Cyworld – Case Analysis

Situation Analysis Company SK Comms crossing line cyberspace Cyworld Social networking Biggest player Value proposal providing drug users with a free and blank community with limited publicizing and an almost exclusive emphasis on social networking Life cycle mature phase of growth NateOn min messaging Biggest player Linked to Cyworld Home2 Social media Media plat category Video 50M +50K/ sidereal day News Pictures +5M/day Cyworld revenue segmentation (2006) Paid items $67M (72%) Virtual items $15. 45M bonnie bell $1 Items sold 32M 3D virtual items $0M 010 projected $(120M 2010 paying item sales Music $14. 48M Selling 200K/day Average price $0. 50 Can be solved technically with blocking omit of useful information Dont want ads in a clean environment Lack of time Customers getting bored Because need of relevancy Not leveraging individual(prenominal) covers Goals Retain users Customize/targeting go out Increase revenues Grow users Possible Options 1) Paid Products Music accounts for 50% salaried revenues (36% of total revenues) Growing at a rate of 10% a year 3-D Virtual Gifts Expected to generate $120m in revenueMaintain catamenia levels of advertising, cargonful not to disrupt customer preferences for an ad-free environment Pros low fringy cost, already established market, integrity to original value proposition of a clean, ad-free environment. Cons ignoring the largest market (890m potential revenues), not solving the attrition job of people tiring of virtual gifts, 2) Acquire a swordplay smart set (acquiring Empas was approximately $30M) Own company (buy for $3 &8212 $5 M or enter into a license agreement where we have a gambol contract. reate a certain number of games per year and collect a small percentage of proceeds) Positioning Statement Marketing Analysis Product Price Market Analysis Founded in 2001, Cyworld initially began as a social networking company beforehand it was acquired in 2003 by SK telecom. It offered a certain and ad-free programme to stay connected with friends and family via a minihompy where users could post information and updates. At the time of acquisition Cyworld had a membership of 1 million before r to each oneing critical mass in 2004 and growing to 21 million in a coun extend of 50 million people.Since then, Cyworld has offered a variation of features such as NateOn, an instant messaging service acquired in 2002, a virtual item market, a music store, a blogging service, a plaza for sharing user-generated media, and a Home2a hybrid model of blogs and minihompys. Cyworld currently enjoys 90% market penetration for the 20-29 year old demography and accounts for 50% of SK Telecoms profits with 72% coming from paid items, 16% from advertising, and 12% from mobile services. However, users are tiring of buying virtual items and decreasing direct custom (64% decreasing versus only 13% increasing).A function of the sites privacy model forces some users to de-register and re-register when relationships get broken instead of only be able to unfriend or block users as is an filling on Facebook. This led to 10,00015,000 cutting users signing on per day, but in like manner 5,000 users butt jointcelling their subscription. young data has also shown that Cyworld users have become increasingly more metameric with regards to usage absolute frequency and money spent. 27. 5% of users logged on 3 times or more per week, but these users account for 93% of the usage and furthermore 35% of total purchases coming from 15% of users.The original value proposition of Cyworld was foc employ on providing a clean and safe social network. The plus of features such as the virtual marketplace and media-sharing platform has evolved the site to being a focal point of entertainment and self-expression. The business model of Cyworld must continually reflect the sites growing importance in the lives of their users. Cyworld must create an enhanced value proposition for its curren t customers so they can better focus on revenue extraction from their high- and mid- frequency users.The main springboard from which Cyworld has launched most of their successful add-ons has been its pre-established network of friends which each user has collected over the years. However, these networks, once they are acquired, become a placid list of superficial relationships. Though users are currently able to jabber with or broadcast to their networks, there is limited actual relationship-building. Cyworld must instanter step in to remedy this gap in emotional familiarity by creating a federal agency for users to engage and strengthen their network.What is the best way to create closeness? Options Our initial analysis of consumer demographics, user behavior and preferences, and overall gaps in the revenue and functionality model, have led us to these possible answers to that inquire 1. Restructure existing business model to shift primary revenue-driving focus to advertisin g, similar to social network competitors, Facebook and Myspace and paid search competitors Naver and Google. With growth evaluate of 46% in 2005 and 29% in 2006, Advertising represents a favourable opportunity for Cyworld.While this option could boost Cyworlds revenues significantly, it poses risks, considering consumer concerns with privacy and the companys commitment to a clean and free online environment. 