Cyworld, Protest, and Politics: Yong Joon Hyoung and the Story of a Korean Innovator
South Korea has never had a Mark Zuckerberg figure, but the man sitting opposite me in a dingy Seoul fried chicken house is probably the closest thing to it.
If he had plied his trade in the US, Yong Joon Hyoung might have been a billionaire by now. More than just an Internet entrepreneur, he is an innovation machine, having started one of the world’s first social networks, popularized the concept of payments for digital items – from which Tencent and Zynga are now making billions – and helped kickstart Korea’s Internet acquisitions market.
Hyoung’s latest venture, Storyblender, took him to the US for the first time as an entrepreneur, where the animation platform was a finalist in 2007’s TechCrunch40. It brought in $1.5 million in funding from Silicon Valley venture capitalists, but faltered amid the 2008 financial crisis. Hyoung had to shut it down and return to Korea.
Now, the entrepreneur is about to hit reset, with a startup called picpler.com. The service is in stealth mode, and Hyoung will say only that it relates to time-based check-ins. Still, the 43-year-old is struggling to get excited by the idea. His priorities lie elsewhere, beyond the check-in, beyond social networks. He is intent on re-shaping South Korean politics.
It’s early evening Wednesday, just as the office workers on the south side of Seoul’s Han River are spilling out of the gleaming high-rises that characterize this part of the city, the most expensive real estate in South Korea. Here, Ferrari and Mercedes dealerships hold pride of place near Samsung’s glittering headquarters, several tall towers that sit together in a uniform clump, with darkened windows that simultaneously convey intensity and impenetrability.
That is not Hyoung’s scene, however. Instead, I meet him in a nearby shopping district known for its hip boutiques and cozy cafes. He’s dressed in blue jeans and a green T-shirt, his thicket of dark hair hand-swept to one side. Like many Koreans, the father of three looks considerably younger than his years.
Hyoung is carrying with him a library copy of Joel Osteen’s “Become a Better You”, a Christian self-help book that purports to assist readers in finding their “authentic soul”. He also has a copy of The Big Issue, a magazine sold by homeless people to help them earn an income. A ridiculously airbrushed K-Pop boy band is on the cover.
I’ve done a lot of meetings in Seoul – 13 in three days – and Hyoung is one of the only people not to hand me his business card as soon as we meet. Instead, we wander the streets until we find a place to sit down for beers and chicken. I am exhausted, running on reserve fuel. Two hours ago, I almost fell asleep during a meeting in a cafe. I take in my surroundings and wonder how long I’m going to last during this encounter. Save for the door we walked in through, there are no windows. There's no music, but a large TV plays the national news at a volume just loud enough to create an uneasy ambience without quite being comprehensible. The next most prominent soundtrack is the hum of the beer fridges. On the walls, just below the dim blue light bulbs that barely illuminate the room, there are decals of cartoon chickens holding enormous glasses of beer.
I soon find out that my fears of involuntary slumber are misplaced. Hyoung’s story is one that stretches back to the Korean War, takes in a history-making movement against a military regime, and sweeps through the dawn of the country’s Internet era. At the end of the night, after an interview that has lasted three hours and thirty-five minutes, I switch off my recorder, close my notebook, and we talk for another hour about how to change the world.
WORLD-BEATING SOCIAL NETWORKThere is a joke in South Korea’s startup community, says Benjamin Joffe, that goes like this:
Q: Why is there no Bill Gates in Korea?
A: Because if you drop out of college, you have to join the army for two years.
Q: Why is there no Steve Jobs in Korea?
A: Because if you fail in your first company, you have to work for Samsung for 20 years to repay your debts. Joffe, an entrepreneur and investor who lived in Seoul for a year and now splits his time between Asia and Silicon Valley, where he is an advisor at 500 Startups, has an addendum to the joke:
Q: Why is there no Mark Zuckerberg in Korea?
A: Because the Korean equivalents of Sean Parker and Peter Thiel would have taken control of the company and sold it to SK on the cheap. That, more or less, is the story of Yong Joon Hyoung and his creation, Cyworld.
“He pretty much made social networking widespread, but he’s also an example of how you don’t get rich from creative, innovative stuff in Korea,” says Joffe, a Frenchman who runs a consultancy called Plus Eight Star. He is a personal friend of Hyoung. “Any of his previous startups would have easily raised capital, attracted talent, and possibly be bought for a good price in Silicon Valley,” says Joffe. He describes Hyoung as a “visionary” who has the skills and charisma to get things built.
Many Americans think of Friendster as the world’s first social network. That’s not true. Cyworld, which at its peak in 2006 had 19 million users – close to 40 percent of South Korea’s entire population – was on the scene much earlier. Hyoung started it in 1999. Friendster launched three years later.
But Cyworld wasn’t even the first. Hyoung says he modelled the site on SixDegrees.com, a service that played on the idea that everyone is connected by six degrees of separation. But he added a crucial element that propelled Cyworld to the forefront of the social networking era: Social search. Like LinkedIn, the feature showed who was connected to who, and how.
