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Wow, Cyworld.de closes

"SK Communications said Friday it is closing its operation in Europe as the Cyworld online social-networking site has failed to win German Internet users. Koreans' favorite online community's pullout from Europe casts a cloud on the overseas expansion of other Internet firms, such as Naver. It was difficult to overcome the cultural barrier in Germany where local firms began similar services and the operation costs were high, the firm said." (Cho Jin-seo, Korean Times)

Cyworld 싸이월드 is a South Korean-born social network, sometimes coined as “Habbo Hotel meets blogging”, which is extremely popular in South Korea with 20 million visitors per month. After reaching a market-share of 90%, Cyworld naturally expanded to several other asian countries, the US and Europe (spearheaded by Germany) in the recent two years.

SK Communications (owner of Cyworld) teamed up with German telco Deutsche Telekom (to be more specific: T-Venture, the company’s corporate venture arm) in 2006 to form Cyworld Europe GmbH. A natural fit, as Cyworld is also heavily in mobile services. SK invested a reputed 3.5 million Euro for a 50.2 percent share, whereas T-Venture paid 25.000 Euro into the joint-venture, according to Edgar-Online. Cyworld Europe was to enter the european market by starting with a local German version.

A few days ago, SK Communications announced to pull out of Europe effectively as reported by Korea Times, closing down Cyworld.de on March 15th, after being out of closed beta for only 5 months.
What happened to Cyworld in Germany? Says Park Sang-joon, chief executive of the firm: “It was difficult to overcome the cultural barrier in Germany where local firms began similar services and the operation costs were high… The restructuring of global operations is to minimize losses from capital investment by liquidating low-profit subsidiaries… (Instead) we will increase investment in markets where there is high profit and high potential.”

While it was not disclosed how much of the investment was already spent, both venture-partners seem to have lost their nerves over the sustainability and profitability of the German market. Admittedly, blogging is still underdeveloped in Germany when measured internationally: the comparably small market of social networking and blogging is shared by a few large networks like StudiVZ, SchülerVZ, Xing and Lokalisten. Cyworld.de seemingly could not generate enough attention with and traffic from its target-group. Marketing campaigns like “White galleries”, a Cyworld-supported graffiti-event in major German areas of high population density were nice, creative ideas, but ultimately lacked in reach and result. Hell, even when comparing the daily traffic of this humble blog with Cyworld, Coobico.com surpassed Cyworld.de’s amount of visitors on a few occasions according to Alexa. Now, Alexa needs to be taken with a pinch of salt for sure, but a wild guessing would be that Cyworld.de’s reach didn’t surpassed a few hundred visitors per day at best. As Cyworld’s spokeswoman She Hee-jung put it: “the German language site, which was launched only four months ago, has seen few members signing up so there is no need to worry about users’ protests at the closure.”

Still, it seems to be a rushed decision to pull a product after only 5 months; a reasonable reaction would have been to cut costs first. However, one issure remains: what happens to the owners of former purchased goods? A Cyworld Acorn (Cyworld’s currency) came at about 2 Euro-Cent. If any former Cyworld-member happens to read this blog, you are kindly invited to leave a comment. Your opinions (or any announcments you received from Cyworld.de) are welcome.

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