October 11, CYWORLD’S SOCIAL NETWORKING GLOBAL EXPANSION

2010 STRATEGY

Manchester Business School

Case Study Report

Cyworld’s Social Networking Global Expansion

Strategy

Group 22
Daniel Taffler, Maria Surkova, Rajnish Pal, Robin Agarwal

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Version 1.0 (11/10/2010)

Contents
Introduction...........................................................................................................3
How culture influences consumer behaviour.........................................................3
1.1 Diversity....................................................................................................... 3
1.2 Context......................................................................................................... 4
1.3 Language......................................................................................................4
1.4 Social outlook ..............................................................................................4
1.5 Psychological outlook...................................................................................4
Competitive environment......................................................................................5
1.6 Content differentiation.................................................................................5
1.7 MySpace....................................................................................................... 6
Market analysis of social networking industry in Korea and US.............................6
1.8 Target Segment Analysis..............................................................................6
1.9 Online Identity and Privacy...........................................................................7
1.10 Attitude to pricing.......................................................................................9
1.11 Graphical style............................................................................................9
1.12 Positioning..................................................................................................9
Decision Modelling...............................................................................................10
1.13 Awareness stage......................................................................................11
1.14 Interest stage...........................................................................................11
1.15 Evaluation stage.......................................................................................11
1.16 Trial stage.................................................................................................12
1.17 Adoption stage.........................................................................................12
Conclusion..........................................................................................................14
Appendices..........................................................................................................14
1.18 Word count (excluding references): 2013.................................................14
1.19 References................................................................................................14
Rebuttal Strategy.................................................................................................16

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Introduction
Following saturation of the South Korean market in 2005, Cyworld decided to
expand its activities overseas in order to continue growing. The US seemed an
ideal target market with more internet users than any other country, 150 million
social networking users, and a high disposable income.

On the surface, the needs of South Korean and US social networkers were the
same; the need to express their identity, communicate with a network of friends
and share photos, video and music. However, Cyworld failed to appreciate that
what satisfied these needs was fundamentally different for US and South Korean
users.

This report analyses several key areas that were responsible for the failure of
Cyworld in the US and also identifies possible ways in which this failure could
have been averted.

How culture influences consumer behaviour

In order to analyse consumer buying behaviour it is vital to understand cultural
differences to address the appropriate needs of the target audience. It was
assumed that Korean model of Cyworld would be appealing to 16-24 years old
people in the US market without appropriate adaption to their cultural needs.
and The strategy was to maintain the keyinitial Korean aspect in the US cultureof
the original Cyworld. As an outcome Cyworld US remained almost the same as
the original Korean Cyworld and it. The Cyworld failed to identify specific needs
and wants of the target audience and the cultural peculiarities of US audience
that appeared to bewere crucial in its further performance.

1.1 Diversity
Korean population are much less diverse that the US population. South Korea is
considered to be the world's most ethnically homogeneous nations where people
of other nationalities are presented in a small percentage of the population. US
population is much more diverse and presented by more than 10 different ethnic
groups. Cultural differences within each group vary significantly. The Cyworld
admitted the fact that US is a cross-cultured country but failed to take it into
accountaddress it while tailoring the social network site for the needs of US
users.

In addition, young people of 16 – 24 years old that were targeted by the Cyworld
US express themselves by belonging to a certain subculture. In the US the
subcultures are numerous and diverse. Tthe cute or kawaii style that dominated
Cyworld in East Asia and was popular with both girls and boys only appealed to
girls in the US and even then only a small segment of them. Because of the

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much higher level of cultural diversity in the US, especially among youngstersthe
target audience of 16-24 years old, it would be difficult for a single style to
appeal to all of them. ‘Cute’ has no appeal to the ‘emo’ or ‘goth’ subcultures, for
example.

1.2 Context
Korean culture is a high context culture with focus on personal reputation,
emphasising background and traditional values, whereas US culture has low
context where people rely more on written words, negotiate issues directly and
are highly competitive. This issue had to be addressed during the site’s
adaptation for the US consumers.s in terms of its content.

1.3 Language
Language barriers were addressed by the Cyworld by translating specific
features and services offered by the site.

1.4 Social outlook

The role of an individual in a community varies across different countries. In the
US, the interests and independence of individuals are of given high value; the
Korean culture tends to be a commune culture with strong collectivism features.
We Cyworld chose not to adapt the content of the social networking site for the
US public. The Cyworld US was organised and each mini-homepage offered the
same tabs, ‘a relaxed hangout that stressed existing friendship’. . At the same
time the chaotic nature of MySpace, ‘a hip party’, was not an obstacle for its
expansion and growing popularity in the US. Users were competing with each
other for popularity and attention that required a wide range of services provided
on the site.

