Her friends took off on exciting trips over the week-long National Day holiday in early October. Some of them went overseas, and some of them travelled domestically, but Beijing native Yu Fei chose to stay home. She had something more important and interesting to do: to learn how to cook Korean food.

Yu is obsessed with the popular South Korean TV drama Jewel in the Palace. It tells the story of a girl's romantic experiences in an ancient Korean royal court, but its detailed depictions of traditional Korean food have encouraged Yu to learn how to cook. She took the class simply because she liked the South Korean drama.

On October 12, Chen Tianqiao defended his title as the richest man in the Chinese technology industry. The key to his success was the online game Legend of Mir, also imported from South Korea.

TV dramas and online games are only the tip of the iceberg in the wave of Korean cultural exports washing over China. The peninsular nation's movies and pop singers are hugely popular here, too.

Observers disagree over what the next big Korean fad will be, but Cyworld tops the list of possibilities. It is an online community based on miniature home pages on the Internet, which are now incredibly popular among South Korean youth.

"We always want to be global and in the future, only companies with an international presence will be able to survive," says Yoo Hyun-oh, president of SK Communications, one of the biggest Internet companies in South Korea and the parent company of the most popular online community in the country, Cyworld.

He said in an interview in Seoul in September that the first targets for overseas expansion would be China and Japan. The three countries share similar cultural backgrounds, all deeply influenced by Confucianism, which emphasizes the community over the individual. Perhaps more importantly, youth in all three countries like fashionable new products.

"In a few years' time, China's market will be much bigger than South Korea's, so we must go there," says Yoo.

The chief of SK Telecom's Internet arm deeply understands the Chinese Internet market, and keeps a close eye on potential Chinese competitors, like top Internet portal Sina Corp and instant messaging service provider Tencent. Both have over 100 million registered users and about US$200 million in revenues.

Despite some formidable competition, Yoo believes there is plenty of room for SK Telecom.

Similar firms, such as Mop.com, also provide social networking services through online communities. Cyworld, however, offers a much richer experience. The network started in 1999 and up to 90 per cent of South Koreans in their twenties are users.

The South Korean company opened Chinese Cyworld in June, and now employs about 50 people. It developed 300,000 registered users over the past few months.

Yoo is far from satisfied, however. There are approximately 100 million Internet users in China, and 70 per cent of them are young people.

He also knows that the Internet is essentially a cultural business, and although there are many similarities between South Korea and Chinese youth, the success of Cyworld in China really depends on how it is tailored to appeal to the local market.

Most Chinese Internet companies are modelled after their US counterparts, but major US giants like AOL, Yahoo!, Amazon, and IAC/Travel have experienced a number of difficulties and setbacks in China. The competition from local players is intense for eBay and MSN, even though they are in a better position.

Zhou Hongyi, former Yahoo! China president, says one reason big US companies initially fared poorly in China was because they didn't pay enough attention to the local culture and consumer demands.

Lu Weigang, a veteran Internet analyst in Beijing, says that the Internet is essentially a cultural business that incorporates snippets of ideology. Acknowledging the concerns of the Chinese authorities and co-operating with them is the key to success.

Yoo also understands the importance of working with local partners. He says that Cyworld is looking for big partners in China, and hopes SK Telecom can form a joint venture. Cyworld China's goal is two million users, with college girls the main target.

The Chinese division of the South Korean Internet firm sponsored a China-South Korea modelling contest for young women in the two countries in August. It aimed to attract more college students.

"We want to be both a leading Internet company in China and a friend, too," Yoo says.

That may not be an easy goal to achieve, however. Lu says that some Chinese portals like Sina have already established a strong, long-term presence in the online community. It is very difficult for new companies to break in.

Cyworld's business model, however, focuses on young users and profits from music downloads, skins and virtual items, which are also quite mature in China. The South Korean company needs to offer unique services that arey attractive to users.

Huge success

Cyworld's impressive growth in South Korea is one of the main reasons it is succeeding in China.

SK Communications was faced with the issue of how to differentiate itself from competitors like South Korean Internet portals such as Daum and Naver, as well as Yahoo! Korea.

Its portal business, Nate.com, had a club profile service that allowed users to form groups and share information.

Personal websites require professional knowledge, so SK Communications created a platform to help users build their own miniature web pages through a few simple steps. Cyworld was born.

South Korean youth always try to be on the cutting edge of new technologies, and they soon endorsed the Cyworld idea. SK Communications also used Nate.com and Nateon to cross promote with Cyworld.

Technological one-upmanship prompted many South Koreans to download background music, web page skins, and special items to decorate their virtual homes. These have become major revenue sources for Cyworld.

Yoo says that about 30 per cent of Cyworld's revenues come from background music, 30 per cent from skin sales, 30 per cent from virtual item sales, and 10 per cent from advertising. Its revenues are expected to reach US$100 million this year. Cyworld also contributes to about a half of SK Communications' total revenues.

With the interaction between the three businesses, Yoo says his company boasts the most traffic of any Internet company in South Korea. Yoo says it has been considering making an initial public offering, either in a domestic bourse or on the NASDAQ in New York.

(China Daily 10/24/2005 page5)