Naver Z, the operator of Zepeto, is facing escalating labor disputes over wage increases as it continues to report operating losses for the sixth consecutive year. The union has initiated its first partial strike in the company's history and has announced plans for further action.
On September 11, the Naver Z union conducted a partial strike demanding wage increases. The union warned that if negotiations with management do not progress, a full strike could occur on September 23. The union is seeking a wage increase of 5.3%, which aligns with the wage increase agreed upon by Naver's headquarters and major affiliates this year. Management has reportedly proposed a wage freeze, citing the company's financial situation.
The union's demand for a 5.3% increase stems from a trend of wage increases that has continued since the company's spin-off. A union representative stated, “When we spun off in 2020, we were assured that there would be no significant changes to our working conditions.” The union has indicated that it has applied wage increases similar to those at Naver headquarters, regardless of performance, since the spin-off.
The union argues that management should not use poor performance as a reason for a wage freeze. They claim that the decision to invest in the unpredictable metaverse business was made by executives, and it is unfair to shift the responsibility for this onto employees through wage freezes.
Management, however, presents a different narrative. Naver Z reported revenues of 66.3 billion won and an operating loss of 49.4 billion won last year. Revenue decreased by 14.4% compared to the previous year, and the operating loss exceeded 70% of revenue. Although the operating loss decreased by 18.6% from the previous year, it remains significant. Naver Z has recorded operating losses for six consecutive years since its spin-off in 2020.
Despite six years of losses, management argues that they have applied wage increases similar to those at Naver headquarters. They contend that the growing losses and the decline of the metaverse trend have made it unavoidable to freeze wages.
It is difficult to solely blame management for the situation. Naver Z rapidly expanded during the COVID-19 pandemic, capitalizing on the metaverse trend. After spinning off from Naver in 2020, the company grew its global user base with Zepeto, surpassing 300 million cumulative users by 2022. At that time, Naver Z's revenue surged by 339% compared to the previous year, reflecting high expectations for the metaverse business.
However, following the pandemic, enthusiasm for investing in the metaverse quickly waned, altering the business environment. According to S&P Global, private and venture capital investments in global metaverse companies plummeted from $4.09 billion in 2022 to $530 million in 2023, an 87% decrease. During the same period, the number of investment deals fell from 65 to 48. Additionally, as generative artificial intelligence emerged as a new growth area, investor interest shifted away from metaverse-related companies, further impacting their business environment.
* This article has been translated by AI.
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