So thanks Benjamin for your time and being prepared to do a Q&A session. on the top line of your report. :-)
So here goes the Q&A.
Lets start with an intro with Benjamin...
Benjamin Joffe is the CEO of the Asian-focused consulting boutique Plus Eight Star Ltd (+8*) based in Beijing. Benjamin spent 7 years in China, Japan and South Korea dealing with mobile and Internet services and just published 'Inside Cyworld', a detailed report covering South Korea's enduring online social phenomenon Cyworld.
CDB - We commented on Cyworld's success in a number of posts, what would you point out to summarize this success?
+8* - To quote a few key figures: 1). 18 million accounts for a 48 million population. This figure is not so useful to consider, though, as it does not say much about users' activity and ARPU 2). 16 million pageviews / day (480 million PV/month). If we use a pageview/user ratio Cyworld is much higher than others. 3). SK Communications made US$67 million directly from Cyworld in 2005, and its mother company SK Telecom, Korea's largest mobile operator, derived an additional US$30 million from the mobile service. The total was thus close to US$100 million a year ago. South Korea's population is 1/6 of the US and average GDP/capita in Korea being about a third, it gives a factor of 18 if a similar success was achieved in the US, that would be US$1.8 billion a year...
CDB - What have you identified beyond what has been already covered?
+8* - Foreign media have commented on Cyworld's success as a 'result' but very little has been said on the 'process' and the 'road to success'. In addition, due to the launch of the stripped-down US version many gave the impression Cyworld was only about funky or childish avatars, and an endemic Korean success that could not bereplicated elsewhere. Last, no detailed description with sufficient details is available to 'see' and understand Cyworld's multiple aspects.
The focus of our research was to:
(1) Explain why Cyworld became successful and how
(2) Identify best practices that are largely independent of the local culture and could be adapted to other markets
(3) Provide insights on critical issues that the pioneering Korean market faced and solved, that are more than likely to happen in other markets as the IT infrastructure and users mature
CDB - So what do you see were the elements critical to Cyworld's success?
+8* - According to its founder Young Joon HYUNG, Cyworld's success is the resul of a combination of factors which allowed his vision to come true. This vision was a development on concepts such as the "six degrees of separation" and an adaptation to the individual of ERP concept (Enterprise Resource Planning). Cyworld's founder called it 'PRP' for 'Personal Resources Planner', which he developed during his PhD Thesis on 'trust-based information sharing' at KAIST, South Korea's MIT, in 1999.
This was the founding concept, which could be implemented because of:
1). Korea's highly advanced broadband infrastructure
2). Meeting with a perfect timing with the digital camera boom in Korea in 2002
3). Persistence until broadband penetration in households reached 60%
Other experts we interviewed mentioned the importance of:
1). Introduction of cybercash ('dottori' or acorns) with a large array of payment methods
2). Paradigm shift from the advertising-reliant online services
3). Shift from mass community to personal community
4). Buy-out by SK Communications, which boosted both marketing and technical infrastructure
We also found that strategic mistakes from competitors who introduced paying services were instrumental in growing Cyworld's community. Cyworld found very smart ways to exploit those mistakes and help users migrate.
CDB - You mentioned best practices, what is there to learn from Cyworld for
foreign community services / social networks?
+8* - To start with, the richness of the Cyworld service itself can support the product planning of foreign services. Among the most interesting aspects are Cyworld's business model relying on micro-customization, which concerns not only avatars but the whole page with music and many other functions. Also, the mobile aspects of Cyworld can certainly inspire companies who wish to step into this next 3-billion dollars industry'.
In addition, understanding the key catalysts of Cyworld's success can helps tune their service for faster pickup by users.
CDB - What are those 'issues' Cyworld faced and solved, and await foreign services?
+8* - Interestingly, those issues have very little to do with technical aspects and are mostly connected to psychological and emotional aspects. What we found fascinating was that those elements were common to most IP-connected human beings.