1.5 Psychological outlook

South Korean people have more introvert personalities predominantly concerned
with their own thoughts and feelings rather than with external things. Korean
social network users only used social networking for people that they already
knew offline. The US users are willing to have online friends without being
introduced in real life and extend their network by sharing contacts with other
friends.

According to World Internet Users and Population Stats the percentage of

population who are willing to socialise through social network sites is
approximately 10% whereas in the US this percentage is nearly 70%.

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Competitive environment
In 2006, the major leaders among the social networking sites were MySpace and
Facebook. tThe social networking market in USA in 2006 was dominated by
MySpace, which had 75.56% of the market share, recorded growing increases
during the year. There wer withe more than 40% (123 million) of all the
population in the US (300 million) in 2006. that used My Space. According to
ALexa Internet, My Space was the world’s fourth most popular English-language
website and the third most popular website in the United States in 2006.nother
emerging site was The Facebook had with 8.26% of the market share.

1.6 Content differentiation

In terms of the Cyworld offering, cyworld we have lacked in differentiateing
itsthe content and the features of Cywrold US in comparison to the from its
competitors.

Features Cyworld MySpace Facebook

• Membership Free Free Free

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• Customisation Paid Free No

• Digital media content Yes Yes Yes
• Virtual gaming Yes No Yes
• Networking services Yes Yes Yes
• Community rooms Yes Yes Yes
• Subscription via mobile Yes Yes Yes
providers
• Selling media/utilities Yes Yes No
• Anonymity No Yes Yes

1.7 MySpace

The social networking market in USA in 2006 was dominated by MySpace, which
had 82% of the market share recorded growing increases during the year. There
were 32% of all the internet users in the US in 2006 that used MySpace.
According to ALexa Internet, MySpace was the world’s fourth most popular
English-language website and the third most popular website in the United
States in 2006.

The following parameters played an influential role in MySpace’s success in US

market:

1. A good mix and match of social networking ingredients in the home page

2. Broader appeal to masses

3. Search is a strong indicator of brand strength

4. Appeal to the young generation

Market analysis of social networking industry in Korea

and US
1.8 Target Segment Analysis
Cyworld attempted to map the main Korean user group to an equivalent US
group. In Korea users were 20-29 year-olds, whereas in the US they were 16-24
year-old girls. Although both groups share certain needs, their wants were
significantly different, so uniform offering couldn’t satisfy both groups at once.

Instead Cyworld could have adapted their offering to appeal to other US market
segments in the US. Boys also use social networking sites, as do 35-55 year-olds
(especially MySpace). The 25-34 year-old demographic remained mostly
untapped back in 2005 too.
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When launching Cyworld in the US an attempt was made to map the key South
Korean user group to an equivalent group in the US. For South Korea the users
were 20-29 year olds of either gender, whereas in the US the target group was
16-24 year old women. Although on the surface both groups share certain key
factors such as wanting to use social networking sites, there were far more
fundamental differences than similarities. Since the Cyworld offering to both
markets was virtually identical it was therefore impossible for it to satisfy both
user groups at once.

An alternate strategy for Cyworld could have been to adapt their offering to
appeal to a few other key market segments in the US. Boys also make
significant use of social networking sites, as do 35-55 year-olds (as shown by the
growth of MySpace for these users). Also, the 25-34 year-old demographic
remained mostly untapped back in 2005 - the success of Facebook in doing so
since then shows that there was significant potential there.

Demographic Profile of Visitors to Select Social Networking Sites in US (August,

2006)

Demographic Total MySpace.co Facebook.co

profile Internet m m
Persons: 12 -17 9.6% 11.9% 14.0%
Persons: 18-24 11.3% 18.1% 34.0%
Persons: 25-34 14.5% 16.7% 8.6%
Persons: 35-54 38.5% 40.6% 33.5%
Persons: 55+ 18.0% 11.0% 7.6%
Total audience: 100.0% 100.0% 100.0%

1.9 Online Identity and Privacy

Koreans accepted having their Cyworld profile automatically linked to their real-
life identity via national security and mobile phone numbers. As a result there
were very direct repercussions for online social misbehaviour. Koreans saw this
as both a security feature and a social feature that guarantees pleasant social
interactions.

US users don’t preferred to have the option to create a social profile with their
real name or assume an entirely fictitious identity. In fact, having an anonymous
profile is what US users see as both a security feature and a social feature that
gives people the freedom to do or say things without direct consequences. This
is borne out by research on the online disinhibition effect 1 in US users.