2. Develop a new music sales strategy to enable users to download music to personal MP3 players, following the ITunes model. Songs currently downloaded by users can only be used as background music for minihompys. Yet, music represents a profitable option as Cyword would be able to retain more than 50% of revenues.However the streaming to MP3 process could be a complicated and costly transition given(p) the wide range of system and compatibility requirements. 3. Develop user-specific personalized applications, product recommendations, and shop options to encourage increased site-usage. Specifically, as the Cyworld High oftenness User ages beyond the 19-29 range, the Cyworld platform for decorating minihompys is becoming less relevant. The company needs to increase the relevance of its services by introducing specificity and targeted marketing.However this may also raise privacy concerns and subvert the previous value proposition of a clean environment. 4. Cyworld could acquire gaming companies to develop games targeted at current users. This would both increase site usage and provide users with an opportunity to further connect with contacts via a friendly and warring venue. In addition, as users start their own families, the Cyworld gaming environment can serve as an educational and entertaining option for their children. Our answer is online gaming.While Cyworld should try to maintain the current level of sales of music and virtual items (especially with the teaching of 3-D virtual gifts driving revenue to $120 million in 2007) and fix the privac y glitch which forces users to register and re-register, the majority of their focus should be on gaming. Cyworld should use gaming to allow members to strengthen their preexisting relationships and form new ones. This would eliminate much of the risk of engaging with strangers online and inject accountability into the way people compete in these games.Instead of being a platform where users share what has already happened, users can now log on to Cyworld for a new challenge, a new way to interact with old friends, and the opening move of a new story generated on the site itself. Strategy murder Cy- plunk for (4 Ps) Product Cy-Game get out be created via a combination of Cyworlds $20M acquisition of Game Me, a network of online gaming technology start-ups in South Korea for exclusive use of their games. User-targeted games go forth be offered and sold via an application store that Cyworld users can easily chafewhether on their home computers or mobile phones. Cy-Games launch go out target High Frequency Users start-off, leveraging the consumer information Cyworld has gathered for the past 12 years. The goal of Cy-Game depart be to provide users with gaming and entertainment options for every stage of their livesfrom the first year college student, to the mid-twenties urban professional, to the mid-thirties married parent feel for a safe and easy pastime to share with their friends, and family. Price The Cy-Game determine model will be as follows A. Pay-to-Advance Games Users will have access to a large database of free games.However, in order to advance to the highest levels of the game, users will be required to purchase special weapons, treasures, and secrets. The fee to acquire each add-on will start at $. 05 and increase incrementally with importance. Theses virtual enhancers are crucial to advance in the game and remain competitive. B. Initial Buy-in Games Cyworld will extract 5% of the buy-ins from users participating in gambling-intensive gam es such as poker game or bridge. C. Subscription Games Users can access these games for free or for a pertinacious price of $36 a year.Paid subscribers can enjoy ad-free gaming, while non-subscribers will be shown a fixed number of ads per hour. We estimate the total annual revenue generated from gaming to be $6M (2 from Free Games and 4 from Paid Games) FINANCIALS HERE. advancement To promote the launch of Cy-Game, Cy-World will offer all existing users a free two-month ad-free subscription and a $10 credit to be used in the buy-in or pay-to-advance games. CyWorld will also sponsor a So You hark back You Can Game contest to be broadcast on Korean MTV.The winner, deemed Koreas Next Top Gamer will win $50,000. Placement Cy-Game advertising will run predominately on the Cyworld homepage. However, we will also leverage Game Mes existing marketing strategy to promote the new fusion with Cy-Game. That marketing strategy includes traditional television and print advertisements. City -Wide murals and billboards will also be prominently placed in city centers and near universities. Cyworlds goal is to attract gamers to Cy-Game while increasing overall Cyworld signup and usage frequency.