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[TECH ANALYSIS]Cyworld debuts on U.S. market in mid-August

Korea`s social network site makes a bold move to win a battle with digital titans such as MySpace.com


By Yang Sung-jin

In a bold attempt to pry open the world`s digital heartland, Korea`s leading portal service operator SK Communications will formally launch its Cyworld online social network service in the United States next month.
"Cyworld will kick off its commercial service in the middle of August with an official party and media events," Park In-hwan, vice president of corporate strategy office at SK Communications told The Korea Herald.
SK Communications operates Cyworld, one of Korea`s most successful internet services which specializes in social networking. With the formal launch of Cyworld in the United States, SK Communications aims to secure a foothold in the biggest internet market in the world as part of its global expansion strategy.
<**1>The debut, the timing of which has been widely speculated in Korea and the United States, is expected to spark a keen interest from potential American rivals, especially top social networking sites such as MySpace.com and Facebook.com.
But as Park revealed during the exclusive interview, SK Communications has been extremely cautious in the run up to the launch. "We have many concerns because we have yet to prove whether a Korean online social network model will prove its value in the advanced U.S. market," he said.
The company, a unit of Korea`s top mobile carrier SK Telecom, formed an American unit called Cyworld Inc. on Oct. 30 last year to prepare for the big launch. Henry Chon, a former telecom consultant, is leading the US operations with 15 staff members.
Cyworld Inc. is now running an internal beta version of its services amid heightening expectations about its impact on the American market.
But the question is whether Cyworld will indeed have any impact on the online social network market in the United States because SK Communications does not have any meaningful brand awareness among American users.
SK Communications, however, has few other options. It has to expand to overseas markets due to market saturation in Korea. The number of monthly unique visitors to Cyworld has slightly declined to 21.17 million last month compared with 21.75 million the previous month.
The not-so-spectacular growth sent a warning message to SK Communications top executives because Cyworld accounts for roughly half of the company`s annual sales. Unlisted SK Communications posted a net profit of 20 billion won on sales of 160 billion won ($168 million) in 2005.
The U.S. market, however, is an untapped reservoir for SK Communications because the American online social network is only recently taking off with the success of MySpace.com and other similar sites.
Cyworld`s multi-layered social community services is mirrored in its American plans. SK Telecom is now keen to boost its brand awareness in the U.S mobile service market through the success of Cyworld, and it has a very good yet unsettling reason to do so.
SK Telecom, a dominant wireless operator here, launched its mobile service in the United States with much fanfare in May through Helio, a joint venture with U.S.-based EarthLink. SK Telecom is renting a mobile network from Verizon Wireless and Sprint.
But the 22 billion won project is reportedly facing troubles in winning a significant number of subscribers. SK Telecom refused to release user figures to the Korean media, prompting speculation about the extent of troubles stemming from an almost non-existent brand recognition in the United States.
SK Telecom, whose mobile service is also nearing a saturation point in the domestic market, is exploring various options to find a breakthrough in foreign markets. Last month, it bought a 6.67 percent stake in China Unicom Ltd. through convertible bonds. The strategic partnership deal was valued at $1 billion.
But it is SK Communications that is spearheading the U.S. operations and the company has its own reason to pull off a success. It is ratcheting up its global expansion plans after launching Cyworld in China in June last year. It also opened up a Japanese site in December and plans to kick off a service in Taiwan on Aug. 24. In late June this year, it signed a joint venture deal with T-Online, a leading European online service provider, to set up Cyworld Europe GmbH in Germany.
Aside from SK Communications` global strategy, the real question posed by online pundits and bloggers is whether the Cyworld service model will generate any ripple effect in the American social networking market, currently led by MySpace.com
Both services offer profiles, photos, music and blogging features. Cyworld and MySpace.com also share their corporate history. In August 2003, SK Communications took over Cyworld, then one of leading community portals in Korea. In a similar act of snatching up a promising online site, Rupert Murdoch`s media giant News Corp acquired MySpace.com in July 2005.
However, the similarities end there. Unlike MySpace.com`s too open and somewhat crude interface, Cyworld boasts a highly sophisticated "open yet closed" networking function that allows users to control how much of their information is open to listed friends and who can read what postings at which personal bulletin boards.
In fact, the dilemma of opening up personal data and protecting them against intruders simultaneously has long caused headaches among internet service operators, notably social network sites. MySpace.com, for instance, is struggling to deal with privacy problems, hitting a series of headlines over child abduction cases due to its less regulated profile access that includes everything from home addresses and phone numbers to personal photos.
Cyworld does not have a clean bill on the privacy issue but it has drastically upgraded its privacy protection features after suffering similar problems in the past years. Now its privacy protection system stands out by international standards.
For example, users can completely block outsider from accessing their personal data. Even Cyworld friends on the buddy list can be given different data access authority. Such multi-layered data access system has resolved the dilemma of opening and closing personal data on the Web at the same time.
Another differentiated characteristic of Cyworld is its service integration.
In short, Cyworld is currently a mix of iTunes, MySpace.com, Facebook.com, blogs and eBay. It provides a paid music streaming service, which is hugely successful thanks to its cybermoney platform named "dotori." Its minihompy, a sort of miniature MySpace.com popularized by Cyworld, hosts more than 18 million subscribers. Reminiscent of eBay, a number of Korean people are making money by setting up shops at their own minihompy. Cyworld also hosts a huge number of online communities. In addition to numerous message postings, more than 6.2 million photos are uploaded on a daily basis throughout Cyworld services.
SK Communications` Park In-hwan said Cyworld is all about "offline relationships." While MySpace.com allows and encourages online-only contact that can lead to abuses such as stalking and identity theft, Cyworld is strictly based on offline human networking.
"Unless I know you personally offline, be it at home, workplace, school or any other organization, I won`t list you as my `ilchon` (cyber friend in Korean)," Park said. Such a privacy-oriented feature will be incorporated into the U.S. service, he added.
Under the mutual system, online friendship forms only when a member sends an ilchon-making proposal to a prospective friend - offline acquaintance in most cases - and the offer is accepted by the counterpart.
SK Communications conducted three focus group interviews, or FGI, for the American market and decided to maintain Cyworld`s popular "minroom" that occupy a central spot in minihompy. It will also offer the same cybermoney-based music streaming service through local partnerships.
All of this means Cyworld Inc. in the United States will push for digital avatar and cybermoney business models, at least for a while. "We concluded the U.S. market provides a potential for avatar and cybermoney-based businesses just like Korea does," Park said.
"Initially, we will target middle-income American families in the suburb areas through a family-oriented service that stresses emotional solidarity through online services," Park said.
To strengthen privacy protection, membership will be done through only e-mail certification, though such restriction tends to put down subscriber figure, he said. "We will focus on helping people forge personal value networks in the long term through Cyworld, not an online garbage bag of petty desires," Park said, referring to the negative impact of some social network sites
Park, however, did not elaborate on how the company would launch a marketing campaign. What he revealed, though, was that Cyworld launch would be covered by mainstream U.S. media including the New York Times and BusinessWeek because of its unique business model and marketing.
In Cyworld-speak, the ilchon-making proposal is now sent to U.S. online users, and it remains to be seen whether they will accept it gladly.
(insight@heraldcorp.com)

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