Transferring Business Models across NationsA Case Study on MySpace & CyWorld

May 2008

Prepared By :

Pauline Ng Wan Ching, Athena Kang Hui Pei, Aloysius Quah Chin YeowThis case was researched and prepared by Pauline Ng Wan Ching, Athena Kang Hui Pei and Aloysius Quah Chin Yeow, under the guidance of Practice Assistant Professor Michael Netzley. This case was written for the purpose of class discussion and is not in-tended to illustrate either effective or ineffective handling of an administrative situation. Academic institutions may copy this case for free so long as this copyright notice is included on all reproductions. Copyright © 2008.

Singapore Management University Pauline Ng, Athena Kang, Aloysius Quah

Hyun Oh Yoo, CEO of CyWorld, alighted from his flight after a grueling 8 hour meeting with his team in Germany. Despite having only entered the market for a mere 6 months, they had come to a painful conclusion to close CyWorld in Germany. Had CyWorld’s amazing success in South Korea brought about complacency in the team as they entered the lucrative European market? Hyun Oh Yoo needs to work out the numbers and the problem as he plans for the next leap into the US mar-ket. On the other side of the world, Thomas Anderson and Christopher DeWolfe of MySpace enthu-siastically discussed their plan of introducing MySpace into South Korea with their development team. They just received news of CyWorld pulling the plug in Europe, and they are not intending to make the mistakes that CyWorld did.

Rise of Social Networking SitesInternet evolution from Web 1.0 to 2.0108 in the past few years can be seen from changes such as Britannica to Wikipedia, Geocities websites to blogging, Napster to iTunes etc. With this change follows an evolution of user expectations and emergence of new Internet business models, one suc-cessful model of which is a result of the former, social networking sites.

Social networking sites (SNS) are defined as web-based services that allow individuals to (1) con-struct a public or semi-public profile within a bounded system, (2) articulate a list of other users with whom they share a connection, and (3) view and traverse their list of connections and those made by others within the system3. Some popular sites currently include Facebook, MySpace, Win-dows Live Spaces, Twitter, YouTube, Flickr, QQ and CyWorld. Windows Live Spaces, MySpace and Facebook attract 120 million, 110 million and 70 million registered users respectively70. SNS basically allows users to create a personal profile and can be broken down into internal social networking (ISN) or external social networking (ESN). The former with examples such as a com-munity within a company or association etc, and the latter offers examples such as MySpace and Facebook. An ESN is public and available to all web users to communicate and are designed to at-tract advertisers although they can also be specialized communities such as DeviantArt. “People are no longer confined to social networks in the near physical neighborhoods. The bond to family and spatially co-present others are decreasing and people actively construct their social relations, be-cause of the relations based upon shared interests and common goals.” (Giddens 1991)

These websites do not usually charge users membership fees but has their revenue coming largely from advertising. Other than that, sites have also creatively devised other ways to monetize their product such as the creation of online marketplaces (Facebook), or selling professional information to business (Linkedln) and microtransactions (Cyworld). With the rapid rise in the popularity of SNS, it is not uncommon for users to be registered with more than one SNS. This trend thus ac-counts for the rise of social network aggregators such as Jaiku69. Users are now able to integrate their online activities such as tracking their blog posts and comments using these aggregation plat-forms. In March 2008, The Economist reported that SNS are beginning to move away from “walled gardens” to more open architectures. The adoption of open social, the common set of application programming interface (API) developed by Google, by many SNS such as Plaxo92, reflects the movement away from the “walled gardens”. Walled gardens refer to an online environment that controls users’ access to web content and services.93

Singapore Management University

Transporting Business Models Across Nations 2

However similar in nature SNS may be, there are recognizable differences in business models as these sites originated from various parts of the world and are modeled to cater to the preferences and culture of the locals. Social networking and community sites face several challenges of building a profitable community and identifying what is it that users value in the service. The MySpace business model originated from the West, and its success motivated the company to launch custom-ized business models in other countries. Some companies started similar services based on the MySpace concept, but these models did not translate well into less developed markets.

The MySpace StoryMySpace started in L.A in 2003 as a small company overseen by Brad Greenspan (eUniverse’s founder), Chris DeWolfe (current CEO), Josh Berman, Tom Anderson (current president), and a team of programmers from eUniverse. It was formed with the idea to create a community where amateur musicians could share content, and hopefully get noticed. MySpace’s primary aim was, no doubt, to undermine big businesses and provide opportunity for individual musicians to have a plat-form to get their music heard. Friendster, started a year before, had in a way, kick started the social networking trend. Instead of taking the stringent censorship and copyright approach like Friendster, MySpace took the opposite approach and allowed users to freely post whatever content they wanted, as long as it is not directly detrimental to anyone. And since then, as the community grows, its purpose has evolved into that of personal expression and content sharing.

According to Jack Myer’s report on MySpace in 2006, it was mentioned that MySpace’s success “does not lie in the fact it is a social network per se: it lies in the nature of this network’s members. Because the site operates as a peer-to-peer community, it has rich intellectual capital, speed of communication, wide reach, and a strong sense of community. These elements are strengthened by the fact that MySpace is a peer-to-peer Y-Gen community. That means relevant intellectual capital, constant communication, wide influence, and a strong need for community.”94

Some of the features that can be found on MySpace include Instant Messaging (IM), Bulletin Board, Groups, Music, TV, Mobile, News, Classifieds and Karaoke. MySpace has now been launched in 22 countries around the world and available in languages from Spanish to French and English is the most widely used. And according to Alexa, since YouTube videos could be embedded onto MySpace user pages in 2005, the former has been the faster growing website on the Internet.106

Since the acquisition by NewsCorp in 2005, there has been a stream of efforts to strength the reve-nue through third party marketing. MySpace started to integrate advertisers as members of the on-line community, providing them with relevant and useful marketing tools. This move has increased their ad revenue healthily thus far despite their user model possessing no paid for features for the end user. Google signed a US$900 million deal to provide a search facility and advertising on MyS-pace on August 2006.95 The MySpace model has also resulted in the creation of their own MySpace economy. Many businesses spin-offs were started, providing users everything from customization of their webpage to tee shirts that says, “Tom is NOT my friend”. Tom is the co-founder of MyS-pace and is a pre-configured friend for every user.96

Singapore Management University

Transporting Business Models Across Nations 3

United States - Internet CultureIn December 2007, there were 364.2 million Internet users in U.S.116, making up almost 40.2% of the entire American population. Half of all Americans have broadband connections at home, chang-ing the face of online interactivity115. Internet users engage in a wide range of activities such as working on blogs or webpages, remixing digital content and re-posting it online, sharing something online created by the user (artwork, photos, stories, or videos), or obtaining information to aid in decision making about purchases. There is also active participation in various online forums as peo-ple with shared interests or problems gather to chat or collaborate.

