August 31, 2006 11:21 pm

Korean site tackles might of MySpace

Jo Seul-ki, a 25-year-old school teacher in the small South Korean city of Bucheon, is an ardent fan of Cyworld, the country’s most popular social network, run by SK Communications.

She regularly updates the daily stories on her mini homepage on the site with pictures and music while checking how others are doing.

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“It’s great because you can upload an unlimited amount of photos, data and lively images. You don’t have to worry about privacy because you can control the exposure to only close people,” she says.

“Through Cyworld, I met many friends with whom I had lost contact.”

Ms Cho is one of 18m South Koreans – 40 per cent of the population – who are using Cyworld to express themselves and communicate more effectively with their friends.

Cyworld has emerged as the most powerful networking tool among technology-savvy young Koreans on the back of the country’s well-developed broadband network. More than 90 per cent of internet users in their 20s are registered as Cyworld members, according to SKC.

“It is an innovative service – an effective blend of blog and social network,” says Yoo Hyun-oh, SKC’s chief executive.

SKC is a unit of SK Telecom, the country’s largest wireless carrier. The company reported a Won20bn ($21m) profit last year on sales of Won160bn, with half of the revenue coming from Cyworld. It generates 80 per cent of its revenue from sales of digital items that Cyworld members use to decorate their mini home pages.

On the back of its phenomenal success in its domestic market, SKC is now expanding its global reach. It already offers Cyworld services in neighbouring countries China and Japan, and last month launched a service in the US and Taiwan.

In China, the number of Cyworld members in the world’s most populous country has already reached 2m since the service’s launch there in June last year.

SKC also plans to enter other regions such as south-east Asia, South America and Europe through joint ventures with local partners. It recently set up a joint venture with T-Online, a subsidiary of Deutsche Telekom, to launch a Cyworld service in Germany.

“I know it is difficult to do internet business in foreign countries due to cultural differences but you cannot survive without being a global player,” says Mr Yoo.

SKC has tailored Cyworld for the US market to overcome cultural differences, while maintaining the basic framework of its Korean service. It has localised website designs, such as those of avatars, or virtual characters, to reflect different racial characteristics. It has also customised its user interface and navigation tools for the US market.

Analysts say SKC needs to push into the US social network market, which is growing at 45 per cent a year, because its domestic market is nearing saturation. But they remain unsure of Cyworld’s global competitiveness – especially in the US.

The world’s largest internet market is becoming increasingly crowded, with 76 per cent of US internet users already using the services of Cyworld rivals such as MySpace and Facebook.

“It is a nice try to venture out of the limited home market for sustainable growth,” says Jay Park, an analyst at Samsung Securities. “But it will be difficult for Cyworld, as a latecomer, to overtake well-entrenched players like MySpace.”

But Mr Yoo, convinced that Cyworld’s service model is superior to its competitors, hopes American youngsters will become hooked on Cyworld like their Korean counterparts.

He says it is easier to decorate, or personalise, Cyworld mini homepages than MySpace, which has limited capacity for photo uploads and graphics. And the US social network, with 100m members, has no other revenue source except advertising, SKC adds.

The company plans to differentiate Cyworld from the others by making it a “cleaner and healthier online community based on the established offline network”.

MySpace is often criticised for a lack of tools to protect privacy, in spite of its focus on social networking among strangers.

SKC allows its potential customers in the US to activate the Cyworld service with their e-mail account, unlike in Korea where members are required to register with their social security numbers.

“We’re already getting a lot of positive responses from US bloggers. We believe that Cyworld will suit young Americans who want to express themselves in creative and innovative ways,” says Mr Yoo.

It remains to be seen whether Cyworld can strike a chord with American youth and pose a threat to MySpace. But it will surely be an uphill battle for the Korean company.

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