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Lessons Learned from Asia




How Beijing, Tokyo and Seoul are relevant to L.A.


  Benjamin Joffe, CEO | Plus Eight Star ...
Here is the plan

0.   Introduction
1.   How Asia can innovate
2.   China | 5Cs of Innovation
3.   Japan | Mobile Galapago...
0.
Introduction
Benjamin Joffe
 ベンジャミン
   벤자민
   本杰明
4 years

          1 year
                   4 years
www.plus8star.com
Innovation Arbitrage
  China | Japan | Korea
What we do
– Worked with mobile SNS in Japan in 2003
   • With avatars, virtual goods and GPS!

– Advise leading companies...
Our clients

EUROPE                   USA




                  ASIA
1
How Asia can innovate
Claim #1


The biggest barriers to
understanding are our
    assumptions
General assumption #1

Everything from USA is   great
General assumption #2

Everything from Asia is    weird
          (and sometimes funny)
Two examples
Movie 1
Magnificent Seven   Seven Samurai
     (1960)            (1954)
Movie 2
The Matrix   Ghost in the Shell
  (1999)       (1989/1995)
Using best scripts & Talent
• Adapted from Asian movies
  – Fistful of Dollars      Yojimbo
  – Star Wars               Hi...
Old Boy – Made in Hollywood


    Directed by Steven Spielberg
         Starring Will Smith
         In theaters in 2010
Who came first?
Leveraging best practices
Claim #2
Innovation is a consequence of

           Talent
       Market size
      Infrastructure
        Investment
Internet      Mobile
1.3 billion   3.3 billion




                    Source: Morgan Stanley, 2007
Digital Population



   Country         USA       China      Japan      Korea
  Population     300 mln   1,300 mln   130 ...
IT Infrastructure
           100%

                                                    Avg. 7 Mbps
           80%

       ...
Alexa Quiz
         USA        China   Japan   Korea
 #1    Google
 #2     Yahoo
 #3   Facebook
 #4   YouTube
 #5
 #6
 #7
...
Alexa Quiz
         USA          China         Japan         Korea
 #1    Google         Baidu     Yahoo JP / SB     Naver...
Alexa Quiz
          USA          China        Japan       Korea
#11       AOL           Soso       Google       (error)
#...
Claim #3


Innovation is beyond technology
       (it’s about services ^_^)
Technology?


     e.g. LAMP stack
(Linux / Apache / MySQL / PHP)
    + HTML / Flash / AJAX…
Largely commoditized…
2
China
Claim #4


China is innovating more and
      more because of
       five key factors
5Cs of Innovation™
a. Copy
“Benchmarking”
               “Inspiration”
              “Best practice”

“If I have seen farther it is only by standing ...
Pragmatic Entrepreneurs & Investors



           Innovation ROI?

            “Blue oceans”
Entry barriers

     Technology?
       Capital?
        Talent?
Intellectual Property?
     Censorship?
The Underpants Gnomes
Business Plan
Copy can backfire!
Japan: Mayonnaise
China: Whipped Cream
Copycats often die


• Market not sustainable

• Business model does not work
b. “China”
Scale / Geography / Demography
   make some services viable
Already in 2007               ...$1 billion do not
(We even published a report…)    appear overnight
Attention Threshold
           =
  1 billion dollars?
Market Capitalization
       (June 2009)




  3-15 bln?    21 bln

                 REAL MARKET CAP
Maybe simply not looking?
c. Combination
Will it blend?
Tencent (1998)
d. Competition
“Survival of the fittest”




  (Herbert Spencer)
What happens when you have
         4 Facebook
         20 YouTube
        10 MySpace
        5 Match.com
           3 Yah...
Tough Spots
                                   Sociology

                                   Psychology
              “Con...
e. Constraints
“Necessity is the mother of invention”
                (Plato)
Low GDP/capita
Small transactions / making millions from cents
Limited advertising
Alternative business models / B2B to B2C
No credit cards
Alternative payment systems,
  mobile, virtual currencies
No legacy industry
  (is it a constraint?)
Leading Companies
mln USD

1,200   www.plus8star.com
                                   1047

1,000

 800

 600           ...
Gaming in China
                                              Profits of 9 listed companies
                              ...
Battlefield by Electronic Arts
When we started two years ago, there
was a real question mark: Can the free-
to-play model work as it did in Asia?