The United States has the highest individualism score in Geert Hofstede research. Citizens of the country are known to value freedom of speech and expression. There is equality between societal levels of government, organizations and families. As the American has a lower level of uncertainty avoidance in their culture, it is not overly concerned with controlling all outcomes and results, but rather tolerant towards new ideas, thoughts, and beliefs. Blogging27% of Americans read blogs on a regular basis. The age group with higher blog readership ranges from 18 – 24 year olds. Widely read blogs discuss issues ranging from technology, business, enter-tainment, politics, gossip to parenthood. Recent trends saw social software tools like blogs and pod-casts becoming an integrated part of mainstream media outlets. With the Internet and digital devices as new distribution channels for news & information on a global level at relatively low cost, the av-erage citizen with a voice can be heard overnight.

The CyWorld StoryCyWorld, founded by Mr Young Joon Hyung in July 1999, is the first social networking site in the world and is developed in South Korea. The word, ‘Cy’, refers to “cyber” and when translated loosely in Korean, means relationships. Mr Hyung had envisioned to be a site that builds relation-ships in the virtual realm. As of September 2005, the membership figures showed that 90% of the all Koreans in their 20s and around 25% of S.Korea’s population are registered with CyWorld72. Furthermore, CyWorld ‘clicked in’ on average 20 million unique visitors to their social networking site each month54. The proliferation of CyWorld has changed the way Koreans interact with their friends and also, their Internet usage patterns. This trend is highly visible amongst the younger generation. Other than creating a lifestyle revolution, CyWorld managed to reap an outstandingly healthy profit of around USD$150,000 per day via its micro-transactions54. CyWorld’s business model and healthy operations led to a takeover by media conglomerate SK Telecommunications in 2003.

Cyworld's business plan is built upon the idea of creating your personal homepage or virtual home, affectionately known as “Minihompy” (Appendix A). This enabled CyWorld users to not only man-age their “profile”, but also their “identity”, the way they want people from both their internal and external social circle to view them. In fact, it is the minihompy that attracts its users to revisit their page frequently. The minihompy is fully customizable with wallpapers, furniture, background music

Singapore Management University

Transporting Business Models Across Nations 4

etc, and acts as user’s virtual home. On top of having these unique personalization options that the minihomphy offers, common social networking features, such as message boards, personal photo gallery etc, are also found on CyWorld. What drive the Cyworld business is the sales of their virtual currency called “Dotori” or “Acorn”. Acorns are used to purchase “items” for the furnishing of the minihomphy. Currently for USD$1, you can get 10 Acorns and the market price for “items” range from around 2 Acorns to for a wall painting, 5 Acorns for a background song and around 20 Acorns for a fully furnished room. On av-erage, users around 20 – 25 years old spend about 500 Acorns a day to decorate their ‘virtual homes’113. The sales of virtual currency for the purchase of virtual items are known as microtransctions. Cur-rently, 35% of the company's revenue is derived from digital song sales and 40% from selling digi-tal wallpaper53. Compared to other major SNS, such as MySpace and Facebook, advertising does not account for a large part of the business model mix. However, CyWorld offers “HappyClicks”, a service that allows users to put ads on their minihomphy and be rewarded with Acorns. CyWorld benefited from its current business model because its low reliance on advertising made sure that it was providing a service for members of its site instead of the advertisers. This enabled CyWorld to better attend to a single group of customers who were the members of the site.

Over the years, CyWorld has grown beyond the function of social networking and evolved into a site that enables celebrities and companies to reach out to fans and consumers respectively. For ex-ample, Korean celebrities have been known to use CyWorld to connect with their fans by setting up a minihomphy and posting details of their upcoming tours and works. Companies, to reach out to customers about product launches and events etc, have also used CyWorld. The main difference in using traditional media and SNS to reach out to consumers is the interactivity in the form of com-munication. This two-way conversation is apparent in the immediate feedback a company can re-ceive and also, the immediate addressing of issue users brings up. The creation and engagement of a conversation between consumers and corporations is made possible with Web 2.0 and SNS is defi-nitely a channel that Korean corporations are exploiting.

Some security issues that have surfaced thus far is that, currently, only those with a Korean social security number are able to create a minihomphy on CyWorld's Korea server. The main issue is the concern with a difference in user experience between CyWorld Korean and CyWorld everywhere else in the world. This experience is the ability to engage in the purchase of a wide variety of digital goods available on the Korean server and the level of modification left for the user is reduced. De-spite this flaw, with its well-established SNS business and its flaming success, Cyworld decided to expand its operations beyond Korea and started their move into United States, China, Japan, Tai-wan, Vietnam and Germany.

Singapore Management University

Transporting Business Models Across Nations 5

South Korea - Internet CultureSouth Korea is a homogenous and relatively small country known for its rich culture and heritage. Along with the rising success of S.Korean international conglomerates and proactive government, S.Korea’s capital, Seoul has become one of the worlds’ most advanced and wired cities in the world.

With more than 7.7 million27 households hooked up to the Internet with high-speed broadband con-nections, Koreans are currently spending an average of 11.5 hours in front of their computers. They have made a name in the cyber-gaming industry, and are extremely active on the Internet surfing, shopping, blogging, downloading music and movies etc. They are also highly engaged in online communities such as CyWorld and OhmyNews. The latter57 is an online newspaper powerhouse serving the Korean netizens who are passionate about expressing their views on politics and Inter-net technology. This is a user created news website with citizen journalists in Korea and also 100 other countries submitting their own articles, contributing to the site’s content. Exhibit B shows the varying focal interests of OhmyNews since its establishment in 2002.

Other than leisure related activities, Koreans are also making use of online platforms for activities such as trading, banking and other financial activities. Amongst these online activities, social net-working takes up the major portion of the time spent online, where meeting, dating and entertaining people online has become a social norm. Majority of the Koreans who has the highest activity rates range from 6 to 29 years old with men leading the usage rate.