Yong in his early days as an entrepreneur
“I realized, ‘Oh, it can be a really good structure for trust-based information sharing,” recalls Hyoung, who leans forward when he talks, sometimes between mouthfuls of chicken. He started Cyworld intending it to be a matchmaking service. In Korea, matchmaking is an incredibly important part of the culture. It’s how most people in relationships meet each other. They rely on friends to introduce them to people with whom they might click. The first date is frequently a blind one.
Hoping to capitalize on that phenomenon and replicate it in the online world, Hyoung’s earliest iteration of Cyworld was an attempt to reproduce Match.com for the Korean market. He and his co-founder Young Sik Jung, a friend he had met in military service, showed an early version of the site to some friends. They responded by asking: “How can we know the profiles are truthful?”
Therein lies another quirk of Korean culture. Hyoung says that when it comes to potential partners, Koreans want to know what they’re signing up for. A lot of it comes down to parental pressure. The unwritten rules, says Hyoung, are that a girl should find a guy who has a good job and a strong education. Money helps, too. Guys, meanwhile, should look for girls who are well educated and beautiful. With such guidelines for partnering, people want to be sure the profiles they’re checking out are legit.
Hyoung thus attempted to build a system of trust into Cyworld that mimicked the offline friend introductions. Having just completed a PhD thesis on trust-based information sharing at the Korea Advanced Institute of Science and Technology – the country’s equivalent of MIT – he knew more about the subject than almost anyone.
His social search idea proved to be the fuel in the tank of a rocket ship. Cyworld started to grow like crazy. Soon, the founders borrowed an idea from SayClub, a popular Korean online chat service, allowing users to pay money for virtual items that they could then send to each other. At the same time, people started using Cyworld as a trading platform. Ebay wasn’t yet in the country, so Koreans started bartering goods and services on the network knowing they could trust each other to make good on deliveries because they were connected by mutual friends. Companies started to use the connected search mechanism as a way to filter for potential hires.
By 2003, the year MySpace launched, it had 7.5 million users. Telco giant SK snapped it up for $7 million in what would turn out to be a ridiculous bargain. Hyoung, however, didn’t see a dime of that. (Update: Since publication, Hyoung has been in touch to clarify that, in fact, he did make some money from the deal. He retained less than 5 percent of the company. That slender slice was so low because, naively, he didn't properly read the contract for the company's first round of funding.) He left the company in 2000 after disagreements with investors that led to his ouster as CEO. He didn’t regret his departure. “I was happy,” he says now. “Very happy.” At the time, he didn’t understand the concept of stock options. He never thought that Cyworld might be sold.
Six years later, Cyworld reached its peak of 19 million users. But by then, all the founders had left. Hyoung’s co-founders hadn’t wanted to become a part of a conglomerate like SK. Instead, they joined search portal and online gaming company NHN. Looking back, Hyoung acknowledges that it’s a sombre story. “I’m very sorry for my founding members,” he says. “They were really sad when I was leaving.”
Under SK’s ownership, Cyworld grew but struggled to launch new features. When it tried to expand internationally, launching in Europe and the US in 2006, it failed miserably. At that time, Facebook had just opened its service to everyone over the age of 13 and had 12 million users. Despite a numbers advantage, however, Cyworld couldn’t capitalize. It didn’t get the Western culture, Hyoung surmises. SK’s executives went in with an “Emperor mindset,” thinking they knew what was best. The more transparent culture of the West, reckons Hyoung, was never going to stand for that.
And anyway, the company effectively killed any chance of success by keeping its American and European offerings separate from the Korean site, which restricted network interactions to only the countries in which they were based – an idea that contradicts the “connected world” ideology of social networking.
POLITICS, PROTEST, AND FAMILYTo understand Hyoung, who is simultaneously very Korean and something of a cultural outlier, you have to understand some Korean history. For most of the last century, Korea was either occupied by Japan, engaged in civil war, under the rule of a military regime, and/or recovering from all of the above. Hyoung's life, like most Koreans of his generation, has been affected by all those factors, which are deeply intertwined.
Samsung's imposing towers
His dad, Nam Suk Hyoung, was a war orphan, having lost both his parents at age 13. When he was 20, he was taken in by an American family, and he went on to establish his own drug store company. By 1973, when he was in his early 30s, the drugstore chain was the largest in the country, with 1,000 employees. Because it was so successful, the country's military rulers started to take notice. Nam came under pressure to pay bribes, a common business practice in Korea at the time – and still prevalent in today’s corporate culture, if Samsung's various corruption scandals in recent years are anything to go by.
Preferring to leave the country rather than pay bribes, in 1974 Nam moved with his four sons to Los Angeles and, later, San Francisco. Yong, the second oldest, was 7 years old. He was put in a classroom with one of his younger brothers so they could offer each other moral support. They didn’t speak English and were grossly outnumbered. In his first class, Hyoung remembers, there was one black student, one Vietnamese student, and then the rest were white. They taunted Hyoung and his brother with racist jibes. The young Koreans took to wearing shoes with thick soles so they could kick their tormentors in retaliation. That fixed the problem.
