Only those networks, which are most innovative, and the most convenient for usage are likely to attract a critical mass of users and become successful. Such is the situation with Facebook at the moment and MySpace in the past. These social networks are the leaders in the US market, and Facebook currently leads in the competition with its unique open platform strategy – a valuable, rare and rather hard-to-imitate resource.
Some unique features and capabilities of Cyworld included the security of customers’ information, the guarantee of protection from fraud, and the experience of tremendous success in Korea. Cyworld was predominantly used to manage already existing relationships its members were freer in their interactions, including commercial ones, and their privacy and identity was protected by the KBA system.
The unprecedented popularity of Cyworld in South Korea where almost all young population is registered in this social network allowed stating that Cyworld is likely to perform successfully at the global level. Cyworld’s unique features and capabilities, however, turned out to be tied to its domestic market and inappropriate to compete with networks such as Facebook in the US.
A variety of factors such as lack of technological innovations (closed platform), the mentality of other countries’ population, psychosocial issues, market saturation, and cultural barriers contributed to the failure of Cyworld in the United States social networking market.
Table of Contents
1. Preface
2. Introduction
3. Cyworld and its Major Competitors in the USA
3.1 Cyworld
3.2 Facebook
3.3 MySpace
4. Competition in the Social Networking Industry
5. Unique Features of Cyworld
6. Institutions constraining Cyworld’s Expansion
7. Conclusion
Objectives and Topics
This paper examines the reasons behind the failure of the South Korean social network Cyworld to establish itself in the United States market, focusing on the company's strategic, technological, and cultural challenges in the face of dominant domestic competitors.
- Analysis of the US social networking market landscape.
- Strategic comparison between Cyworld, Facebook, and MySpace.
- Evaluation of Cyworld's unique features and their perceived value to US users.
- Examination of institutional and cultural barriers hindering expansion.
- Application of the VRIO framework and Porter’s Five Forces to industry performance.
Excerpt from the Book
Cyworld and its Major Competitors in the USA
The success of Cyworld in Korea is really impressive: By late 2007 it had about 22 million users in a country of 50 million people. And 90 percent of all Koreans under the age of 20 have a Cyworld account (e.g. Schonfeld 2006). Even among people not using Cyworld, newly coined words became colloquial. “Cying”, for example, stands for interacting (Kim & Yun 2007).
The history of Cyworld can be traced back to 1999. The network was started in South Korea by a group of MBA students. The name Cyworld was coined of two words – “cy” and “world”. “Cy” means “relationship” in Korean, which defined the goal of the venture. In 2003, SK Telecom, the dominant wireless service provider in South Korea that aimed to grow its own online activities, has acquired Cyworld. SK Comms, the online department of SK Telecom, managed to grow Cyworld’s user base from 2.5 million in 2003 to over 21 million in mid 2007 (Kim & Yun 2007).
In contrast to its competitors, Cyworld aimed to offer a „small, clean community”. It required its members to use their real names and abstained from showing any banner ads. Since 2001, every Cyworld user could create an own mini home page to write diaries and invite friends to leave comments. This strategy got a very positive response.
Summary of Chapters
Preface: The author explains the motivation behind the paper, which was prompted by Cyworld's sudden announcement of its withdrawal from the US market.
Introduction: This chapter defines the essence of online communities and outlines the competitive dynamics between MySpace, Facebook, and the South Korean entrant, Cyworld.
Cyworld and its Major Competitors in the USA: This section details the background of Cyworld’s domestic success and profiles the US market leaders, Facebook and MySpace.
Competition in the Social Networking Industry: The chapter applies economic theories, including monopolistic competition and Porter's Five Forces, to evaluate the industry environment.
Unique Features of Cyworld: This section examines the distinctive capabilities of Cyworld and analyzes why these features failed to gain traction among American users.
Institutions constraining Cyworld’s Expansion: The chapter explores how cultural differences and informal institutions acted as significant barriers to Cyworld’s international expansion.
Conclusion: The author synthesizes the findings, confirming that a combination of market saturation, closed platform strategy, and underestimated cultural barriers led to the company's failure.
Keywords
Cyworld, Social Networking, US Market, Facebook, MySpace, Market Expansion, Strategic Failure, Virtual Currency, Online Communities, VRIO Framework, Cultural Differences, Monopolistic Competition, Innovation, User Acquisition, Digital Strategy
Frequently Asked Questions
What is the core focus of this research paper?
The paper focuses on analyzing the underlying reasons for the failure of the South Korean social network Cyworld to succeed in the highly competitive United States market.
What are the primary themes discussed in the analysis?
The main themes include market rivalry, the impact of platform strategies, cultural differences, institutional constraints, and the effectiveness of unique business models in different geographic markets.
What is the primary goal of the author?
The primary goal is to provide a comprehensive explanation of why Cyworld’s home-country success could not be replicated abroad, specifically identifying the mismatch between its features and US user preferences.
Which scientific methods were used to evaluate the situation?
The author utilizes strategic management frameworks, specifically the VRIO framework and Michael Porter’s Five Forces, alongside a socio-cultural analysis of institutional differences.
What topics are covered in the main body of the work?
The main body covers the history and competitive positioning of Cyworld, Facebook, and MySpace, followed by a deeper look into market entry barriers, Cyworld’s unique technical configurations, and the role of cultural factors.
What are the key terms that characterize this work?
The work is characterized by terms such as market saturation, competitive advantage, network effects, identity verification, and cross-border strategic management.
Why was Cyworld's "clean" business model unsuccessful in the US?
US users were not accustomed to the "kitschy" design, found the strict identity verification process intrusive, and preferred the open, developer-friendly platforms offered by competitors like Facebook.
How did cultural differences affect Cyworld's performance?
The author suggests that the company underestimated the cultural gap between Korean collective-oriented social behaviors and American individual-focused habits, leading to a product that did not resonate with US consumers.
- Quote paper
- Timo Beck (Author), 2009, The United States Social Networking Market, Munich, GRIN Verlag, https://www.grin.com/document/140972