BloggingAccording to Edelman’s press release on Korean blogosphere60, South Korea has an estimated 7 million active bloggers and over 20 million people participating in social networks such as Cy-World. Technology was cited as the top reason for blogging. Other areas of interests include poli-tics, sports, recreation, photography, culture, cuisine, art, social activities, celebrities and travel. Some examples of blogs reflecting various interests can be found in Exhibit C. Korean bloggers comes from various backgrounds, some living in the country and some living outside the country. Some bloggers have labels below each post and RSS feeds, but most of them do not provide track-back links and this is possibly because they are still mostly using plain html and not CSS + XHTML.

The Edelman's third annual Stakeholder Study59 revealed that, “the on-line media is now exactly equal in trust to newspapers at 41% in Korea”. The blogosphere appears to have significant influ-ence on what the locals think, considering that people between ages 18 and 24 are likely to read blogs almost four days per week and almost half of this age group read blogs every day. However, the language is a barrier to index Korean blogs in Technorati, despite the enormous size of the Ko-rean blogosphere.

Search Engine - NaverNaver is a locally developed search engine, making it the most popular search portal in Korea be-cause of its ability to enable search queries in the Korean language. One of Naver’s features (which was replicated by other Western search engines such as Google and Yahoo), “Knowledge Search”,

Singapore Management University

Transporting Business Models Across Nations 6

is an information sharing tool where users actively participate to answer others users’ questions and award points to users who provide the best answers. The entire database is made up of user’s con-tributions to these questions and answers, which explains why the locals would only want to use Naver because it is the only search engine that can return results of quality content in the language they are most familiar with.

Mobile S.Korea’s mobile penetration rate is one of the highest in the world as well, with over 80% of the country’s population owning at least one mobile phone. Huge mobile conglomerates such as Samsung and LG, and the strong nationalistic culture of Koreans to support local goods can account for this phenomenon. Usage purpose of mobile phones has gone beyond making calls and SMSes for the Koreans. One just has to hop on the subway of Seoul to experience the mobile lifestyle Ko-reans lead. Watching live TV, engaging in multi player online gaming and surfing the Internet are just some of the activities from the list that digital multimedia broadcasting (DMB) has brought to the users in Korea. The development of DMB and its activities are triggered by advent of larger memory storage devices along with well-constructed infrastructure that enables high-speed transfer of large amounts of data.

Germany - Internet CultureWithin the European Union, Germany is the most populated country, with over 82 million people residing in the country107. Germany has a number of larger cities such as Berlin, Hamburg and Mu-nich. German is the official language in Germany, with other immigrant languages like Turkish, Polish, the Balkan languages and Russian. Their language is culturally unique to them, with minori-ties of words derived from Latin, Greek, French, and English.

Social Networking Sites61% of the German population uses the internet104 with more than 10 million DSL customers in Germany. In 2007, MySpace Germany attracted 3.7 million unique visitors, capturing 11%100 of the total German Internet audience and 24.6% of the social networking market. The next leading social networking site with a slice of the pie, StudioVZ, had 3.1 million unique visitors. There are several other popular sites such as Jux.de, Piczo.com and Stayfriends.de which are popular in Germany. The success of MySpace in Europe illustrated that developing local languages sites and pages was important for securing traffic, especially since there are many countries such as Belgium, United Kingdom, Poland, Italy and France within Europe.

BloggingThe German blogosphere is rather underdeveloped. 85% of Germans never read blogs, according to results of the Edelman Omnibus Blog Study that was conducted on 1000 Germans. Elite blogs were interested in technology, personal diaries, media, popular culture, or politics. However, ties within the blogosphere are tightly knit, where there have been cases of bloggers coming together to protect their fellow bloggers who have been criticized by companies. In addition, bloggers actively post comments on others’ blogs, as opposed to non-bloggers who seldom leave comments.

Singapore Management University

Transporting Business Models Across Nations 7

CyWorld’s Entrance & Failure in GermanySK Telecommunications felt that the Korean market was beginning to witness saturation in the so-cial media scene and there was waning interest in Cyworld’s services. Aforementioned, Cyworld.kr has over 20 million members, which translate to 40% of the population already being a member of the website54. Market saturation was also why it had its recent expansion into China in 2004, United States and Japan in 2005, as well as Taiwan and Vietnam earlier in the same year. Although still in the early stages of these foreign expansions, the sites in these Asian countries are already showing promising results, thus inspiring CyWorld to move into Europe.

As with almost all business plans a set of well drawn strategies would help drive the business and turn it into a profitable one. For Cyworld, it needed to understand how to build a community, know how to monetize the service, be aware of users’ value in the service and recognize the driving factor that will keep the Germans interested. After considerable planning, in July 2006 Cyworld signed a deal with Germany's T-online a subsidiary of Germany's Deutsche Telekom and introduced "Cy-world Europe GmbH” in which the Cyworld invested 5.1 billion won for a 50.2% stake34. The deal marked Cyworld’s first debut in the European social media market. Cyworld also made a decision to launch its European expansion first in Germany then to the rest of Europe because Germany had the most advanced Internet infrastructure and user market amongst all other European countries.

Shockingly, the buzz surrounding Cyworld's entrance into Europe has hardly settled down when it unfortunately announced that it would close its European unit due to sluggish prospects caused by strong regional competitors. These competitors whom already have a strong footing and following amongst Europeans include StudiVZ and Skyrock. These existing competitors also drove the cost of entry high as more advertising and overhead cost was needed, thus increasing the overall operation costs. Since the profits of the European market were not up to par, Cyworld felt that there was little use in trying to wrestle a share of the social media pie and would rather focus its efforts on its more profitable subsidiaries. Not to mention, there was also added pressure from global players like MySpace that made it almost impossible for Cyworld to set up shop and stay profitable. Beyond the profitability issue, the main underlying reason for Cyworld’s failure in Europe as quoted from Lee Chang-young, an analyst at Tongyang Securities was that, “Cyworld failed to overcome the lan-guage and culture barriers". This same sentiment is echoed widely across other business analyst and observers as well.

The company said that the closure of the European branch also marked a time for it to review and consolidate its businesses. Some plans being considered include expanding investments in emerging markets such as Taiwan and Vietnam, while refurbishing its Japanese website to attract Japanese enthusiastic about Korean pop culture. As for Vietnam and Taiwan, CyWorld executives felt that the popularity of Korean TV stars in these countries can make it possible for further expansion.

