Japan Case Study: "Mobile 2.0 and the Next Generation of Mobile Applications"

© 2007 Infinita Inc.

Japan Case StudyMobile 2.0 and the Next Generation of Mobile Applications

Christopher Billich, Infinita Inc.

Mobile Monday Indonesia Launch

Jakarta, December 4, 2007


100,000,000,000,000

cb

Rectangle


...Mobile Page Views per monthin Japan!

Source: NTT DoCoMo/Infinita


40% of Mobile Data RevenuesWorldwide

Source: Chetan Sharma Consulting, 2006


Japan Mobile Market: Key DifferencesThe Secret Sauce

Email, not SMS

Operators control

handset makers

Open Standards

Operator Revenue

Share favors CPs

Same cost for On- and

Off-Deck access

All handsets

SIM-locked

“Free” Messaging

Competition on Network Technologies

80% 3G penetration

Operators pay

handsetmakers

★ Regulatory/Government Level

★ Operator Business Model Level

★ Operator-Handset Maker Relationship Level

★ User Experience Level

No spectrum license costs


Traditional i-Mode Ecosystem

MobileOperator

Handsets

Volume Opportunity

Interoperability Interoperability

Content/Handset Integration

Business Opportunity Portal Functionality

HandsetVendors

PlatformVendors

ContentProviders

Content

RevenueCollection


Subscribers by Network Technology2004-2008 (est.), in million

Content

Source: Impress R&D

Voice only 2G Data Users3G Data Users Non-Flat 3G Data Users Flat Rate3.5G Data Users


CarriersMarket Share Mobile Subscribers (Total)

Source: Telecommunications Carriers Association of Japan

NTT DoCoMoau KDDISoftbank Mobile

Total mobile penetration: 77.8%


CarriersSubscribers (Net Additions): Softbank winning for 6 months straight

Source: Telecommunications Carriers Association of Japan

NTT DoCoMoau KDDISoftBank Mobile

MNP

SBM White Plan

SpringHandsets

New DoCoMoDiscount Plans


ARPUPressure on Voice ARPU - High Data ARPU ratio (JPY)

Source: Japan Ministry of Internal Affairs and Communications

0

1,500

3,000

4,500

6,000

7,500

9,000

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 Q1

4,3504,4404,6704,9025,2635,7666,245

6,889

2,0802,1201,9921,8671,7401,8051,6071,346

Data ARPUVoice ARPU

DoCoMo au


HandsetsManufacturers Market Share 2002-2007

0

6.25

12.50

18.75

25.00

2002 2003 2004 2005 2006 2007

Sharp NEC Panasonic Toshiba SanyoSonyEriccson Fujitsu Kyocera Mitsubishi Casio

Source: Nikkei BP Consulting


HandsetsKey Facts

Source: CIAJ, July 2007; JEITA, October 2007

★ 70% of users replaced handset in past 10 months

★ JPY 8,000 average purchase price (heavy subsidies!)

★ 90% of users are “fine with current pricing” (handsets & voice/data)


Source: KDDI

All-Round Product AttractivenessFactors


Mobile Content MarketMobile Content Market Segments, 2003-2006 (JPY billion)

2003

2004

2005

2006

0 100 200 300 400

119

92

82

73

7

2

0

6

1

0

75

59

41

27

24

10

0

52

46

20

3

84

105

117

110

Poly Ringtones Real Tones Full Tracks GamesDecomail Books and Manga Other

Source: Mobile Content Forum


Mobile MessagingService Example: Decomail

Source: Decotomo.jp; NTT DoCoMo

★ On- and off-deck★ Service Provider: Various★ Service Model: Graphics/animations for HTML mobile mail★ Business model: Subscription; advertising★ Fastest-growing mobile content category along with mobile books/Manga★ More popular than search, picture messaging, music, games, video...


Mobile Books and MangaService Example: Mobile Manga

Source: NTT Solmare

★ On- and off-deck★ Service Provider: Various★ Service Model: Mobile versions of comics, sold in episodes (USD 0.30 color/0.10 b&w)★ More than 10,000 titles available★ Business model: Tiered Subscription/points★ 430% YoY growth in 2006★ 60% of readers female


Mobile Books and MangaService Example: Mobile Books

★ On- and off-deck★ Service Provider: Various★ Service Model: Novels/stories written on mobile - for mobile★ Not your standard book: Heavy use of emoticons and “keitai shorthand”★ Author and audience “writing together”★ Business model: Subscription; Advertising★ “Deep Love”: from 2,000 flyers to book (2.7 mln), film, TV series, manga


