CyWorld, MySpace and network effects

CyWorld, the South Korean social networking site that is used by so ridiculously high a percentage (Om Malik) of young South Koreans that it might as well be all of them, has launched a beta site (Mashable) in the US.

The immense reach, not to mention profitability, of the site in South Korea has led many commentators to see it as a potential MySpace killer.

Of course, it is no such thing. The fact that CyWorld’s uniformity is easy on the eye, and MySpace’s visual anarchy almost aesthetically unbearable, is neither here nor there. In Korea, everyone uses CyWorld because everyone uses CyWorld. The same dynamic means that in the US, everyone uses MySpace.

This is the crucial network effect that means the more people use a service designed to foster connections and interactions, the more valuable that service becomes. Owning the world’s first telephone is purposeless. Not owning a telephone when everyone else uses it to keep in touch means you’re out of the loop. This is the same dynamic that makes eBay so valuable and made Gizmondo so worthless. Interactive networks of users are incredibly valuable things that reinforce themselves in a virtuous circle– if all the buyers are on eBay then the sellers have to go there and so all the buyers go there too and so on ad infinitum.

The fact that perhaps as many as 90% of young South Koreans use CyWorld tells us nothing, absolutely nothing, about its prospects in other markets unless we assume that American teens are going to learn Korean and make new friends in Seoul. Amongst the US digital natives, everyone uses MySpace, and therefore everyone uses MySpace. Unless News Corp does something stupid, that’s a circle that CyWorld will have enormous problems breaking.