Cyworld Lands on Myspace

Since last year, Myspace, which was bought by News Corporation at the time for $580 million, has seen phenomenal growth. It has more than tripled its number of unique visitors to 38 million while seeing its total number of registered users rise past 70 million in the last quarter. Its net income is expected to reach $50 million by next year.

The latest company setting its sights on the Myspace market has recently opened a test site for the U.S. market but it is no newcomer. Cyworld’s social-networks are already known in East Asia, with an especially strong base of 18 million users in its home country of South Korea. Riding that success, Cyworld is expanding operations worldwide. Among its targets is the United States this August.

While Myspace is currently atop the social networking heap, Cyworld comes with seven years experience and backing from SK Communications, a subsidiary of South Korea’s largest wireless operator SK Telecom.

Capturing the Market

Cyworld was founded in 1999 by four graduates of the Korea Advanced Institute of Science and Technology, the South Korean equivalent of MIT. The site was hardly an overnight success. However since that time, Cyworld has grown to become a dominant service, especially among South Koreans in their late teens and twenties.

SK Communications bought Cyworld for $8.5 million in 2003. In 2005, Cyworld accounted for nearly half of the company's $160 million in sales and most of its $25 million profit. This year, Cyworld expects to generate over $140 million in sales.

With the formal launch of Cyworld in the United States, SK Communications aims to secure a foothold in the world’s biggest Internet market. In June of last year, the service expanded to China, where it has reached nearly 2 million users. It also opened up a Japanese site in December and plans to launch a service in Taiwan on August 24.

Time is Ripe

Cyworld has seen so much success in South Korea it is beginning to saturate its own market. While it has nearly half of the nation’s 49 million people, the number of monthly unique visitors to Cyworld fell slightly to 21.17 million in June compared with 21.75 million the in May. In contrast, by this April, unique visitors to Myspace grew by 30 million from 8 million last year.

Myspace has more than twice the traffic of the closest competing U.S social-networking site, Blogger. However with soaring growth, the American market is still open to competition.

The concern from some observers that social networking sites may not have staying power is unfounded, according to some experts, who compare the phenomenon with “reality television.”

Now that reality TV has become a staple in programming, Neilsen//Netratings Sr. Director Jon Gibs feels the same way about online networking

"Social Networking is not a fad that will disappear," he says. "If anything, it will become more ingrained in mainstream sites, just as reality TV programming has become ubiquitous in network programming."

Same Game, Different Moves

While Cyworld will follow MySpace into the U.S. market by offering an opportunity for users to interact in online social networks, that alone will not guarantee success, according to Gibs.

"The concept of 'reality' alone, or in this case 'social networking,' is not enough," he says. "In this competitive marketplace, sites also have to provide consumers with distinct content they can identify with."

Cyworld, just as Myspace, will include blogging, photos and music. However the similarities end there. Cyworld offers an advanced user interface not available on Myspace.

Home pages, for example, appear as three-dimensional rooms that users can decorate and personalize. Other users are represented by icons known as "avatars.” The idea behind the availability of options is for users to make their rooms as attractive as possible.

Along with its unique interface, the creators also devised a unique business model. Most of Cyworld’s revenue comes from the sale of items to decorate rooms.

In addition, Cyworld provides a paid music streaming service, which has been successful thanks to its cybermoney platform named "dotori," or acorn in Engish. The acorns, which can be paid for with cash, are used to make payments for virtual items. Some users are even setting up their online pages as shops.

American Potential

SK Comm has deployed a team in San Francisco to study the site’s feasibility to work in the American market. So far, the company has found the need to rid the site of features that may be too "cute" for American tastes, but still keep the bulk of the site in tact.

The U.S. version will launch in mid-August with just three major components: the mini-homepage, clubs, and the digital store. The team has also decided to add a navigation bar on each page so users can easily navigate as well as a "My Cyworld" tab that will give American users a single view of everything they and their friends have created.

Getting users to take notice of Cyworld may be a challenge. Studies have shown users to be surprisingly loyal to their sites. Nielsen reports MySpace has enjoyed the highest retention rate among all U.S social-networking sites, with 67 percent of all at-home visitors returning in April.

To fuel growth, new members to the U.S. Cyworld page will initially get free "dotori" when they sign up, promotional "dotori" from advertisers, and extra ones for referring friends or moderating clubs. Using that approach, Cyworld hopes to attract 2 million American members by the end of next year, with concurrent plans to bring the site to other countries.

On the web:

http://us.cyworld.com

http://www.myspace.com