Cyworld - Case Analysis
Situation Analysis
Company: SK Comms
Product line
Internet
Cyworld
Social networking
Biggest player
Value proposition: providing users with a free and clean community with limited advertising and an almost exclusive focus on social networking
Life cycle: mature phase of growth
NateOn
Instant messaging
Biggest player
Linked to Cyworld
Home2
Social media
Media platform
Video: 50M; +50K/day
News:
Pictures: +5M/day
Cyworld revenue segmentation (2006)
Paid items: $67M (72%)
Virtual items: $15.45M
Average price: $1
Items sold: 32M
3D virtual items: $0M
2010 projected: $(120M – 2010 paid item sales
Music: $14.48M
Selling ~200K/day
Average price: $0.50 Can be solved technically with blocking
Lack of useful information
Don’t want ads in a “clean” environment
Lack of time
Customers getting bored
Because: lack of relevance
Not leveraging personal applications
Goals
Retain users
Customize/targeting experience
Increase revenues
Grow users
Possible Options
1) Paid Products
Music accounts for 50% paid revenues (36% of total revenues) Growing at a rate of 10% a year
3-D Virtual Gifts Expected to generate $120m in revenue
Maintain current levels of advertising, careful not to disrupt customer preferences for an ad-free environment
Pros: low marginal 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 problem of people tiring of virtual gifts,
2) Acquire a gaming company (acquiring Empas was approximately $30M) Own company (buy for $3 -- $5 M; or enter into a license agreement where we have a gaming contract....create 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 before it
Company: SK Comms
Product line
Internet
Cyworld
Social networking
Biggest player
Value proposition: providing users with a free and clean community with limited advertising and an almost exclusive focus on social networking
Life cycle: mature phase of growth
NateOn
Instant messaging
Biggest player
Linked to Cyworld
Home2
Social media
Media platform
Video: 50M; +50K/day
News:
Pictures: +5M/day
Cyworld revenue segmentation (2006)
Paid items: $67M (72%)
Virtual items: $15.45M
Average price: $1
Items sold: 32M
3D virtual items: $0M
2010 projected: $(120M – 2010 paid item sales
Music: $14.48M
Selling ~200K/day
Average price: $0.50 Can be solved technically with blocking
Lack of useful information
Don’t want ads in a “clean” environment
Lack of time
Customers getting bored
Because: lack of relevance
Not leveraging personal applications
Goals
Retain users
Customize/targeting experience
Increase revenues
Grow users
Possible Options
1) Paid Products
Music accounts for 50% paid revenues (36% of total revenues) Growing at a rate of 10% a year
3-D Virtual Gifts Expected to generate $120m in revenue
Maintain current levels of advertising, careful not to disrupt customer preferences for an ad-free environment
Pros: low marginal 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 problem of people tiring of virtual gifts,
2) Acquire a gaming company (acquiring Empas was approximately $30M) Own company (buy for $3 -- $5 M; or enter into a license agreement where we have a gaming contract....create 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 before it