Changes in Japan’s mobile ecosystem
Benjamin Joffe, CEO | +8* Plus Eight Star | 2009.3
Introduction




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Business Consulting
Benjamin Joffe
 ベンジャミン
   벤자민
   本杰明
4 years

          1 year
                   4 years
www.plus8star.com
Cross-Market Consulting
Telecom & Internet Innovation
     China | Japan | South Korea
26 events | 98 speakers | 3,296 members | 1,440 companies
Overview




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Business Consulting
What changed in the past 2 years

      1. For mobile operators
      2. For handset manufacturers
      3. For ARPU & Pri...
What changed for mobile operators




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Busi...
Mature mobile market
Total = 106.5 mln users (+5 mln yoy)
                1,288,300
                   1%
  30,619,700    ...
Handset market
Lower subsidies lead to less sales




                                             1Q09




              ...
Market shares: 2G phasing out
      Total = 8.6 million users
              328,500
                4%
  2,227,400        ...
Japan stopped selling 2G
         in 2007
Market shares: 3G for all
      Total = 97.9 mln users
               1,288,300
                  1%
30,291,200           ...
3G (and more) for all
         92% market penetration
                    2G %     3G %




 89%       89%                ...
3G penetration in Japan is
         >90%
But of course it is not the end…
         LTE @ Docomo




                            Source: Docomo, 2009
LTE @ Docomo (300Mbps DL)
      starts next year




                      Source: Docomo, 2009
LTE @ KDDI
  (“3.9G”)




             Source: KDDI, 2009
Surprise!
  Mobile WiMAX getting started
• UQ WiMAX
  – Consortium of 6
    companies
    •   KDDI | 32.26%
    •   Intel ...
UQ WiMAX Service
• Overview
  – Service start 2009.7
  – 35 EUR / month
  – 40 Mbps DL / 10 Mbps UL

• Deployment
  – 5,00...
What changed for ARPU & price plans




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Bu...
Net additions history
       “White Plan” effect

                    15 million “White Plans”




“White Plan”




      ...
Net additions 2008
Aggressive pricing paying off




                            Source: Operators, 2009
Softbank
Shifting costs and aggressive pricing

                                                Lower costs




          ...
KDDI’s Double Flat Fee
     (introduced in May 2005)

                 40 USD




10 USD


  1.5 MB      6.5 MB~
Flat-rate data
        From mobile only to full web
• Docomo: 36% (17 mln – 2008.12)
  – i-mode only / full browser / PC d...
Softbank
Towards the “mobile Internet machine”
Mobile widgets




                 Source: Operators, February 2009
“au” by KDDI
Data ARPU is 38% overall
Docomo
• Various discount plans
  – Family
  – Data plans
• 100% HSDPA population coverage
• Segmentation: Style / Smart /...
Parenthesis: SMS vs. IP




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Business Consu...
Data revenues 2008
                  Most Western
                  mobile carriers
Data ARPU %               20%       40...
SMS = Candles




Brighter    Last longer    Smell good
IP = Electricity
Parenthesis: i-mode and iPhone




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Busines...
Social games
       &
iPhone games
Mobile ecosystems
Technical specs
  Content selection
 Content distribution
    Pricing system
   Payment system

User Experience
iPhone vs. i-mode

Ecosystem   iPhone         NTT DoCoMo
Users       10 million?    55 million
Content     20,000 apps?   ...
48 million
i-mode users




                Applications!
               (January 2001)
  87.7%
 3G users
What changed for mobile content




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Busine...
Mobile Ecosystem
                                                                      TOTAL
Million USD
                 ...
Content
40 USD / user / year

    Commerce
70 USD / user / year
Mobile Content
Million USD                                                                        TOTAL
                  ...
Flat-rate data: 2004
What happened since?
Awesome

        Irrelevant?               Great          ?!      Good       So-so      ?

   Million USD
                ...
What changed for mobile music




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Business...
Million USD
                                  2004       2007
        1,186
                                              ...
90% of digital music
sold in Japan is mobile
Digital music revenues in Japan




                      Source: Infinity Venture Partners, 2008
What changed for mobile games




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Business...
Million USD
                                  2004       2007
        1,186
                                              ...
What changed for mobile social networks




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.co...
Registered users



              MANY
              MOBILE         MOBILE
                             ONLY!


