Is 3G a Dog or a Demon - Hints from 7 years of 3G Hype in Asia

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

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”

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

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 * High quality www.slideshare.net/plus8star

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Is 3G a Dog or a Demon - Hints from 7 years of 3G Hype in Asia

by Benjamin Joffe on Nov 26, 2008

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Is 3G a Dog or a Demon - Hints from 7 years of 3G Hype in Asia — Presentation Transcript