6-page white paper outlining the key findings from an in-depth Infinita research report on Mobile Advertising and Marketing in Japan. Download the full report at www.infinita.co.jp/research

1. 21st Century Mobile Marketing campaigns and actually sign up for promotions
or make purchases as a result. Close to
Global Insights into the Worldʼs Most another third click on ads, but do not
Advanced Mobile Society: Japan participate in promotional offers.
Christopher Billich, Infinita Inc. Thus, there is no question that mobile
April 11, 2008 advertising will continue to gain in significance
According to industry data released by Japanʼs in Japan - a market where more than 4 in 5 of
largest advertising agency Dentsu in late a total 100 million mobile subscribers use
February, mobile advertising expenditures in mobile data services.
the Japanese market in 2007 increased by
almost 60% compared to the previous year, 1,500
reaching ¥62.1 billion (ca. USD 621 million).
This result tops even Dentsuʼs own optimistic 1,125
prognosis, published 12 months earlier, by
12%. An impressive performance in an 750
advertising market close to saturation - total
advertising expenditures in Japan only grew by 375
1.1% from 2006 to 2007, and by 1.7%
between 2005 and 2006.
0
2000 2002 2004 2006 2008 2010
Mobile advertising up 60% in 2007
For the first time ever, online advertising Japan mobile advertising spendings, USD million
expenditures (¥ 443.6 billion, ca. USD 4.4
billion) exceeded combined radio and So there clearly is a lot of room for growth in
magazine advertising expenditures, which mobile advertising here, even though Japan is
each were down around 4% on a YoY basis. one of the most mature mobile markets
Newspaper advertising suffered even more worldwide: Mobile advertising revenues are
heavily at -5%, and TV advertising expected to more than double between now
expenditures are down for the third year in a and 2011. Which factors have contributed to
row. where we stand today, what are the forces
While the importance of mobile advertising is driving the industry at the moment, and which
growing, it still accounts for a relatively small challenges and opportunities does the market
share of online advertising revenues (10.3%) face in the coming years?
and for a minor piece of the whole advertising What makes the mobile web fly in
pie, which is still dominated by TV, print and Japan?
sales promotion.
Several factors combined have led to the
Disconnect between mobile media massive adoption of mobile internet usage in
usage and advertising spendings Japan: First and foremost, the fast and early
Considering how media usage is developing in roll-out of third-generation network technology
Japan, there is still clearly a disconnect (used by more than 75% of all subcribers) and
between advertising spendings on traditional resulting ease-of-use for the user. The
media and mobile. Between 2000 and 2006, widespread promotion and adoption of flat-rate
the share of time that consumers spend on data plans since 2004, used by about a third of
mobile (relative to all forms of media) has all subscribers already is the second major
increased four-fold to 4%, but mobile-related driver. Additionally, a revenue share model
expenditures still only account for 1% of all favoring content providers 9:1 over the
advertising spendings. 25% of Japanese operator has led to an abundance of attractive
mobile data users today respond to mobile on-deck content. QR codes and mobile
21st Century Mobile Marketing www.infinita.co.jp/research Page 1 of 6

2. search, both pushed by the operators, make major advertising agencies. These joint
off-deck sites easily accessible as well. subsidiaries serve three main purposes:
A factor that is particular to Japan is the power (1) to develop and implement standards in
balance between operators and handset formats, targeting and metrics,
manufacturers. All handsets are SIM-locked
(2) to act as sales representatives for operator-
and exclusive to the operator, who controls
owned services and content providersʼ on-
development and handles distribution. This
deck sites,
gives carriers an elsewhere unheard-of level of
control over the rollout of handset features and (3) to work with the operator in developing new
results in a homogeneous distribution of products and services that spawn new
features across the device base. Thus, Japan mobile advertising opportunities.
