Why Are the Largest Social Networking Services Sometimes Unable to Sustain Themselves? - MDPI
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sustainability
Article
Why Are the Largest Social Networking Services
Sometimes Unable to Sustain Themselves?
Yong Joon Hyoung 1, * , Arum Park 2 and Kyoung Jun Lee 1,2
1 Department of Social Network Science, Kyung Hee University, Seoul 02447, Korea; klee@khu.ac.kr
2 School of Management, Kyung Hee University, Seoul 02447, Korea; penellope007@gmail.com
* Correspondence: yong.hyoung@gmail.com
Received: 11 November 2019; Accepted: 13 December 2019; Published: 9 January 2020
Abstract: The sustainability of SNSs (social networking services) is a major issue for both business
strategists and those who are simply academically curious. The “network effect” is one of the most
important theories used to explain the competitive advantage and sustainability of the largest SNSs
in the face of the emergence of multiple competitive followers. However, as numerous cases can
be observed when a follower manages to overcome the previously largest SNS, we propose the
following research question: Why are the largest social networking services sometimes unable to sustain
themselves? This question can also be paraphrased as follows: When (under what conditions) do the largest
SNSs collapse? Although the network effect generally enables larger networks to survive and thrive,
exceptional cases have been observed, such as NateOn Messenger catching up with MSN Messenger
in Korea (Case 1), KakaoTalk catching up with NateOn in Korea (Case 2), Facebook catching up with
Myspace in the USA (Case 3), and Facebook catching up with Cyworld in Korea (Case 4). To explain
these cases, hypothesis-building and practice-oriented methods were chosen. While developing our
hypothesis, we coined the concept of a “larger population social network” (LPSN) and proposed
an “LPSN effect hypothesis” as follows: The largest SNS in one area can collapse when a new SNS
grows in another larger population’s social network. For the validity and reliability of our case
studies, we used an evidence chain and case study protocol with a publicly-accessible LPSN index to
determine which SNS is better for participating in or adding offline social networks to their platform.
Keywords: network effect; larger population social network; social network; business sustainability;
network sustainability
1. Introduction
Some of the most powerful companies in the world are social networking services (SNSs) such
as Facebook or mobile instant messaging services like WhatsApp, Line, WeChat, and KakaoTalk.
They dominate countries or a wide range of continents. In Korea, KakaoTalk is so strong that even
the most dominant portal, Naver, never tries to compete with it, while Facebook or LinkedIn are so
strong on a global scale that nobody tries to defeat them. However, what if we can provide meaningful
information with which one can decide whether it is worth trying?
We chose practice (rather than theory)-oriented research for our methodology because the
motivation for this study comes from working in the social networking service industry. Among the
three options for practice-oriented research, we chose the hypothesis-building (instead of the descriptive
or hypothesis-testing) method because we want to determine why and how the largest SNS can collapse
even with their network effects advantage. There are three traditional case study methods: exploratory,
descriptive, and explanatory. We chose explanatory for the purposes of this research, which includes a
case study (or case studies) aimed at explaining how or why certain phenomena came to be. Explanation
Sustainability 2020, 12, 502; doi:10.3390/su12020502 www.mdpi.com/journal/sustainability
Sustainability 2020, 12, 502 2 of 23
models and multiple case study methods are strongly recommended by Yin, which was a factor in our
decision to utilize them [1].
These research results can provide valuable clues as to whether Facebook, LinkedIn, Line,
or KakaoTalk can be destroyed by a competitor in the future. Facebook, an SNS that was developed
relatively recently, defeated Myspace in the USA and Cyworld in Korea, which were the first SNSs in
those countries. Under what circumstances can a dominant SNS be destroyed by a newer entrant and
competitor? To answer this question, we developed an LPSN effect hypothesis as follows: If a leading
SNS does not have the majority of the offline social network universe using its platform, then it can
be defeated by a newer competitor who can obtain a larger social network population more quickly.
In other words, if the LPSN index (width rate × depth rate) of the first SNS becomes smaller than the
newer SNS’s index, the newer SNS can easily overtake the older one, where the width rate = the number
of users/local population, and the depth rate = the average number of first-degree friends in the
SNS/the Dunbar Number [2]. This hypothesis means that a company that eventually gains a larger
social network population or effectively replicates an offline real social network will enjoy the benefits
of the network effect.
To verify this hypothesis in line with the explanation research method, we chose multiple case
studies. In addition, in line with our case study protocol, we chose four cases in which the newer SNS
overtook the older, dominant SNS, as follows:
The first case study involves MSN messenger, which was once Korea’s largest PC instant messenger
service, being overtaken by NateOn in Korea [3]. The second one focuses on NateOn, after achieving
dominance, being overtaken by KakaoTalk, which was initially a mobile messenger service [4]. The third
focuses on when Myspace was overtaken by Facebook [5]. The fourth investigates Facebook overtaking
Cyworld, which was once the largest social network in Korea [6].
2. Literature Review
The network effect has traditionally been used to explain the competitive advantage possessed by
market-leading companies, including SNSs. As a company’s size crosses the network effect threshold,
its network effect increases exponentially. As a result, the company can completely overtake its
competitors [7,8] and increase the switching cost of consumers [9]. The company can then enjoy
monopolistic profits [10]. If a company with market dominance enjoys the benefits of the network effect,
then late market entrants or established competitors will find it difficult to beat that company [11].
However, sometimes online SNSs that already dominate the market have been defeated by later
entrants and competitors. Therefore, it is natural to ask why this happens in spite of the network
effect [3–6,12]. There is a dearth of research on this question, especially in the online SNS industry.
