Despite the expanding popularity of social networks and virtual worlds in the U.S., Europe, and many other parts of the world, both local and foreign-made online community sites are losing grown momentum in Korea’s market, according to a report by The Korea Times.

The operator of South Korean community site Cyworld, SK Communications, said Friday that its revenue from the service decreased 6% in the first quarter of the year, compared to the same period last year, down ₩500 million ($495,000).

As a result, the networking service reported ₩4.3 billion in operating losses and ₩5.6 billion in net losses. Cyworld sells music and other items for users to decorate their virtual spaces using “dotori,” a virtual currency that users buy with real cash.

Cyworld has lead the field of social networking sites in the country since 1999, and has over 22 million users in South Korea, almost half the entire population. The company's strong presence has kept better known companies, like Facebook and MySpace, at bay in Korea.

Last month's launch of MySpace's Korean subsidiary and Korean language site have shown how hard it is to break into the market there. In the first week, the number of visitors to MySpace’s Korean site was about 20 times less than that of Cyworld's.

Seeking to reverse the tide, SK Communications plans to upgrade Cyworld into a 3D virtual world in June. Limited success for previous virtual worlds and the Korean version of Second Life, however, have given many in Korea’s internet industry case to greet the upgrade with skepticism.