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Social Networking Craze in Asia

Businessweek has released a special CEO guide to technology specifically on social networking. There are some pretty interesting articles regarding the MySpace craze and similar phenomena across the globe.

One article entitled, "MySpace Clones Stalk Cyberspace," offers an interesting look into the social networking world in Asia. The article title's is misleading as it implies that many Asian social networking sites are copies of the U.S. MySpace site. This is partly false because Korea's Cyworld existed for at least 5 years which is much longer than MySpace's three-year existence.

Now Japan's mixi will launch its public initial offering on September 14th. Although mixi's 5 million members is miniscule compared to the MySpace giant, mixi's membership quintupled in the past year. According to Alexa.com, mixi only trails Yahoo! and Google in Japan with 7 million page views a month and is ranked 37th in global online traffic. The expected share price for mixi is $13,300 per share which puts mixi's market capitalization at $940 million. It seems like good news for the company and marketing execs as there is an estimated 70% of mixi users who log in frequently.

Mixi will not be alone as there are many other social networking providers that hope to reap the benefits and rewards. Foreign competitors such as MySpace and Cyworld are planning to enter the Japanese market . Meanwhile, Japan's Gree and Any are growing in popularity too. Netportal Yahoo! Japan and online retailer Rakuten are planning to enter the market as well.

Korea's Cyworld is another interesting case in which SK Telecom (a major Korean telecommunications corporation and cell phone carrier) owns this site. The company expanded to the United States and Taiwan last month. It has also expanded to China last year, and hopes to move into Germany and Vietnam in the next few months.

Although Cyworld has only 19 million members (40% of Korean population), Cyworld gets an average of $270,000 per day from users purchasing digital currency called dotori (acorns) for decorating their digital rooms. There are 3 million Cyworld users who access Cyworld via mobile phone. In order to encourage loyalty, SK Telecom allows users to post as many photos as they like.

Of course, this poses an interesting problem in regulated markets such as China. Due to the government's stringent standards on what goes on the Internet, every photo and video uploaded to Chinese social networking sites must be monitored and filtered. This is definitely a pain point for any Chinese company hoping to reap the success of social networking in China where many Chinese people spend hours in internet cafes. In addition, there are many more mobile phone users in China than internet users.

There is also the question of relevance to the market. Cyworld works in Korea, because young Koreans are very susceptible to pop culture and fashion. These Koreans would pay the money to decorate their mini-hompies and digital rooms to differentiate themselves from others and show off their personal styles. It also helps that Cyworld is owned by SK Telecom, a major cell phone carrier, so it's natural for SK Telecom to allow unlimited access to Cyworld through mobile phones because it could generate more revenue. In addition, Cyworld is the predominant social networking site used in Korea. In the United States, there are several social networking websites (MySpace, Facebook, Digg, YouTube) that are popular and widely used. It would hard for a U.S. carrier to allow unlimited access to all of these because the increased traffic could affect the network.

Nevertheless, Cyworld works on a business model where users are willing to pay real money for digital currency and items. MySpace and Facebook offer their features for free and makes money based on marketing research fees and ad revenues. It could be hard to persuade the average Facebook or MySpace user to begin paying for features found on these sites.

I would be more interested to see how niche social networking sites work and thrive such as 1Up.com (for gamers).

posted by Koh @ 10:00 AM