As a methodology for this study, we adopt a multiple-case study methodology, including four cases.
In each case, the first SNS is repulsed by the later one. There is a copious amount of literature on
existing network effects, but there is no specific and direct research on how a late SNS can defeat the
existing, largest one.
The network effect means that a network’s value increases as its size increases. There are several
other definitions for network effect in economics literature. Katz and Shapiro describe the source of
positive consumption externalities as the “utility that a user derives from consumption of goods” which
“increases with the number of other agents consuming the (same) good” [13]. Katz and Shapiro newly
define network effects as “the value of (a) membership to one user (which) is positively affected when
another user joins and enlarges the network” [14]. Church et al. emphasize that “network effect exists
if consumption benefits depend positively on the total number of consumers who purchase compatible
products” [15]. Literally, all kinds of consumption with positive feedback on the supply and consumer
sides could be subsumed under the terms of the network effect and network externalities.
Here we can briefly summarize the famous three Laws of Network Effect:
- Sarnoff’s Law: David Sarnoff led the Radio Corporation of America (which created NBC) from 1919
until 1970. It was one of the largest networks in the world during those years. Sarnoff observedSustainability 2020, 12, 502 3 of 23
that the value of his network seemed to increase in direct proportion to its size—proportional
to N, where N is the total number of users on the network. Sarnoff’s description of network
value ended up being an underestimate for SNS types of networks, although it was an accurate
description of broadcast networks with a few central nodes broadcasting to many marginal nodes
(a radio or television audience).
- Metcalfe’s Law: Metcalfe’s Law states that the value of a communications network grows in
proportion to the square of the number of users on the network (N2 , where N is the total number
of users on the network). The formulation of this concept is attributed to Robert Metcalfe, one of
the inventors of the Ethernet standard. Metcalfe’s Law seems to hold because the number of links
between nodes on a network increase mathematically at a rate of N2 , where N is the number of
nodes. Although originally formulated to describe communication networks like the ethernet,
faxing or phones, with the arrival of the internet, it has evolved to describe SNSs as well.
- Reed’s Law: Reed’s Law was published by David P. Reed of MIT in 1999. While Reed
acknowledged that “many kinds of value grow proportionally to network size” and that some
grow as a proportion to the square of network size, he suggested that “group-forming networks”
that allow for the formation of clusters (as described above) scale value even faster than other
networks. Group-forming networks, according to Reed, increase value at a rate of 2N , where N is
the total number of nodes on the network. Reed suggested a formula of 2N instead of N2 because
the number of possible groups within a network that “supports easy group communication” is
much higher than 1 so that the total number of connections in the network (the network density)
is not just a function of the total number of nodes (N). In reality, it is a function of the total number
of nodes plus the total number of possible sub-groupings or clusters, which scales at a much
faster rate with the addition of more users to the network. Since most online networks allow for
the formation of clusters, they will likely behave at least somewhat as Reed’s Law suggests and
grow in value at a much faster rate than either Metcalfe’s Law or Sarnoff’s Law suggests.
The range of networks effect that we mainly want to deal with in this paper is produced by SNS,
such as Myspace, Cyworld, Facebook, Whatsapp, Line, KakaoTalk, and WeChat. The effect is related to
Metcalfe’s Law or Reed’s Law. All of these services assume initial consent for connecting new people
online by using the real names used in daily life. This paper concentrates only on the SNSs that have
accumulated offline social network- and offline relationships-related data.
This study focuses on cases in which network effect did not seem to be working, as each case
only included the largest SNS defeated by a newer one. All of the literature dealing with network
effects is based on the assumption that network effects have already been achieved and companies
use various tactics to firmly maintain it by maximizing the switching cost of the carrier or employing
a complementary strategy [16], such as integrating portal services [17], collaborating with partners
on an API [18,19], utilizing a CEO’s ability [20], adapting to environmental change, or providing
user satisfaction [21], none of which are pertinent to why network effects fail or continue to succeed.
These articles point out that network effects are extremely important, hard to break, and require a
variety of tactics to continue. But nowadays, there are more and more reports questioning network
effects and providing examples of the downfall of services that once had the largest networks [22–25].
There is a misbelief that the emergence of a new technology paradigm means that the existing
network effects are almost inoperable. As the PC era transforms into the mobile era, with disruptive
innovations, those who once enjoyed such network effects have changed. There is also a new argument
that network effects alone are not enough. In the case of online marketplaces, it is difficult to grow
too quickly; or, if an SNS fails to build trust, network effects cannot be sustained [26,27]. Also, as an
existing network becomes saturated, it collapses due to leakage of personal information and stalking
from an overflow of content and excess of people [28].
However, even in the above studies, we could not figure out why the first SNS, which enjoyed the
network effect, could fall even if they followed recommendations or overcame problems by providing
new service features. We later realized that this was because they only considered either external factors,providing new service features. We later realized that this was because they only considered either
external factors, such as rapid environmental change or technological change, which are relatively
difficult to control, or superficial factors like user interface. Additionally, little research has been
undertaken to investigate why this exceptional phenomenon (i.e., latecomers overtaking the older
ones) transpires,
Sustainability 2020, 12, and
502 currently, available research only superficially touches upon the nature of 4 ofthe
23
social network [29,30].