    SOME
 ...
Some ads


                SNS
                 +
            Free games
                 +
Homepage   Virtual goods
Revenues 2008 (Est. $US)




350 mln                       60 mln
                    200 mln
          120 mln
Profit margin (Est.)



          31%
- X?               40%        63%
Average Revenue From Users (E)
           ARFU

  10%?   5%?     75%    75%
Market Capitalization ($US)
              (March 2009)




3-15 bln?   504 mln 1.4 bln                  1.2 bln

         ...
What changed for mobile books




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Business...
Digital books: Internet vs. Mobile




           Flat-fee data plans
             are introduced




                    ...
Several best-selling novels in Japan in
2007 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 zora”
(“Loving sky”) sold…
“Koi zora” sold over 2 million copies
           (10 USD / book)

The paper version a
“by-product” of the
mobile version!
Even on TV!
What changed for mobile TV




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Business Co...
Mobile TV penetration is over 47%
50 million handsets (2006.4 - Now)
Business model? It’s free!

         Users are happy (it’s free!)
Broadcasters have more reach (1 TV per person)
  Adverti...
Experiment: TV + mobile coupons
• Broadcast ads, text & images with TV content
• Use of the mobile coupon service Toruca

...
And also…




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Business Consulting
Mobile advertising
       Mobile search
      Mobile commerce

are still doing well and growing
Conclusions




Mobile & Internet     © Copyrights 2009. All rights reserved. www.plus8star.com
Business Consulting
1.
    3G + Flat-rate
will open new doors
2.
 As markets converge,
some of Japan’s lessons
are even more relevant
3.
   With current 3G, 3G+ penetration
          With flat rate data
            With 4G coming
      With mobile TV wides...
About +8*
There are more ideas
outside your country
          than inside
                   Tom Kelley
                    CEO, IDE...
“Innovation Arbitrage”
• About us
   – +8* | Plus Eight Star is the leading cross-market and cross-cultural consultancy in...
Selected References
•   Adidas | E-commerce strategy for China, Japan & Korea

•   Bouygues Telecom | Cases studies of lea...
Social Contribution
• Mobile Monday
   – Founder of the Mobile Monday forum in Beijing since 2006 (3,000+
     members, 26...
Contact Us

www.plus8star.com

benjamin@plus8star.com
                                       +81 | Japan
benjamin0123     ...
Japan Mobile Ecosystem
Japan Mobile Ecosystem
Japan Mobile Ecosystem
Japan Mobile Ecosystem
Japan Mobile Ecosystem
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Japan Mobile Ecosystem

