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Korean Broadband Holds Lessons for U.S.
Where technology is ubiquitous, opportunities abound says entrepreneur and blogger Bernard Moon
Bernard Moon (internews)     Email Article  Print Article 
Published 2005-01-14 11:55 (KST)   
This article first appeared Jan. 13 on AlwaysOn and is reprinted with permission.

Back in 2001, during the second year I was living in Korea, I encountered Hangame.com just as it was launching paid services for its online casual games (for example, Tetris, blackjack, chess, and pool). The world's leading casual online gaming company was about to begin charging users a fee of less than a dollar to do things like extend playing time and host private group games.

"Only in Korea or Asia could this happen," I said to myself. Americans would never pay 50 cents for such a service. If the price were that low, Americans would expect it to be free; they wouldn't recognize the value that Korean online gamers have accepted.

Or so I thought in my American arrogance. Within months, Hangame's revenues hit $30,000 per day on micropayments of 50 cents on average. Within a year, that number had risen to $80,000, and by 2004 revenues per day exceeded $254,000 and accounted for more than $93 million for the year.

Two years ago, when camera phone sales exploded in Korea, I said once again -- though with a tad less arrogance -- "Only in Asia." I simply couldn't imagine Americans taking to camera phones in the same way that the Koreans and Japanese had. Once again, American consumers proved me wrong: When I came back to the United States last May, I found that the camera phone market had exploded here as well -- and so I ate my words again.

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As I passed my second year in Asia, I came to realize that while I'd once deemed cultural factors to be a driving force behind the use of technology and the Internet, the real driver was the ubiquity and power of technology itself. The Korean government's build-it-and-they-shall-come approach spurred a broadband revolution in that country that the U.S. cable industry could learn from. With 75 percent of Korean households having broadband access (compared with 20 percent of U.S. households) and almost 80 percent having wireless phones, the ubiquity of broadband and wireless services has created a development environment that's completely different than that which exists here in terms of services, products, and human behavior.

Camera phones provide one example. Blogs provide another. With 98 percent of Korean Internet users having broadband access -- and their average pipes providing speeds of 20 megabits per second (vs. 2 megabits per second in the United States) -- the blogging phenomenon in Korea has evolved quite differently than the blogging phenomenon here.

Blogs, in fact, were relatively late coming to South Korea, with Korea Telecom's portal service Hitel representing the first major launch (in April 2003) and NHN (Korea's leading portal by revenues and the parent company of Hangame) the second (in October 2003). But here's the interesting part: While in the United States text blogging led to photo blogging, which led to podcasting and finally video blogging, Korea's immersed broadband world allowed its providers and users to skip all of those stages: All blogs were text, photo, audio, and video blogs from the start -- without any distinctions.

Says Doug Yeum, CEO of Xfiniti (the company that developed Korea Telecom's blog service), "We wanted to make [blogging] multimedia from the beginning. Since our target base was the younger generation, having multimedia was essential. In the United States, developers are too conscious about speed -- and they probably have to be -- so most blogging services utilize static HTML, while in Korea we use dynamic page formats."

If you visit any Korean blogs, you'll soon discover that they're all like MySpace on steroids ... lots of steroids. One hybrid service to develop out of Korea's broadband incubator is CyWorld (HatTip to Pip Coburn, who mentioned this site in a prior post). Think of a blog, social network, and Flickr (a social network that lets users manage and share their photos online) rolled into one, and you begin to get an idea of what CyWorld is all about. In about 18 months, CyWorld went from nothing to being Korea's leading Web site in terms of page views and visit durations, and 19th in the world in terms of traffic (after AOL.com and Amazon.com), according to Alexa Traffic Rankings. (And we thought Friendster -- the hot social network that gained millions of users -- was viral and sticky.) It also makes money.

CyWorld's 10 million users -- who represent approximately one-fifth of South Korea's population -- make free "mini-hompies" (blog, social network, and Flickr combinations) and typically select who can access their personal sites. These sites typically include photos (for which there's unlimited space), background music, and customized avatar products. (For an example of one such customized avatar, check out my friend's mini-hompy: His avatar shares his hairstyle!) CyWorld charges approximately $1 to $2 a month to maintain background music or to purchase a virtual couch-micropayments that amounted to more than $114 million in 2004 for SK Communication, owner of the NATE portal that provides Cyworld.

As broadband becomes ubiquitous throughout the world, we can expect certain behaviors and protocols to evolve that transcend culture. And as the pipes grow fatter for everyone in this country, I believe we'll witness the following trends here:

Rapid growth of micropayments. Although micropayments have met with skepticism in the past, much of that criticism was directed at paying for content, not services. Even in Korea, efforts to sell content haven't met with much success: It's services and products (even if only virtual) that people are willing to spend their hard-earned dimes on. A recent survey by Peppercoin and Ipsos-Insight revealed that from October 2003 to September 2004, the number of Americans who bought something online for $2 or less grew from 4 million to 14 million-figures that indicate Americans are growing more comfortable with micropayments. Expect this slice of the U.S. online market to explode well beyond iTunes.

Increased presence of avatars (and avatar-related services) . In Korea, avatars-which are targeted primarily at teens and 20-somethings-represent a significant portion of online revenue. Expect avatar services and sales to grow in the United States (and elsewhere) as well -- but to spread well beyond the under -- 30 demographic. I believe the U.S. market will see older users innovate and adopt such virtual representations as well -- though the cartoonish representations that dot Asian Internet services will probably be replaced by icons and information slides that follow the user around the site (and possibly other sites). In fact, I believe AlwaysOn creator and editor-in-chief Tony Perkins has a similar vision for AlwaysOn, so perhaps we'll see them on this site within the year.

Significant growth of the video game industry. Although the $11 billion video game industry already surpassed the movie industry's annual box office receipts a couple years ago, get ready for it to overtake the overall movie industry within the decade: As broadband grows, so too will the gaming market, driven by casual online gaming, wireless gaming, and advertising within video games (which the Yankee Group predicts will increase from $79 million in 2003 to $260 million by 2008).

A move to the PC as entertainment epicenter. More than 70 percent of South Koreans chose the PC over the TV as their preferred source of entertainment in a recent survey, making Korea the only member nation in the Organization for Economic Cooperation and Development (OECD) in which a majority of its population preferred the PC to the TV. While a lack of content and quality programming from the network and cable industries has something to do with this preference, it's also driven by the presence of high-speed access on every street corner along with abundant libraries of music, movies, and entertainment. When an always-on environment truly comes to fruition in the United States, look for a significant portion of the population to shift to the PC as their entertainment epicenter.

Total blog integration. According to a recent Pew Internet & American Life Project study, 27 percent of Internet users read blogs-a tremendous jump from the 11 percent who were doing so in spring 2003. Still, 38 percent of Internet users don't know what a blog is. Expect this to change within the next five years as broadband enables more functionality on blogs, increasing their viewership to more than 60 percent of the online population.

Korea's broadband environment allowed a nation of just 48 million to create the first MMORPG (massive multiplayer online role playing game), the first paid online casual gaming services, the first avatar services, and the first mini-hompies. Just imagine, then, what America -- with all of its resources and people -- will be able to do once broadband is finally ubiquitous here. You can't learn to swim until you get in the water, but once that pool is full, expect a flood of innovation on these shores!
Bernard Moon is an entrepreneur responsible for a handful of startups related to video-on-demand, voice recognition, and computer software. He is also a freelance writer and blogger at his personal, politically leaning blog.
©2005 OhmyNews

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