On the other hand, this study focuses on the verification of the hypothesis that, if any online SNS
such as rapid environmental change or technological change, which are relatively difficult to control,
cannot occupy most of the offline social network’s “large set”, it can fail at any time if another SNS
or superficial factors like user interface. Additionally, little research has been undertaken to investigate
continues to occupy the “large set” faster than the first. This is different from Tucker’s central
why this exceptional phenomenon (i.e., latecomers overtaking the older ones) transpires, and currently,
argument [25], which claims that network effects do not work well in comprehensive cases, including
available research only superficially touches upon the nature of the social network [29,30].
the marketplace, riding apps like Uber, SNSs, and music services. Rather, our study shows that
On the other hand, this study focuses on the verification of the hypothesis that, if any online
network effects still work well, especially within the SNS industry, and that only those who properly
SNS cannot occupy most of the offline social network’s “large set”, it can fail at any time if another
understand the nature of the social network itself can sustain its network effect.
SNS continues to occupy the “large set” faster than the first. This is different from Tucker’s central
argument [25], which claims that network effects do not work well in comprehensive cases, including
3. Research Method
the marketplace, riding apps like Uber, SNSs, and music services. Rather, our study shows that
networkOureffects
studystill
is based on a especially
work well, practice-oriented
within thecase
SNS study methodology.
industry, A practitioner
and that only requires
those who properly
knowledge to define and solve problems in an identified practice,
understand the nature of the social network itself can sustain its network effect.and this methodology is intended
to provide the practitioner with useful knowledge. Dul and Hak divided the types of case study
3. Research
methods Method
into descriptive research, hypothesis-building research, and hypothesis-testing research
[31]. Our
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of the industries where the network effect occurs.
2. We performed literature studies on factors that cause the network effect as well as those which
1. The purpose of the case study in this paper is to determine which factors enabled latecomers to
enable later participants to overtake first entrants because of the network effect.
outperform earlier entrants despite the fact that the latter group was producing the network effect.
We investigated cases where this phenomenon was observed with later participants. We have
limited the research scope to SNS, one of the industries where the network effect occurs.
2. We performed literature studies on factors that cause the network effect as well as those which
enable later participants to overtake first entrants because of the network effect.
3. Case Selection: The four cases analyzed for this study were chosen because they were examples
of later participants outperforming first entrants.Sustainability 2020, 12, 502 5 of 23
4. Case analysis tool: The unit of a case analysis is the number of users or unique visitors, the market
share of each social network service, and the network effect strategy of each company.
5. For the validity of case analysis and hypothesis-building, three researchers collected literary data
on each case, compared this to determine the facts, and analyzed all information based on the
verified data. In the analysis process, one researcher presented the analysis process and results of
one case, and the other two researchers followed the same process and verified the triangulation
method to determine whether the same result was reached.
6. Implications: This study proves the hypothesis about which factors enable latecomers to outwit
the first entrants. This knowledge can be used as a strategy for a later entrant to increase its
market share when the earlier entrant’s network effect has occurred.
Table 1. Case study framework.
Case Study
Research
Sequence
1. Case study purpose Presenting the research purpose for the case study
2. Draw a hypothesis Drawing a hypothesis through literature research and data collection
3. Select cases Selecting cases that meet the set study objectives
4. Case analysis tools Presenting tools and protocols for case analysis
5. Case analysis and hypothesis building Analyzing the selected cases
6. Present implications Drawing implications for case studies from an integrative perspective
Among the methods presented by Bent [32], extreme and deviant case selection methods were
applied. This method is a useful method for acquiring information about specific cases.
4. Analysis of the Four Cases
4.1. MSN vs. NateOn
From 2000 to 2004, MSN Messenger was the No. 1 online messenger in Korea and had hundreds
of millions of installers around the world. Most PC users installed MSN Messenger and used it for
business purposes as well as among friends. However, MSN’s market dominance was overturned by
latecomer NateOn as early as 2005.
As seen in Figure 2, before 2003, MSN had a bigger LPSN than NateOn in the same PC space in
Korea. The number of PC-based MSN social network users in Korea was about 6 million, which was
much larger than that of PC-based NateOn social network users in Korea.
Since 2005, NateOn integrated both the social network of Cyworld, i.e., NateOn_SN (Cyworld;
represented in Figure 3) and the cellular phone address book social network, i.e., NateOn_SN (Cellular),
into its PC-based social network, i.e., existing NateOn messenger, NateOn_SN (PC).
With the integration, NateOn constructed a bigger LPSN than MSN in the PC space in Korea,
as depicted in Figure 3.
In addition, NateOn replicated offline social networks more deeply. Although MSN’s global social
network was bigger than NateOn’s, MSN could not occupy the majority of the offline local social
networks in Korea. Therefore, it could not keep its No. 1 position in Korea.
In August 2005, NateOn provided 100 free SMS messages every month and the button for “one-
step login” to Cyworld. The free SMS function was a great help in securing the installation base,
and the login linkage with Cyworld and the Cyworld notification functionality provided the main
driving force for continuous use of the NateOn messenger. By installing the NateOn Messenger, users
could download their cell phone address books into the PC messenger and then easily send text
messages to any friend in their address book with just one click in Messenger, which provided a strong
incentive to install the NateOn Messenger. SK Telecom (SKT), the NateOn Messenger operator, was
the number one cellular carrier company with a market share of over 50% at that time. The marketing
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2010, NateOn, The
represented as
Cyworld,
powerful
power of at that
weapon
the time,
monthly had
100 15
for outpacing million
free text users and
the messages
number was
offor
MSN still
its growing.
