User Segmentation and
TMBA BBUS 506 A
Michael Cavelero, Joel Engstrom, Nesreen Zadah, David Tobey
Smoke signals, telegraphs and telephones: communication in the modern world evolves quickly. The 21st century has been no exception. The rise of the internet heralded the growth of so called “online social networks” or simply “social networks” – websites where individual users carved out their own niche. Many of these networks have become household names to
Americans: MySpace, Facebook, Linkedin and more.
For many Koreans between the ages of ten and thirty, social networking has meant one thing: Cyworld. Cyworld, a small social networking company, was founded in 1999 by a group of
MBA students in South Korea. The network was revolutionary, pioneering user experiences, such as community gifting and public threads, that other networks would adapt years later.
Cyworld underwent rapid growth, and in 2003, was acquired by SK Telecom, a billion dollar
Korean mobile communications enterprise.
Cyworld employed a relatively unique revenue model of selling virtual items
(“microtransactions”) to over twenty million users. However, by 2006, the social networking market was changing rapidly. Surveys and forecasts reflected declining activity and loyalty among current users. Additionally, an increasing percentage of users simply took advantage of the free services that were offered.
Hyung-Chul Joo, as newly appointed CEO of SK Comms (the online services division of SK
Telecom), is faced with creating the vision for what Cyworld will become. Development of this vision requires not only a clear understanding of what Cyworld is today and how it got there, but also of how users extract value from Cyworld. Defining value creation, identifying market segmentation, observing their values and understanding Cyworld’s role in delivering those values are key to formulating a plan for the network’s future success.
Why People Use Social Networks
Knowing why people use Cyworld is fundamental to understanding how to retain users and attract new ones. Qualitatively, our team understood the need to connect with other people as a basic human need. Other “old media” types, such as radio, music and television, are
“passive” – offering users a one-way conversation: the media broadcasts and the viewer consumes. These old medias may connect with a person on an emotional level, but do not provide real time feedback and are not dynamic. This leaves the most established part of the human social psyche unmet: relationships.
One of the most powerful differentiators for social networks is feedback, assumedly, from friends and family. On Cyworld, and most other social networks, a user can send messages, write on people's “walls”, or blog about any subject they deem important. Through other features, such as Twitter, a user can instantly communicate what they are doing, thinking, feeling, or experiencing through a text message on their phone. This leads a user’s friends (and
"followers") to reply with their insights. This, in turn, creates a feeling of connection beyond what any other informational internet site, movie, or song can provide. This connection often transcends differences in geography, gender, age or economic position – critical barriers to relationships that, according to our analysis, persist in modern East Asian cultures. Indeed, social networks are often criticized by authority figures in China, Korea and elsewhere for encouraging “inappropriate discourse” between young men and women.
Additionally, through these endless connections, a user has the capacity to explore what others are interested in. If, for example, a friend posts a new song, the user can listen and make judgments. A user can find friends who have seen a movie or visited a new restaurant.
Based on their reviews, the user can make better purchasing decisions. Social networks expose other's experiences, helping to reduce the number of