  1. 1. Changes in Japan’s mobile ecosystem Benjamin Joffe, CEO | +8* Plus Eight Star | 2009.3
  2. 2. Introduction Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  3. 3. Benjamin Joffe ベンジャミン 벤자민 本杰明
  4. 4. 4 years 1 year 4 years
  5. 5. www.plus8star.com
  6. 6. Cross-Market Consulting Telecom & Internet Innovation China | Japan | South Korea
  7. 7. 26 events | 98 speakers | 3,296 members | 1,440 companies
  8. 8. Overview Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  9. 9. What changed in the past 2 years 1. For mobile operators 2. For handset manufacturers 3. For ARPU & Price plans – Parenthesis: SMS vs. IP – Parenthesis: i-mode vs. iPhone 4. For mobile content 5. Conclusions
  10. 10. What changed for mobile operators Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  11. 11. Mature mobile market Total = 106.5 mln users (+5 mln yoy) 1,288,300 1% 30,619,700 Total 29% 54,322,500 51% 20,251,200 19% Docomo Softbank AU EMOBILE Source: Telecommunication Carrier Association, March 2009
  12. 12. Handset market Lower subsidies lead to less sales 1Q09 Source: Operators, March 2009
  13. 13. Market shares: 2G phasing out Total = 8.6 million users 328,500 4% 2,227,400 2G 26% 6,033,400 70% Docomo Softbank AU Source: Telecommunication Carrier Association, March 2009
  14. 14. Japan stopped selling 2G in 2007
  15. 15. Market shares: 3G for all Total = 97.9 mln users 1,288,300 1% 30,291,200 3G 31% 48,289,100 49% 18,023,800 19% Docomo Softbank AU EMOBILE Source: Telecommunication Carrier Association, March 2009
  16. 16. 3G (and more) for all 92% market penetration 2G % 3G % 89% 89% 92% 99% 100% 11% 11% 8% 1% 0% Docomo Softbank AU EMOBILE TOTAL Source: Telecommunication Carrier Association, March 2009
  17. 17. 3G penetration in Japan is >90%
  18. 18. But of course it is not the end… LTE @ Docomo Source: Docomo, 2009
  19. 19. LTE @ Docomo (300Mbps DL) starts next year Source: Docomo, 2009
  20. 20. LTE @ KDDI (“3.9G”) Source: KDDI, 2009
  21. 21. Surprise! Mobile WiMAX getting started • UQ WiMAX – Consortium of 6 companies • KDDI | 32.26% • Intel | 17.65% • East Japan Railway | 17.65% • Kyocera | 17.65% • Daiwa Securities | 9.80% • Tokyo-Mitsubishi UFJ | 5%
  22. 22. UQ WiMAX Service • Overview – Service start 2009.7 – 35 EUR / month – 40 Mbps DL / 10 Mbps UL • Deployment – 5,000 test users – 500 base stations – Plans for 20,000 BS – 90% population coverage by 2012
  23. 23. What changed for ARPU & price plans Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  24. 24. Net additions history “White Plan” effect 15 million “White Plans” “White Plan” Source: Operators, March 2009
  25. 25. Net additions 2008 Aggressive pricing paying off Source: Operators, 2009
  26. 26. Softbank Shifting costs and aggressive pricing Lower costs Aggressive pricing on voice and monthly charges Data ARPU is 44% (decrease of basic charges)
  27. 27. KDDI’s Double Flat Fee (introduced in May 2005) 40 USD 10 USD 1.5 MB 6.5 MB~
  28. 28. Flat-rate data From mobile only to full web • Docomo: 36% (17 mln – 2008.12) – i-mode only / full browser / PC data access • KDDI: 72% (21.8 mln – 2009.12)
  29. 29. Softbank Towards the “mobile Internet machine”
  30. 30. Mobile widgets Source: Operators, February 2009
  31. 31. “au” by KDDI Data ARPU is 38% overall
  32. 32. Docomo • Various discount plans – Family – Data plans • 100% HSDPA population coverage • Segmentation: Style / Smart / Prime / Pro – Touch screens – Smartphones • Credit business DCMX – 9 million members; 400,000 iD terminals installed
  33. 33. Parenthesis: SMS vs. IP Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  34. 34. Data revenues 2008 Most Western mobile carriers Data ARPU % 20% 40% SMS share 50% 5% 90% profit margin “Real” data 50% 95%
  35. 35. SMS = Candles Brighter Last longer Smell good
  36. 36. IP = Electricity
  37. 37. Parenthesis: i-mode and iPhone Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  38. 38. Social games & iPhone games
  39. 39. Mobile ecosystems
  40. 40. Technical specs Content selection Content distribution Pricing system Payment system User Experience
  41. 41. iPhone vs. i-mode Ecosystem iPhone NTT DoCoMo Users 10 million? 55 million Content 20,000 apps? XXX publishers Rev share 30% 10% Mystery % Data 100%
  42. 42. 48 million i-mode users Applications! (January 2001) 87.7% 3G users
  43. 43. What changed for mobile content Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  44. 44. Mobile Ecosystem TOTAL Million USD 11.6 billion USD 12,000 Commerce > 10,000 Content 4,301 8,000 3,720 6,000 3,200 4,000 2,645 7,347 5,714 2,167 1,822 2,000 4,139 2,634 1,736 1,212 0 2002 2003 2004 2005 2006 2007 Commerce Content Source: Japan Mobile Content Forum, 2008