Messenger
20 million users (about
cellular network6 million at the was
subscribers time).a
NateOn_SN (Korean,
NateOn_SN (Korean,PC) PC)in Figure 4, had
in Figure 4, ahad
bigger LPSN inLPSN
a bigger the PCinspace thanspace
the PC KakaoTalk’s, represented
than KakaoTalk’s,
Cyworld, weapon
powerful at that time, had 15 million
for outpacing the users and
number of was
MSNstill growing.users (about 6 million at the time).
Messenger
as KakaoTalk_SN
represented (local,
as KakaoTalk_SN mobile), which
(local, was growing
mobile), which in thegrowing
was mobile space.
in the The number
mobile of The
space. NateOn_SN
number
Cyworld,
(Korean, at that
PC) userstime,
washad12 15 million
million and users
the and was
mobile IM,still growing.had just started.
KakaoTalk,
of NateOn_SN (Korean, PC) users was 12 million and the mobile IM, KakaoTalk, had just started.
Figure 2. MSN IM and NateOn IM offline Social Network Occupation map in 2003.
Figure 4. NateOn and KakaoTalk offline Social Network Occupation map in 2010.
NateOn
Figure2.4.MSN
Figure and NateOn
IM and KakaoTalk
IM offline
offlineSocial
SocialNetwork
NetworkOccupation
Occupationmap
mapinin2010.
2003.
FigureNateOn
2. MSN IM and NateOn IM offline Social Network Occupation map in 2003.
[Before
[Before 2010:
[Before 2010:
2003: NateOn
MSN had had
had bigger
bigger
bigger LPSN
LPSN
LPSN than than
than KakaoTalk
KakaoTalk
NateOn.] atKorea
at Korea PCspace.]
PC space.]
NateOn_SN
NateOn_SN (local, PC) > [KakaoTalk_SN
[KakaoTalk_SN
>bigger (local, PC) ∪∪ KakaoTalk_SN (local, mobile)]
mobile)]
MSN_SN
[Before 2003: (local,
(local,
MSN PC) PC)
> NateOn_SN
had than(local,
LPSN(local, PC) orPC)
NateOn.] (MSN KakaoTalk_SN
= 10M users > NateOn (local, = 0)
(NateOn
(NateOn == 12M 12M (but(but locally
locally saturated
saturated in in PC)
PC) > > [(0 =
= KakaoTalk PC IM) ++mobile IM
IMgrowing]
MSN_SN (local, PC) > NateOn_SN
[Before 2003: MSN had bigger LPSN than NateOn.] (local, PC) [(0
or (MSN KakaoTalk
= 10M PC
users IM)
> mobile
NateOn = 0) growing]
Since 2010,
MSN_SN KakaoTalk
(local, has steadily(local,
PC) > NateOn_SN defeated PC) or several
(MSNcompeting
= 10M users mobile messengers
> NateOn = 0) in Korea,
Since
gaining more2010, thanKakaoTalk
42 million hasmobile
steadily defeated
users in 2012, several
whichcompeting
accounts mobile messengers
for a majority of theinKorean
Korea,
gaining more than 42 million mobile
population (reflecting most of the offline social network). users in 2012, which accounts for a majority of the Korean
population
KakaoTalk (reflecting
occupied most the ofmobile
the offline social network).
messenger market in a short period. On the other hand, the once
KakaoTalk occupied the
No. 1 PC messenger NateOn, which beat out MSN mobile messenger market in a short
messenger, period.
has been On the
saturated other
in the hand,
smaller-
the once No. 1 PC messenger NateOn,
population social network that is Korea PC space. which beat out MSN messenger, has been saturated in the
smaller-population
KakaoTalk is a social mobilenetwork
messenger thatapp
is Korea PC space.
that allows users to send free text/photo messages to any
KakaoTalk is a mobile messenger app
of their friends. Because of this strong benefit, users were that allows users to send
willing free text/photo
to send “invitations” messages
to theirtofriends,
any of
their accepted
who friends. Because
them. Thus, of this strong benefit,
it spread quickly users
in such were willing
a viral to send
manner. “invitations”
Similar to the 100 to free
theirtexts
friends,
per
who accepted them. Thus, it spread quickly in such a viral manner.
month of NateOn, the free text messaging feature between friends has played a major role in quickly Similar to the 100 free texts per
month of NateOn, the free text messaging feature between friends
creating an enormous installation base. On the other hand, NateOn PC Messenger also launched its has played a major role in quickly
creatingmessenger
mobile an enormous quite installation
late. Sincebase. On thecompany
its parent other hand, SKT,NateOn
Korea’sPC Messenger
largest also launched
telecommunications
its mobile messenger quite late. Since its parent company SKT, Korea’s
company, made close to 1 billion USD per year in short text messaging sales at that time, it hesitated largest telecommunications
company,
to strengthen made itsclose
mobile to 1presence.
billion USD per year
In June 2013, in KakaoTalk,
short text messaging
which alreadysales athadthat40time, it hesitated
million mobile
to strengthen
users, started aitsnew mobile presence.
PC version In June 2013,
of KakaoTalk IM KakaoTalk,
and overwhelmed which already
NateOn had 40 million
messenger within mobile
just
users,months.
nine startedFigurea new3. PC MSN version
IM andof KakaoTalk
NateOn IM offline IM and Socialoverwhelmed
Network Occupation NateOn messenger
map in 2005. within just
nine Amonths.
smartphoneFigure 3.isMSN alwaysIM and NateOnonline
connected IM offline andSocial Network unlike
in real-time, Occupation a PC.map
In in 2005. because it
addition,
is a phone,
[After 2005:
A smartphone
it Figure NateOn
is utilizedis always
3. MSN made bigger
connected
IMessential
as an and NateOn LPSN
online than
and
IM offline
product, whereasMSN
in at Korea
real-time,
SocialaNetwork PC
unlike space.]
a PC.