Mobile MusicService Example: au LISMO

Source: KDDI

★ On-deck (au)★ Service Provider: au KDDI★ Service Model: Cross-platform (mobile & PC) digital music service★ ca. USD 2.50 per track ★ Full track downloads can be used as ringtones★ Mobile-to-PC backup for music, address data and pictures ★ utatomo: playlist-based mobile social networking


Mobile MusicService Example: au LISMO utatomo

Source: KDDI

★ Service Provider: au KDDI★ Playlist-based mobile social networking

• Integration with au Music Player• Blogs/communities• Location-based playlists


Mobile MusicMobile Full Track Downloads Usage (All Mobile Internet Users, in %)

Source: Impress R&D, October 2006

Have used itEnabled Handset, but never usedHandset doesn’t support it


Mobile MusicAverage Full Track Downloads per Month (Active Users)

Source: RIAJ, March 2007

TotalMale Junior High School Students


Mobile VideoService Example: MyTube

★ Off-deck★ Service Provider: Key Life Inc.★ Service Model: Video sharing aggregation and re-formatting for mobile plus Social Networking★ Aggregates videos from YouTube, Google Video, Ameba Vision, dailymotion and others★ Pre-filtered for “Japanese relevance”★ Most recommended mobile service among teenagers


Mobile GamesAverage Downloads per Month (All Mobile Internet Users)


Never<1 per month1-4 per month>5 per month


Mobile GamesService Example: DoCoMo Mega i-Applis (905i Series Demo)

Source: IT Media


Mobile GamesPreferred Types of Games (Active Gamers, in %)

Source: Famitsu, July 2007

Definitely prefer short gamesUsually prefer short gamesUsually prefer long gamesDefinitely prefer long games


Mobile GamesService Example: DoCoMo Motion-controlled Games (904i Series)

Source: NTT DoCoMo


Mobile GamesService Example: DoCoMo Motion-controlled Games (904i Series)

Source: Taito


http://www.taito.co.jp/company/news/release/mobile/news_mc_image/2007/10_12/01.jpg

Mobile Social MediaService Examples: mobagetown

★ Off-deck★ Service Provider: DeNA★ Service Model: Free, mobile-only site combining games + social networking + avatars + mobile commerce + news★ Business Model: Advertising/mobile commerce★ More than 6m users in 18 months★ 10 billion+ PV/month★ Core Enabler: Virtual currency “MobaGold”




Mobile Social MediaService Examples: mobagetown (ctd.)





Source: DeNA





Source: DeNA




Mobile BloggingAwareness and Usage (All Mobile Internet Users, in %)

20052006





Mobile Social NetworkingAwareness and Usage (All Mobile Internet Users, in%)

Source: Rakuten Research/Mitsubishi Research, February 2007

AwarenessUsage



Mobile Social MediaService Examples: mixi

Source: mixi Inc.

★ On-deck★ Service Provider: mixi Inc.★ Service Model: Mobile and PC social networking site ★ Business Model: Advertising (90%), Premium features (10%)★ #1 service in JP SNS market★ More than 10m users★ 10 billion+ PV/month★ 30% of traffic generated via mobile★ Key Success Factors

• Invitation-only• Clear mobile/PC differentiation



Mobile Social MediaService Examples: Kaocheki

Source: J-Magic

★ Off-deck★ Service Provider: J-Magic★ Service Model: Face recognition + entertainment + community

• “What celebrity do you look like?”• 50m picture emails received since launch in summer 2007

★ Business Model: Advertising★ Other implementations of core technology

• Photo-sharing/image recognition SNS (eyenowa)• CD/book cover visual search• Visual search API




Mobile Social MediaService Examples: eyenowa Gourmet

Source: J-Magic

★ Off-deck★ Service Provider: J-Magic★ Service Model: Visual recognition + food info + community

• Find restaurant reviews by sending a picture of shop sign/business card• Share your own reviews and pictures• Create personalized maps of restaurants you like




Source: IT Media/J-Magic

★ Advertisers: Pizza Hut / Sony Pictures★ Campaign Date: current★ Campaign Outline: “What pizza/zombie do you look like?