  45. 45. Content 40 USD / user / year Commerce 70 USD / user / year
  46. 46. Mobile Content Million USD TOTAL 4.3 billion USD Full songs > 5,000 Ring tones 4,000 1,140 849 231 3,000 585 252 240 500 862 2,000 229 760 598 465 417 192 419 571 156 204 274 771 28 1,091 204 1,000 1 1,186 1,119 1,065 972 856 568 0 2002 2003 2004 2005 2006 2007 Ring tones Full songs Mobile games Mobile books Fortune telling Screensavers Others Source: Japan Mobile Content Forum, 2008
  47. 47. Flat-rate data: 2004 What happened since?
  48. 48. Awesome Irrelevant? Great ?! Good So-so ? Million USD 2004 2007 1,186 1,140 1,200 1,091 1,000 862 800 568 600 500 419 400 229231 225 204 185 200 108 0 0
  49. 49. What changed for mobile music Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  50. 50. Million USD 2004 2007 1,186 1,140 1,200 1,091 1,000 862 800 568 600 500 419 400 229231 225 204 185 200 108 0 0
  51. 51. 90% of digital music sold in Japan is mobile
  52. 52. Digital music revenues in Japan Source: Infinity Venture Partners, 2008
  53. 53. What changed for mobile games Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  54. 54. Million USD 2004 2007 1,186 1,140 1,200 1,091 1,000 862 800 568 600 500 419 400 229231 225 204 185 200 108 0 0
  55. 55. What changed for mobile social networks Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  56. 56. Registered users MANY MOBILE MOBILE ONLY! SOME MOBILE 175 mln 16.3 mln 8 mln 12 mln
  57. 57. Some ads SNS + Free games + Homepage Virtual goods
  58. 58. Revenues 2008 (Est. $US) 350 mln 60 mln 200 mln 120 mln
  59. 59. Profit margin (Est.) 31% - X? 40% 63%
  60. 60. Average Revenue From Users (E) ARFU 10%? 5%? 75% 75%
  61. 61. Market Capitalization ($US) (March 2009) 3-15 bln? 504 mln 1.4 bln 1.2 bln REAL MARKET CAPS BASED ON STOCK PRICE
  62. 62. What changed for mobile books Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  63. 63. Digital books: Internet vs. Mobile Flat-fee data plans are introduced Source: Infinity Venture Partners, 2008
  64. 64. Several best-selling novels in Japan in 2007 were written on mobile phones
  65. 65. One full bookshelf for mobile novels at Kinokuniya, Japan’s largest bookstores chain!
  66. 66. The two volumes of this book “Koi zora” (“Loving sky”) sold…
  67. 67. “Koi zora” sold over 2 million copies (10 USD / book) The paper version a “by-product” of the mobile version!
  68. 68. Even on TV!
  69. 69. What changed for mobile TV Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  70. 70. Mobile TV penetration is over 47% 50 million handsets (2006.4 - Now)
  71. 71. Business model? It’s free! Users are happy (it’s free!) Broadcasters have more reach (1 TV per person) Advertisers get more mileage (same price) Manufacturers sell mobiles (must have feature) Leaves out… mobile operators Thanks to Guillaume & Pierre for their views on this 
  72. 72. Experiment: TV + mobile coupons • Broadcast ads, text & images with TV content • Use of the mobile coupon service Toruca Source: IT Media, 2008.03.05
  73. 73. And also… Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  74. 74. Mobile advertising Mobile search Mobile commerce are still doing well and growing
  75. 75. Conclusions Mobile & Internet © Copyrights 2009. All rights reserved. www.plus8star.com Business Consulting
  76. 76. 1. 3G + Flat-rate will open new doors
  77. 77. 2. As markets converge, some of Japan’s lessons are even more relevant
  78. 78. 3. With current 3G, 3G+ penetration With flat rate data With 4G coming With mobile TV widespread Japan’s advance is unlikely to fade
  79. 79. About +8*
  80. 80. There are more ideas outside your country than inside Tom Kelley CEO, IDEO The 10 faces of Innovation
  81. 81. “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
  82. 82. 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 investment opportunities in social networks in China
  83. 83. Social Contribution • Mobile Monday – Founder of the Mobile Monday forum in Beijing since 2006 (3,000+ members, 26 events, 98 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. Ad-Tech, eComm, 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.
  84. 84. Contact Us www.plus8star.com benjamin@plus8star.com +81 | Japan benjamin0123 +82 | Korea +86 | China http://twitter.com/plus8star Telecom & Internet www.linkedin.com/in/benjaminjoffe + Added Value www.slideshare.net/plus8star * High quality

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