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

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

Christopher Billich, Infinita Inc.
Mobile Monday Indonesia Launch
Jakarta, December 4, 2007
© 2007 Infinita Inc.

100,000,000,000,000

...Mobile Page Views per month
in Japan!
Source: NTT DoCoMo/Infinita

40% of Mobile Data Revenues
Worldwide
Source: Chetan Sharma Consulting, 2006

Japan Mobile Market: Key Differences
The Secret Sauce
Same cost
for On- and “Free” 80% 3G
★ User Experience Level Off-Deck Messaging penetration
access
Operators All Operators

control handsets pay
★ Operator-Handset Maker handset SIM- handset
Relationship Level makers locked makers
Operator
★ Operator Business Model Email, not Revenue Open
SMS Share Standards
Level
favors CPs
★ Regulatory/Government Competition on Network Technologies

Level
No spectrum license costs

Traditional i-Mode Ecosystem
Interoperability Interoperability
Platform
Vendors
Business Opportunity Portal Functionality
Mobile
Handsets Content
Operator
Volume Revenue
Handset Opportunity Collection Content
Vendors Providers
Content/Handset Integration

Subscribers by Network Technology
2004-2008 (est.), in million
Voice only 2G Data Users

3G Data Users Non-Flat 3G Data Users Flat Rate
3.5G Data Users Source: Impress R&D

Carriers
Market Share Mobile Subscribers (Total)
NTT DoCoMo
au KDDI
Softbank Mobile
Total mobile
penetration: 77.8%
Source: Telecommunications Carriers Association of Japan

Carriers
Subscribers (Net Additions): Softbank winning for 6 months straight
NTT DoCoMo
Spring
au KDDI Handsets
SoftBank Mobile SBM New
White DoCoMo
MNP Plan Discount
Plans
Source: Telecommunications Carriers Association of Japan

ARPU
Pressure on Voice ARPU - High Data ARPU ratio (JPY)
9,000
Voice ARPU
6,889 Data ARPU
7,500 6,245
5,766
5,263 4,902
6,000 4,670 4,440 4,350
4,500
3,000
1,500 1,867 1,992 2,120 2,080

1,607 1,805 1,740
1,346
0
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 Q1
DoCoMo au
Source: Japan Ministry of Internal Affairs and Communications

Handsets
Manufacturers Market Share 2002-2007
Sharp NEC Panasonic Toshiba Sanyo

SonyEriccson Fujitsu Kyocera Mitsubishi Casio
25.00
18.75
12.50
6.25
0
2002 2003 2004 2005 2006 2007
Source: Nikkei BP Consulting

Handsets
Key Facts
★ 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: CIAJ, July 2007; JEITA, October 2007

All-Round Product Attractiveness
Factors
Source: KDDI

Mobile Content Market
Mobile Content Market Segments, 2003-2006 (JPY billion)
2003 110 3 27 73
2004 117 20 0 41 0 0 82
2005 105 46 10 59 1 2 92
2006 84 52 24 75 6 7 119
0 100 200 300 400

Poly Ringtones Real Tones Full Tracks Games
Decomail Books and Manga Other Source: Mobile Content Forum

Mobile Messaging
Service Example: Decomail
★ 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...
Source: Decotomo.jp; NTT DoCoMo

Mobile Books and Manga
Service Example: Mobile Manga

★ 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
Source: NTT Solmare

Mobile Books and Manga
Service Example: Mobile Books

★ 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 Music
Service Example: au LISMO
★ 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
Source: KDDI

Mobile Music
Service Example: au LISMO utatomo

★ Playlist-based mobile social
networking
• Integration with au Music Player
• Blogs/communities
• Location-based playlists
Source: KDDI

Mobile Music
Mobile Full Track Downloads Usage (All Mobile Internet Users, in %)
Handset doesn’t support it

Enabled Handset, but never used
Have used it
Source: Impress R&D, October 2006

Mobile Music
Average Full Track Downloads per Month (Active Users)
Total
Male Junior High School Students
Source: RIAJ, March 2007

Mobile Video
Service 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 Games
Average Downloads per Month (All Mobile Internet Users)
Never
<1 per month
1-4 per month
>5 per month

Mobile Games
Service Example: DoCoMo Mega i-Applis (905i Series Demo)
Source: IT Media

Mobile Games
Preferred Types of Games (Active Gamers, in %)
Definitely prefer short games

Usually prefer short games
Usually prefer long games
Definitely prefer long games
Source: Famitsu, July 2007

Mobile Games
Service Example: DoCoMo Motion-controlled Games (904i Series)
Source: NTT DoCoMo

Mobile Games
Service Example: DoCoMo Motion-controlled Games (904i Series)
Source: Taito

Mobile Social Media
Service 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 Media
Service Examples: mobagetown (ctd.)

