February 9, 2014

Japan Digital:
Business Culture, Mobile, Games
The Hollywood Perspective

Long Duk Dong,
“Sixteen Candles”
The Israeli Perspective
The Real Basis for Japanese Culture

4
Rice Farming Has Moved to the Office

5
Japan viewed by Hofstede’s 5 Dimensions
- Power distance
- Individualism vs collectivism

- Masculinity vs femininity
- Un...
Role of the Individual
Japanese Artwork

Western Artwork
Japanese is Very Generational
20-30

30-40

YUTORI
Generation

LOST
Generation

Bubble
Sedai and upper

•

Digital natives...
Japanese young people: Real = Danger
LIFE HISTORY OF A 22 YEAR OLD

KOBE
EARTHQUAKE
(5 YRS OLD)

POKEMON
(7 YRS OLD)

MOBI...
Gen Y: “SOUSHOKU DANSHI”
DO YOU THINK YOU ARE
A “SOSHOKU DANSHI”?

“Soshoku Danshi”
(lit. Herbivore Men):
(noun) They are ...
Not a herd, but a swarm

11
YASHIMA Operation

12
Japan Operator Market Share (Jan, 2014)
■ 128 million subscriptions

Softbank
(25.3%)

KDDI
(29%)

Source: Bloomberg Repor...
Higher iOS Share than US and growing…
The Future of Mobile?
More Likely THIS is the Future of Mobile?
THIS is the Future of Mobile

17
THIS is the Future of Mobile

18
Maybe, THIS is the Future of Mobile

19
Look to JAPAN for the Future of Mobile
Japan 1st market to near saturation
•
•
•
•
•

Media / Video (most popular category)
Photos
Shopping
Lifestyle
Tools

Mand...
Japan: Networks Change Behavior

Japan LTE deployments
clustered in Tokyo
Say こんにちは to Phablets
Growth / decline in ad-spend by category,
2010-2012

Total
Ad
spend

Newspaper

Magazine

TV

Radio

Digital Ads
Balloon Fishing

http://www.youtube.com/watch?v=j-6jn4Qo76E
Social Gaming Market Size : $5 billion USD in 2013
2010

2011

2012

2013

Annual Market Size
(unit: 100 million Yen)

¥1,...
Monetization: Japan has ¼ of US Google Play
downloads but highest revenues in the world

Source: AppAnnie Index, Nov,
iOS: World #2 revenue despite smaller user base
• DoCoMo, Japan’s largest
operator, just launched
iPhone in October
• Japa...
Japan Social Mobile Gaming Market Drivers
• Carrier billing- integration of
virtual wallets into games
• Game friendly soc...
2 Closed platforms- DeNA and Gree

Source: Serkantoto.com
Japan-Only Genres: Manga based social games

Bandai Namco: Gundam
Japan-Only Genres: Social RPGs
Japan-Only Genres: Social Dating/ Love Simulation
Special Genres: Social Idol Raising Games
Special Genres: Social Card Battle Games
Building a Successful Mobile Game in Japan
• Focus on popular genres- RPG (21%) & Romance (18%) popular on mobile
Localized marketing with celebrities and events
Prevent abandonment with easy game-play
Target female players with genre, art & game flow
Simple, colorful and streamlined UI
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Digital Business in Japan_Feb 2014: Japan-Israel Business Summit, Tel Aviv

