Is 3G a DOG or a DEMON?
Learning from 7 years of 3G spin in Asia
Benjamin Joffe, CEO | +8* | www.plus8star.com
Mobility World Congress | Beijing | November 2008

Introduction

3G penetration in Japan and Korea
is over 70%; it is <0.1% in China

100%
80%
USA
60%
3G users
40%
Chin Japa
20% a n
0%
0% 20% 40% 60% 80%
% of Internet connections measured above 5Mbps
(Source: Akamai)

#2 economy, #1 mobile society
#1 mobile & Internet population
#1 digital society

Japan stopped selling 2G
in 2007

DOG or DEMON
?

Demons?

TD: 2001 all over again?
=?
TD-SCDMA Phone W-CDMA (r.99) Phone
Motorola, 2008 Panasonic, 2001

Video phone

Mobile payment

Contactless
(and networkless)

Mobile TV

Terrestrial or
Satellite Broadcast

Learning #1
Most talked-about services
don’t need 3G

We are sorry for telecom operators
who made the mistake of 3G,
but it’s not our fault!
Martin Varsavsky
CEO, FON
(world’s largest WiFi network operator)

For operators, 3G is essentially a
waste of money.
Unfortunately, there is no
coming back
Top executive at one of the most innovative European Telecom operators
(Very familiar with Asian markets)

Alternate definition

Games
3G Girls
Gambling

Games
3G Girls
Gambling

Mobile Content

Carriers
content

Official content
Carriers
content

Mobile content
Official content
Carriers
content

PC content
Mobile content
Official content
Carriers
content

PC content
Mobile content
Official content
Carriers
content
Blue ocean of offline world
“lifestyle infrastructure”

Dogs?

Mobile music

More music is sold “online” than
“offline” in China and Korea

Ringback tones were created in
Korea in 2001
They reached 30% penetration in
less than 2 years

90% of digital music
sold in Japan is mobile

Digital music revenues in Japan
Source: Infinity Venture Partners, 2008

KDDI Mobile Music
1 song = 3 USD

KDDI Mobile Music
10% content fee = 0.3 USD

KDDI Mobile Music | Direct Effect
100 million songs
Total = 300 million USD
KDDI = 30 million USD

KDDI Mobile Music | Indirect Effect
#1
Monthly growth index
1.50
New subs share /
Market share Ring songs
December 2002 Full Song Downloads
November 2004
1.00
0.50
0.00
Nov-01
Nov-02
Nov-03
Nov-04
Nov-05
Nov-06
May-01
May-02
May-03
May-04
May-05
May-06
Aug-01
Feb-02
Aug-02
Feb-03
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Feb-06
Aug-06
-0.50
Source: Telecommunications Carriers Association, 2007

KDDI Mobile Music | Indirect Effect
#1
x2 new subscribers
KDDI = +400 million USD / YEAR

KDDI Mobile Music | Indirect Effect
#2
Data ARPU boost
KDDI = +800 million USD / YEAR

TOTAL
Content Providers = 270 million USD
KDDI Content Fee = 30 million USD
KDDI New Subs = 400 million USD
KDDI ARPU Boost = 800 million USD
TOTAL KDDI = 1.2 billion USD / YEAR

Learning #1
Content Providers Market Services
& Educate Users

Learning #2
Indirect Benefits >> Direct Benefits

Learning #3
Ecosystem Growing

or

KDDI’s Double Flat Fee
(May 2005)
40 USD
10 USD
1.5 MB 6.5 MB~

Mobile TV

Koreans now spend more time on
the Internet than watching TV

Mobile TV penetration in Japan
and Korea is over 30%

37 million mobile TV phones were
sold by June 2008 in Japan
Mobile TV started in May 2006

In Japan over 70% of new handsets
are mobile TV-enabled

Mobile advertising

The mobile ad market in Japan was
over 700 million USD in 2007

Have you seen this before?

QR code in a train station
with directions to a hotel
QR code on a web page
QR code printed on chocolate

TV ad
for a show’s website
Train ad Magazine ad
for job portal for cosmetics
Newspaper ad
for health product

Blyk?
(Guess what Blyk benchmarked?)

Beyond mobile advertising
Mobile Commerce

Moba-Oku (DeNA)
Mobile Auctions
1. Take pic
2. Select category
3. Enter info
4. Check
5. Done!

Over 6 billion USD in 2007
Size of M-commerce market by year
(billion USD)
14
12
10
8
6 10.6
12.3
4 9
6 7.4
5.6
2 2.6
4.1
1.7
0
2003 2004 2005 2006 2007 2008 2009 2010 2011
(F) (F) (F) (F)

Japan’s m-commerce
=
2x mobile content
=
10x mobile advertising
=
China’s e-commerce

Mobile books

Several best-selling novels in Japan
were written on mobile phones

One full bookshelf
for mobile novels
at Kinokuniya,
Japan’s largest
bookstores chain!