Although Cyworld suffered a setback in its expansion plans into Europe, it must be noted that its other foreign operations, especially those in the Asian region have taken root in the local market and are beginning to experience growth in those regions. Moreover, various attempts from other Korean Internet firms like Naver (the largest online portal in Korea) have always planned for a Japanese-language search service but the plan never took off. Other Korean Internet firms have also faced

Singapore Management University

Transporting Business Models Across Nations 8

such setbacks and so far very few or almost none has managed to transport its business beyond the shores of Korea successfully. Cyworld, in addressing the issue of a pullout from Europe, said that this mistake made it realize that it might have better opportunities by not altering its business strategy to accommodate to a domestic market but instead, focus on the platform and the license approach towards the global business. The expansion of the domestic service requires understanding of cultural gap and investment in the in-frastructure, which more often than not, is easier said than done. Therefore, Cyworld will now focus on the export of platform, application and know-how, other than the service itself. Particularly, it intends to cooperate with major companies in the world to cooperate in the license business.

The Big Culture QuestionThere has been a lot of buzz surrounding Western countries bringing their business models into Asian markets, making adaptations and improvement to accomplish a better fit between the origin social networking concepts and local environment. This is also where the outcome of creating a successful business model to meet the needs of the market is extremely good or an absolute failure, highly subject to cross-cultural differences. For example, mutual understanding and agreement with “shaking hands” means that an agreement is reached in Western countries, but it does not necessar-ily mean the same in Asian countries where relationship and trust need to be cultivated before busi-ness negotiations can even commence.

Hofstede’s assessment of cultural dimensions111 is a useful tool to interpret the behaviour of socie-ties by national groupings that are persistent over time. Korea scores relatively high on uncertainty avoidance, and they attempt to control everything so as to reduce ambiguity. Change is not readily accepted. Koreans belong to a collectivist society where people value commitment in a group. The Germans are only slightly less risk averse as compared to the Koreans; they are more willing to ac-cept change and consider new ideas. Ties between individuals in the German society are loose be-cause people do not place a very high value in groups, but rather on themselves and/or their imme-diate family. The culture values and reinforces the importance of the individual as opposed to the group. The Germans also take a long-term orientation, in contrast to the Koreans who are associated with having respect for tradition, fulfilling social obligations, and protecting one's 'face'. With MySpace recently launched in Korea, a cultural comparison graph of South Korea and Germany (Exhibit D) can give some insights into the focus of the original MySpace business model and the cultural values of Korea.

Benjamin Joffee, Founder and CEO of +8*, quoted “…in addition to the language barrier, limited media coverage, clichés and worldviews were getting in the way of foreign companies benefiting from the tremendous amount of innovation taking place there.”. The population’s experience with online services, the existing IT infrastructure, trust-based information, digital life models vs. pure advertising models and existing competition are weighty business decisions, which revolve around what do users ultimately value in the online service.

Singapore Management University

Transporting Business Models Across Nations 9

MySpace going Head-On with CyWorld in KoreaOn a webmaster forum61 discussing the launch of MySpace Korea, a particular individual by the username GrendelKhan TSU expressed that the social networking site is not as impressive as com-pared to CyWorld. Features such as the “minilog”, email system, stationary and “fancy stamps” of-fer no unique value to its users. He argued that CyWorld is likely to be dominant because its users connect to each other in the same language and are already used to the user interface and localized content. To him, MySpace is merely a platform for people to set up their profile in English. Chosan Ilbo62, one of the most influential daily newspapers in Korea, published an article on for-eign services achieving little success in South Korea. In general, Korean users are rather inclined towards local services and offering. Two bloggers pointed out that the MySpace site was not user-friendly or interesting in contrast to CyWorld. The debate goes on as to whether overseas web serv-ices really understand the markets they are entering and provide well-tailored products those online users can really appreciate. The existence of a market leader e.g. CyWorld may indicate some lim-ited rewards of going after the same segment of high-tech and digital creative people.

Jackson West on Gigagom63, an online news read, emphasized that CyWorld offers Koreans a pri-vate realm of their own, in which close family and friends can “visit”, which can be determined by level of accessibility to profile. In contrast, Westerners do not see a similar need to do so or express themselves through text; they already have that private space in their own bedrooms at home. MyS-pace’s profile is a one-page stop, unlike CyWorld, which has many visually attractive pages.

Other more technically inclined bloggers recognize that MySpace wants to establish a presence in Korea with the objective of increased contribution to its OpenSocial-compatible platform. The Ko-rean version of MySpace is not much different from its U.S. parents, and users can easily turn to other sources such as Pandora TV and Daum to communicate with one another.

MySpace has 22 versions tailored for specific countries, on top of the US and UK, and also offers additional versions for French Canadians, and three languages for Switzerland.

ConclusionThere is no success formula in business and definitely not one in the young SNS industry. However, from the CyWorld success and failure cases in two different parts of the world, it remains for users to analyze and decipher what actually works and determine what does not. According to the indus-try environment analysis using Porter’s 5 forces (APPENDIX E), we learn that a company can find it’s niche and create value for themselves in other ways in addition to catering to users’ needs. Nonetheless, local culture affects taste and preferences, and also accounts for habits and rationality behind the users’ internet habits. Successfully integrating the tailored services to cater to these in-tangible sublime needs of the locals plays a huge part in the development of the SNS in the new country. With all these in plan, we shall wait and see what becomes of MySpace in time to come.

Singapore Management University

Transporting Business Models Across Nations 10

Exhibit A – Screenshot of a minihomphySingapore Management University

Transporting Business Models Across Nations 11

Exhibit B – Focal interest of OhmyNews

2002Citizens strived to achieve participatory democracy through the Internet and this caused changes in the presidential election then.

2004"Bloggers" was selected as the "word of the year" by many media. People want to know Internet and personal media.