Mobile Social Media
Source: DeNA

Mobile Social Media
Source: DeNA

Mobile Blogging
Awareness and Usage (All Mobile Internet Users, in %)
2005
2006

Mobile Social Networking
Awareness and Usage (All Mobile Internet Users, in%)
Awareness
Usage Source: Rakuten Research/Mitsubishi Research, February 2007

Mobile Social Media
Service Examples: mixi
★ 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
Source: mixi Inc.

Mobile Social Media
Service Examples: Kaocheki
★ 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
Source: J-Magic
• Visual search API

Mobile Social Media
Service Examples: eyenowa Gourmet
★ 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: J-Magic

Mobile Social Media
Service Examples: Kaocheki “Zombie Check”
★ 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
Source: IT Media/J-Magic on a map

Mobile Social Media
Service Examples: “Koala March” Campaign
★ 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
Source: Impress K-tai Watch
Gocco the more you collect

Mobile Content vs. Mobile Commerce
Market Volume, 2003-2006 (JPY billion)
Mobile Content
Mobile Commerce
Source: Mobile Content Forum, July 2007

Mobile Commerce Market
Mobile Commerce Market Segments, 2003-2006 (JPY billion)
Transactions
Services
Goods
Source: Mobile Content Forum, July 2007

Mobile Shopping and Auctions
Service 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)

Service Examples: Girlswalker (ctd.)
★ 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
Source: Xavel, Inc. ★ Tickets: USD 20-80
★ Xavel Inc. also active in actual off-

line commerce (fashion, cosmetics,
beauty salons, design hotels)
through collaborations

Mobile Shopping
Usage (All Mobile Users, in %)
Once a year 2-4 times/yr. 5-10 times/yr. >10 times/yr. Every month Every week
Not at all Don’t know

Mobile Shopping
Average Yearly Spending (Mobile Shoppers) vs. Yearly ARPU (All Users)
Yearly Mobile Shopping Spendings in JPY (av.)

Yearly ARPU in JPY (av.)
Sources: Impress R&D, October 2006; Japan Ministry of Internal Affairs and Communications

Service Examples: 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
Source: Rakuten

Service Examples: au Shopping and Auction Sites
★ On-deck (au)
★ 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
Source: KDDI

Mobile Auctions
Total Mobile Auction Trading Volume, 2003-2006 (JPY billion)
Sources: Mobile Content Forum, July 2007

“Location-based Services”
Service Examples: Otetsudai Networks
★ 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
Source: Location Value
★ About 45,000 workers and
several large clients so far

The Off-Portal Shift
i-Mode Traffic
On-portal
Off-portal

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 Search
Usage Frequency (All Mobile Internet Users)
Source: Mobile Marketing Data Laboratory, October 2007

Mobile Search
Service Examples: au and Google
Source: KDDI

Mobile Search
Service Examples: au and Google
Source: KDDI

Mobile Search
Service Examples: Yahoo! Mobile on SoftBank

Mobile Search
Service Examples: DoCoMo Multi-Engine Search

Mobile Advertising vs. Content vs. Commerce
Revenues, 2005-2007 (JPY billion)
“Pure Ads”
Mobile Search Ads
Mobile Content
Mobile Commerce
Sources: Dentsu, Ministry of Internal Affairs and Communications

Mobile Advertising
Preferred Types of Mobile Advertising among Users (in %)
Website Text/Content Ads

Banner Ads
Mobile Email Ads/Mail Magazines

Base: Mobile Advertising Responders (multiple answers possible)

Mobile Advertising
Marketer Attitudes toward Mobile Advertising (in %)
Active
Not active
Source: D2 Communications, May 2007

Base: 274 large Japanese corporations

Mobile Advertising
Preferred Types of Mobile Advertising among Marketers (in %)
2006
2007
Source: D2 Communications, May 2007

Base: Corporations with current Mobile Advertising activity

1seg Digital Mobile TV
1seg Today
★ 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
Source: Yomiuri TV
• Battery problems

