the consumer web services challenge of East Asia

Changwon Kim has news on his blog that Cyworld is quitting the US market: Cyworld pulling plugs from US.

Cause of failure? Well, for starters (the obvious ones): Cyworld didn’t seem to have sharp strategies as to how to position their service (Was it Myspace or Habbo hotel?); They didn’t localize the service very well; SK Telecom, the parent company, didn’t “get it” yet still tried to put a grip on the business.

Chang suggests that this recession is a good time for Korean entrepreneurs to build the post-Cyworld service that would ideally be more popular outside of Korea. I’d be happy for this to happen, but that barrier to success is quite high.

Why?

It’s clear from the existing marketplace that Asia is qualitatively different for consumer web services. I’ve been blogging about this for years and the best example comes from a post by Mitani-san at Asiajin quoting George Godula of Web2Asia; In fact, I’ll use the subtitle instead of the title as the subtitle is more relevant: Why it is difficult for European and U.S. companies to advance into Asia.

Godula’s presentation at Open Web Asia looked at China, Japan and Korea and compared the leading ecommerce, video hosting, sns, bbs and blog service vs. what is popular outside of Asia. It’s a crystal clear chart that shows that sites and services that are popular in North/South America or Europe are just nowhere to be found in Asia. Godula has a good list (be sure to click over to see it) of why companies are unsuccessful in Asia:

1. No formal internationalization/Asia entry strategy
2. Entered Asia too late/ too slow
3. Local HQ has no full decision power
4. Incomplete localization´╝łTranslation, Content, Pricing, Branding(name, colours, etc.), Features, Business model)
5. No Local technical development team (Slower time to market, More expensive)
6. Domestic players sometimes simply have the superior technology/business model
7. Global corporate guidelines
8. Local legislation

This is tough stuff. And as I commented on Chang’s blog, I’m not sure there are good examples of Asian-founded successful consumer web services that have been successful outside of their home areas. One might say Naver is doing ok in Japan with their web-based games but to me Flash-games are not consumer web services.

That Friendster’s success in SE Asia (specifically the Philippines) was largely accidental is telling. They’ve been smart to focus on their successful markets but being successful in markets by accident is a scary way to grow a business.

Tonight Jason Calcanis joins Tokyo 2.0.  I won’t be able to make it as I have a previous committment but if you go, ask Jason what he thinks it takes for a non-Asian consumer web service to be succesful in Asia.  Outside of core search (which is a consumer service but one that requires the deepest of pockets) it’s instructive to consider how little Asia has in common with N. America or the EU in this segment.

Jason Calcanis at Web 2.0

2 comments on “the consumer web services challenge of East Asia
  1. Chang says:

    Maybe it’s true that SocNet is *meant* to be local and therefore there is an untapped potential in every country/culture where there is no dominating local SocNet player. With the right formula, new startups could win over incumbents that have gained market success thanks more to the lack of local competition than to its intrinsic appeal to the local audience… Could this be an opportunity for web entrepreneurs in the Philippines?

  2. In Europe, many countries have one international SNS player plus one to two local player, they coexist happily. Also, some of the startups or SNS started in one country, but quickly expanded to other countries in Europe. Very different from Asia!