Cyworld - History - 2011 Data Leakage and Decline

2011 Data Leakage and Decline

As Facebook began its services in Korea in 2009, Cyworld slowly began to lose its status as the only popular SNS service in Korea. According to some research, Facebook's simpler design and function were more appealing and easier to use than Cyworld. And Cyworld did not offer global services, which made it undesirable for people who wanted to contact foreign friends. The introduction of Smartphones to the market was also a key factor in Cyworld's decline. Facebook and Twitter offered stronger interconnectivity with moblie platforms. Kakao Story, a SNS service exclusive for Smartphone users had the advantage over its rivals due to its connection with mobile service Kakao talk which has over 53 million members. Cyworld's inability to keep up with the trend made it fall behind in the market.

Cyworld's declining market share was further aggravated by the 2011 Data Leakage. In July 2011, Cyworld/Nate was hacked into by criminals who stole the personal information of more than 35 million users. Nate had 33 million users and Cyworld had 25 million, and combined, they had about 35 million members. The information for almost all of the Cyworld/Nate members was compromised. This means about the 70 percent of the Korean population was exposed. The hackers accessed its system by using an Internet protocol address based in China. Because Cyworld/Nate requires its members to submit personal information for membership, the 2011 Nate Data Leakage was quite detrimental as the hackers had the members' resident registration numbers, phone numbers, and email addresses. Though SK communications insisted that the resident registration numbers and passwords were encrypted and are not likely to be abused even in the hands of the hackers, nobody gave the company the benefit of the doubt.

SK Telecom took measures trying to minimize the harm, but it was soon over flooded with lawsuits demanding compensation for the leakage. It yielded costly lawsuits for the company in a country with virtually no precedent in class action lawsuits. The public’s discontent with the data leak led straight to the plummet of stock prices. The company’s reputation was tarnished and Information-sensitive Koreans moved to other agencies of SNS after the leakage. This phenomenon was directly reflected in the plunging page views for Cyworld/Nate. Between March 2011 and April 2012, the monthly UV(Unique Visitors) and PV(Page View) for Cyworld dropped from 21.5million and 7.5billion to 16.5million and 1.7 billion, respectively. Statistics show that the fall in UV and PV became more dramatic after the July 2011 data leakage.

In September 2012, SK Telecom announced its decision to allow membership for Cyworld without obligating members to register resident registration numbers and name. Minimum personal information is to be asked of the members such as email address and nationality.