Enabled Handsets, cumulative shipments (in million)
Number of 1seg handsets shipped
Sources: JEITA, July 2007; NTT DoCoMo, October 2007

Usage and usage intention (Representative sample)
Source: CIAJ, July 2007

Base: Mobile Phone Users in Tokyo/Osaka

Consumer Attitudes
1seg usage and usage intention (Teens, male)


Consumer Behavior
Key Facts
★ 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
Source: CIAJ, July 2007; MMRI, October 2007

Integration with ToruCa/FeliCa (Contactless Payment)
Source: K-tai Watch Impress

NTT 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

Fujitsu Spotcasting
★ 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.
Source: Fujitsu

Contactless Payment
FeliCa Plattform
Sources: FeliCa Networks

Contactless Payment
Enabled Handsets, cumulative shipments (in million)
Number of FeliCa handsets shipped
Source: NTT DoCoMo, October 2007

Contactless Payment
JR East: Mobile Suica; BitWallet: Edy
Source: JR East

Contactless Payment
NTT DoCoMo: iD/DCMX
Source: NTT DoCoMo

Contactless Payments
NTT DoCoMo: iD Platform Approach
Source: NTT DoCoMo

Contactless Payment
Comparison of Major Players (Installed Mobile Client Base)
Nanaco
Suica
DCMX/DCMX mini
Edy
Sources: IT Media Business, August 2007

Contactless Payment
Usage 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


SoftBank: Strategic Approach
A Mobile Carrier and...then some
Source: SoftBank

KDDI: Strategic Approach
Fixed-line, Mobile and Broadcasting Convergence
Source: IT Media

DoCoMo: Strategic Approach
“Life Assist” Concept
Source: NTT DoCoMo

DoCoMo Vision
Source: NTT DoCoMo

Infinita
Mission
★ Research and promote mobile innovation

★ Build mobile sites/applications
★ Bring together partners with complimentary goals
★ Facilitate business between Japan and abroad

Infinita
Clients

Thank you!
www.infinita.co.jp/en

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Japan Case Study

Mobile 2.0 and the Next Generation of Mobile Applications

Mobile Monday Indonesia Launch

Jakarta, December 4, 2007

© 2007 Infinita Inc.

© 2007 Infinita Inc.

Source: NTT DoCoMo/Infinita

© 2007 Infinita Inc.

Source: Chetan Sharma Consulting, 2006

© 2007 Infinita Inc.

Operators All Operators

★ Regulatory/Government Competition on Network Technologies

© 2007 Infinita Inc.

Business Opportunity Portal Functionality

© 2007 Infinita Inc.

Voice only 2G Data Users

© 2007 Infinita Inc.

Source: Telecommunications Carriers Association of Japan

© 2007 Infinita Inc.

Source: Telecommunications Carriers Association of Japan

© 2007 Infinita Inc.

1,500 1,867 1,992 2,120 2,080

© 2007 Infinita Inc.

Sharp NEC Panasonic Toshiba Sanyo

© 2007 Infinita Inc.

★ 70% of users replaced handset in past 10 months

Source: CIAJ, July 2007; JEITA, October 2007

© 2007 Infinita Inc.

© 2007 Infinita Inc.

0 100 200 300 400

© 2007 Infinita Inc.

★ On- and off-deck

Source: Decotomo.jp; NTT DoCoMo

© 2007 Infinita Inc.

★ On- and off-deck

Source: NTT Solmare

© 2007 Infinita Inc.

★ On- and off-deck

© 2007 Infinita Inc.

© 2007 Infinita Inc.

★ Service Provider: au KDDI

© 2007 Infinita Inc.

Handset doesn’t support it

Source: Impress R&D, October 2006

© 2007 Infinita Inc.

Source: RIAJ, March 2007

© 2007 Infinita Inc.

© 2007 Infinita Inc.

Source: Impress R&D, October 2006

© 2007 Infinita Inc.

© 2007 Infinita Inc.

Definitely prefer short games

Source: Famitsu, July 2007

© 2007 Infinita Inc.

Source: NTT DoCoMo

© 2007 Infinita Inc.

© 2007 Infinita Inc.

© 2007 Infinita Inc.

© 2007 Infinita Inc.

© 2007 Infinita Inc.

© 2007 Infinita Inc.

Source: Impress R&D, October 2006

© 2007 Infinita Inc.