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Koreans are scratching their heads over why and how latecomer Facebook sidelined Cyworld, the home-grown pioneer of the social networking service (SNS) and came to dominate the world. The soul-searching is all the more meaningful as the U.S.-based firm is celebrating its seventh anniversary this month.
In 1999, four KAIST graduates launched Cyworld; the same year that Facebook co-founder Mark Zuckerberg was a middle-school student preparing to enroll at Harvard University.
The SNS was a great consolation for Koreans who were passing through a painful financial crisis. A decade later, its U.S. counterpart has become an iconic global company while Cyworld has become a back-alley shop. Facebook is available in 70 languages, and is valued at $50 billion. Cyworld is catering to young Koreans mostly in their teens and 20s.
The Cyworld-Facebook episode should be a case study at Harvard Business School on how the latecomer outshone the pioneer?
Much of the failure is strategic, cultural, linguistic and educational.
Cyworld’s global marketing was a complete failure as it segmented each market for the United States, Japan, Germany, China, and Vietnam. For Facebook, the world is a single marketplace ― something the Korean firm is belatedly adopting in its global standard platform.
Like Apple’s iPhone, Facebook adopted an open application program interface (API), seeking interaction with other Internet firms through networking. For example, users can install Apps such as campus schedulers or games on their Facebook sites; while Cyworld was opposed to networking.
The iPhone’s belated debut in Korea was deadly. Facebook was ahead of Cyworld in enabling users to click onto its site through the smartphone, and it constantly upgrades its user interface while the latter has been sticking to a childish one.
Ironically, it failed to recognize the fact that Western people are not interested in populating their sites with cute avatars and virtual homes, though these things are popular in Korea.
Facebook adopted a principle of simplicity, which was crucial in luring as many as 550 million citizens worldwide. By next year, 1 billion people will be using Facebook.
Cyworld prioritized privacy to openness, but Facebook adopted the opposite strategy ― users can know where their friends are and what they are doing and thinking in real time. Cyworld is now moving toward this openness.
Cyworld looks like a Korean, while Facebook seems like an American. Facebook has a Western way of outward-oriented, aggressive and open thinking, but Cyworld is inward-looking, and family- and group-oriented.
Its users form coteries, clubs and cafes only for members, whereas Facebook users do not like such cliquishness.
Cyworld allows users to import contents, photos and information from the sites of others. Facebook users can import content through networking, not direct copying.
The American firm was more aggressive than its Korean competitor in adopting “poke” tactics to lure inactive users.
Asking a person’s blood type is common here and Cyworld introduced the concept on its site. Outside Korea, asking a blood type is considered exceedingly strange ― a cultural gap.
Facebook learned from Cyworld, which introduced virtual money called “acorns” that is similar to the former’s “gift.” Non-Koreans seldom understand why acorn should be a gift. Acorn allegedly came from the nickname of a Cyworld founder.
Being a Korean firm was a minus overseas ― for example, a dispute over Dokdo spoiled Cyworld’s launch in Japan in 2006. Such names as Samsung, Hyundai, LG and SK are more widely known worldwide than Korea itself.
Facebook users can find friends easily as they can join common interest user groups, organized by workplace, school, college or other characteristics. Cyworld followed the American company.
Cyworld runs the Riding the Wave section, but how many people would be able to understand the terminology worldwide? Even for Koreans, it is difficult to understand the application for the arduous personal search for friends. Facebook’s Friend Suggestion enables members only to decide whether to accept a person as a friend or not.
A movie featuring Mark Zuckerberg also played a key role in popularizing Facebook.
Cyworld has probably failed abroad because it was not prioritized and effectively marketed in English. The name is a combination of cyber and world, and also denotes a pun on the Korean word for a relationship or between ― it is Konglish. Facebook is an English word. Cyworld smacks of cliquishness and introversion.
Cyworld entered the U.S. market in 2006 ― two years behind Facebook and three years behind Myspace. It was a Korea-focused service and came too late to the international arena.
Cyworld is owned by SKT, part of SK Group, which has signally failed to breach international markets in any significant business area. It failed in the US telecom market and has become the most domestically focused chaebol, which is a problem for Cyworld as it cannot make an emotional connection with non-Koreans.
The company’s failure illustrates that Korea is strong in hardware but weak in software. Hyundai cars, Samsung chips and LG refrigerators are now global household names. They imported foreign technologies and improved them for successful global marketing. Koreans can make iPhone hardware or parts, but they have difficulty in developing iPhone-like software.
As long as rote memorization is the norm at school and militaristic corporate culture lingers, Korea, the world’s 14th largest economy, may face hurdles in becoming a global software power.
The OECD reported the services sector here is less than half of manufacturing in Korea’s productivity.
Cyworld is tapping the world market again. It needs to do extra homework, especially on global culture and standards, and English, not Konglish, before dreaming of internationalizing its services.
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