CYWORLD
PRASHANT
KUMAR-160103099
Creating and Capturing Value in a social network
1. Cyworld customer segments
and the value proposition
Actual Segmentation
Value for the actual segment
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
1. Active users- more applications like
games, virtual points for greater usage
2. Purchasers- homepage theme based on
a brand, discounts given by brand,
special loyalty scheme for Cyworld
members
3. 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,
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
Increase
per member
- In case ofaverage
Cyworld,amount
number spend
of members
is already very high (21 m with 90 %
-penetration)
Cyworld must first create sustainable value and subsequently capture it
- Looking
at members
that spend
money
is confined to a moment (not necessarily
How to increase
the amount
spend
per member?
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.
Way
ofas
building
-Hence
a result relationships
increasing connectors result sin increasing purchases as well.
-- Thereby,
relationship
be build through
social
Customers with lots ofcan
connections
increase
value bonds
of whole network and are thus the
-most
Increase
interactions,
information
sharing
and
rapport
among customers
valuable
- 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
China, Vietnam. Failed in Us, Japan and Germany
Present Worldwide
Maturity
Launched in 1999, spearheaded social networking
concept
Launched later 2004 and 2003 respectively but have
much larger market penetration
Revenue
Model
Revenue primarily by sale of dotori to purchase
virtual items to decorate minihomepy online(70%)
Shifting focus to advertising gradually
Revenue from advertisements, apps (facebook) etc
Behavior and interest targeting for advertisements
Features/
Attributes
Background music, furniture, appliances
Facebook- photos, blogs, games etc
MySpace-Minisodes
Initial
vision
Free clean community with exclusive focus on social
networking
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
Expansions
Gradually morphed into a hybrid with elements of
Facebook, Youtube, MySpace Flickr etc
Minihompy (~ MySpace) ; Profiling service (~
facebook)
MySpace Expanded later to popular culture and
lifestyle
Mobile
Service
First to have the idea to link mobile service to social
networking but not successful
Vodaphone struck a deal with MySpace and Facebook in
2007
Linked mobile to social networking successfully
Instant
Messenger
Synergistic relationship with NateOn (instant
messenger service)
Facebook has its own instant messenger
Cons
Users did not find much information in Cyworld
Privacy Infringement
Social networking sites
and
differences
The aim of social networking sites (which is not present on other
sites) is to achieve revenue by increasing the networking.
The main factor is network of friends
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.
4. CAPTURING VALUE
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
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
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 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
STRATEGY
Paid Items
Mobile Cyworld
Advertising
Customer Target
Service Offered
Capabilities Needed
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
ALTERNATIVE STRATEGIES
Segmenti
ng
Targeting
Life stages
Age Median 17-25
Demographic
College Student
Social Class
Young Student
Geographical
Middle low-middle
up
Focus in Pacific Asia
Positionin
g
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
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