• tweaks of ultra-popular Kaocheki service (J-Magic)• take a picture of yourself to see which Pizza suits you (then order it)• take a picture of yourself and be transformed into a Zombie from Resident Evil - find other Zombies on a map

Mobile Social MediaService Examples: Kaocheki “Zombie Check”




Source: Impress K-tai Watch

★ Advertiser: Lotte★ Target Group: Junior High School Students★ Campaign Date: 04/06-10/06★ Campaign Outline: “Next-generation fortune cookies”

• Take a picture of the Koala on the cookie (217 kinds!) and receive a free fortune-telling message from the Koala• Return email contained link to official community on Mobile SNS Gocco• Boost membership points on Gocco the more you collect

Mobile Social MediaService Examples: “Koala March” Campaign




Mobile Content vs. Mobile CommerceMarket Volume, 2003-2006 (JPY billion)

Mobile CommerceMobile Content

Source: Mobile Content Forum, July 2007




Mobile Commerce MarketMobile Commerce Market Segments, 2003-2006 (JPY billion)

GoodsServicesTransactions

Source: Mobile Content Forum, July 2007




Mobile Shopping and AuctionsService Examples: Girlswalker.com

★ Off-deck★ Service Provider: Xavel Inc.★ Service Model: Mobile Commerce + Events + Real Stores★ #1 service in JP women’s market

• 7 million users• 1.4 billion PV/month

★ Operates a portfolio of fashion-and entertainment-related sites,e.g.

• Fashionwalker.com (Shop and read fashion magazines)• Stylewalker.com (Blog, connect and strut your avatar)




Mobile Shopping and AuctionsService Examples: Girlswalker (ctd.)

Source: Xavel, Inc.

★ Twice-yearly “Tokyo Girls Collection” events combining

• 20+ Brands’ fashion shows• 60+ Top Models and Idols• Real-time shopping via mobile• Live Acts• Beauty Contest

★ Attendance: 25,000★ Tickets: USD 20-80

★ Xavel Inc. also active in actual off-line commerce (fashion, cosmetics, beauty salons, design hotels) through collaborations




Mobile ShoppingUsage (All Mobile Users, in %)

Once a year 2-4 times/yr. 5-10 times/yr. >10 times/yr. Every month Every weekNot at all Don’t know




Mobile ShoppingAverage Yearly Spending (Mobile Shoppers) vs. Yearly ARPU (All Users)

Yearly ARPU in JPY (av.)Yearly Mobile Shopping Spendings in JPY (av.)

Sources: Impress R&D, October 2006; Japan Ministry of Internal Affairs and Communications



Mobile Shopping and AuctionsService Examples: Rakuten

Source: Rakuten

★ On-deck (DoCoMo)★ Service Provider: Rakuten★ Service Model: Online Shopping Site Aggregator★ Biggest online retailer in Japan (40% market share)★ More than 15 million goods for sale★ 25% of sales generated via mobile commerce★ Also operates Rakuoku mobile auctions site with DoCoMo




Mobile Shopping and AuctionsService Examples: au Shopping and Auction Sites

Source: KDDI

★ On-deck (au)★ Service Provider: au KDDI★ Service Model: Mobile/PC shopping sites (operator-branded, partner-powered)★ Site lineup:

• au Shopping Mall• EZ au Records• EZ au Books• EZ au Tickets• EZ au Games• EZ au Travel• EZ au Auctions



Mobile AuctionsTotal Mobile Auction Trading Volume, 2003-2006 (JPY billion)

Sources: Mobile Content Forum, July 2007



“Location-based Services”Service Examples: Otetsudai Networks

Source: Location Value

★ Off-deck ★ Service Provider: Location Value★ Service Model: “Location-centric auction system for temp staff”

• Businesses post openings with rate• Workers post profiles and availability via Java client/GPS • Includes ranking systems for employers and workers• Includes negotiation options

★ Business Model: B2B subscription★ About 45,000 workers and several large clients so far



On-portalOff-portal


The Off-Portal Shifti-Mode Traffic



Driver I: QR Codes

Source: qrcodeblog.com


Driver II: Mobile Search

„Japanese teens in the 13-19yr age segment prefer searching using mobile search in 70.1% of cases, as opposed to official mobile carrier listings in 47.1%.“

Source: CNET Japan, May 2007



Mobile SearchUsage Frequency (All Mobile Internet Users)

Source: Mobile Marketing Data Laboratory, October 2007



Mobile SearchService Examples: au and Google

Source: KDDI


Mobile SearchService Examples: au and Google

Source: KDDI


Mobile SearchService Examples: Yahoo! Mobile on SoftBank


Mobile Search Service Examples: DoCoMo Multi-Engine Search


Mobile Advertising vs. Content vs. CommerceRevenues, 2005-2007 (JPY billion)

“Pure Ads”Mobile Search AdsMobile ContentMobile Commerce

Sources: Dentsu, Ministry of Internal Affairs and Communications



Website Text/Content AdsBanner AdsMobile Email Ads/Mail Magazines

Source: Impress R&D, October 2006Base: Mobile Advertising Responders (multiple answers possible)

