
Hangame
Netmarble
24%
23%
19%
Pmang Key Operating Index
Monthly Unique Visitors and Paying Rate(%)
6
5.1%
Monthly
Visitors
(LHS)
5.1%
5.1%
(in million)
5.5%
4.9%
4.2%
4
6
Paying
Rate
(RHS)
4 (%)
4.5
4.7
5.7
5.7
5.9
5.1
2
2
UV
1Q03 2Q03 3Q03
4Q03
1Q04
Monthly Paying customers and ARPU
(‘000)
400
W15,300
Monthly300
Paying
Users
(LHS) 200
W15,400
2Q04
W14,800
ARPU
( RHS)
238,564
290,744
3Q03
4Q03
326,973
248,858
229,365
100
-
1Q03
2Q03
 Paying rate has reached
4.9% in 3Q04, which is
relatively lower than for
other major game portals.
W17,000
W12,900W13,000
237,370
 Paying subscribers and
unique visitors were reduced
in 2Q04, due to seasonal
factors and slowdown of
paying subscribers’
acquisition. However it is
picking up and taking #1
traffic M/S in beg of 3Q04
1Q04
2Q04
 Pmang.com generates the
highest web board game
monthly ARPU in the
industry (W17,000 in 2Q04).
SayClub: No1. Online Community
450 million Mini Homepy service
Monthly Access
10 million Online Community
Unique Visitors
Web Chatting with over
515,145 Concurrent Users
5,000,000
550,000
500,000
515,145
475,418
10,006,368
12,000,000
504,465
486,894
8,913,463
495,781
10,127,135 9,913,855
8,466,954
4,500,000
4,720,700
4,792,151
4,306,389
4326046
9,403,543
10,000,000
4,000,000
450,000
8,000,000
400,000
3,500,000
6,000,000
350,000
Q2 03
Q3 03
Q4 03
Q1 04
Q1 03
2Q 04
Q2 03
Q3 03
Q4 03
Q1 04
2Q 04
3,000,000
Q3 03
Q4 03
Q1 04
Q2 04
SayClub.com Avatar Revenue Trends
8
87
(단위: 억)
6
76
80
83
78
67
4
67
53
1Q 04
2Q04
59
2
Q2 02
Q3 02
Q4 02
Q1 03
Q2 03
Q3 03
Q4 03
SayClub at a Glance
With its no. of concurrent users exceeding
480,000 every day, Sayclub is the most active
chatting environment in the world.
Users graphic representation (Avatar).
Online Advertising
880,000+ active
communities are
present in
SayClub.
The Avatar Mall is where SayClub users purchase the
Avatar of their choice. Over the past 3 years, more than 4
million people have purchase Avatars from SayClub.
SayClub’s users
can enjoy
listening to music.
Launched in Dec
2003, Sayclub’s
streaming music
service is a good
example for others
of how an online
music service
should operated.
Every Sayclub user has their own Avatar
representation that can be viewed by other users.
SayClub Avatar: the concept
Users saw Avatars as a way to
represent their virtual personality
Avatar
Bulletin Board
Memo
Internet Broadcasting Room
Messenger Buddy List
Introduction in Chat Rooms
Global Avatar Licensing Partners
•
Mattel: “Barbie” Character
(Neowiz is the “Only” licensee of Mattel “Barbie Collectibles” in the world)
•
NIKE, FILA: Sports apparels & celebrity
•
Blizzard: Starcraft, Diablo II, War Craft III Game Characters
•
Movie Characters: The Lord of the Rings
3/21
Overview
Financial Highlights
Services & Products
2004 Business Outlook
2004 Outlook
Game Business Outlook
Pmang Expansion
Avatar & Online Music
2004 Overall Business Outlook
Business Outlook in 2H
 Increasing buying users to double, in order to strengthen in web
board game biz  More powerful growth engine
 Publishing our first MMORPG, “Yogurting”
 Commercializing online games (publishing only)
in full scale
 Growing “Jukeon”, online music business
 Raising awareness of our blog service in market
2004 Game Business Outlook
Monthly Membership
8% of Monthly Visitors
will pays the fee.
Repurchasing rate
reaches 70% in 3Q04
Fee Paying Rate
Monthly Membership
service launched on Feb
15, 2004.
Monthly Membership
Introduced on Feb 15.
