August 11, 2006 1:28 PM PDT
Korean social-networking site hopes to nab U.S. fans
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Cyworld, a site based in South Korea, kicked off a beta in the U.S. on July 27 and later this month will formally begin a nationwide tour to encourage Americans, particularly those in the age 18 to 29 demographic, to create personalized Web pages, or "mini-homes," on the site.
Henry Chon, CEO of Cyworld USA, won't say how many people the beta site has attracted, but said the number is "way more than we expected."
Although most Americans are unfamiliar with the service, it's an inescapable fact of life in broadband-saturated South Korea. Approximately 18 million people in the country, or 30 percent of the population, have accounts with the service, according to Cyworld.
More than 90 percent of South Koreans age 20 to 29 have Web pages on Cyworld, Chon said, and close to 92 percent of them use the site "almost daily." In other words, about 80 percent of 20 to 29 year olds in the country stop somewhere on the site close to every day, which has made Cyworld popular with advertisers.
The service, which started in 1999, has since expanded into China, Japan and Taiwan. It now has 2 million users in China.
Although sites such as MySpace.com have already taken hold in the U.S., Cyworld will try to carve out a place in the market by differing in tone.
"A lot of social-networking services are like going to a concert in a big stadium. You have loud music and 40,000 to 50,000 people in a stadium," Chon said. "Everybody is having a great time, but you will probably never see them again."
By contrast, Cyworld attempts to facilitate communications between people who know one another: new parents who want a site where relatives can go to see the latest pictures of their baby; friends at different colleges who want to stay in touch. Overall, the demographic on the service skews slightly older.
"People will have multiple accounts on multiple services for different purposes," Chon theorized. "We don't have to take people away from other services. Even if Cyworld is coming into a market that some people say is crowded already, I think we bring a nice alternative to other services."
In South Korea, Cyworld also functions as an extension of people's mobile phone. Using a camera phone, they take a picture of what they're eating for lunch, post it to their site and send a text message directing friends to the latest update. The ability to post from a mobile phone will come to the U.S. too.
The company gets revenue from advertisers and from hosting corporate-sponsored pages. But it also sells background screens, charms and other graphics to decorate individual sites. In South Korea, users can pay to have music streamed onto their site as well.
The decorative services account for $300,000 a day in revenue, Chon said. "We sell more than $100 million a year in those sales. That's U.S. dollars," he said.
MySpace is expected to garner revenue of $180 million this year from all its services, according to research firm eMarketer. But MySpace has a base of 100 million members, five times as many as Cyworld. Thus, Cyworld garners more revenue per member than MySpace.
To keep up with demand for novel graphics, the company employs 4,400 graphic artists in Korea. It will hire artists in the U.S. as well, Chon said.
Social networking took off early in South Korea, largely because of the proliferation of broadband. After the monetary crisis of the late 1990s, the government funded the creation of a massive cellular and broadband network that covers most of the country. Partly as a result, the country has become one of the global centers for online gaming, electronic homes, consumer electronics and development work for third-generation and fourth-generation networks.
"In the U.S. we didn't get meaningful penetration of broadband until a few years ago," Chon said. "The U.S. still trails Asia."
So far, Cyworld has avoided some of the predator problems that have hit MySpace. Mostly, that's because of the way the service works in Korea. To sign up for the service, people have to give their national ID number, which is the equivalent of a Social Security number. (Cell phone buyers in South Korea have to do the same to open an account.)
The company will not ask for Social Security numbers in the U.S. so authentication will be far less stringent. Chon, however, said users, like at other sites, can reduce the danger of unwanted advances through filters.
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