Occupation
PC is utilized heavilyIn addition,
mapbyinonly2005. because
some it is a
workers
phone, MSN_SN
it is (local,
utilized
[After 2005: NateOn
and temporarily as PC)
an
by students <
made [NateOn_SN
essential
and product,
bigger
mostLPSN (local,
people. whereas
than PC)
In MSN ∪
a
otherat NateOn_SN
PC is utilized
KoreaaPC
words, (local,
heavily
PCspace.] Cyworld)
by only ∪
someNateOn_SN
is a tool that exists apart from workers
people,(local,
and temporarily
MSN_SN
[After Cellular)]
2005: by
(local, students
NateOn PC) <
made and
[NateOn_SNmost
bigger people.
LPSN (local,
than In
whereas a smartphone is equivalent to the entity of a person. MobilePC)other
MSN ∪ words,
NateOn_SN
at Korea a
PCPC is a tool
(local,
space.] that exists
Cyworld)
messenger apart
∪ users
NateOn_SN
usefrom
the
people,
Or (MSN
whereas
(local,
MSN_SN = 6M
a
Cellular)] users
smartphone
(local, < NateOn
is users
equivalent 10M to ∪
the Cyworld
entity ofusers
a 15M
person. ∪ cell
Mobile phone users
messenger 20M)
users use the
PC version of the samePC) < [NateOn_SN
messenger service (local,
for reasons PC) ∪such NateOn_SN (local, Cyworld)
as the convenience ∪ NateOn_SN
of continuous use of a
mobile
PC version
Or (MSN
(local, of the
= 6M
Cellular)]sameusers messenger
< NateOn service
users for
10M reasons
∪ Cyworld such as
usersthe convenience
15M ∪ cell phoneof continuous
users 20M) use of a
Asmessenger’s
a result, whereas contacts,MSN typing
only long texts the
occupied usingKoreaa bigPC-space
keyboard, and network,
social sending files.which was much
mobile
smaller Or messenger’s
(MSN
In previous = 6M contacts,
users
sections, < typing
NateOn
we social long
users
hypothesized texts
10M ∪using
Cyworld a big keyboard,
users 15M and
∪ cell sending
phone files.
users 20M)
As athan thewhereas
result, offline, realMSN networkthat
only occupied thean
(40 SNSPC-space
million
Korea which
Koreanoccupies
population mostinoftotal),
social network, the offline
which NateOn, social
was much by
network
utilizing
smaller universe
the
As athan cell
thephone
result, would
whereas be
offline,address
realthe
MSNsocialfinal
only winner
bookoccupied
network in
(which includedexercising
(40
the million
Korea the
over everlasting
20 million
Korean
PC-space network
people,
population
social more
in
network, effect. The
thanNateOn,
total),
which 50%medium
was of muchthe
by
that
entire
utilizing betterthe captures
population)cell and
phone offline
Cyworld’s
address socialbooknetworks
first-degree
(which can
friend
included change
lists
over as
(the
smaller than the offline, real social network (40 million Korean population in total), NateOn, by 20 technology
only one,
million and advances.
people, the largest
more As
thanSNStechnology
50%in Korea
of the
at innovation
entire
utilizing themigrates
thatpopulation)
time, with
cell 15from
and
phone PCsusers
million
Cyworld’s
address tobook
cellphones
and
first-degree
(which and
growing),friend
includedthenwas smartphones,
lists
overable
(the to
20only one,
million innovative
overtake andMSN
people, themoremedia
largest than which
Messenger’s
SNS 50% better
No.
in Korea
of the1
at captures
position
entire offline
in thewith
thatpopulation)
time, social
Korean networks
PC
15 million
and messenger
Cyworld’s is
usersessential
market.
and in order
growing),
first-degree friendwasto maximize
lists able or sustain
to overtake
(the only one, andMSN network effects.
Messenger’s
the largest However,
No. 1
SNS in Korea
position in the Korean PC messenger market.
at that time, with 15 million users and growing), was able to overtake MSN Messenger’s No. 1
position in the Korean PC messenger market.Sustainability 2020, 12, 502 8 of 23
Sustainability 2020, 12,
In previous x FOR PEER
sections, REVIEW
we hypothesized 6 of 22
that an SNS which occupies most of the offline social network
universe would
Sustainability 2020, 12,be the PEER
x FOR final REVIEW
winner in exercising the everlasting network effect. The medium6 that of 22
the number
better captures
Sustainability
one cellular
offline
2020, 12,
carrier
x FORsocial
company with a market share of over 50% at that time.
networks can change as technology advances. As technology innovation
PEER REVIEW
The marketing
6 of 22
power
the
migrates offrom
number the monthly
one
PCscellular
to 100 freecompany
carrier
cellphones text then
and messages
with afor its 20innovative
market
smartphones, million
share cellular
of over network
50%which
media subscribers
at thatbetter
time. was a
The marketing
captures offline
Sustainability 2020, 12, x FOR PEER REVIEW 8 of 22
powerful
power
the of weapon
number
social the
networks monthly
one for outpacing
cellular
is 100 infree
carrier
essential the
text
company
order number
withof
tomessages
maximize MSN
afor
market
or Messenger
its 20
sustain million
share users
cellular
of over
network 50%(about
effects. at 6 time.
network
that
However,million
Theatmarketing
merely the
subscribers time).
was
migration a
Cyworld,
powerful
power
to of
the mobile at
thethat
weapon time,
monthly
world for had
100 15
outpacing million
free the
text users
number
messagesand
of was
MSN
for still
its 20 growing.
