Creating and Capturing Value in a social network

Manasi Shenolikar 1111038 Sumedha Goenka 1111068 Shweta Srivastava 1111145 Shweta Mantri 1111382 Beschir Hussain - 11E6105

Actual Segmentation
The customer segments as identified in the case are: 1. Active Users- The ones with high amount of Cyworld activity 2. Purchasers- The ones who spend a lot on the virtual purchases, help increase direct revenue 3. Connectors- the ones who have a massive network of friends on Cyworld

Value for the actual segment

1.
2.

3.

Active users- more applications like games, virtual points for greater usage Purchasers- homepage theme based on a brand, discounts given by brand, special loyalty scheme for Cyworld members Connectors- have a professional branch like LinkedIn, Amway like structure for the person at the head of the branch(additional benefits)

There is high correlation between the Purchases and Connections (Exhibit 9). Which is 17.27% and is the highest when compared to 13.27% and 13.06% in the other

two graphs. Hence as a result of this Purchases and Connections holds high
weightage for Cyworld. Further analysis leads us to conclude that Connectors are key since they themselves lead to Purchases. We explore this further in the next slide in detail.

Members that increase the extent of the social graph are the most valuable members
We came to this analysis using Exhibit 8 and Network Theory

Primary Objective as basis for evaluation - Primary objective of Cyworld is to maximize revenues - Either by increasing number of members or by average amount spend per member - In case of Cyworld, number of members is already very high (21 m with 90 % penetration) - How to increase the amount spend per member? Increase average amount spend per member - Cyworld must first create sustainable value and subsequently capture it - Looking at members that spend money is confined to a moment (not necessarily sustainable) - Value creation by increasing the extent of the social graph (connections between members) - Connections make people interact and engage more with applications and services of Cyworld -Their anticipated benefit becomes higher than their willingness to pay (costs) -> they spend money -This results in increasing the number of purchases/ turning purchasers from low to medium or high. -Hence as a result increasing connectors result sin increasing purchases as well. - Customers with lots of connections increase value of whole network and are thus the most valuable Way of building relationships - Thereby, relationship can be build through social bonds - Increase interactions, information sharing and rapport among customers - Create opportunities for sharing common interests and activities (groups, fan pages etc.) - As a consequence, switching costs become high

CyWorld Reach Maturity Revenue Model Features/ Attributes Initial vision Present primarily in South Korea limited expansion in China, Vietnam. Failed in Us, Japan and Germany Launched in 1999, spearheaded social networking concept Revenue primarily by sale of dotori to purchase virtual items to decorate minihomepy online(70%) Shifting focus to advertising gradually Background music, furniture, appliances Free clean community with exclusive focus on social networking

Facebook, MySpace and others Present Worldwide Launched later 2004 and 2003 respectively but have much larger market penetration Revenue from advertisements, apps (facebook) etc Behavior and interest targeting for advertisements Facebook- photos, blogs, games etc MySpace-Minisodes Facebook-Vision to position facebook as a social operating system like windows was for the pc MySpace-Launched as an online community for musicians, actors and artists MySpace Expanded later to popular culture and lifestyle

Expansions

Gradually morphed into a hybrid with elements of Facebook, Youtube, MySpace Flickr etc Minihompy (~ MySpace) ; Profiling service (~ facebook) First to have the idea to link mobile service to social networking but not successful

Mobile Service

Vodaphone struck a deal with MySpace and Facebook in 2007 Linked mobile to social networking successfully Facebook has its own instant messenger Privacy Infringement

Instant Messenger Cons

Synergistic relationship with NateOn (instant messenger service) Users did not find much information in Cyworld

The main factor is network of friends

The aim of social networking sites (which is not present on other sites) is to

achieve revenue by increasing the networking. It is neither activity nor purchase but number of friends which is important. For other sites people visit them for a particular purpose, like search engines to buy something as opposed to social networking sites which are visited by people to just maintain and develop relations. Although gradually, because of limited functioning some social networking sites are expanding into other domains creating indirect competitors in YouTube, Yahoo etc. Cyworld created home2 to compete with YouTube and the likes where people were going to communicate with people with similar tastes by sharing news photographs and videos. Happy Click was modeled on Googles Adsense.

Another difference is the revenue model.

Social networking site have a click through rate of .04% Google and other such sites click through rate of 0.2%

Paid Items
Accounted for 68% of Cyworld revenue USD 65 mil (2007) Revenue from minihompy s virtual items Music Decoration Avatar Virtual items accounted for 32% of the paid items revenue.

Mobile Networking
Accounted for 16% of Cyworld revenue USD 15 mil (2007) Mobile Cyworld had the potential to increase customer loyalty from SK Telecom. Expanding its operation of both SK Telecom and Cyworld to penetrate another country Cumbersome software and poor UI quality may lead to delay in mobile becoming mainstream

Advertising
Accounted for 16% of Cyworld revenue USD 15 mil (2007) Represented only 16%

Cyworlds revenue but had the largest growth potential. The revenue from advertising is expected to grow even more Advertising could be the future of the company

Paid Items

Largest revenue share due to established market Growing music market with greater margins (50% +) It is the USP of Cyworld

Young people are losing interest Irrelevance , exhaustion, lack of tangible benefits

Mobile SNS market

90% market share Parent company mobile market leaders Fast growth rate (Exhibit 10) and promising future

3-4 years time lag in adoption due to cumbersome software and poor user interface quality

Advertising

Largest growth potential with annual growth rate of 20% Competitors already leveraging interest based advertising Multiple options in advertising to increase company revenue

Clashing with Cyworlds objective and image of clean community. Possibility of alienation Needs to prove its value to corporate sponsors; low click through rates Tough Competition from Google & Naver

Paid Items Customer Target Service Offered Capabilities Needed r r a

Mobile Cyworld a a a

Advertising a a r

Competition Faced

Continue the paid items without further investments. Leverage as long as market is there

Advertising would become indispensable. Foray into it.

Look for clean advertising options e.g minihompies of advertisers

Invest in R&D for mobile

Segmenting
Life stages Demographic Social Class Geographical

Targeting
Age Median 17-25 College Student Young Student Middle low-middle up Focus in Pacific Asia

Positioning
User Friendly International social network Targeted marketing age based Professional network build-up Online dating Real Gift service instead of Virtual gifts Music applications to download music

Reassert its focus by providing rich media content relevant to the users.

Evolve Cyworld from a social network to a social hub where social events are
created. Cyworld should become an essential marketing medium. Collaborate with big brands like Nike, Adidas and create minihompies Celebrities could create minihompies to build their brands and advertise their upcoming shows/movies. The market for video games is huge in Korea and hence Cyworld should champion this phenomenon on its social network. Innovating new networking tools wherein Cyworld connects users in common geographical areas with their mobile devices.