Mobile From East to West
Benjamin Joffe, CEO | Plus Eight Star | Jeju, Korea, 2009.09

Agenda
0. Introduction
1. “The West”
2. Japan
3. China
5. Discussion

0.
Introduction

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

Innovation Arbitrage

What we do
– Worked with mobile SNS in Japan in 2003
• With avatars, virtual goods and GPS!
– Advise leading companies worldwide
• Microsoft, Adidas (E-commerce / Digital strategy)
• IMVU (US | 3D chat / Virtual World)
• MIH (China/S.Africa | Largest shareholder of Tencent)
– Published reports
• Inside Cyworld
• Inside Tencent (Clients include Harvard Business School)
• Inside Taoabao (Upcoming)

Our clients
EUROPE USA
ASIA

30 events | 107 speakers | 3,000+ members | 1,500+ companies

3D Facebook Game Team

1. The West

Digital Population
Country USA China Japan Korea
Population 300 mln 1,300 mln 130 mln 50 mln
Internet users 225 mln 340 mln 100 mln 35 mln
Mobile users 260 mln 650 mln 100 mln 45 mln
1/5 1,680 mln
1/2 Total 475 mln
1/3 785 mln

IT Infrastructure
100%
Avg. 7 Mbps
80%
Avg. 15 Mbps
60%
3G users
40% C
hi
n
20% a Avg. 4 Mbps
www.plus8star.com
0%
0% 20% 40% 60% 80%
% of Internet connections measured above 5Mbps
(Source: Akamai, 4Q08)

Social games
&
iPhone games

From University Café
to Sand Hill Road

THE iPhone
• Sales
– 5.2M in 2Q09
– 22M iPhone users (+16M Touch)
• Applications
– 65,000 applications
– 1.5B application downloads
• Myths?
Source & Recommended Read: Strand Consult - The Moment of Truth, a Portrait of the iPhone

Global Market
• Mobile Services Market in 2008
– Total 8.6 billion USD
– Mobile games 3 billion USD
– Apple 150 million USD! (=1.7%)
• Handset Market
– Total 250 million / quarter
– Apple 5.2 million (=2%)
Source & Recommended Read: Strand Consult - The Moment of Truth, a Portrait of the iPhone

Games
Images
Gambling
LBS
Social Networking
Mobile payment
Enterprise

The iPhone Effect
• Application stores
– App stores are not new
• Touch screen
– Touch screen is not new
• Developers make money?
– Not so sure
Source & Recommended Read: Strand Consult - The Moment of Truth, a Portrait of the iPhone

Realities
• Mobile broadband >> iPhone
• Free apps are cannibalizing revenues
– And driving iPhone sales.
Source & Recommended Read: Strand Consult - The Moment of Truth, a Portrait of the iPhone

2. Japan

3G penetration in Japan
>90%

Beyond Voice & Beyond Telecom
3G Mobile TV NFC
Flat-rate Data Data ARPU Non-SMS Share

In addition
• Business models
– Micro-payments since 1999 (“i-mode”)
– “App store” since 2001
• Content
– Mobile music, mobile ads, mobile commerce…
– Financial services by mobile carriers
• LTE at 300Mbps starts next year!

48 million
i-mode users
Applications!
(January 2001)
87.7%
3G users

Unlimited Unlimited
30 USD 10-40 USD

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

Flat-rate data users
X? 76%

Flat-rate data: 2004
What happened since?

Mobile Market
• Mobile content
– 4.3 billion USD in FY07
– 40 USD / user / year
• Mobile commerce
– 7.3 billion USD
– 70 USD / user / year

Before & After 3G
2004 2007
1,186
1,200 1,140
1,091 www.plus8star.com
1,000
862
800
Million USD
600 568
500
419
400
204 225 229231
185
200 108
0
0

90% of digital music
sold in Japan is mobile

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

Mobile Gaming Market
=
Online Gaming Market

Japan Game Market
[1 billion JPY = 10 million USD]

Mobile Social Networks
make A LOT of profit

Some ads
SNS
+
Free games
+
Homepage Virtual goods

Revenues 2008 (E)
$200 mln $60 mln

Profit margin (E)
40% 63%

Average Revenue From Users (E)
75% 75%

Market Capitalization
(March 2009)
$1.4 bln $1.2 bln

Other Services

Mobile books

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

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)

Even on TV!

Mobile TV penetration in Japan and
Korea is over 40%

Business model = Free

Galapagos Syndrome
• No foreign mobile brand is strong in Japan
• Too complex to survive abroad?
• But Ideas are valid

3. China

Key market figures
• Mobile and Internet users growing fast
800
700 Mobile users | 673 million
600
million
500
400 Internet users | 338 million
300
Fixed-line subs | 320 million
200
100 Broadband subs | 90 million
0
Sources: MIITT, CNNIC, +8*

High Growth Potential
60
Penetration rate %
50 Mobile | 50%
40
30 Internet | 25%
20 Fixed-line | 24%
10
0
Sources: MIITT, CNNIC, +8*

Three operators
• China Mobile: the mobile leader
– GSM + TD-SCDMA
• China Unicom: the balanced operator
– GSM + WCDMA
• China Telecom: the broadband leader
– CDMA1X + CDMA2000
Mobile Fixed-line Broadband
Sources: +8*

