CYWORLD

Creating and Capturing Value in a social network

Manasi Shenolikar – 1111038

Sumedha Goenka – 1111068
Shweta Srivastava – 1111145
Shweta Mantri – 1111382
Beschir Hussain - 11E6105
 1. Cyworld customer segments and the value
proposition
Actual Segmentation Value for the actual segment
The customer segments as identified in the case
1. Active users- more applications like games, virtual
are:
points for greater usage
1. Active Users- The ones with high amount
2. Purchasers- homepage theme based on a brand,
of Cyworld activity
discounts given by brand, special loyalty scheme
2. Purchasers- The ones who spend a lot on
for Cyworld members
the virtual purchases, help increase direct
3. Connectors- have a professional branch like
revenue
LinkedIn, Amway like structure for the person at
3. Connectors- the ones who have a massive
the head of the branch(additional benefits)
network of friends on Cyworld

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.
 2. MOST VALUABLE SEGMENT
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
 3. DIFFERENT SNS
CyWorld Facebook, MySpace and others

Reach Present primarily in South Korea limited expansion in Present Worldwide

China, Vietnam. Failed in Us, Japan and Germany

Maturity Launched in 1999, spearheaded social networking concept Launched later 2004 and 2003 respectively but have much
larger market penetration

Revenue Revenue primarily by sale of dotori to purchase virtual Revenue from advertisements, apps (facebook) etc
Model items to decorate minihomepy online(70%) Behavior and interest targeting for advertisements
Shifting focus to advertising gradually

Features/ Background music, furniture, appliances Facebook- photos, blogs, games etc
Attributes MySpace-Minisodes

Initial vision Free clean community with exclusive focus on social Facebook-Vision to position facebook as a ‘social operating
networking system’ like windows was for the pc
MySpace-Launched as an online community for musicians,
actors and artists

Expansions Gradually morphed into a hybrid with elements of MySpace Expanded later to popular culture and lifestyle
Facebook, Youtube, MySpace Flickr etc
Minihompy (~ MySpace) ; Profiling’ service (~ facebook)

Mobile First to have the idea to link mobile service to social Vodaphone struck a deal with MySpace and Facebook in 2007
Service networking but not successful Linked mobile to social networking successfully

Instant Synergistic relationship with NateOn (instant messenger Facebook has its own instant messenger
Messenger service)

Cons Users did not find much information in Cyworld Privacy Infringement
 Social networking sites & other large
websites Differences
 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 Google’s 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%
 4. CAPTURING VALUE
Paid Items Mobile Networking Advertising
• Accounted for 68% of • Accounted for 16% of • Accounted for 16% of
Cyworld revenue – USD Cyworld revenue – USD Cyworld revenue – USD
65 mil (2007) 15 mil (2007) 15 mil (2007)
• Revenue from • Mobile Cyworld had the • Represented only 16%
minihompy ’s virtual potential to increase Cyworld’s revenue but
items customer loyalty from had the largest growth
• Music SK Telecom. potential.
• Decoration • Expanding its operation • The revenue from
• Avatar of both SK Telecom and advertising is expected
• Virtual items Cyworld to penetrate to grow even more
accounted for 32% of another country • Advertising could be
the paid items revenue. • Cumbersome software the future of the
and poor UI quality may company
lead to delay in mobile
becoming mainstream
 PROS AND CONS
 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 Cyworld’s 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
 STRATEGY
Paid Items Mobile Cyworld Advertising

Customer Target r a a

Service Offered r a a

Capabilities Needed a a r

Competition Faced a a r

Continue the paid

Advertising would Look for clean
items without
become advertising options Invest in R&D for
further investments.
indispensable. Foray e.g – minihompies of mobile
Leverage as long as
into it. advertisers
market is there
 ALTERNATIVE STRATEGIES
Segmenting Targeting Positioning

• Life stages • Age Median 17-25 • User Friendly

• International social
• Demographic • College Student network
• Targeted marketing – age
• Social Class • Young Student based
• Professional network
build-up
• Geographical • Middle low-middle up • Online dating
• Real Gift service instead
• Focus in Pacific Asia
of Virtual gifts
• Music applications to
download music
 ALTERNATIVE STRATEGIES
•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.
THANK YOU