hardly has the problems of device It should be emphasized here that the operator
fragmentation causing the rest of the world subsidiaries work together closely with each
headaches. other, as well as with the mobile content and
Operators work together to create common media industries. So well-oiled a machine is
standards and have steadily introduced one the system that advertisers are able to book
technological feature after another, enabling campaigns across all three operators through
innovative content and services, many of them any one of their joint subsidiaries, keeping
crucial to making mobile advertising a transaction costs for marketers to a minimum.
success. Examples include: Mobile email with In addition to this construct, non-operator
full HTML support since the very early days of media sales reps market some of the official
the medium (as opposed to creatively sites as well, this is specifically the case for
restrictive SMS), robust mobile browsers, and some of the larger content providers.
a cross-carrier emoticon library - not to forget Independent agents cater to the plethora of
phone cameras, QR Code readers, Mobile off-deck sites, often in the form of Google
Flash, GPS, 1seg digital terrestrial AdSense-type affiliate ad networks. Off-deck
broadcasting technology and FeliCa (RFID) sites operate on the same basic format,
chips for contactless transactions. targeting and metrics standards as on-deck
While the particular nature of the operator- ones, with slight variations.
handset manufacturer relationship in Japan
The early days: banners and email
has historical roots and cannot be replicated in
other markets, other factors driving mobile Until about two years ago, mobile marketers
internet usage, and in turn mobile advertising, relied mostly on banner ads, text ads and
apply everywhere. mobile email advertising. One of the more
prominent operator initiatives from this era is
How did mobile advertising develop in the Tokusuru Menu, which lists campaigns and
Japan? promotions on the deck.
No structured approach to mobile marketing Another one are carrier-driven, opt-in mobile
existed during the first few years after the newsletters that aggregate promotions and
emergence of the medium with NTT campaigns from different advertisers.
DoCoMoʼs 1999 launch of i-Mode. The market Needless to say, many off-deck sites use opt-
was fragmented with an abundance of players in newsletters as promotional tools for their
and formats, as a consequence, marketers own and third-party advertising as well.
hesitated to pursue the mobile opportunity. However, in light of operatorsʼ strict anti-spam
Standardization and cross-industry measures and consumersʼ increasing wariness
efforts of message overload, mobile email advertising
has been decreasing in popularity.
To solve this problem, each of the operators
established a joint subsidiary with one of the
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3. With regard to compensation models for impressions per month from a good 9 million
mobile media, the traditional setup relied registered users (for comparison: the top page
heavily on CPM and fixed-time pricing. More of Yahoo! Mobile clocks in just under 4 billion
recently, marketers are beginning to favor page impressions, NTT DoCoMoʼs i-Mode
performance-based models (CPA and CPC), menu itself at an estimated 5 billion).
although traditional pricing approaches are still
warranted for branding-oriented campaigns.
About a third of the brands currently using the
mobile to advertise are actually content
providers promoting their own sites, so to
some degree, one segment of the industry is
driving another. About 30% of Japanese
companies have a mobile site in addition to a
PC web presence, but only about a quarter of
them use mobile advertising as a marketing
tool today, showing that there is still much
untapped potential.
The advertisersʼ reluctance can mainly be
attributed to the time factor. For a new medium
to find strong acceptance in advertising, it first
takes consumers to adopt it on a large scale,
and then traditionally-oriented agencies to
understand the benefits, challenges and rules
of the medium. Lastly, this thinking still needs
to trickle down to marketers. While many Coca Cola x mobagetown tie-up
advertisers active on mobile today praise the
medium for cost-effectiveness, targetability In Coca Colaʼs case, a fully branded version of
and transparency, some cite creative mobagetown was created. This was only
restrictions and lack of emotionality as accessible to mobagetown members who also
problems. had an Coca Cola Mobile member account or
signed up for one. Once in, users were able to
Today: Large-scale tie-ups and branded play Coca Cola-branded games, use
content promotional Decomail elements (graphic-
But looking at some large-scale campaigns heavy mobile HTML mail with animations) and
from 2007, it becomes clear that the third obtain exclusive Coca Cola avatar items. The
screen is quickly developing into a first-rate campaign was a massive success, with more
marketing channel. than 1 million users signing up to Coca Cola
Mobile over the course of the four-week
Both Coca Cola and NIKE ran major campaign run. It generated 185 million page
campaigns on a a site called mobagetown, views, 350,000 users became “friends” with
which since about late 2006 has been, hands- the Coke avatar, and 190,000 comments were
down, the most popular mobile site in Japan. left on the Coke characterʼs blog. And the
The site operates on a model of free browser- campaign clearly lives on - almost one year
based flash games, social networking and later, users still sport the brandʼs virtual
avatars that users can dress up from a choice clothing online.