The an...
More innovation
Lihua | Order food over IM
Alimama | Ad exchange + Micro-retail
Babytree | Vertical for young parents
Huica | Mobile coupons
PPLive | P2P Internet TV
Hozom | Address book + SNS
iNezha | RSS-to-IM
Qifang | P2P Micro-lending
Digu | Twitter + Pics + Celebs
Lakoo | Appstore for non-iPhones
2
Japan
Claim #5

  Japan is the world’s most
  advanced mobile market
             AND
Too isolated for its own good
Beyond Voice & Beyond Telecom

                      50%           50%
      92%



     3G          Mobile TV       NFC

...
In addition
• Business models
  – Micro-payments since 1999 (“i-mode”)
  – “App store” since 2001

• Content
  – Mobile mu...
Mobile Market

• Mobile content
  – 4.3 billion USD in FY07
  – 40 USD / user / year


• Mobile commerce
  – 7.3 billion U...
Before & After 3G
                                                 2004       2007
                      1,186
           ...
Galapagos Syndrome




• No foreign mobile brand is strong in Japan
• Too complex to survive abroad?
Some examples that work
“Social Networking
 Is Not a Business”

MIT Technology Review
  July/August 2008
And more (April 2009)
Mobile Social Networks?
Social Networks


Company                 Mixi         DeNA          GREE
Reg. users              16 mln       12 mln     ...
Mobile Game Town
Revenue Breakdown




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




   [1 billion JPY = 10 million USD]
More successes
Golf Digest Online
• What is it?
  – Golf online vertical

• Numbers
  – 1.37M registered users
  – 128M USD, 6.9M USD pro...
Cookpad
• What is it?
  – Cooking focused vertical

• Numbers
  – 6.67 M USD rev., 1.76M profit
  – Profitable, IPO

• Bus...
So-Net M3
• What is it?
  – “Medicine” “Media” “Metamorphosis”
  – “Social network for doctors” / Vertical site on
    med...
Various Virtual Worlds
• Services
  – Nicotto Town (250K)
  – Ameba Pigg (350K)



• Content & business models
  – 2D
  – ...
3
Korea
Claim #6

 Korea is a window into the
    future of broadband
            AND
Foreign companies leverage
    Korea’s ideas...
Online Games
• 1 billion USD market
  – Larger than Japan with 1/3 population and 1/2 its
    GDP/capita
  – 1/3 of China’...
Cyworld
• Real-name SNS
• Beats FB and
  MySpace
• Virtual goods
  – Avatars
  – Page skins
  – BGM
  – Fonts!
• … since 1...
Naver
• Google & Yahoo’s
  nemesis in Korea

• Innovations
  – “360 search”
  – Yahoo Answers
  – Since 2002!

• More
  – ...
Alternative Media Models
• Citizen journalism | OhmyNews

• Video Jockey “VJ” | Afreeca.tv

• Online education | Megastudy...
Contacts

www.plus8star.com

benjamin@plus8star.com
                                       +81 | Japan
benjamin0123       ...
Lessons Learned From Asia
Lessons Learned From Asia
Lessons Learned From Asia
Lessons Learned From Asia
Lessons Learned From Asia
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Lessons Learned From Asia

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Presentation on Asian best practices to a group of Silicon Valley investors, showing how Asian innovations can be relevant to Western markets. In addition to key ideas, several examples are included.

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Transcript of "Lessons Learned From Asia"