Huge market, but low ARPU
ARPU (RMB)
1 USD = 6.8 RMB
10 RMB = 1,750 KRW
80 75
70 63.6
60
50 41.7
40
30
20
10
0
China Unicom China Mobile China Telecom
Sources: Company Reports, 1H2009

3G started this year
WCDMA TD-SCDMA CDMA 2000
0.1 mln 1 mln 1.1 mln
• Started late • Largely expected by the • Better subsidies than
• Waiting for iPhone in Q4 government China Unicom
• Big issues on handsets • Better handset quality
than China Mobile

China Mobile’s Service Strategy
Fetion - IM 12580 – Voice Search Mobile Newspapers 12530 - Mobile Music
Mobile Game Streaming Mobile TV 139 - Mailbox PIM - Telephone Book Backup
Source: China Mobile

China Mobile’s Service Strategy
37M active users >15M USD/month
20M requests / 1M songs
147M registered #1 newspaper in
month 85M members
Growing fast China! (23M users)
Fetion - IM 12580 – Voice Search Mobile Newspapers 12530 - Mobile Music
Mobile Game Streaming Mobile TV 139 - Mailbox PIM - Telephone Book Backup
4M active users
6M USD / month
20M registered
Source: China Mobile

Popular Services
Overview
Gaming • From single player game to MMO.
• Emerging sector
Music • Mature market thanks to Ring Back Tone business
• Strong revenue maker
LBS • GPS getting popular
• Mobile LBS early stage
Portal • Getting mature (content and user base)
• Web companies and pure mobile players
Browsing • Getting mature (user experience, user base)
SNS • Getting mature (user experience, user base)
• Both pure mobile SNS player and mobile extension of PC-based SNS
TV • Emerging market
• Both broadcasting and streaming
• Lack of business model
• Interesting technologies enabling streaming on 2.5G

Tencent / QQ case
Mobile QQ client
• Tencent integrates various services
– #1 online community in China, Chat room
leveraging IM
Game
– 400 mln active accounts WAP Portal
– 1 bln USD revenue in 2008
• Mobile extension of QQ: Info: finance, Music
book, news player
20% of revenue
– WAP, mobile client, SMS
– PC-Mobile synchronization
E-mail Movie
– Good multimedia experience
in 2.5G network
Qzone (SNS)

PC-Mobile Connection
IM + QQ Show
(avatar service)
available on PC
and mobile

Tencent / QQ case
Mobile search: Soso Mobile browsing Mobile music Mobile QQ mini player
Mobile Qzone (SNS) Mobile email Mobile game Mobile video

Learn from the best!
“Inside Tencent” Report
2009 Edition
Detailed Analysis, 20 Interviews, 280+ pages

Handset Market size
Nokia 38.9%
• 160 million mobiles
Top 3 for years
sold in 2008 Samsung 18.6%
66% of the market
– Another 50 mln Motorola 8.8%
phones sold in grey K-Touch 8.1%
market (not
Lenovo 3.9%
accounted for)
Sony-Ericsson 3%
Jinli 2.5%
LG 2.3%
Konka 2.2%
Amoi 2.1%
Bird 1.5%
Changhong 1%
Haier 0.9%
Others 6.3%

Handset Market size: MTK
Nokia 38.9%
• 160 million mobiles
sold in 2008 Samsung 18.6%
– Another 50 mln Motorola 8.8%
phones sold in grey K-Touch 8.1%
market (not
Lenovo 3.9%
accounted for)
Sony-Ericsson 3%
• Note: MTK phones Jinli 2.5%
– All domestic makers LG 2.3%
have migrated to Konka 2.2%
MTK
Amoi 2.1%
Bird 1.5%
Changhong 1%
Haier 0.9%
Others 6.3% Sources: Analysys International, ZOL

“We make anything you can imagine”
Cigarette case shaped
Barbie dressing case phone
PSP shaped, popular
games preinstalled
Car shaped
Solar power
Watch phone Super lens attachable rechargeable handset

More Creativity With MTK
366 days stand-by, dual- Dark light for money
SIM, super powerful battery authentication
Big thunder phone
Spider-Man design

Market Impact
• Foreign brands threatened by MTK phones
– Feature phones for <2,000 RMB (300 USD).
– Nokia’s China sales down 30% in 2008.
• Key results
– 90% of China’s mobile phone chipset market.
– 160 million chipsets shipped in 2007.
– 95% orders from China customers.

From Shanzhaiji to Shanzhai culture
iPhone
Manufacturer: Apple
One SIM card
Price: >4,000 RMB
iOrange: Fake iPhone
Manufacturer: iOrange
Made on MTK platform
Dual-SIM card
Price: 900 RMB

iPhone
• iPhone 3G: 8GB
• iPhone 3GS: 16GB, 32GB 4Q2009

oPhone: Android Phones for China Mobile
DELL Dopod Philips LG Lenovo Hisense

4. Conclusion

1.
3G + Flat-rate

2.
New usages
New business models

3.
Innovation Arbitrage
THAT’S WHAT WE DO

Discussion

Contacts
www.plus8star.com
benjamin@plus8star.com
+81 | Japan
benjamin0123 +82 | Korea
http://twitter.com/plus8star +86 | China
Telecom & Internet
www.linkedin.com/in/benjaminjoffe
+ Added Value
www.slideshare.net/plus8star * High quality