of more than 10,000 digital items. These can
be purchased with a virtual currency obtained Similarly, NIKE promoted one of its collections
by clicking on ads, and registering with or via mobagetown, giving users virtual versions
shopping on affiliate sites. Mobagetown of the clothes to be found in NIKE stores, to
currently generates about 17 billion page dress up their avatars. Additional “limited
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4. edition” content could be obtained by users matched ads on R25 Mobile, a highly popular
who went to an actual NIKE retail store and news site aimed at young professionals. Since
accessed URLs hidden in QR codes on July, Overture has been partnering with
stickers, driving traffic to the point of sale. mobagetown to provide content-matched ads.
Google started AdSense mobile services in
Banner and mobile email ads used to be the
October. And au KDDIʼs plans to offer
main route consumers took to find their way to
behavioral targeting on mobile show where the
promotions like these. More recently, search-
things are heading.
based and content-matched ads are starting to
increase in importance. Contactless transactions and digital
All three operators in Japan have chosen to mobile broadcasting: Key technologies
partner with Internet search brands and make for next-generation mobile marketing
access to the off-deck world just as easy as There are two
finding on-deck content. This is a strategy key mobile
clearly aiming to drive data access and open technologies that
up a new revenue stream in mobile search were launched in
advertising. Operator au KDDI plugged Google 2004 and 2006,
Search into its EZweb menu as early as respectively,
summer 2006. Softbank Mobile followed suit which are being
shortly after its takeover of Vodafone Japan heavily pushed
with a drastic move, replacing the entire by operators and
Vodafone live! portal with Yahoo! Mobile. And create new
NTT DoCoMo recently announced a far- mobile marketing
reaching cooperation with Google, opportunities:
encompassing not only mobile search, but joint Contactless
development of future mobile services as well. transactions via
Search and content-matched ads RFID (on the
gaining importance Sony-developed
FeliCa standard)
To illustrate just how important mobile search and digital
is becoming: Up strongly from only one year terrestrial
ago, more than 30% of mobile internet users in broadcasting to
Japan today already use mobile search on a mobile (called
daily basis. Only less than a quarter say they 1seg in Japan).
do not at all. While today an estimated 25% of The implications
all mobile advertising revenues come from of these reach far
search ads, over the next 4 years this ratio is beyond the
expected to shift to about 60%. Initially, concept of
operators were worried that users would shy “advertising on
away from official on-deck content as a result the mobile web”.
of search being prominently positioned on the
deck. But au KDDI quickly proved that search
McDonaldʼs trial campaign on digital mobile TV
can drive on-deck usage as well - and greatly
increase off-deck access and mobile search
ad revenues in the process. Both technologies can be found on almost
every handset shipping today.
While search ads are certainly one of the
strongest-growing areas of mobile advertising, Almost one third of all devices in the hands of
content-matched mobile ads are seeing fast Japanʼs mobile subscribers already feature a
adoption, too. Overture teamed up with NTT Mobile FeliCa chip. This enables users to
Data in February 2007 to provide content- contactlessly make payments at participating
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5. retailers and vending machines, as well as Specifically with regard to mobile search
online on mobile shopping sites. Other advertising, algorithms are not as powerful as
applications include passing through train on the PC web, since mobile sites tend to have
gates, using the handset for credit cards less interlinkage with each other than their PC
transactions, checking into airplanes and counterparts.
redeeming electronic coupons - all of it with
Other challenges are structural: Even though
just a touch. More than 70 major partners have
the industry is relatively mature, the media-
signed up with FeliCa so far. With revenues
buying process is fragmented, forcing
from mobile commerce having surpassed
advertisers to coordinate a range of partners
mobile content revenues three years ago
for campaigns that reach across all operatorsʼ
already, the mobile phone is fast turning into a
portals, on-deck and off-deck sites.
full-fledged shopping and payment device.
