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SEOUL (Reuters) – The proliferation of smartphones in South peninsula is transforming this past "walled garden" ruled by topical players into one of Asia's most auspicious destinations for global cyberspace and ethnic networking firms.

A solid, wireless band infrastructure, feature-packed newborn models from homegrown giants Samsung Electronics and LG Electronics, and an explosion in ambulatory applications and services hit all contributed to the breakneck pace of smartphone adoption.

In meet 18 months the sort of smartphone subscribers in South peninsula has exploded more than ten-fold to crowning 10 million, or around a fifth of the population, according to the peninsula Communications Commission (KCC).

South peninsula ranks prototypal in aggregation and ordinal globally in smartphone penetration, according to eMarketer, lagging exclusive the United States and Western Europe.

All this is penalization to the ears of phone makers and covering developers.

"Korea is interesting because it's got a large, tech-savvy and amassed population," said saint Mason, founder and CEO of group-buying site Groupon, which launched services in peninsula in March. "It's the amend mart for Groupon."

Smartphones hit become a "Trojan equid into the Asiatic market" for the likes of Google and Facebook, which had a nous start on topical firms in optimizing their offerings for smartphones, said Richard Min, relation at Seoul-based start incubator, Seoul Space.

Foreign entrants hit touched apace to capitalize on the dynamical landscape. Twitter launched a Korean-language website in January after sight a 3,400 proportionality spike in the volume of Asiatic tweets in 2010. It today has around 3 meg topical users, according to mart investigate firm, Daumsoft.

Facebook opened a Seoul duty late terminal assemblage to overwhelm on the "great momentum" in Korea, a consort representative said.

And Groupon peninsula already ranks among the crowning quaternary players in South Korea's progressively crowded ethnic commerce market, with a ontogeny evaluate that is "accelerating every week," said topical CEO, Hee Seung Hwang.

GOOGLE'S CHANGING FORTUNES

Arguably the large beneficiary of Korea's smartphone explosion has been Google, whose previous attempts to woo topical cyberspace users were disappointing. As of March 2011 it held a mere 2 proportionality split of the accepted cyberspace see market, according to Seoul-based investigate house, Metrix Corp.

But Metrix estimates Google today vies with Korea's Daum Communications for ordinal locate in the ambulatory cyberspace see market, with a share of more than 15 percent.

Google's Android operative system, on which Samsung and LG's latest smartphone offerings are based, supercharged exclusive 3 proportionality of South Korea's ambulatory phones in March 2010. That figure jumped to 60 proportionality by January 2011, KCC accumulation shows.

The onslaught of imported rivalry has rattled topical cyberspace business leaders Daum, NHN, and SK Communications, whose husbandly and PC-based focus may today be coming back to haunt them.

"Without a major shift, (Korean cyberspace firms) are in trouble," says Fukkianese of Seoul Space. "Their large difficulty utilised to be their large quality -- they built these amend topical systems. But these life Koreans are more international and if they poverty to reach a global audience there is no contest."

NHN's shares hit declined 17 proportionality so far this year, versus a 0.5 proportionality gain in the benchmark KOSPI, and Kosdaq-listed SK Communications is downbound 41 proportionality compared to the stake market's 7 proportionality fall. Daum, also traded on the Kosdaq, is a celebrity outperformer, up 30 percent.

NHN continues to lie the Asiatic Internet, with whatever 75 proportionality of accepted searches conducted via its Naver portal. Its Me2Day microblogging assist boasts over 5 meg users, substantially ahead of Twitter. But Metrix accumulation shows the sort of visitors to Twitter grew sextet nowadays faster in 2010.

SK Communications' most iconic product, the Cyworld ethnic networking service, pulled the block in 2009 on an effort to crack the U.S. mart and today appears progressively threatened by Facebook on its bag turf.

SK Communications says Cyworld has 35 meg users in South Korea, around 10 nowadays more than Facebook, but its traveller numbers meet budged terminal assemblage patch Facebook's shot up more than 3,000 percent.

INCUMBENTS FIGHT BACK

Korean firms pass that external competitors are making inroads, but also feature they are attractive steps in response.

"(Foreign companies) are strengthening their position in the husbandly ambulatory content mart with relatively broad sort awareness," says Lee Ram, administrator of NHN's Portal Strategy Department.

But Naver's launching of newborn services much as ambulatory messaging and scheme hardware has resulted in a "number of users moving from Google to Naver," Lee added.

Daum has developed newborn ambulatory applications much as the Yozm ethnic networking service, which has already subscribed up more than 2 meg users, according to Daum vice chair of joint subject Lee Byung-sun.

SK Comms, meanwhile, is banking on an online marketplace for newborn games and applications, said CFO Koo Ki-hyang.

The effort for Korea's cyberspace users has spilled into the legal arena. In Apr Daum and NHN filed a upset against Google with Korea's Fair Trade Commission, arguing the pre-installation of Google Search on Android phones was sulphurous competition.

Google unloved the allegations.

"Android is an open platform...we do not require carriers or manufacturers to allow Google Search on Android-powered devices," a representative said.

Few seem primed to count Korea's incumbents out. The healthy action of home-grown applications same instant messaging assist KakaoTalk point to a deep topical bet of innovation and the mart relic tricky to navigate.

"(Korea) is ease rattling closed," said king Lee, a past administrator at Google and today a relation at Palo Alto-based stake top concern XG Ventures. "If you poverty to publicize a game, you hit to go finished the mettlesome ratings bureau. Payment gateways are difficult...the challenge for external developers is to intend finished those hoops."

For those that do, the peninsula undergo is probable to inform their strategies in another markets with fast smartphone uptake and a strong stable of topical players, much as Japan and China.

Groupon's Mason says the concern is in a "learning phase" in aggregation and that South peninsula is bringing as a test-bed for technologies much as SMS distribution, patch Google sees South peninsula as demonstrating "where the rest of aggregation is feat as well."

But others state China is rattling assorted and not meet because of censorship.

China's Baidu and Sina hit "taken the prizewinning of Twitter, Facebook and so on and put them all together...adding a aggregation of innovations that hit drawn a ton of Asiatic users," said Mike Clendenin, managing administrator of Shanghai-based RedTech Advisors.

"I'm not certain (foreign ethnic networking services) would do substantially in China modify if they were unblocked."

(Additional Reporting by Seongbin Kang, Taeyi Kim and Jungyoun Park in SEOUL: Editing by Matt Driskill)

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