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http://www-usr.rider.edu/~suler/psycyber/disinhibit.html
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Forcing US users to link their profile to their national security or mobile phone
number actually deterred people from joining Cyworld for these reasons. An 18
year-old girl may want to keep her relationship with an unsuitable boy secret
from her parents, but may not be able to with this restriction in place. Privacy or
stalking scandals at MySpace and Facebook were not sufficient to deter US
users.

Cyworld could have marketed the superior privacy features of Cyworld to target
markets who would have valued these attributes, examples include universities
and schools where each year would want to form a closed community. With an
option that anonymous accounts will be notified to other users as an unverified
account.South Korean Cyworld users only used social networking for people that
they already knew offline. Without that face-to-face relationship in the real
world, South Korean users wouldn’t allow a stranger to become their ilchon
(‘cyber friend’). However, US users had no qualms about being friends with
people that they only knew online and had never met face-to-face. Although
there were privacy or stalking scandals for MySpace and Facebook, these were
not sufficient in themselves to deter US users.

This cultural attitude is even more relevant with regards to privacy. South
Koreans accepted having their social networking profile linked to their real-life
identity via national security and mobile phone numbers as a condition of joining
Cyworld. As a result there were very direct repercussions for online social
misbehaviour, and this was seen as both a security feature for Korean users, but
also a selling point – that users would all behave responsibly because they are
known.

US users preferred to have the option to create a social profile with their real
name or assume an entirely fictitious identity. In fact, having an anonymous
online profile is also seen by US users as both a security feature in preventing
stalking and also as a selling point in giving people the freedom to do or say
things without direct consequences. This is borne out by research on the online
disinhibition effect 2 in US users.

Forcing US users to link their profile to their national security or mobile phone
number actually deterred people from joining Cyworld due to the restriction on
online activities that would result. An 18 year old girl in the US may want to
keep her relationship with an unsuitable boy secret from her parents, but may
not be able to with this restriction in place.

Although Cyworld management saw this restriction as an addition security

feature that would be popular in the light of privacy scandals for MySpace and

2
http://www-usr.rider.edu/~suler/psycyber/disinhibit.html
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Facebook, US users may have seen the feature as a security risk when these
personal details are sometimes stolen from social networking sites.

In order to circumvent these issues, Cyworld could have given US users the
option to create an anonymous account or link it to a real identity. This is
industry standard practice on other US social networking sites.

In addition, we could have made more attempts to market the superior privacy
features of Cyworld to target markets who would have seen these attributes as
significantly enhancing the value proposition. These would have primarily been
various ‘closed’ networks where privacy was useful to the users. Examples
include universities and schools where each year would want to form a closed
community of just the students without strangers being admitted to the network.

1.10 Attitude to pricing

In addition, whereas the payment model for Cyworld was well established in
Korea, in the US users expected social networking sites to be free for them, but
supported by advertising instead. This cultural expectation further distorted the
value proposition from Cyworld in the US, even before an analysis of the specific
offerings of competitors.

In addition, whereas the payment model for Cyworld was well established in
Korea, in the US users expected social networking sites to be free for them, but
supported by advertising instead. This cultural expectation further distorted the
value proposition from Cyworld in the US, even before an analysis of the specific
offerings of competitors.

1.11 Graphical style

Cyworld’s ‘cute’ Korean style graphics were of limited appeal to US users, who
required much more individualistic ways of expressing personal style. Cyworld
could have achieved greater success by allowing users to select a style for the
interface and graphics that suited their lifestyle (i.e. a ‘skin’).greater flexibility to
its users in customizing their ‘homies’ as per there needs. In addition, this would
allow users to move between skins in response to changes in their life (e.g.
Moving from a ‘mosher’ skin age 16 to a ‘raver’ skin at age 19).

1.12 Positioning
Cyworld US was believed to be anted to establish itself as a long-term network
that people would use for many years; continually adding new content over
timemany years to come. This was appealing to Korean users, but not for US
consumers. . The existing social networks Facebook and MySpace positioned
themselves as short-term networks based on the assumption that users will be
easily switching to new networks or losing interest once their life and interests

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change. Being an individualistic and short-termist culture, American users

generally do not perceive social sites as long-lasting in themselves.