(%)
10
8%
5
5.1%
5.1%
5.1%
5.5%
4.9%
4.2%
1Q03
2Q03
3Q03
3Q03
Monthly membership
subscribers exceeded
100,000 in Mar 2004.
1Q04
2Q04
3Q04
4Q04
2004 Game Business Outlook
New Teen Customer Acquisition:
Currently Pmang is covering adult
segments only. With the launch of
MMORPG & arcade games, the company is
expanding its service coverage into teen
segment.
Expanding Customer Base
Current Pmang Coverage
(%)
2000.8
100
2001.6
2002.6
2003.6
90
80
Older Customer Acquisition:
The online game playing
population figure will rise
as the current web board
game users reach the higher
age segment.
70
60
50
40
30
20
10
0
6~19 age
20s
30s
40s
50s
Over 60
Online Game Playing Population of Korea by Age Group
2004 Pmang Coverage Expansion
Entering MMORPG & Online arcade games arena…
3Q04
Online Arcade Games
Series of online arcade games
has been published. By 1H04,
Pmang is expected to offer 6 or
more arcade games that will bring
Pmang into arcade games sector.
Pmang
Web board games
Market Size: W 230 bn
Arcade Games
Market Size: W 150 bn
MMORPG Games
Market Size: W 450 bn
1H04
MMORPG Game
With the expected public launch
of ‘Yogruting’ (3D online role
playing game) in summer 2004,
the company will enter the
MMORPG game arena for the first
time.
Major Titles Publishing Schedules
Intro
6.21
1th Closed Beta
7.07~7.11
2th Closed Beta (Plan)
3Q 2004
Open Beta (Plan)
Commercialized (Plan)
4Q 2004
1H 2005
N a m e : Yogurting
Name concept from “Yogurt
cities” that are the places
with active culture-access.
T y p e : MMOAAG
NEW
(Massively Multi-player
Online Action Adventure
Game)
Introduction:
1) Online action game of
school adventurous life
2) Based on variety of
episode and stages to gain
level up and items
Rev. generated by (plan) :
1) Monthly membership 2) Game items
Schedule: Commercialized 1H05
Major Titles Publishing Schedules
Special Force
Closed Beta Launch on June 2004
Open Beta launch on 3Q04 and then
commercialized.
Team Revolution
(Racing)
5+ more titles under development.
2004 SayClub: Avatars & Beyond
20 million
Registered
Users
Revenues
Execution
Operation
2004
 Avatar buying customers to
exceed 550,000
 Concurrent users to reach
600,000
 Reach 1.5 million unique
visitors
 Incubate online music
business
600,000
Concurrent
Users
 Commercialize mobile
services
Avatars
Online
Music
Mobile
New
Services
1.5 million
Unique
Visitors
 Introduce brand new Sayclub
services (2H04)
 Avatars: w 35.4 bn
 Mobile: w 7.6 bn
Non Paying
Users
Paying
Customers
Free Services
Commercialized
Services
Online Music Market
Due to the emergence of free online music services & P2P file sharing sites,
the domestic music market size has fallen almost KRW124billion in two years.
However, government regulatory bodies are clamping down big illegal music
sites, meaning that this lost portion of the market will be regained in form of
online music customers.
Shrinking of Korean Music Industry
(KRW in billion)
400
124
Billion
won
300
200
Emergence of P2P &
Free online Streaming
Service
100
1996
1997
1998
1999
2000
2001
2002
Online music
market Neowiz is
targeting.
Starting with its
online streaming
service; a music
downloading
service will be
started before the
end of 2004.
Jukeon.com: Online Music
OOFFFFLLIINNEE
•
•
•
Licensing fee arrangements completed with most big record labels
Monthly re-subscription rate of 90%
Preparing for the ‘post-illegal’ online service market
Song창작자
Writhers
창작자
Record음반사
Companies
음반사
도매상
Whole
Sales
도매상
Retailers
소매상
소매상
Licensing Agreements
Project Investment
OONNLI
LINNEE
Planning
Agency
기획사
기획사
Obtain copyright
Eins Digital
아인스디지탈
아인스디지탈
Neowiz
네오위즈
네오위즈
Streaming Service
Music Download Service
Value added online contents
Customers
소비자
소비자
Contact
www.neowiz.com/eng/
Jason Lee (Head of IR)
jasonlee@neowiz.com
+82.2.6001.1605
Katie Park
katie@neowiz.com
+82.2.6001.1603