Cyworld: Creating & Capturing Value in a Social Network

1. Why do people use social networks? How can you segment Cyworld's users? Which segment should Cyworld Target? How can it create value for its users? Reasons for using social networking sites Relationship-building- people stay in touch with their family, friends & relatives. Also they get to meet new people & make new friends. Self-expression- a good platform to voice your opinion which can be read & criticised by others of similar interest Promotion- many business entities see this medium as a platform for marketing and promotion Sharing- people tend to share their videos, photos; blogs etc. & tend to maintain a repository of the same. Better than storing on a hard drive which is prone to damage.

SegmentationAs per Exhibit 9 segmentation is done based on three parameters i.e. - Activity, Purchases & Connections. All have high, medium & low categories. While users are equally divided between the three categories of Purchases & Connections the activity parameters shows that majority of the people have low activity. Also from the combined tabled we can see that users are equally divided between the three categories of Connections & Purchases. There seems to be a correlation between the two. As per the combined tables of these three activities Purchases & Connections seem to have a correlation in between. Cyworld should focus on these two segments jointly & more importantly on the segment Purchaser & Segment because most of the people-52% is inactive in terms of scrapes while they are equally distributed in the other two segments. Around 66.7% of the people spend around 25.6$ & 67% of users have around 108 connections. Thus it clearly shows a trend towards social networking where people interact & purchase items. People want something new & this is the new trend in the social networking world. Since this site is predominantly used by youngsters they get bored and switch to newer ways of entertainment. The survey of the segmentation clearly shows a result where the trend is towards connections & purchasers so Cyworld should leverage on that. 2. Which is the most valuable customer to Cyworld - an active user, a use who spend a lot of money or the one with a lot of connections? As per my opinion a user with a lot of connections is more important to the Cyworld. As per the customer response the basic use of Cyworld is connecting with people & sharing, posting, etc. moreover the things that people purchase is to project them better in Cyworld, decorate their home page with different things. Purchase is actually dependent on the connections. Lets say a person purchases more so if he has more number of friends he will

spend more as compared to a person who has less connections. Moreover the market of purchasing is at its maturity stage now FB failed to do so & Mr. Yun too hint the same thing that item-based model has reached its potential. The activity feature is on decline while purchase & connections go hand in hand as can be judged from Exhibit 9. Moreover there are many people who are Connector (Exhibit 8) who keep the model into one place. If Cyworld focuses on other things it will lose it core competency. Cyworld is based on social networking & nor on individual usage. It should focus on the connections.

3. How's Cyworld different from Facebook? How are social networking sites different from Yahoo or Youtube? Cyworld Has various sources of revenue which includes paid-up items, advertisements & mobile Cyworld Promise of Clean service Virtual gifts for friends for which user has to pay some price Users created an avatar More of personal usage Facebook Has only as a source of revenue Displays ad based on usage Users dont need to purchase and gift. No such provision Users were real, no avatar More of open usage

Social networking sites are different from sites like Yahoo or Youtube because on Yahoo its more of a portal where user can view news, search the internet for his needs, etc while Youtube on the other side is a video sharing site where user can upload, view, like, dislike, comment on videos. However social networking sites like FB, Twitter, etc. provide a platform for the user to interact, meet, relate with the rest of the world which could be their friends, family and relatives and even strangers of similar interest or just strangers. They can express themselves, contact others, and share their stuff. Its more or less a substitute to the society in which he lives or a mode of communication with their nears & dears. 4. What should be Cyworld's business model? Evaluating the three options based on the financial statistics Paid items would boost the sale based to $120 million by 2010 in which songs could alone go up to $50 million (considering 10% growth rate). More over if they succeed like what they have done in iTunes then this option could even be a star of the whole business. Mobile Networking- is promising but still considering the present growth it will lead to only $24 million by 2010 which is much less compared to Paid items. Also the churning factor came in. Advertising- though many experts believe in Ads as the future model but still financial statistics dont agree with the same. Expecting the similar growth they could also reach up to a maximum of $50 million by 2010. Moreover it involved the risk of users cancelling their accounts since their business was built on clean factor. Also the click-through rate was another concern for neglecting this offer. Thus as of now paid-up items seemed to be the best source of revenue for Cyworld and they should focus on that.

Now since Purchase is their main agenda of their site so they should focus on the same in terms of Cyworld too i.e. they should concentrate on things which will make Cyworld work in the same manner as their revenue model. They should keep updating their site regularly in order to keep the users engaged interested. This will involve social networking along with selling music & selling virtual gifts. Since these are the main sources of revenue and people are interested in social networking. They need to form a blend of all these while maintaining their unique proposition of clean social networking site. However the loss from the users who cancel could be covered by advertisements. Permission based advertisements could be a helpful way in this area. Moreover they need to leverage on the mobile networking websites since it could be a next big thing. From my opinion Cyworld should keep up their options open for some more time to judge the success in any field. From exhibit 7 we can say that people want some change in the social networking sites which are simplicity in terms of usage, various services, privacy, communication & useful information. All these criteria are fulfilled by Cyworld as of now. So they need to change their model as of now by drastically. Giving the same model some more time could be more useful.