Messenger
million users
cellular(about 6
network million at the
subscribers time).
was a
merely migration to or
thenew
mobiletechworld
platform will tech
or new not be sufficient.
platform willKeeping the focusKeeping
not be sufficient. on accumulating
the focus
Cyworld,
powerful
offline at that
weapon
social time,
networks had 15
for outpacing
should million
the users
number and was
of MSN still growing.
Messenger users (about 6 million at the time).
on accumulating offline social be a higher
networks priority.
should be a higher priority.
Cyworld,
As
As seenat that
seen in time,
in Figure
Figure 5,had 15
5, after million
after 2013, users
2013, KakaoTalkand was
KakaoTalk achieved still growing.
achieved aa bigger
bigger LPSN
LPSN than
than NateOn,
NateOn, even
even in
in the
the PC
PC
space,
space, let
let alone
alone the
the mobile
mobile space.
space.
Figure 2. MSN IM and NateOn IM offline Social Network Occupation map in 2003.
NateOn
Figure2.5.MSN
Figure andNateOn
IM and KakaoTalk offline Social
offline
IM offline social network
social network occupation
Network occupation map
Occupationmap inin2013.
mapin 2013.
2003.
Figure 2. MSN IM and NateOn IM offline Social Network Occupation map in 2003.
[After
[After2013:
[Before 2003:KakaoTalk
2013: MSN had had
KakaoTalk hadbigger
bigger bigger
LPSN LPSNthanthan
LPSN than NateOn
NateOnatatKorea
NateOn.] KoreaPC PCspace.]
space.]
[NateOn_SN
[NateOn_SN
MSN_SN
[Before (local,
(local,
(local,
2003: MSN PC)]
PC)]
PC)had NateOn_SN
bigger LPSN(local, than PC) (local,
or (MSN = 10M users > NateOn = 0) (local,
(local,
NateOn.] mobile)
mobile) includes
includes KakaoTalk_SN
KakaoTalk_SN (local,PC)]
PC)]
(NateOn
(NateOn
MSN_SN
[Before ==(local,
6M
2003: 6M(but
MSN (but
PC) had biggerdecreasing)
decreasing)
NateOn_SN < (local,
[40M [40M
mobile
than mobile
PC) users users =includes
includes
or (MSN
NateOn.] PC IM
10M PC> IM
users
users 5Musers
NateOn 5M
0) (but
(but =rapidly rapidly
growing)]
growing)]
MSN_SN (local, PC) > NateOn_SN (local, PC) or (MSN = 10M users > NateOn = 0)
4.3. Myspace vs. Facebook
4.3. Myspace vs. Facebook
In 2007, Myspace was the largest SNS in the United States, as can be seen in Figure 6.
In 2007,
However, in Myspace was the largest
2013, its position SNS in thebyUnited
was overtaken States,
latecomer as can be seen
Facebook. Unlikein Figure
Korea,6.the However,
United
in 2013,
States itshad
still position wasLPSN
a bigger overtaken
in the by PClatecomer
space in 2013. Facebook.
MyspaceUnlikedid Korea, the United
not occupy States
more than 30% still
ofhad
the
a bigger
offline LPSN
social in the PC
network space
space andinfailed
2013. to
Myspace
continue did not occupy
building up itsmore than
offline 30% network
social of the offline social
databases.
network
In the end,space evenand withinfailed
the toPCcontinue building
space, Myspace wasupdefeated
its offline
bysocial network
Facebook. databases.
Additionally, as In
thethe end,
mobile
even within
space provides thelarger
PC space, Myspace
containers was defeated
for fetching by Facebook.
offline social networks,Additionally,
Facebook steadilyas thecollected
mobile spacemore
provides
of the offlinelarger containers
social networks for fetching
using offlineapp.
its mobile social networks, Facebook steadily collected more of
the offline
In 2013 social
in the networks
United usingStates,itsmost
mobileusersapp. accessed their online SNSs through a PC rather than
In 2013
a mobile phone in the United
because the States,
mobile most users accessed
penetration rate wastheir
notonline SNSs
yet that highthrough a PCFacebook
in the US. rather than hada
mobile phone
already surpassed because the mobile
Myspace in the US penetration
in terms of rate was not
monthly yet that
active high
users, in the
largely byUS. Facebook
occupying had
offline
already
social surpassed
networks Myspace
consisting in the US in
of university andterms of monthly
high-school activeFacebook
students. users, largely by occupying
also had offline
a strong presence
social
in networks
foreign countries consisting of university
through university andand college high-school students. Facebook also had a strong
students abroad.
presence in foreign
In Figure countries through
7, Facebook_SN PC + mobile)
(Global,university and college students abroad.
means Facebook used the global network and
Figure 3. MSN IM and NateOn IM offline Social Network Occupation map in 2005.
used In + mobile,
PCFigure 7, Facebook_SN
Myspace_SN(Global, PC means
(local, PC) + mobile) thatmeans
MyspaceFacebook
focused used the global(i.e.,
on domestic network
the USA)and
Figure 3. MSN IM and NateOn IM offline Social Network Occupation map in 2005.
used PC
social + mobile,
networks Myspace_SN
rather than global(local,ones PC)
and means that Myspace
it also focused on PC focused
networks onrather
domestic
than(i.e.,
mobilethe ones.