2005Web 2.0 was introduced and OhmyNews was seen as a platform to interpret this technology

2006 User-generated content produced by netizens

Singapore Management University

Transporting Business Models Across Nations 12

Exhibit C – Screenshots of popular Korean blogs (in English)

http://www.koreacrunch.com

http://www.kimelee.com/

Singapore Management University

Transporting Business Models Across Nations 13

http://mykoreankitchen.com/

http://hotspotkorea.blogspot.com/

Singapore Management University

Transporting Business Models Across Nations 14

Exhibit D – Comparison of S.Korea & Germany’s Hofstede’s Index

Singapore Management University

Transporting Business Models Across Nations 15

Exhibit E – Porter’s 5 Forces Analysis of the SNS Industry

Potential Entrants

Buyers(end users)

Suppliers

Threat of Substitutes

Industry Competitors

Low capitalFree access to distribution channelsNo need for sales forceLow product differentiation

Low/no profitsLow product differentiation

Low switching costNo middle channels

VOIP (Skype/Pfingo)IM (MSN/AIM)YoutubeConstantly new ideasIntegration

400 Social networking sitesHigh international industry growthLow switching costLow IP rightsLow exit barriers

Open Social (Application Programmers)AdvertisersServer Providers

Singapore Management University

Transporting Business Models Across Nations 16

Bibliography1) Marshall Manson (April 24, 2008)“Europe Lags on Internet Penetration, Moves Ahead on Broadband Take-Up”, Edelman Digital. Retrieved on April 30, 2008 from http://www.edelmandigital.com/blog/2008/04/europe_lags_on_internet_penetr.html

2) Hyung Jin Kim (April 15, 2008) “MySpace Targets Korean Culture Barrier with Tailor-Made Site”, Tech News World. Retrieved on May 5, 2008 from http://www.technewsworld.com/story/62591.html

3) Boyd, d. m., & Ellison, N. B. (2007). "Social network sites: Definition, history, and scholarship..". Journal of Computer-Mediated Communication, 13(1), article 11. http://jcmc.indiana.edu/vol13/issue1/boyd.ellison.htm

4) Michael Rappa (March 16, 2008) “Business Models on the Web”, Managing the Digital Enterprise. Retrieved on May 5, 2008 from http://digitalenterprise.org/models/models.html

5) Michael Rappa (December 27, 2007) “Intellectual Property”, Managing the Digital Enterprise. Retrieved on May 5, 2008 from http://digitalenterprise.org/ip/ip.html

6) National Research Council (2008). “The Digital Dilemma: Intellectual Property In the Digital Age”. Retrieved on May 5, 2008 from http://books.nap.edu/html/digital_dilemma/

7) Jesse Hampel (December 12, 2005) “The MySpace Generation”, Business Week Cover Story. Retrieved on May 6, 2008 from http://www.businessweek.com/magazine/content/05_50/b3963001.htm

8) Erick Schonfeld (July 27, 2006)."Cyworld ready to attack MySpace", CNN Money Business 2.0 Magazine. Retrieved on April 30, 2008. from: http://money.cnn.com/2006/07/27/technology/cyworld0727.biz2/index.htm

9) James Chadwick (July 29, 2006). "Can Korea’s Cyworld sell its acorns in US?", The Big Switch by Mindshare. Retrieved April 30, 2008 from http://thebigswitch.wordpress.com/2006/07/29/can-koreas-cyworld-sell-its-acorns-in-us

10) Yang Sung-jin (July 25, 2006). "Cyworld debuts on U.S. market in mid-August.", Korea Herald. Retrieved April 20, 2008 from http://www.asiamedia.ucla.edu/article.asp?parentid=49829

11) Gideon Marken (2006). "Free, The Business Model of the Web", Web Technologist - Electronic Artist. Retrieved April 30, 2008 from http://www.gideonmarken.com/index.cfm/tag/free

12) Cho Jin-seo (March 7, 2008). "Cyworld Pulls out of Europe", The Korea Times. Retrieved April 30, 2008 from http://www.koreatimes.co.kr/www/news/biz/2008/03/123_20324.html

13) Erick Schonfeld (March 27, 2008). "For Chinese IM Portal Tencent, The Money Is In Micro-Transactions", TechCrunch. Re-trieved April 30, 2008 http://www.techcrunch.com/2008/03/27/for-chinese-im-portal-tencent-the-money-is-in-micro-transactions/

14) Aramhur (November 28, 2007). "Cultural tailoring of online tools: a look at Korea’s Cyworld", Team blog for the Internet & Democracy Project, a research initiative at the Berkman Center for Internet & Society at Harvard Law School. Retrieved April 30, 2008 from http://blogs.law.harvard.edu/idblog/2007/11/

15) Brad Stone (September 18, 2007). "MySpace mines data to tailor advertising", International Herald Tribune. Retrieved April 30, 2008, from http://www.iht.com/articles/2007/09/18/business/social.php

16) Andreas Engel (August 8, 2006). "Solid Model for MySpace.com", BizDev & Product Development. Retrieved April 30, 2008 from http://andreasengel.com/2006/08/solid-business-model-for-myspacecom.html

17) Trent Lapinski (2006). "MySpace: The Business of Spam 2.0 (Exhaustive Edition)", Valley Wag - Silicon Valley's Tech Gossip. Retrieved April 30, 2008 from http://valleywag.com/tech/myspace/myspace-the-business-of-spam-20-exhaustive-edition-199924.php

18) Ken Yarmosh (December 1 2005). "Web 2.0 Business Models", WebProNews. Retrieved April 30, 2008 from http://www.webpronews.com/topnews/2005/12/01/web-business-models

19) Pro Photo Business Blog (2008). "The coming business model: The creator pays". Retrieved April 30, 2008 from http://wikiprophoto.blogspot.com/2008/03/coming-business-model-creator-pays.html

20) Jeffe Howe (November 2005) "The Hit Factory", Wired Issue 13.11. Retrieved April 30, 2008 from: http://www.wired.com/wired/archive/13.11/myspace.html

21) Staci D. Kramer (April 15 2008). "Asian Expansion: MySpace Korea, AOL Hong Kong" The Washington Post. Retrieved April 30, 2008 from http://www.washingtonpost.com/wp-dyn/content/article/2008/04/15/AR2008041502943.html

22) Michael Hatamoto (2008). "MySpace launches in Korea, immediately starts playing catch-up", Beta News. Retrieved April 30, 2008 http://www.betanews.com/article/MySpace_launches_in_Korea_immediately_starts_playing_catchup/120828702

Singapore Management University

Transporting Business Models Across Nations 17

23) (2008). "About Slide", Crunchy Base. Retrieved April 30, 2008 from: http://www.crunchbase.com/company/slide

24) Oliver Thylmann (2006). "Social Networking in Germany", Oliver Thylmann's Thoughts. Retrieved April 30, 2008 from http://blog.thylmann.net/2006/10/17/social-networking-in-germany/

25) Unknown (January 2, 2008) "Making Facebook Dollars", Web2ourist. Retrieved April 30, 2008, from Web2ourist Web site: http://dsp-ip.com/web2ourist/

26) Agency, Y. N. (2008, March 7). "SK Communications decides to close European unit", Yonhap English News.