Mobile AdvertisingPreferred Types of Mobile Advertising among Users (in %)




Source: D2 Communications, May 2007Base: 274 large Japanese corporations

ActiveNot active

Mobile AdvertisingMarketer Attitudes toward Mobile Advertising (in %)




20062007

Source: D2 Communications, May 2007Base: Corporations with current Mobile Advertising activity

Mobile AdvertisingPreferred Types of Mobile Advertising among Marketers (in %)




1seg Digital Mobile TV1seg Today

Source: Yomiuri TV

★ Free Service (Regulation!) - for now• Standard TV Channels (Regulation!) - for now• Data Feed with Back Channel for selected programs• Time-shifting on some models

★ From 2008: Tailor-made programming, several joint ventures between operators and broadcasters in progress

★ Issues• Reception quality & service areas• Battery problems



1seg Digital Mobile TVEnabled Handsets, cumulative shipments (in million)

Number of 1seg handsets shipped

Sources: JEITA, July 2007; NTT DoCoMo, October 2007


1seg Digital Mobile TVUsage and usage intention (Representative sample)

Source: CIAJ, July 2007Base: Mobile Phone Users in Tokyo/Osaka


Consumer Attitudes1seg usage and usage intention (Teens, male)



★ 6.1 times average use per week

★ 11.7 times weekly use at peak

★ 47 minutes per week average viewing time

★ 75% of users view less than 10 minutes per session

★ 9-12 pm weekday primary attention peak

★ Weekend usage much lower than weekdays

★ 50% use email or voice while watching TV on phone

Consumer BehaviorKey Facts

Source: CIAJ, July 2007; MMRI, October 2007



1seg Digital Mobile TVIntegration with ToruCa/FeliCa (Contactless Payment)

Source: K-tai Watch Impress



1seg Digital Mobile TVNTT DoCoMo x TBS x McDonald’s Campaign

★ Advertiser: McDonald’s★ Trial Date: June 2007★ Campaign Outline: Mobile TV + mobile FeliCa coupons (ToruCa) + quizzes/games

• Quiz after each inning of Yokohama Bay Stars baseball games • Users who participate are rewarded with ToruCa coupons that can be redeemed at McDonald’s and other prizes

Source: AV Watch


1seg Digital Mobile TVFujitsu Spotcasting

Source: Fujitsu

★ Local area broadcasting with limited reach★ H.264 format plus BML★ Automatic launch of 1seg client and tuning via FeliCa chip on phone★ Installation cost: ca. USD 1,000

= In-store broadcasting, temporary broadcasts at events, security applications etc.


Contactless PaymentFeliCa Plattform

Sources: FeliCa Networks


Contactless PaymentEnabled Handsets, cumulative shipments (in million)

Number of FeliCa handsets shipped

Source: NTT DoCoMo, October 2007


Contactless PaymentJR East: Mobile Suica; BitWallet: Edy

Source: JR East

Source: NTT DoCoMo

Contactless PaymentNTT DoCoMo: iD/DCMX



Contactless PaymentsNTT DoCoMo: iD Platform Approach

Source: NTT DoCoMo


Contactless PaymentComparison of Major Players (Installed Mobile Client Base)

NanacoSuicaDCMX/DCMX miniEdy

Sources: IT Media Business, August 2007


Contactless PaymentUsage and usage intention (Representative sample)


★ Av. monthly spend: JPY 5,270★ Mobile-type users spend 7% more than card-type★ Heaviest users: Male in teens and twenties★ Biggest spenders: 50 years and older★ Most used locations: convenience stores and train stations


Source: SoftBank

SoftBank: Strategic ApproachA Mobile Carrier and...then some


Source: IT Media

KDDI: Strategic ApproachFixed-line, Mobile and Broadcasting Convergence


Source: NTT DoCoMo

DoCoMo: Strategic Approach“Life Assist” Concept


DoCoMo Vision

Source: NTT DoCoMo


InfinitaMission

★ Research and promote mobile innovation

★ Build mobile sites/applications

★ Bring together partners with complimentary goals

★ Facilitate business between Japan and abroad



InfinitaClients

http://www.nttdocomo.co.jp/info/news_release/page/images/new070911_01-3.jpg


http://www.nttdocomo.co.jp/info/news_release/page/images/new070911_01-3.jpg


Thank you!

www.infinita.co.jp/en

http://www.infinita.co.jp

http://www.infinita.co.jp

Japan Case Study: "Mobile 2.0 and the Next Generation of Mobile Applications"

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