In In the US, the longevity of a social networking site depends on the longevity of
a social network itself. Whereas in Korea the target segment of 20-29 were
mostly in 1 key life stage throughout this time, in the US, the 16-24 year old girl
may go through 3 or more key life stages (e.g. school, college, working life). It is
much less likely that her social network will remain the same throughout this
period, and this factor goes someway to explaining the segmentation of social
networking tools in the US by age group viz. Bebo for the 12-17 year-olds, My
Space for the 18-25 year-olds, Facebook for the 25-35 year-olds, MySpace again
for the 35-45 year-olds etc..

Decision Modelling
In order to convince users to shift to our product, it would have been necessary
to succeed at all 5 stages of the commonly used Adoption Process Model.
Failures in the early stages fed through to a lack of customers in the later stages.

In order to convince users to shift to our product, it would have been necessary
to succeed at all 5 stages of the commonly used Adoption Process Model. In
many ways this model is also a purchasing funnel with decreasing numbers of
customers at each stage. Failures in the early stages fed through to a lack of
customers in the later stages for Cyworld.

Trial: Consumer tries new

product on a small scale

(The Adoption Process Model – adapted from Kotler et al, 2001)

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1.13 Awareness stage

There was no co-ordinated advertising campaign on tv, magazines, online and
other media to build brand awareness. Although broad campaigns could have
been prohibitively expensive, there was a failure to seek out the key magazines,
online services, blogs and tv programmes that appealed to just the key
demographic. The NBC Fancy Crane tie-in was insufficient to give brand
awareness to the majority of the 42 million 16-24 year-old girls in the US.

Cyworld failed to achieve either broad brand awareness across all segments or
even just in our key demographic. There was no co-ordinated advertising
campaign on tv, magazines, online and other media to build brand awareness.
Although campaigns to build broad awareness could have been prohibitively
expensive, there was a failure to seek out the key magazines, online services,
blogs and tv programmes that appealed to just the key demographic. The NBC
Fancy Crane tie-in was insufficient to give brand awareness to the majority of the
42 million 16-24 year-old girls in the US.

1.14 Interest stage

The next stage in the process would be to generate interest about the product in
the potential user. Ideally the advertising that gave brand awareness would also
generate interest in the user by making them aware of the unique selling points
and positive attributes.

However, due to the lack of broad or targeted advertising and the weakness of
the Cyworld value proposition for the US market, very little interest was created.

1.15 Evaluation stage

In the evaluation stage, the desire to actually try the product is generated.
However, due to the failure of the earlier stages the flow-through to this stage
was low.

If Cyworld had convinced key bloggers and opinion leaders of the value of the
service, these people could have generated enormous amounts of free publicity
for the service by writing positive posts and articles that would motivate users to
try the product.

In the evaluation stage, the desire to actually try the product is generated.
However, due to the failure of the earlier stages the flow through to this stage
was low.

If Cyworld had convinced key bloggers and opinion leaders of the value of the
service, these people could have generated enormous amounts of free publicity

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for the service by writing posts and articles extolling its virtues. These articles
would have been able to outline the key features of the product in a positive
way, leading to interest and a desire to trial the product.

1.16 Trial stage

In this stage the potential user actually tries the product for the first time.

The attempt to give free dotori to trial users was a useful move to get people to
use it for the first time, but because the entire concept was new to the US
market, it was insufficient. Tie-ins with established brands could have been a
useful tactic, e.g. giving a new Dell laptop or Hummer for the best mini-
homepage.In this stage the potential user actually tries the product for the first
time. The market research demonstrated that over two thirds of US users had
more than 3 online identities, but only 53% of users were willing to join a new
site if it was compelling enough. For Cyworld the failure of the earlier stages of
this process meant that it wasn’t seen as compelling to try even for this 53% of
users.

The attempt to give free dotori to trial users was a useful move to get people to
use it for the first time, but because the entire concept was new to the US
market, it was necessary to think of innovative ways of encouraging people to
trial Cyworld. Tie-ins with established brands could have been a useful tactic
here, such as giving prizes of a new Dell laptop or Hummer for the best mini-
homepage.

1.17 Adoption stage

In this stage the customer decides to make regular use of the product. Again,
due to the failure of the preceding stages, the flow-through to this stage was
minimal. Because of the lack of users there was a further negative feedback
loop generated for any actual users – these adopters would stop using Cyworld if
their friends didn’t join.

To combat this Cyworld could have tried to offer these adopters dotori bonuses
for every friend they recommend who starts an account or purchases their first
product.

In this stage the customer decides to make regular use of the product. Again,
due to the failure of the preceding stages, the flowthrough to this stage was
minimal. Because of the lack of users there was a further negative feedback
loop generated for the people who had actually adopted the service – if none of
their friends also made the jump there was no social network for them on
Cyworld and eventually they would return to other social networking sites.