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  • Until WWII, 45% of Japan worked in agriculture, mostly in rice cultivation. Until mechanization in the 1970’s, this is the way rice was cultivated in Japan.
  • For an Israeli, the culture differences would include:A higher power-distance: Israeli hierarchical structures are normally quite flat and it is expected that everyone has a voice, contributes to decisions, and so on. This is reflected by the Israeli habit of questioning and criticising superiors openly, and expecting that leaders are visible and accessible. Although Japan does not score as high as other Asian countries in power-distance, to an Israeli the difference will be striking since: hierarchical positions have a far greater importance than they are normally used to (more on this in later posts), decisions are less democratic, wage differences are greater, and so on.A lower degree of individualism: Although the Japanese national culture scores moderately in this area (and demonstrates some tendencies towards both individualism and collectivism), an Israeli will find the Japanese to be more group-oriented and place more emphasis on harmony of the group. This is also reflected in the communication style, where the Israelis are far more direct, highlighting the wants and needs of the individual in what is said. By contrast, the Japanese will be more indirect, due to a reluctance to affect group harmony.A far higher degree of masculinity: This is the most striking difference. The Israeli society is one of the most feminine, emphasising quality of life, involvement, equality, and compromise. By contrast, Japan is extremely competitive (usually on a group level). This is something that is fostered from a very young age and serves as the main motivational factor in business, while in Israel motivational factors include free time and comfortable living. Striving for excellence is at the core of Japanese values.A far higher degree of uncertainty avoidance: This is another area where the differences are extremely pronounced. With a low uncertainty avoidance index, the Israelis are comfortable in uncertain situations. They accept that things change and incorporate them easily into their work routines and so on. Furthermore, there are fewer rules and the work situations are less structured. Japanese national culture is exactly the opposite. The Japanese have an aversion towards ambiguity and emphasise structure and codes of behaviour. Managers are interested in all the facts and figures, and a lot of effort is put into feasibility studies (etc.) in an effort to identify and eliminate risk factors.A higher degree of long term orientation: Japan is a long-term oriented society, which looks at the bigger picture and views an individual’s life as a short moment in time. In business, this translates to a far higher focus on long term investment (e.g. in R&D) rather than short-term profits. In Western countries, including Israel, the focus tends to be more towards the short-term. Often, our business models, which require maximisation of stakeholder profits, do not allow for the same long-term focus that is common in Japan (i.e. our managers tend to get fired if they do not produce short-term results).
  • In Japanese art, the person is not the central theme. Much more important is the broader context, the role of nature and how people fit within that larger whole. Contrast that with Western art, in which the individual is the most prominent attribute.
  • It is important to recognize that Japan is the oldest society in the OECD. With a birth rate of only 1.3 children per couple and the longest life expectancy in the world, more than 20% of the population is over the age of 65. Between 1946 and 1991, Japan achieved continuous GDP growth. The only exceptions were the Oil Shock years of 1973 and 1979. The demographic challenge currently confronting Japan’s growth is how to support the older generation with a shrinking labor pool.
  • Japanese born 22 years ago will have known economic stagnation for the entirety of their lifetime. Moreover, a series of natural and human disasters, coupled with government paralysis, has shaped their impression of the real world. Contrast that with experiencing the transition from offline social experiences as children, such as Pokemon and Tamagochi, into online social experiences. Unlike their peers in the US, Japanese have enjoyed the connected lifestyle since DOCOMO was the first carrier in the world to roll out 3G with their iMode mobile operating system. More recently, self-expression platforms like Ameba and now Twitter enable Japanese to share their inner feelings in a socially acceptable way. Japan is #2 in the world for per capita blog usage (Comscore).
  • Masayoshi Son, founder of Softbank. In the 90’s, he invested in offline publishers. Later he acquired major portals, wireless carriers and companies that could expand his footprint in China. In the last 6 months, Softbank has made two acquisitions for mobile social game publishers, Gung Ho and Supercell, both of which valued the acquired companies at more than $3 billion USD.
  • Supercell is a games business with just two titles, Clash of Clans and Hay Day, which until last week could only be played on Apple's iPhone and iPad. Japan's Softbank paid $1.5bn to acquire a 51% stake in Supercell and integrate with its own publisher, GungHo, maker of Puzzles & Dragons. Launched in 2011, Supercell revenues grew from $100m in 2012 to $179m in the first quarter of this year and are on course to hit $1bn for the whole year.
  • Colopl is a mobile social game publisher.Their title Quiz RPG: Wizard & Wiz the Black Cat, is a mix between quiz game and RPG,with more than 10 million downloads in Japan alone and a market cap of 3.2 billion USD.By way of comparison: social gaming behemoth GREE is currently listed with US$1.9 billion. DeNA stands at US$3 billion.So Colopl’s market cap is now higher than that of GREE (over 40 million registered users in Japan) and DeNA (over 50 million users). 
  • Line makes messaging social, with pictogram-based communication. Users purchase stickers to enhance their own self-expression.
  • Tokyo Girls Collection began as a mobizine in which the community uploaded photos of fashionable women, editors tagged the clothing with QR codes, enabling readers to make purchases directly from their phones. Today, mobile and offline commerce are blended with an offline fashion show format designed to encourage online fans to make purchases.
  • What happens wheneveryone who is likely to is carrying at least one smartphone or tablet? Japan has a lower penetraton than Korea but it is concentrated in the Tokyo region. In Korea, as in the US, 96% of the apps available through the T Store – are free. NFC is prevalent in connected devices, allowing for innovations across devices. For example, SK Planet has a mobile payment system called T Cash, which is used for 54% of in app purchases, and also can be used to pay for off-device transactions such as train and taxi fares. Interestingly, another third of in app purchases are paid for using gift certificates, demonstrating the potential of mobile devices as a mechanism for giving and receiving gifts.
  • Digital Business in Japan_Feb 2014: Japan-Israel Business Summit, Tel Aviv