The key point in Cyworld is its 'real-name policy'. Basically you need to use your real name associated with your official ID number to register. This has become more or less a standard among South Korean Internet services. It is a bit counter-intuitive, but real name policy does not damage free speech, it brings responsibility, courtesy and a lot of benefits for users themselves in terms of trust in the information they can find. We faced the same elements when doing a benchmark of best practices in online 'serious dating' services: trust and reliability brings a very high value to services.
Another very important aspect that sets Cyworld apart from 'western style blogs' is that minihompy are about social and emotional presentation of the self, while Western blogs tend to be rather intellectual. It is very different to have an 'online self' and a 'public journal'. This has an important impact on economics as users want to present the most attractive online self for their friends, and friends and emotions do not have a market price!
It is useful to note here that most Cyworld users write for their 'offline friends' and not for strangers. They can set privacy levels to their hompy, setting accessibily by content category to themselves only, friends or everybody. The role of the 'il-chon' friendship link is critical here. Visiting friends' pages and friends-of-friends' can help deepen relationships by understanding people better.
Among the most important issues has been this privacy aspect: many information are at risk on blogs: appearance, name, address, contact info, pictures, relationships, age, etc. Some problems have appeared in services like MySpace.
CDB - Some compared Cyworld with Habbo Hotel, MySpace or Second Life, could you point out what would be the key distinctions between them?
+8* - Among the easy ones are: 1). how mature is the service? Cyworld and MySpace can be considered mature while Habbo and 2L (Second Life) are a kind of niche (for HH) or 'next big thing' for 2L.
2). what is their target?
Cyworld and MySpace are resolutely mass market. Trend setters and 'early adopters' have probably both started to leave a while ago. 2L (Second Life) is in transition and might become crowded with users that have little to do with the first wave that made the service successful. HH is positioned for teens as a social space and its design pretty much prevents older users to join, limiting its social and economic impacts.
3). what is their business model?
HH is the closest to Cyworld in business models, but is very limited in terms of presentation of the self and very 'ego-oriented'. For MySpace, it is not clear if the clients are users or advertisers and this is likely to have a very strong impact on the service popularity. Cyworld stayed away from advertising largely for this reason. 2L is a very interesting service that has the potential to way beyond 'ego' issues, but is rather complex while a 6-years old Korean kid can use Cyworld. Last, 2L is totally online while Cyworld offers also mobile and more importantly offline extensions to buy/sell real-life things, making it a powerful marketplace.
4). what is their identity policy?
Cyworld being the only service with a real-name policy, we think users put a lot more trust and value much more Cyworld's service than the 3 others which are mostly 'show off' ego- or entertainment-based.
5). what do users value in the service?
This is a critical question to ask yourself as a SNS operator, as it will largely condition service development, marketing and eventually revenues! In Cyworld we found the following drivers:
a). Not being left behind
b). Their creations
c). Their relationships
d). Their image
CDB - What would you say to foreign companies who are within or entering the red-hot social networking / community space?
+8* - Considering users' value is a pre-requisite. Once you are clear with this there are also still a number of points to think about to become a 100 years company - or just survive: 1). Users can move if the value proposition changes 2). Users can move if it‚s easy to get out, but will not get in if they feel trapped 3). Users can move if the service is not trendy anymore 4). Users can move if they need to change their image
CDB - Two lines to promote your publication on Cyworld?
+8* - We analyzed an described Cyworld with the perspective of a company operating in a foreign market who wants to learn. The result is over 180 slides that we think could help many to refine, improve, monetize their service and accelerate their business. The report has already been purchased by several online media and community services and can help many more!
What a day :-)
And Benjamin will be in Tokyo on November 13th the Japanese traditionally celebrate Shichi-Go-San (7-5-3) Day, so it’s an auspicious time to mark the start of MoMo Tokyo’s third year. MoMo happens this month at the ultramodern Canadian embassy, one of Tokyo’s toniest Akasaka addresses.
I reccomend you go and listen to what Benjamin has to say.