27) (2006). Consumer Lifestyles - South Korea. London: Euromonitor International.

28) (2007). Country Profile 2007: South Korea. London: The Economist Intelligence Unit.

29) January 28, 2008, "CyWorld Reviews its Overseas Business". Retrieved on May 6 2008 from The Electronic Times (Korea).

30) Ewers, J. (2006, September 11). "Cyworld: Bigger than Youtube?", US News & World Report. Retrieved April 29, 2008 from http://www.usnews.com/usnews/biztech/articles/061109/9webstars.cyworld.htm\

31) Explainer Minihompies. (2007, August 14). The Guardian.

32) Hofstede, G. (1967, 2003). "South Korea", Geert Hofstede Cultural Dimensions. Retrieved April 29, 2008 from http://www.geert-hofstede.com/hofstede_south_korea.shtml

33) Holtz, N. H. (2005, July 4 ). Home: For Immediate Release. Retrieved April 29, 2008, from http://www.forimmediaterelease.biz/

34) Hyun-Joo, J. (2008, March 8). "Cyworld global push suffers setbacks", The Korea Herald. Retrieved on May 6, 2008.

35) Jesdanun, A. (2008, April 15). "MySpace launches site for Korea, with features, design tailored to cultural habits", Associated Press Newswires. Retrieved on May 6, 2008

36) Jesdanun, A. (2008, April 15). "MySpace Offers Site Designed for Korea", Associated Press Newswires. Retrieved on May 7, 2008.

37) Jin-Seo, C. (2008, March 7). "Cyworld Pulls Out of Europe", Korea Times. Retrieved on May 6, 2008

38) Joel, M. (2004 to 2008). "Blog: Six Pixels of Separation". Retrieved April 29, 2008, fromhttp://www.twistimage.com/blog/

39) Joffe, B. (2006 to 2008). "Home: Mobile and Internet, Innovation Arbitrage, China, Japan & South Korea". Retrieved April 29, 2008, from http://www.plus8star.com/

40) Joins.com. (March 8, 2008). "Cyworld fails to catch on in Europe",Joins. Retrieved on May 7, 2008 fromJoins.com.

41) Kim, H.J. (April 15, 2008). "MySpace launches in SKorea, saying it learned from difficulties of other US companies", Associated Press Newswires. Retrieved on May 7, 2008.

42) Kim, H.J. (April 15, 2008). "MySpace launches South Korean Web site", Associated Press Newswires. Retrieved on May 7, 2008.

43) MacManus, R. (March 30, 2008). "Facebook vs Asia's Top Social Networks", Read Write Web. Retrieved April 29, 2008, from http://www.readwriteweb.com/archives/facebook_vs_asia_top_social_networks.php

44) MacManus, R. (2003 to 2008). "Home: Read Write Web". Retrieved April 29, 2008, from http://www.readwriteweb.com/

45) Maren, C. K. (2006 to 2008). Home: Digital Culture and Communication. Retrieved April 29, 2008, from http://www.digitalcultureandcommunication.blogspot.com/

46) Moore, A. (November 3, 2006). "Cyworld Insight from +8*", Communities Dominate Brands. Retrieved April 29, 2008, from Communities Dominate Brands: http://communities-dominate.blogs.com/brands/2006/11/cyworld_insight.html

47) (2008, April 15). "MySpace Launches Site For Korea With New Features", Dow Jones News Service. Retrieved on May 10, 2008.

48) Olszewski, P. (April 17, 2008). "MySpace launches into the world’s most competitive social network markets", Media Blab. Re-trieved on May 10, 2008

49) Reports, B. A. (April 16, 2008). "MySpace launches site in South Korea", Tulsa World. Retrieved on May 10, 2008

50) Schonfeld, E. (July 28, 2006)."Cyworld ready to attack MySpace: Technology", CNN Money. Retrieved April 29, 2008, from http://money.cnn.com/2006/07/27/technology/cyworld0727.biz2/index.htm

Singapore Management University

Transporting Business Models Across Nations 18

51) SK Communications Made a Joint Corporation with T-online of Germany. (2006, June 27). The Electronic Times (Korea).

52) (2008). South Korea: Country Factfile. London: Euromonitor International.

53) Stein, J. (April 19, 2007). Cyworld eyes global connection. Hollywood Reporter.

54) Yeom, B. J. (2006). Inside Cyworld: Best Practices from South Korea’s Leading Online Community.

55) Yun, C. (January 8, 2006). "Cyworld Attacks MySpace", Korean Crunch. Retrieved April 29, 2008, from http://koreacrunch.com/archive/cyworld-attaks-myspace

56) Steve Rubel (May 22, 2006), "Working with Technorati to Listen to the Global Conversation", MicroPersuasion. Retrieved May 18, 2008 from http://www.micropersuasion.com/2006/05/working_with_te.html

57) Oh Yeon-ho (Februrary 26, 2007)."10 Preconditions for the Value of User-generated Content", Oh My News. Retrieved May 18, 2008 from http://english.ohmynews.com/articleview/article_view.asp?article_class=8&no=347268&rel_no=1

58) Joi Ito (June 2, 2005). "Blogging about Blogging", Korean Bloggers. Retrieved May 18, 2008 from http://joi.ito.com/archives/2005/06/02/korean_bloggers.html

59) Edelman (November 7, 2006). "Observations on the Chinese and Korean Blogospheres", Edelman Speaks. Retrieved May 18, 2008 from: http://www.edelman.com/speak_up/blog/archives/2006/11/observations_on.html

60) Unknown (April 5, 2007). "Half of Koreans Read Blogs Once a Week and 35 – 54 Year Olds Likely to Take Action after Reading B l o g s ” , E d e l m a n P r e s s R e l e a s e . R e t r i e v e d M a y 1 8 , 2 0 0 8 f r o m http://www.edelman.co.kr/web/insight/news/upload/Press%20Release_20070405_Blog%20Study%20Findings_Eng.pdf