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To combat this Cyworld could have tried to offer these adopters dotori bonuses
for every friend they recommend who starts an account or purchases their first
product..

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Conclusion
In conclusion, it can be seen that Cyworld failed due to certain key factors.
These were:

• The failure to understand cultural differences between US and Korean

customers

• The failure to effectively market Cyworld in the US

• The failure to influence the decision-making units of customers

• The failure to tailor the Cyworld offering to meet the wants and desires of
the target segments

• The failure of Cyworld to sufficiently differentiate its product from those of

the established competitors

If Cyworld were to try to enter similar markets in the future it would be important
to turn each of these failures into a success using some of the detailed methods
in the main body of the document.

Appendices

1.18 Word count (excluding references): 2013

1.19 References
1. Kotler, P., Keller, K.L., Brady, M., Goodman, M. and Hansen, T. (2009)
"Marketing Management” (authorised adaptation from US 13th edition),
Prentice Hall. ISBN: 978-0-273-71856-7

2. Evans, Martin, Jamal, Ahmad and Foxall, Gordon (2006) ”Consumer

Behaviour”, Wiley, Chichester, ISBN: 0-470-09352-8

3. Kotler, P. & Armstrong, G., (2009) “Principles, Marketing”, Global 13th

Edition, Pearson

4. “The Online Disinhibition Effect” http://www-

sr.rider.edu/~suler/psycyber/disinhibit.html Suler, J. (2004),
CyberPsychology and Behavior, 7, 321-326

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5. “Korean Upstart In MySpace’s Face”, www.businessweek.com, November

13, 2006

6. Benjamin Joffe, Taesun Yeom, “Inside Cyworld” www.plus8star.com

7. James Shih “Social Networking Sites Keep Their Local Flavor as They Go
Global”, October 13, 2006 http://yaleglobal.yale.edu/content/social-
networking-sites-keep-their-local-flavor-they-go-global

8. Christine Lagorio “MySpace Pulls Ahead In Page View Race”, July 12, 2006
http://www.cbsnews.com/

9. Donald Schön (1983) “The Reflective Practitioner”

10.“Analysis:Friendster, Facebook, MySpace, and Xanga.com have Different

Audiences”, www.web2journal.com, October 9, 2006

11.LeeAnn Prescott “Searching MySpace and Its Competitors”, March 08,

2006 http://www.imediaconnection.com/content/8554.asp

12.Yang Sung-jin “Cyworld debuts on U.S. market in mid-August”, July 25,

2006 http://www.asiamedia.ucla.edu/article.asp?parentid=49829

13.Hwang Si-young “KOREA: Cyworld faces challenges in overseas

expansion” December 9, 2006 http://www.asiamedia.ucla.edu/article.asp?
parentid=59329

14.Erick Schonfeld “Cyworld Attacks!”, October 2, 2006

http://money.cnn.com/

15.Erick Schonfeld “Cyworld ready to attack MySpace”, July 27, 2006

http://money.cnn.com/2006/07/27/technology/cyworld0727.biz2/index.htm

16.“Cyworld and MySpace (from CNN). Mobile User Generated content – what
happens next with them?” November 29, 2006
http://wirelessfederation.com/news/

17.Song Jung-a in Seoul “Korean site tackles might of MySpace”, August 31,
2006 http://www.ft.com/cms/s/2/eacfbf3c-3938-11db-a21d-
0000779e2340.html

18.Aline van Duyn “Social network sites battle to befriend US teenagers”,

December 20, 2006 http://www.ft.com/cms/s/0/5f33a28e-906f-11db-a4b9-
0000779e2340.html

http://www-usr.rider.edu/~suler/psycyber/disinhibit.html

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Rebuttal Strategy

We intend to analyse the presentation of the other marketing team by first

examining their process in these areas:

• Do they correctly identify issues for Cyworld in the US?

• Do they offer alternative courses of action that might have improved the
situation?

• Do they interact well with their audience and give good responses to
questions posed?

Similarly we will also consider the content of the presentation in more detail to
check that they address key areas:

• Cultural differences between the US and Korea

• Comparison of target market segments in the US and Korea

• Decision making process for users to switch to Cyworld

• Competitor analysis

In each area we will see if the presentation refers to appropriate marketing

theories.

Each member of the team will be given an area to concentrate on so that we can
each generate detailed points that can be collated into a single, comprehensive
response to the presentation as our rebuttal.

The rebuttal will not only focus on areas of weakness, but also acknowledge
areas of strength in the presentation, giving good feedback in the mode of the
Reflective Practitioner.

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