However, even with obstacles like these to
An estimated 25 million handsets out of the
overcome, the outlook for mobile marketing in
100 million in use in Japan today are already
Japan is bright: Mainstream adoption of mobile
capable of receiving digital broadcasts. For
internet usage driven by affordable flat-rate
now, due to (soon-to-change) regulation the
data pricing, evolution of network speeds
actual programming that users see is what is
beyond 3G and ever-increasing handsets
being broadcast on TV. A data feed below the
capabilities provide the framework. Cross-
TV content window provides links to
industry efforts in standardization of formats,
programming-related websites and
targeting and metrics lead to transparency for
promotional offers, offering a compelling
advertisers. Close cooperation between all
advertising platform to marketers without
players of the value chain constantly creates
interrupting the userʼs media experience.
new marketing opportunities.
NTT DoCoMo has been running trials that
The mobile phone is a highly personal device
combine both 1seg and FeliCa technologies:
that users carry anywhere and anytime. It is
during a baseball game, consumers could
starting to integrate communications, content
participate in a mobile game, betting on the
consumption and production features with
outcome of innings. For this, they received
contactless transactions and locational
promotional coupons, which they could
positioning. This spells unprecedented
redeem at McDonaldʼs. A similar concept
possibilities for marketers indeed.
involved coupons which could be used by
simply touching the handset to Coke vending While Japanʼs mobile advertising market has
machines. its particularities, it is certainly a place anyone
in the business - whether operator, marketer,
While these examples are still early-stage
agency, media and technical enabler - should
proofs of concept, the opportunities for mobile
be looking towards for inspiration and best
marketing look promising.
practices in mobile marketing.
Barriers and drivers
So which barriers does mobile marketing face
in Japan?
Some of them are technical: Until very
recently, it was not possible for off-deck sites
to discern the unique device ID of NTT
DoCoMo handsets. Less than half of Softbank
devices are enabled for use of cookies. This
makes it difficult to measure campaign
effectiveness, and in turn lowers attractivity of
the medium to advertisers. There are similar
issues with session IDs.
21st Century Mobile Marketing www.infinita.co.jp/research Page 5 of 6

6. 21st Century Mobile Marketing * How will mobile marketing develop in years
to come?
Global Insights into the Worldʼs Most
Advanced Mobile Society: Japan Who should read this report
Author: Christopher Billich, Infinita Inc. Operators, advertisers, media, agencies and
This strategic research report provides technical enablers anywhere that are looking
detailed insights into the inner workings of for mobile marketing insights and best
mobile marketing and advertising in a country practices from the worldʼs most advanced
where the vast majority of the population uses mobile society to leverage in their local
mobile Internet services - and where mobile markets.
marketing is fast evolving into a standard part Publishing date: April 11, 2008, Version 1.0
of the marketing mix, a scenario soon to
become reality in many other parts of the world Pages: 188
as well. Format: PDF
With the rapid and widespread introduction of Company-wide License: USD 1,500
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encompassing interaction both on- and offline.
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“21st Century Mobile Marketing” provides in-
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* Drivers and barriers for mobile marketing Member Discount
* Interviews with key industry players and “21st Century Mobile Marketing - Global
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Mobile Society: Japan”, published by Infinita
Key questions addressed in this report Inc., is available at a 10% discount to Mobile
* How has mobile marketing evolved into a Marketing Association (MMA) Members.
USD 620 million market in Japan (and again For further information, please contact
is set to double by 2011), and what lessons Christopher Billich at billich@infinita.co.jp.
does this hold for other markets?
* How are the players in the value chain
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21st Century Mobile Marketing www.infinita.co.jp/research Page 6 of 6