61) Unknown (April 16, 2008). Asia and Pacific Region. Korea MySpace launches. Retrieved May 19, 2008 from:http://www.webmasterworld.com/asia_pacific_search_engines/3627890.htm

62) Unknown (April 21, 2008) Biz Tech. Foreign Web Giants Find Little Success in S. Korea. Retrieved May 19, 2008 from English Chosun News Web site:http://english.chosun.com/w21data/html/news/200804/200804210008.html

63) West, Jackson (April 16, 2006). Will Cyworld stop MySpace juggernaut. Retrieved May 19, 2008 from:http://gigaom.com/2006/04/16/will-cyworld-stop-myspace-juggernaut/

64) McCarthy, Caroline. (April 14, 2008) MySpace expands to Korea, with India on the way soon. Retrieved May 18, 2008 from CNET News web site:http://www.news.com/the-social/?keyword=MySpace

6 5 ) L i s t o f S o c i a l N e t o w o r k i n g We b s i t e s , W i k i p e d i a . R e t r i e v e d o n M a y 1 9 , 2 0 0 8 f r o m http://en.wikipedia.org/wiki/List_of_social_networking_websites

66) Charl Norman (May 18, 2008). "Some Interesting Facebook Facts", Charlnormandotcom. Retrieved on May 19, 2008 from http://www.charlnorman.com/2008/03/28/facebook-facts/

67) Andrew Girdwood (November7, 2007). "Facts you might not know". Retrieved on May 19, 2008 from http://blog.arhg.net/2007/11/facebook-facts-you-might-not-know.html

68) Jeremiah Owyang "Web Strategist". Retrieved on May 19, 2008 from http://www.web-strategist.com/blog/?page_id=2

6 9 ) S o c i a l N e t w o r k A g g r e g a t i o n , W i k i p e d i a . R e t r i e v e d o n M a y 1 9 , 2 0 0 8 f r o m http://en.wikipedia.org/wiki/Social_network_aggregation

70) Social Network Service, Wikipedia. Retrieved on May 19, 2008 from http://en.wikipedia.org/wiki/Social_network_service

71) (March 19, 2008). "Everywhere and Nowhere", The Economist. Retrieved on May 19 2008 from http://www.economist.com/business/displaystory.cfm?story_id=10880936

72) Choi, Jaz Hee-jeong. (2006). Living in Cyworld : Contextualising Cy-Ties in South Korea. In A. Bruns & J. Jacobs (Eds.), Use of Blogs (Digital Formations) (pp. 173-186). New York: Peter Lang.

73) Boyd, Danah. (2006). Friends, Friendsters, and MySpace Top 8: Writing Community Into Being on Social Network Sites. First Monday. 11 (12), December.

74) Boyd, Danah. (2008) None of this is Real. In Joe Karaganis (Ed.), Structures of Participation. New York: Social Science Re-search Council.

75) Dwyer, Cathy. (2007). Digital Relationships in the 'MySpace' Generation: Results From a Qualitative Study. 40th Hawaii Interna-tional Conference on System Sciences (HICSS), Waikoloa, HI.

Singapore Management University

Transporting Business Models Across Nations 19

76) Ellison, Nicole, Charles Steinfield, and Cliff Lampe. (2006). The Benefits of Facebook "Friends:" Social Capital and College Students' Use of Online Social Network Sites. Journal of Computer-Mediated Communication, 12 (3), article 1.

77) Hargittai, Eszter. (2007). Whose Space? Differences Among Users and Non-Users of Social Network Sites. JCMC, 13 (1). [Spe-cial Issue of JCMC on Social Network Sites, Eds.: danah boyd and Nicole Ellison.]

78) Hodge, Matthew J. (2006). The Fourth Amendment and privacy issues on the "new" internet: Facebook.com and MySpace.com. Southern Illinois University Law Journal, 31.

79) Kim, Kyung-Hee and Haejin Yun. (2007). Cying for Me, Cying for Us: Relational Dialectics in a Korean Social Network Site. JCMC, 13 (1). [Special Issue of JCMC on Social Network Sites, Eds.: danah boyd and Nicole Ellison.]

80) Rosen, Christine. (2007). Virtual Friendship and the New Narcisissm. The New Atlantis, 17 (Summer), 15-31.

81) Skog, D. (2005). Social interaction in virtual communities: The significance of technology. International Journal of Web Based Communities, 1 (4), 464-474.

82) Snyder, Johnny, Don Carpenter, & Gayla Jo Slauson. (2006). Myspace.com: a social networking site and social contract theory. Dallas, TX: ISECON 23.

83) Spertus, Ellen, Mehran Sahami and Orkut Buyukkokten. (2005). Evaluating similarity measures: a large-scale study in the orkut social network. Proceedings of 11th International Conference on Knowledge Discovery in Data Mining (KDD-2005) (pp. 678-684).

84) Boyd, Danah. (2006). Identity Production in a Networked Culture: Why Youth Heart MySpace. Talk as AAAS 2006 (part of panel: "It's 10PM: Do You Know Where Your Children Are ... Online!"). St. Louis, Missouri: February 19.

85) Timusk, Peter. (2007). Exposed edges and tighter nodes: a suggested social networking hypothesis for web 2.0 as seen through a user of facebook a web 2.0 social networking site. Paper presented at the Communications, Information and Technology section of the American Sociology Asssociation Mini Conference 3.0, Second Life, August 12, 2007.

86) Ofcom. (2008). Social Networking: A quantitative and qualitative research report into attitudes, behaviours and use.

87) Kutlu, Denise and Peter Overgaard. (2007, November). Social Networking Sites: A Comparison of User Experiences on MyS-pace and Windows Live Spaces. Master's Thesis for IT-University of Copenhagen, Denmark.

88) Boyd, Danah. (2007). The Significance of Social Software. BlogTalks Reloaded: Social Software Research & Cases (ed. Thomas N. Burg and Jan Schmidt). Norderstedt. 2007. pp 15-30.

