E-BUSINESS TREND : FAR - EAST E-COMMERCE EXPLOSION

Although most parts of the world lag behind the United States in terms of technology penetration (to the public at large), some parts more readily embrace new technology advances. For example, only 22.6 percent of U.S. citizens describe using a cell phone to access the Internet as important or very important. Compare that to Western Europe (30.4 percent), Eastern Europe (53.9 percent), Asia (56.4 percent), and Latin America (63.5 percent). That should concern some of the U.S.- based e-commerce leaders.

Take, for example, Myspace. Myspace has 92 million registered users but only 23 percent of the U.S. 20-something group are among those 92 million. On the other hand, Cyworld, the South Korean version of Myspace, boasts only 18 million users but 90 percent of the South Korean 20-something use Cyworld. Cyworld ("cy" is Korean for "relationship") is an interesting blend of a social networking site, blogging site, Flickr (a photo sharing Web site at www.flickr .com), and videogamelike avatars.

Unlike the text-heavy bulky sites like Myspace, Facebook, Friendster, and Yahoo 360, Cyworld lets a user create an avatar called a mini-me. You can dress up the mini-me according to your mood on any particular day and even change hair styles. From your personal space, called a mini-room (which you can also decorate to your tastes), you can send out your mini-me to visit other people. Cyworld is free to use, just like most other social networking sites, but it generates revenue by having users pay for virtual furniture and wall art for their mini-rooms and also to accessorize themselves in their virtual mini-mes. This may seem like an odd way to generate revenue, but Cyworld generates $7.78 annually per user while Myspace generates only $2.17 annually per user.

The creators of Cyworld are not content with owning the South Korean social networking market. Recently, Cyworld launched in Japan and China (where it already has 1.5 million users). Moreover, Cyworld spent almost a year "Americanizing" its site and launched it in the United States, going head-to-head with Myspace and the other popular social networking sites aimed at the 20-something group ("digital natives" and "screenagers"). Another Asian entrant into the hotly contested e-commerce space is TaoBao ( www.taobao.com), China's main competitor to eBay.

If you visit Taobao's Web site, it's in Chinese, but the look and feel are similar to eBay. But don't get the idea that Taobao is copying everything that eBay is doing. On a recent trip to China, eBay CEO Meg Whitman learned that Taobao was allowing buyers and sellers to instant message through the Taobao auction system. Meg came home and declared that eBay needed to do the same. In the Chinese Consumer to Consumer auction space, eBay China holds a 29.1 percent market share. Taobao owns a remarkable 67.3 percent. If Taobao ever comes to the United States, it will give eBay a run for its money until the fi nal gavel falls. 21,22,23

Questions
1. According to Porter's Five Forces Model (from Chapter 1), how would you characterize the competitive space in which Cyworld and Myspace operate according to buyer power, supplier power, threat of substitute products or services, threat of new entrants, and rivalry among existing competitors? Pick one of Porter's Five Forces and describe what Cyworld has undertaken to shift that force in a positive way in its direction.

2. In our discussions of customers and their perceptions of value, we noted that customers tend to categorize products and services as either convenience or specialty. How would you characterize the products and services on Consumer to Consumer e-commerce auction sites such as Taobao and eBay-convenience, specialty, or perhaps a combination of the two? Justify your answer.

3. What sort of payment options does eBay provide? You may have to visit eBay's site to learn this information. If Taobao were to enter the U.S. market, would it have to offer similar payment options? That is, are these payment options entry barriers? Is there room for innovation in the payments space? If so (and the answer is yes), describe it.

4. Privacy is an overriding concern today on the Internet. At sites like Cyworld and Myspace, some people often divulge too much information such as a full name, an address, and even a phone number. From an ethical point of view, do you believe that social networking sites have an obligation to protect users from cyber stalkers? If you believe the answer is no, justify your answer. If you believe the answer is yes, describe what steps can be undertaken to protect users.

5. One key to consumer retention is creating a "sticky" Web site. Review the virtual environments for both Cyworld and Myspace. Which do you think is more "sticky" and better retains consumers? What is your definition of "sticky"?