  1. 1. Lessons Learned from Asia How Beijing, Tokyo and Seoul are relevant to L.A. Benjamin Joffe, CEO | Plus Eight Star | Santa Monica, 2009.07
  2. 2. Here is the plan 0. Introduction 1. How Asia can innovate 2. China | 5Cs of Innovation 3. Japan | Mobile Galapagos 4. Korea | Ultra-broadband laboratory 5. Closing & Questions
  3. 3. 0. Introduction
  4. 4. Benjamin Joffe ベンジャミン 벤자민 本杰明
  5. 5. 4 years 1 year 4 years
  6. 6. www.plus8star.com
  7. 7. Innovation Arbitrage China | Japan | Korea
  8. 8. 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) – First commercial report on Tencent “Inside QQ” – Partner of 3D social gaming startup Cmune – Co-Founded Mobile Monday in Beijing
  9. 9. Our clients EUROPE USA ASIA
  10. 10. 1 How Asia can innovate
  11. 11. Claim #1 The biggest barriers to understanding are our assumptions
  12. 12. General assumption #1 Everything from USA is great
  13. 13. General assumption #2 Everything from Asia is weird (and sometimes funny)
  14. 14. Two examples
  15. 15. Movie 1
  16. 16. Magnificent Seven Seven Samurai (1960) (1954)
  17. 17. Movie 2
  18. 18. The Matrix Ghost in the Shell (1999) (1989/1995)
  19. 19. Using best scripts & Talent • Adapted from Asian movies – Fistful of Dollars Yojimbo – Star Wars Hidden Fortress (partly) – The Ring (id.) – Shall We Dance? (id.) – My Sassy Girl (id.) – The Departed Internal Affairs • Asian movies succeeding “as is” – Kungfu movies, Crouching Tiger Hidden Dragon…
  20. 20. Old Boy – Made in Hollywood Directed by Steven Spielberg Starring Will Smith In theaters in 2010
  21. 21. Who came first?
  22. 22. Leveraging best practices
  23. 23. Claim #2 Innovation is a consequence of Talent Market size Infrastructure Investment
  24. 24. Internet Mobile 1.3 billion 3.3 billion Source: Morgan Stanley, 2007
  25. 25. 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 x5 1,680 mln x2 Total 475 mln x3 785 mln
  26. 26. 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)
  27. 27. Alexa Quiz USA China Japan Korea #1 Google #2 Yahoo #3 Facebook #4 YouTube #5 #6 #7 MySpace MSN Live ? #8 Wikipedia #9 Craigslist #10 eBay
  28. 28. Alexa Quiz USA China Japan Korea #1 Google Baidu Yahoo JP / SB Naver #2 Yahoo Tencent FC2 Yahoo #3 Facebook Sina Google JP Daum #4 YouTube Google China YouTube YouTube #5 MySpace Taobao Rakuten Google #6 MSN Netease Livedoor Cyworld #7 Live Google Ameblo Nate #8 Wikipedia Sohu Mixi Google KR #9 Craigslist Youku Wikipedia Live #10 eBay Yahoo Goo Facebook
  29. 29. Alexa Quiz USA China Japan Korea #11 AOL Soso Google (error) #12 Blogger Ku6 MSN Tistory #13 Amazon Kaixin001 Nicovideo JoongAn Ilbo #14 Go Mop Amazon JP Chosun Ilbo #15 CNN Live 2 Channel MSN #16 Twitter PCOnline Nifty Gmarket #17 Microsoft 56.com Yourfilehost Paran #18 Flickr Yahoo CN Biglobe Auction #19 ESPN Sogou Geocities JP Blogger #20 Photobucket Tom Online Infoseek JP Friendster
  30. 30. Claim #3 Innovation is beyond technology (it’s about services ^_^)
  31. 31. Technology? e.g. LAMP stack (Linux / Apache / MySQL / PHP) + HTML / Flash / AJAX…
  32. 32. Largely commoditized…
  33. 33. 2 China
  34. 34. Claim #4 China is innovating more and more because of five key factors
  35. 35. 5Cs of Innovation™
  36. 36. a. Copy
  37. 37. “Benchmarking” “Inspiration” “Best practice” “If I have seen farther it is only by standing on the shoulders of Giants.” (Isaac Newton)
  38. 38. Pragmatic Entrepreneurs & Investors Innovation ROI? “Blue oceans”
  39. 39. Entry barriers Technology? Capital? Talent? Intellectual Property? Censorship?
  40. 40. The Underpants Gnomes
  41. 41. Business Plan
  42. 42. Copy can backfire!
  43. 43. Japan: Mayonnaise
  44. 44. China: Whipped Cream
  45. 45. Copycats often die • Market not sustainable • Business model does not work
  46. 46. b. “China”
  47. 47. Scale / Geography / Demography make some services viable
  48. 48. Already in 2007 ...$1 billion do not (We even published a report…) appear overnight
  49. 49. Attention Threshold = 1 billion dollars?
  50. 50. Market Capitalization (June 2009) 3-15 bln? 21 bln REAL MARKET CAP
  51. 51. Maybe simply not looking?
  52. 52. c. Combination
  53. 53. Will it blend?
  54. 54. Tencent (1998)
  55. 55. d. Competition
  56. 56. “Survival of the fittest” (Herbert Spencer)
  57. 57. What happens when you have 4 Facebook 20 YouTube 10 MySpace 5 Match.com 3 Yahoo 4 Twitter ?
  58. 58. Tough Spots Sociology Psychology “Concepts” Business models Marketing “Execution” Metrics Feedback loop Payment
  59. 59. e. Constraints