Hyoung's older bother, Won Joon, did particularly well in California. He was the only one in the family who spoke fluent English. He was popular with American girls, a champion soccer player, and the best chess player for his age in the state. Still, when his father came to him two years later, when Korea's business and political climate had improved, to ask if he would like to return to Korea, Won said yes. And so the family once again packed its bags.
Back in Seoul, the boys had a hard time adjusting to Korea's more rigid and demanding education system. To catch up to their peers, Yong and his brothers had to study math at night, with their dad watching over them with a stick, ready to punish them for any errors. At least professionally speaking, the method proved successful. Won went on to work for Samsung, where he excelled, and is now the CEO of SAP Korea. Yong's immediate younger brother distributes the Swiss herbal candy Ricola in Korea, and the youngest is a fashion designer who has worked in New York and Italy.
As for Yong himself, he went to KAIST, where he started an undergraduate degree in mechatronics. But then 1987 arrived. On June 10, South Korea’s President, Chun Doo Hwan, announced his successor, provoking an already-discontented populace to rise up in anger. The regime had continually delayed a process to revise the country’s constitution, which would have allowed citizens to elect the President directly. Chun’s announcement triggered three weeks of protests, led by students. Hyoung was right in there among it, leading a KAIST group called the Reunification Team. In the confrontations, students clashed with government troops, who fired gas guns into the crowd. One student died after being struck in the skull by a gas grenade.
“I was scared, but we were a group of students,” Hyoung recalls. “We were together, so that helped. We could be braver.”
The June Democracy Movement in Seoul, 1987
Eventually, the demonstrations – referred to as the June Democracy Movement – prevailed. The government decided that instead of crushing its people a year before the city was due to host the Olympics, it would listen to them. Ultimately, it agreed to hold elections and institute other democratic reforms that have changed the country forever.
That experience politicized Hyoung, who decided he wanted to be a leader of social movements. He changed his degree to information management science and became enamored with Swedish-style democracy, which relies on high taxes but provides generous social services for its people, including free university education and inexpensive healthcare.
After graduating, Hyoung avoided the military service that is mandatory for young Korean males by exploiting an option that allowed him to work in the research department for a large corporation. While there, however, he was asked by his bosses to use math techniques to “rationalize” corporate results so they wouldn’t seem as bad as they actually were. He found the work so distasteful that he left after a year and joined the military. After two years there, he went on to do the PhD that provided the framework for his thinking about Cyworld.
VISION FOR A NEW KOREAHyoung’s output is so great that I haven’t even mentioned three of his startups. Soon after Cyworld, he started a new matchmaking service, SayCupid, which targeted young professionals. It became one of the top five dating sites in the country. He would go on to launch Kukubox.com, which, like its contemporary Plaxo, was a social address book. Within six months, Hyoung sold it to NHN for $1.2 million. He also started Nplugs, a service that linked cellphone data with email data for sharing between friends across the two platforms. That was done in cooperation with Omnitel, a mobile operator. It failed when Omnitel turned its back on the partnership.
Today, Hyoung is still paying back investors for money lost on the Storyblender venture. It is common for Korean investors to have a guarantee written into funding contracts that requires founders to pay them back as much as 10 percent of their outlay if a venture fails. He has settled with one investor and is on the verge of settling with another.
Once that is out of the way, he can concentrate on picpler.com and Founders Camp, an incubator started by a friend who owns a Korean domain hosting company. Hyoung has signed up to be a mentor. He is confident that a new generation of Korean entrepreneurs can succeed on a global stage. Unlike his generation, today’s young Koreans are internationally minded, having learned English since kindergarten and being able to see more of the world. With Founders Camp, he will be looking for business models that can be taken global.
Increasingly, however, he has become more focused on family, God, and politics. In 2007, a friend took him to church, where the PR woman for one of the Presidential candidates – a member of the Hyundai family – gave an inspiring speech. Hyoung returned the next week and decided to become a Christian. His newfound faith, he says, helped fill a hole in his heart. It also opened up a new path for him.
“I more and more want to follow Jesus’ teaching,” he says. “So I think I found some vision in my life for the future.” That vision is to build a social democracy party for Korea, based on the Swedish model. “I don’t want to be a politician, but I want to boost that, or help some good politicians.”
He and a group of friends from a wide range of fields – including government, universities, and conglomerates – are working together on a road map for a party that would promote an alternative form of capitalism. “There is a limit to capitalism, and there’s also a limit to communism,” says Hyoung. “So we have to find a better way. Not easily, but something real, something good. Even if it’s not perfect, it should be supplemented by love, or help, or giving.”
Mankind is weak, Hyoung says, and in Korea the capitalist system is undermined by corruption at the highest levels. He hopes to change that.
“Korea now, starting from politics and university, and religion, including Christian religion in Korea – many churches – are corrupted. So much corruption,” he says. Then, he pauses, before adding with a laugh: “Except startups.”