89) Matt Asay (May 20 2008). "Apple & MySpace win at Microsoft Expense", CNET News. Retrieved on May 25, 2008 from http://news.cnet.com/8301-13505_3-9948039-16.html

90) Ben Lorica (May 19, 2008). "MySpace/Facebook App Platforms & Total Installs", O'reilly Radar. Retrieved on May 25, 2008 from http://radar.oreilly.com/archives/2008/05/myspace-app-platform-and-total.html

91) Michael Arrington (May 15, 2008) "The Social Network Wars Begin in Earnest: Facebook Bans Google Friends Connect", Tech C r u n c h . R e t r i e v e d o n M a y 2 5 , 2 0 0 8 f r o m http://www.techcrunch.com/2008/05/15/the-social-network-wars-begin-in-earnest-facebook-bans-google-friend-connect/

92) Kirsten Nicole (August 28, 2007). "Plaxo Opens Up Social Networking Aggregation Code", Mashable Social Networking News. Retrieved on May 25, 2008 from http://mashable.com/2007/08/28/plaxo-open-source-code/

93) (August 14, 2004). "What is Walled Garden? - A definition", Whatis.com. Retrieved on May 25, 2008 from http://searchsecurity.techtarget.com/sDefinition/0,,sid14_gci554703,00.html

94) Jack Myers (October 3, 2006). "MySpace: A Changing Virtual Phenomenon", Media Village. Retrieved on May 25, 2008 from http://www.mediavillage.com/jmr/2006/10/03/jmr-10-03-06-Kat/

95) (August 7, 2006). "Google signs $900 million News Corp Deal", BBC News. Retrieved on May 25, 2008 from http://news.bbc.co.uk/2/hi/business/5254642.stm

96) Rachel Rosemarin (October 4, 2006). "The MySpace Economy", Forbes.com. Retrieved on May 25, 2008 from http://www.forbes.com/2006/04/07/myspace-google-murdoch-cx_rr_0410myspace.html

97) Unknown (9 March, 2008). Futurize Korea. Reports on Technology and come. SK Telecom's Cyworld exits Europe, makes new i n v e s t m e n t s . R e t r i e v e d M a y 2 1 , 2 0 0 8 f r o m : http://www.futurizekorea.com/entry/SK-Telecoms-Cyworld-exits-Europe-makes-new-investments

98) Lewis, Norman (19 May, 2008). To see the future of the Internet, look East. Retrieved May 21, 2008 from Spiked Online Web sitehttp://www.spiked-online.com/index.php?/site/article/5166/

Singapore Management University

Transporting Business Models Across Nations 20

99) Hobson Neville (20 June, 2006). European expansion for MySpace. Retrieved May 21, 2008 from:http://www.nevillehobson.com/2006/06/20/european-expansion-for-myspace/

100) Unknown. (19 September, 2007). Press release. German Social Networking Community Reaches 14.8 Million. Retrieved May 21, 2008 from: http://www.comscore.com/press/release.asp?press=1737

101) Fehrenbacher Katie (21 July, 2006). The German MySpace:Lokalisten. Retrieved May 21, 2008 from: http://gigaom.com/2006/07/21/german-myspace/

102) Moore Carla (19 September, 2007). Germany: Internet and e-commerce. German social networking community reaches 14.8m. Retrieved May 21, 2008 from DM Europe Web site: http://www.dmeurope.com/default.asp?ArticleID=26959

103) Unknown (23 May, 2008). Germany - Broadband Market - Overview, Statistics & Forecasts. Retrieved May 21, 2008 from B u d d e . c o m W e b s i t e : http://www.budde.com.au/buddereports/2980/Germany_-_Broadband_Market_-_Overview_Statistics__Forecasts.aspx?r=51

104) Unknown (2007). International World Stats. Germany Internet Usage stats and Market Report. Retrieved May 21, 2008 from:http://www.internetworldstats.com/eu/de.htm

105) Hobson Neville. (6 November, 2006). Building trust in virtual communities. Retrieved May 21, 2008 from: http://www.nevillehobson.com/2006/11/06/building-trust-in-virtual-communities/

1 0 6 ) ( J u l y 2 0 0 6 ) . " I n f o o n Y o u T u b e . c o m " , A l e x a . R e t r i e v e d o n M a y 2 5 , 2 0 0 8 f r o m http://www.alexa.com/data/details/traffic_details/youtube.com?compare_sites=myspace.com&range=max&size=large&y=r#top

107) "Germany", Wikipedia. Retrieved on May 25, 2008 from http://en.wikipedia.org/wiki/Germany

108) Tim O'Reilly (September 30, 2005). "What is Web 2.0", O'Reilly. Retrieved on May 25, 2008 from http://www.oreillynet.com/pub/a/oreilly/tim/news/2005/09/30/what-is-web-20.html

109) Andrew Domino (23 April, 2008). Leaving The U.S. Behind: Cutting-Edge MySpace found in Korea. Retrieved May 24, 2008 from: http://inventorspot.com/articles/leaving_the_us_behind_cuttingedge_myspace_found_korea_13025110)

110) Jemima Kiss (15 April, 2008). MySpace launches Korean Service. Retrieved May 21, 2008 from Guardian.co.uk Web site:http://www.guardian.co.uk/media/2008/apr/15/myspace.web20?gusrc=rss&feed=media

111) Unknown (2003). Geert Hofstede's Cultural Dimensions. Retrieved May 26, 2008 from:http://www.geert-hofstede.com/

112) Intercultural Business Communications. Cultural Comparison Graph of South Korea and Germany. Retrieved May 26, 2008 from: http://www.kwintessential.co.uk/intercultural-business-communication/tool.php?culture1=44&culture2=52

113) CyWorld, Wikipedia. Retrieved on May 19, 2008 from http://en.wikipedia.org/wiki/Cyworld

114) (18 May, 2008). Pew Internet and American Life Project. Reports: Technology and Media. Broadband: What’s all the fuss about? Retrieved May 23, 2008 from Pew Internet Web site: http://www.pewinternet.org/PPF/r/224/report_display.asp

115) Josh Catone (May 6, 2008). Hitwise: MySpace Takes 3/4ths of US Social Network Traffic. Retrieved May 23, 2008 from Read Write Web Web site: http://www.readwriteweb.com/archives/hitwise_social_network_traffic_apr08.php

116) Unknown (2007) International Word Stats. American Internet Usage and Population Statistics. Retrieved May 23, 2008 from: http://www.internetworldstats.com/stats2.htm

Singapore Management University

Transporting Business Models Across Nations 21