USA)
[After 2005: Figure NateOn
3. MSN made
IMglobal
andbigger
NateOnLPSN than MSN at
IM offline Korea PC space.]
social networks rather than ones and it also Social
focused Network
on PCOccupation
networks map in than
rather 2005. mobile ones.
MSN_SN
[After 2005: (local,
NateOn PC)made
< [NateOn_SN
bigger LPSN (local,
thanPC) MSN ∪ NateOn_SN (local, Cyworld) ∪ NateOn_SN
at Korea PC space.]
(local, 2005:
MSN_SN
[After Cellular)]
(local,
NateOn PC)made
< [NateOn_SN
bigger LPSN (local,
thanPC) MSN ∪ NateOn_SN (local, Cyworld) ∪ NateOn_SN
at Korea PC space.]
Or (MSN
(local,
MSN_SN =(local,
6M users
Cellular)] PC)the number one cellular carrier company with a market share of over 50% at that time. The marketing
already surpassed
Cyworld, at that Myspace
time, had inmillion
the
theUS in terms of monthly active users
users,(about
largely6 by occupying
at the offline
powerful
power of weapon
the for
monthly 100 15
outpacing
free text users
number
messagesand was
offor
MSNitsstill growing.
Messenger
20 million cellular network million
subscribers time).a
was
social networks
Cyworld, weapon consisting
at that time, of university
had 15 million and
users and high-school students. Facebook also had a strong
powerful for outpacing the number of was
MSNstill growing.users (about 6 million at the
Messenger time).
presence in foreign countries through university and college students abroad.
Cyworld, at that time, had 15 million users and was still growing.
In Figure 7, Facebook_SN (Global, PC + mobile) means Facebook used the global network and
used PC + 2020,
Sustainability mobile, Myspace_SN (local, PC) means that Myspace focused on domestic (i.e., the USA)
12, 502 9 of 23
social networks rather than global ones and it also focused on PC networks rather than mobile ones.
Sustainability 2020, 12, x FOR PEER REVIEW 6 of 22
Sustainability 2020, 12, x FOR PEER REVIEW 6 of 22
the number one cellular carrier company with a market share of over 50% at that time. The marketing
Sustainability 2020, 12, x FOR PEER REVIEW 6 of 22
power
the of the
number monthly
one cellular100 freecompany
carrier text messages
with afor its 20share
market million cellular
of over 50% network subscribers
at that time. was a
The marketing
Figure 2. MSN IM and NateOn IM offline Social Network Occupation map in 2003.
powerful
power
the of weapon
number the monthly
one for6.outpacing
cellular
Figure 100
carrier
Myspace
theFacebook
freecompany
text
and
number
messages
with of MSN
afor its
market
offline
Messenger
20
social million
share
network
users (about
cellular
of over 50%
occupation
6in
network
atmap
that million atmarketing
the was
subscribers
time.
2007.The time).a
Figure
Sustainability 2020, 12, x2.
Figure FOR Myspace
6.MSNPEER and
IMREVIEW
and Facebook
NateOn IM offline social
Social network
Networkoccupation
Occupationmapmapinin2007.
2003. 9 of 22
Cyworld,
powerful
power at that
of weapon
the time,
monthly had
100 15
for outpacing million
free text users and
the messages
number was
offor
MSNitsstill growing.
Messenger
20 users (about
million cellular 6 million
network at the was
subscribers time).a
Figure 2. MSN IM and NateOn IM offline Social Network Occupation map in 2003.
Cyworld,
powerful
[Before
[Before
[Beforeat 2007:
that
2007:time,
weapon
2003: for had
Myspace
MSN
Myspace had15
outpacing
hadmillion
bigger
bigger
had biggerusers
theLPSN
number
LPSN and
than
LPSN of
thanwas
MSNFB
NateOn.]
than FBstill
at growing.
Messenger
atUSA
USAPC users
space](about 6 million at the time).
PCspace]
Cyworld,
#MSN_SN
#of
[Before at that
ofUsers
Users oftime,
of
(local,
2003: MSN had
Myspace_SN
PC)
Myspace_SN> 15
had million
(USA,
NateOn_SN
(USA,
bigger users
PC)
LPSN >>and
## of
(local,
PC) than was
PC)
of orstill
Users
Users
NateOn.] ofgrowing.
of
(MSN Facebook_SN
= 10M users(USA,
Facebook_SN PC)]
> NateOn
(USA, PC)]= 0)
Where
Where# #2003:
MSN_SN
[Before ofof Users
Users
(local,
MSN of
PC)of Myspace_SN
Myspace_SN
> NateOn_SN
had (USA,
(USA,
bigger LPSN (local,
than =PC)
PC)PC) =or
110M 110M
NateOn.] and and
(MSN # of # of Users
= Users
10M >ofNateOn
Facebook_SN
of Facebook_SN
users =(USA, (USA,
0) PC)] = 30M
PC)]
= 30M
MSN_SN (local, PC) > NateOn_SN (local, PC) or (MSN = 10M users > NateOn = 0)
Figure 2. MSN IM and NateOn IM offline Social Network Occupation map in 2003.
Figure
Figure
Figure 7.
2.7.
MSNMyspace
Myspace and
and
IM and Facebook
Facebook
NateOn offline Social
IM offline social network
social network occupation
Network occupation map
Occupationmap inin2013.
mapin 2013.
2003.
Figure 2. MSN IM and NateOn IM offline Social Network Occupation map in 2003.