    1. 1. February 9, 2014 Japan Digital: Business Culture, Mobile, Games
    2. 2. The Hollywood Perspective Long Duk Dong, “Sixteen Candles”
    3. 3. The Israeli Perspective
    4. 4. The Real Basis for Japanese Culture 4
    5. 5. Rice Farming Has Moved to the Office 5
    6. 6. Japan viewed by Hofstede’s 5 Dimensions - Power distance - Individualism vs collectivism - Masculinity vs femininity - Uncertainty avoidance index - Long term orientation 6
    7. 7. Role of the Individual Japanese Artwork Western Artwork
    8. 8. Japanese is Very Generational 20-30 30-40 YUTORI Generation LOST Generation Bubble Sedai and upper • Digital natives • Fear becoming oyaji • • Fast moving • • Gentle but risk averse Responsibility shy in their private lives Suffering from pension crisis • Harder to adapt to changing workplace AGE GENERATION LIFESTYLE • Fewer getting married 40-55+ 8
    9. 9. Japanese young people: Real = Danger LIFE HISTORY OF A 22 YEAR OLD KOBE EARTHQUAKE (5 YRS OLD) POKEMON (7 YRS OLD) MOBILE VIRTUAL SNS (13YRS OLD) EARTHQUAKE, TSUNAMI, Government Failure (21 YRS OLD) SUBWAY TERROR (4 YRS OLD) iMODE MOBILE WEB (8 YEARS OLD) BUBBLE COLLAPSE SARS EPIDEMIC (12 YEARS OLD) Self-Expression Platforms (16 YRS OLD) STAGNATION & RECESSION
    10. 10. Gen Y: “SOUSHOKU DANSHI” DO YOU THINK YOU ARE A “SOSHOKU DANSHI”? “Soshoku Danshi” (lit. Herbivore Men): (noun) They are men with gentle hearts. They don’t worry about being “masculine”, or greedily pursue the opposite sex. They are men that dislike being hurt and hurting others. They are Socializers. Source: Masahiro Morioka “Heisei Danshi Zukan (Guide to Men in Heisei Era)” Source: Research on 20-year-olds 2010, Macromill 10
    11. 11. Not a herd, but a swarm 11
    12. 12. YASHIMA Operation 12
    13. 13. Japan Operator Market Share (Jan, 2014) ■ 128 million subscriptions Softbank (25.3%) KDDI (29%) Source: Bloomberg Reports, Q3 2013 59.62 million (45.7%)
    14. 14. Higher iOS Share than US and growing…
    15. 15. The Future of Mobile?
    16. 16. More Likely THIS is the Future of Mobile?
    17. 17. THIS is the Future of Mobile 17
    18. 18. THIS is the Future of Mobile 18
    19. 19. Maybe, THIS is the Future of Mobile 19
    20. 20. Look to JAPAN for the Future of Mobile
    21. 21. Japan 1st market to near saturation • • • • • Media / Video (most popular category) Photos Shopping Lifestyle Tools Mandatory tablets in all K-12 classrooms
    22. 22. Japan: Networks Change Behavior Japan LTE deployments clustered in Tokyo
    23. 23. Say こんにちは to Phablets
    24. 24. Growth / decline in ad-spend by category, 2010-2012 Total Ad spend Newspaper Magazine TV Radio Digital Ads
    25. 25. Balloon Fishing http://www.youtube.com/watch?v=j-6jn4Qo76E
    26. 26. Social Gaming Market Size : $5 billion USD in 2013 2010 2011 2012 2013 Annual Market Size (unit: 100 million Yen) ¥1,064 ¥2,385 ¥3,394 ¥4,135 Market size (monthly) 89 199 283 345 ARPU (monthly) 2365 3775 4635 5510 Paying users (unit: 10,000) 375 527 610 626 Paying Ratio 10% 13% 15.5% 17% Active Users (unit: 10,000) 750 810 875 920 Active User Ratio 30% 27% 25% 23% Unique Players (unit: 10,000) 2500 3000 3500 4000 Source: UFJ Morgan Stanley
    27. 27. Monetization: Japan has ¼ of US Google Play downloads but highest revenues in the world Source: AppAnnie Index, Nov,
    28. 28. iOS: World #2 revenue despite smaller user base • DoCoMo, Japan’s largest operator, just launched iPhone in October • Japanese consumers ready to spend for mobile content • Games account for >80% of revenue in Japan App Store • Catching up to US- faster growth in Japan Source : AppAnnie Index, Nov
    29. 29. Japan Social Mobile Gaming Market Drivers • Carrier billing- integration of virtual wallets into games • Game friendly society and mobile-centric users • Faster mobile networks • Integration between mobile and social gaming via SNS • High disposable income, especially women gamers • Card Battle represents 70% of Top 20 on Gree & DeNA
    30. 30. 2 Closed platforms- DeNA and Gree Source: Serkantoto.com
    31. 31. Japan-Only Genres: Manga based social games Bandai Namco: Gundam
    32. 32. Japan-Only Genres: Social RPGs
    33. 33. Japan-Only Genres: Social Dating/ Love Simulation
    34. 34. Special Genres: Social Idol Raising Games
    35. 35. Special Genres: Social Card Battle Games
    36. 36. Building a Successful Mobile Game in Japan • Focus on popular genres- RPG (21%) & Romance (18%) popular on mobile
    37. 37. Localized marketing with celebrities and events
    38. 38. Prevent abandonment with easy game-play
    39. 39. Target female players with genre, art & game flow
    40. 40. Simple, colorful and streamlined UI
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