The two volumes of
this book “Koi Sora”
(“Loving sky – story
of a love without
gentleness”) sold…

“Koi Sora” sold over 2 million
volumes (8 EUR / book)

Even on TV!

Digital books: Internet vs. Mobile
Flat-fee data plans
are introduced
Source: Infinity Venture Partners, 2008

Mobile Social Networks

“Social Networking
Is Not a Business”
(but it might be soon)
MIT Technology Review
July/August 2008

Build communities
with matching games
Attract user
with free games
Chat Avatars
BBS Journal Clubs
Get new users with
Word-of-mouth

Starting date
2004 1997 1999 2004 2006

Registered users
60 mln 500 mln 20 mln 14 mln 10 mln

Country’s Internet users
60 mln 500 mln 20 mln 14 mln n.a.
200 mln 220 mln 35 mln 90 mln 90 mln

Starting date (mobile)
2007 2000 2004 2006 2006

Mobile users (est.)
3 mln 50 mln 6 mln 10 mln 10 mln

Country’s mobile users
3 mln 50 mln 6 mln 10 mln 10 mln
255 mln 580 mln 45 mln 100 mln 100 mln

Revenues 2007 (USD)
150 mln 520 mln ~200 mln 100 mln 150 mln

Profit 2007 (USD)
(50 mln) 225 mln ~100 mln 35 mln ~60 mln

Average Revenue From Users
~0% 87% 80% 5% 50%

Impression unit price
PC
Mobile
April 2005 April 2006 April 2007 May 2008

2008 Trends

Mobile Service Trends: Japan
Mobile TV service “One Seg”
Twist screen
with data menu overlay
Decorated and animated mobile
Internet browsing (left)
messaging

Mobile Service Trends: Korea
Mobile TV Mobile web browsing service
Video phone call Mobile widget

Conclusion

Mobile lifestyle
infrastructure

All Media Converge to
Mobile

3G
+
Flat-fee data

For content, media and advertising:
New service & revenue models

For mobile carriers:
indirect effects of innovations

Thanks!

About +8*

There are more ideas
outside your country
than inside
Tom Kelley
CEO, IDEO
The 10 faces of Innovation

“Innovation Arbitrage”
• About us
– +8* | Plus Eight Star is the leading cross-market and cross-cultural consultancy in Asia.
– We provide local expertise & global perspective on mobile and Internet innovation from
China, Japan and South Korea to add value to and accelerate the development of our
clients’ businesses.
• Our services
– Analysis of proven best practices and business models from Asia
– Other services: executive study trips, market entry strategy, M&A advisory, partners
identification, negotiation support.
• Founder & CEO: Benjamin Joffe
– 9 years experience with mobile & Internet in Asia
– Selected among “China’s Top 100 mobile industry influencers” in 2007
– Regular speaker at events on mobile and Internet in Asia
– Fluent in English, Japanese, French with working knowledge of Mandarin, Korean and
Spanish

Selected References
• Adidas | E-commerce strategy for China, Japan & Korea
• Bouygues Telecom | Cases studies of leading Asian Web 2.0 services
and virtual worlds
• Deutsche Telekom / T-Online | Benchmark of Korean mobile & Internet
convergence strategies
• Hemisphere | Analysis of mobile marketing best practices in Japan and
South Korea (Hemisphere is a leading digital advertising agency),
analysis of leading social platforms (SNS, virtual worlds, online games).
• Microsoft | Analysis of Japan’s key players and market catalysts for
mobile commerce market positioning in China
• DeNA | Case studies of the best practices of leading social networks in
China and South Korea (DeNA operates Mobile Game Town, Japan’s
leading mobile SNS service)
• China Mobile | Benchmark of Korean leading online communities
• Sands Capital Management | Evaluation of China’s investment
opportunities in social networks in China

Social Work
• Mobile Monday
– Founder of the Mobile Monday forum in Beijing since 2006 (3,000+
members, 23 events, over 80 presentations).
• Media
– Monthly column on Asian innovation for Asian Business Leaders (one of
the leading Chinese business magazines), numerous interviews in
international media.
• Events
– Regular keynote speaker and moderator at Internet, Telecom, Media and
Investment events
e.g. ITU Asia, Asia Venture Capital Forum, China Mobility International Summit,
O’Reilly’s Graphing Social Patterns, Red Herring Asia, Media 08 Conference,
Wireless Developer Forum, Open Web Asia, XMediaLab, Mobile Monday Global
Summit, etc.)

Contact Us
www.plus8star.com
benjamin@plus8star.com
benjamin0123 +81 | Japan
+82 | Korea
http://twitter.com/plus8star +86 | China
Telecom & Internet
www.linkedin.com/in/benjaminjoffe + Added Value
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