  60. 60. “Necessity is the mother of invention” (Plato)
  61. 61. Low GDP/capita Small transactions / making millions from cents
  62. 62. Limited advertising Alternative business models / B2B to B2C
  63. 63. No credit cards Alternative payment systems, mobile, virtual currencies
  64. 64. No legacy industry (is it a constraint?)
  65. 65. Leading Companies mln USD 1,200 www.plus8star.com 1047 1,000 800 600 522 429 452 468 439 400 370 200 97 0 Kongzhong Si a n Tencent Sohu N ease et Bai u d Shanda Al aba b i Mobile Web IM Portal + Online Search Online Only B2B content Portal Games games engine games e-commerce part
  66. 66. Gaming in China Profits of 9 listed companies 80% Profit margin2008 (mln USD) 70% 60% 50% 40% 30% 20% 10% www.plus8star.com 0% 0 100 200 300 400 500 600 Revenue 2008 (mln USD) Note: The profit Margin for Tencent game and NetEase is taken as the one of the whole company.
  67. 67. Battlefield by Electronic Arts
  68. 68. When we started two years ago, there was a real question mark: Can the free- to-play model work as it did in Asia? The answer is an emphatic yes. Ben Cousins General manager Battlefield Heroes team Electronic Arts
  69. 69. More innovation
  70. 70. Lihua | Order food over IM
  71. 71. Alimama | Ad exchange + Micro-retail
  72. 72. Babytree | Vertical for young parents
  73. 73. Huica | Mobile coupons
  74. 74. PPLive | P2P Internet TV
  75. 75. Hozom | Address book + SNS
  76. 76. iNezha | RSS-to-IM
  77. 77. Qifang | P2P Micro-lending
  78. 78. Digu | Twitter + Pics + Celebs
  79. 79. Lakoo | Appstore for non-iPhones
  80. 80. 2 Japan
  81. 81. Claim #5 Japan is the world’s most advanced mobile market AND Too isolated for its own good
  82. 82. Beyond Voice & Beyond Telecom 50% 50% 92% 3G Mobile TV NFC 40% 50% 95% Flat-rate Data Data ARPU Non-SMS Share
  83. 83. 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!
  84. 84. Mobile Market • Mobile content – 4.3 billion USD in FY07 – 40 USD / user / year • Mobile commerce – 7.3 billion USD – 70 USD / user / year
  85. 85. 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
  86. 86. Galapagos Syndrome • No foreign mobile brand is strong in Japan • Too complex to survive abroad?
  87. 87. Some examples that work
  88. 88. “Social Networking Is Not a Business” MIT Technology Review July/August 2008
  89. 89. And more (April 2009)
  90. 90. Mobile Social Networks?
  91. 91. Social Networks Company Mixi DeNA GREE Reg. users 16 mln 12 mln 8 mln Usage 2/3 mobile 100% mobile 100% mobile Revenue 2008 $120 mln $320 mln $60 mln Profit margin 31% 40% 63% From users 5% 80% 75% Market capitalization $500 mln $1.4 bln $1.2 bln www.plus8star.com
  92. 92. Mobile Game Town
  93. 93. Revenue Breakdown [1 billion JPY = 10 million USD]
  94. 94. Japan Game Market [1 billion JPY = 10 million USD]
  95. 95. More successes
  96. 96. Golf Digest Online • What is it? – Golf online vertical • Numbers – 1.37M registered users – 128M USD, 6.9M USD profit, Listed • Business models – Ads, e-commerce (booking, products), subscriptions
  97. 97. Cookpad • What is it? – Cooking focused vertical • Numbers – 6.67 M USD rev., 1.76M profit – Profitable, IPO • Business models – Ads, subscriptions, lead generation
  98. 98. So-Net M3 • What is it? – “Medicine” “Media” “Metamorphosis” – “Social network for doctors” / Vertical site on medical products. • Numbers – 177,000 doctors – 85 M USD rev., 24 M net profit, Listed • Business models – Advertising, subscriptions, surveys, jobs
  99. 99. Various Virtual Worlds • Services – Nicotto Town (250K) – Ameba Pigg (350K) • Content & business models – 2D – Virtual items – Avatars and spaces
  100. 100. 3 Korea
  101. 101. Claim #6 Korea is a window into the future of broadband AND Foreign companies leverage Korea’s ideas better
  102. 102. Online Games • 1 billion USD market – Larger than Japan with 1/3 population and 1/2 its GDP/capita – 1/3 of China’s • Pioneer of – Online gaming! – Virtual goods model Kingdom of the Wind (Nexon, 1996)
  103. 103. Cyworld • Real-name SNS • Beats FB and MySpace • Virtual goods – Avatars – Page skins – BGM – Fonts! • … since 1999!
  104. 104. Naver • Google & Yahoo’s nemesis in Korea • Innovations – “360 search” – Yahoo Answers – Since 2002! • More – Knowledge shopping, etc.
  105. 105. Alternative Media Models • Citizen journalism | OhmyNews • Video Jockey “VJ” | Afreeca.tv • Online education | Megastudy • Various smaller services with innovative concepts.
  106. 106. 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
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