[After
[After2013:
[Before Figure
2013:
2003: FB
FB3.made
MSN MSN
made hadIM and LPSN
bigger
bigger
bigger NateOn
LPSN
LPSN IM
than
than
thanoffline
Myspace
Myspace Social
NateOn.] atNetwork
at USA
USAPC PCOccupation
space.] map in 2005.
space.]
Myspace_SN
Myspace_SN
MSN_SN
[Before Figure
2003: (USA,
3. MSN
(USA,
(local,
MSN PC)
>IM
PC)
PC)had NateOn mobile)]
map in 2005.
=mobile)]
0)
Where
[After
Where 2005:
# of NateOn
Users of made bigger
Myspace_SN LPSN
(USA, than
PC) MSN
= = (MSN
20M at Korea
and # of PC space.]
Users of Facebook_SN
MSN_SN
[Before Figure
#2003:
(local,3. MSN
MSN of
PC) hadIM and NateOn
>Myspace_SN
NateOn_SN
bigger IM
(USA,
LPSN(local,thanoffline
PC)Social
PC) or
NateOn.] 20MNetwork
and= 10M# Occupation
ofusers
Users ofmap = 0) (Global,
in 2005.
Facebook_SN
> NateOn PC)
(Global,
MSN_SN
[After
= 1.3B 2005:
= 1.3B (local,
NateOn
and(local,
# of #UsersPC) <
made[NateOn_SN
bigger LPSN (local,
than PC)
MSN ∪ NateOn_SN
at Korea PC
= 0.9B(local,
space.] Cyworld) ∪ NateOn_SN
PC)
MSN_SN and PC) >of
of Users Facebook_SN
of Facebook_SN
NateOn_SN (Global,
(local, mobile)
(Global,
PC) or mobile)
(MSN == 0.9B
10M users > NateOn = 0)
(local, 2005:
MSN_SN
[After Cellular)]
(local,
NateOn PC)made
< [NateOn_SN
bigger LPSN (local,
thanPC)MSN ∪ NateOn_SN
at Korea PC space.] (local, Cyworld) ∪ NateOn_SN
Before 2013, Myspace was thethe representative
representative SNS in inusers
theUnited
United States. Myspace was acquired
Before
Or (MSN
(local,
MSN_SN 2013,
Cellular)] Myspace
=(local,
6M PC)Sustainability 2020, 12, 502 10 of 23
the SNS was used for illegal activities such as prostitution. This is an inevitable consequence of
emphasizing anonymous activities.
It should be noted here that transforming an offline social network into an online one requires
strategy. The largest offline social network is society itself, and the best place to clone a society, if you
can weave a contact list to another contact list that follows an overlapped person, is the address book
on cell phone networks or mobile phones. Thus, with a mobile messenger service, it is relatively easy
to build a first-degree (friends) network by absorbing the mobile phone address book. However, it was
not easy to replicate the offline social network in the online or PC world, where the anonymous culture
is strong and true user identity is difficult to verify. Accordingly, Facebook founder Mark Zuckerberg
initially sent e-mail invitations to Harvard students whom he already knew. Because of this, Facebook
first consisted of mostly Harvard students and then expanded its invitations to other Ivy League
students. Later, it expanded again to the remaining college or university students in the world. In other
words, the SNS has grown by successfully transforming offline social networks into an online social
network. After taking control of most US college offline social networks and expanding the invitation
to international students, Facebook naturally entered the global market. The culture and habit of using
a real name might have initially been awkward for the online PC world’s anonymous name culture,
but after users were invited, they became used to the requirement. After this, Facebook opened to the
general public without requiring an invitation-only, so that follow-up subscribers naturally behaved
according to the existing culture and inertia.
4.4. Cyworld vs. Facebook
Cyworld was officially launched in August 1999 after changing its name from PeopleSquare,
which was founded in 1998. SKT took over Cyworld in 2003 and invested in server infrastructure.
Cyworld grew rapidly, absorbing more than 51% of the Korea population, more than 25 million users.
It has grown to generate revenue of 100 million USD annually, mostly with digital item selling.
By 2009, Cyworld was Korea’s largest SNS, as can be seen in Figure 8. In 2013, the LPSN shifted
from PC to mobile, but before that, even in the PC space, Cyworld had been overwhelmed by Facebook
(Figure 9). Cyworld was attacked from two directions as follows:
First, Facebook, which had built up a steady network of offline social networks, connected Koreans
to the global network. Cyworld, on the other hand, simultaneously established branch offices in China,
Germany, the USA, and Japan, and built a separate social network database for each country without
connecting them.
Ignoring the basic global expandability of offline social networks, Cyworld Korea was isolated
from the Cyworld China membership database, US users, and all other country users. As a result,
Korean Cyworld users living in Korea had to sign up to use American Cyworld to meet foreign
friends living in the US, and if a relative who had lived in Korea went to the United States to study,
he/she had to register again with Cyworld USA and had to be invited again. Korean Cyworld users
could not invite foreign friends who only spoke English to use their SNS because only Korean menus
were provided.
This meant that it lost an enormous opportunity to acquire global social networks utilizing Korea’s
local network, which was already built into Cyworld at the time. More than 51% of the population
were using Cyworld, including most Korean celebrities. It also meant losing the opportunity to save
on significant marketing costs globally.
How Facebook built up the largest social network to include 50% of the world population should
be summarized. As seen in interviews with the former Myspace CEO, Myspace introduced an SNS,
but only Facebook mastered it [29]. In short, Facebook insisted on the real-name system and never
looked back. This requirement reflects offline society, where we call our friends and family by their real
names. On this basis, Facebook executed the open API policy to more quickly acquire offline social
networks from each country.You can also read
