Cyworld Case Analysis

Rishi Kumar

Session 18: Cyworld -Creating and Capturing Values in a Social Network

Analysis

About Cyworld:

Cyworld was started in 1999 by a group of MBA graduates from the Korean Institute of Science and Technology(KAIST).Initially called People Square , it was quickly renamed Cyworld.”Cy” in Korean means “relationship”, which defined the goal of the venture. Cyworld encouraged users to invite their friends to join by offering users 500 Korean Wons every time they brought in a friend. In 2003, Cyworld was finding it increasingly difficult to cope up with increasing user base leading to increased cost of servers etc. SK Communications came as willing partner. SK Comm was part of internet venture of SK Telecom. It immediately invested $10 million to improve server capacity. Freechal , its competitor started charging membership fees which this let Freechal users to shift to Cyworld. This was synergized in order to promote SK Comms messenger service NateOn.

Models of Revenue Generation

Paid items-

Revenue from minihompy’s virtual items like Music ,Avatar and Decoration.The virtual items accounted for 32% of the paid items revenue.

Mobile Networking-

Mobile Cyworld had the potential to increase customer loyalty from SK telecom and had accounted 15% of Cyworld’s Revenue.

Advertising-

It represented only 16% of Cyworld’s Revenue but had the largest growth potential.The

Revenue from advertising expected to grow even more.

Users and User Segments

Targeted users were teens and people in their early twenties.

Users were divided into three main segments:

Active Users

Buyers

Connectors

Criterion of segmentation was also not clear as some managers preferred to divide the users based on revenue and others on activity. Some preferred to divide the users based on the number of connections.

User segment data for past 4 months from exhibit 9 shows the...