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.

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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Lessons Learned From Asia Presentation Transcript

  • 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. 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. 0. Introduction
  • 4. Benjamin Joffe ベンジャミン 벤자민 本杰明
  • 5. 4 years 1 year 4 years
  • 6. www.plus8star.com
  • 7. Innovation Arbitrage China | Japan | Korea
  • 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. Our clients EUROPE USA ASIA
  • 10. 1 How Asia can innovate
  • 11. Claim #1 The biggest barriers to understanding are our assumptions
  • 12. General assumption #1 Everything from USA is great
  • 13. General assumption #2 Everything from Asia is weird (and sometimes funny)
  • 14. Two examples
  • 15. Movie 1
  • 16. Magnificent Seven Seven Samurai (1960) (1954)
  • 17. Movie 2
  • 18. The Matrix Ghost in the Shell (1999) (1989/1995)
  • 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. Old Boy – Made in Hollywood Directed by Steven Spielberg Starring Will Smith In theaters in 2010
  • 21. Who came first?
  • 22. Leveraging best practices
  • 23. Claim #2 Innovation is a consequence of Talent Market size Infrastructure Investment
  • 24. Internet Mobile 1.3 billion 3.3 billion Source: Morgan Stanley, 2007
  • 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. 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. 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. 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. 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. Claim #3 Innovation is beyond technology (it’s about services ^_^)
  • 31. Technology? e.g. LAMP stack (Linux / Apache / MySQL / PHP) + HTML / Flash / AJAX…
  • 32. Largely commoditized…
  • 33. 2 China
  • 34. Claim #4 China is innovating more and more because of five key factors
  • 35. 5Cs of Innovation™
  • 36. a. Copy
  • 37. “Benchmarking” “Inspiration” “Best practice” “If I have seen farther it is only by standing on the shoulders of Giants.” (Isaac Newton)
  • 38. Pragmatic Entrepreneurs & Investors Innovation ROI? “Blue oceans”
  • 39. Entry barriers Technology? Capital? Talent? Intellectual Property? Censorship?
  • 40. The Underpants Gnomes
  • 41. Business Plan
  • 42. Copy can backfire!
  • 43. Japan: Mayonnaise
  • 44. China: Whipped Cream
  • 45. Copycats often die • Market not sustainable • Business model does not work
  • 46. b. “China”
  • 47. Scale / Geography / Demography make some services viable
  • 48. Already in 2007 ...$1 billion do not (We even published a report…) appear overnight
  • 49. Attention Threshold = 1 billion dollars?
  • 50. Market Capitalization (June 2009) 3-15 bln? 21 bln REAL MARKET CAP
  • 51. Maybe simply not looking?
  • 52. c. Combination
  • 53. Will it blend?
  • 54. Tencent (1998)
  • 55. d. Competition
  • 56. “Survival of the fittest” (Herbert Spencer)
  • 57. What happens when you have 4 Facebook 20 YouTube 10 MySpace 5 Match.com 3 Yahoo 4 Twitter ?
  • 58. Tough Spots Sociology Psychology “Concepts” Business models Marketing “Execution” Metrics Feedback loop Payment
  • 59. e. Constraints
  • 60. “Necessity is the mother of invention” (Plato)
  • 61. Low GDP/capita Small transactions / making millions from cents
  • 62. Limited advertising Alternative business models / B2B to B2C
  • 63. No credit cards Alternative payment systems, mobile, virtual currencies
  • 64. No legacy industry (is it a constraint?)
  • 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. 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. Battlefield by Electronic Arts
  • 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. More innovation
  • 70. Lihua | Order food over IM
  • 71. Alimama | Ad exchange + Micro-retail
  • 72. Babytree | Vertical for young parents
  • 73. Huica | Mobile coupons
  • 74. PPLive | P2P Internet TV
  • 75. Hozom | Address book + SNS
  • 76. iNezha | RSS-to-IM
  • 77. Qifang | P2P Micro-lending
  • 78. Digu | Twitter + Pics + Celebs
  • 79. Lakoo | Appstore for non-iPhones
  • 80. 2 Japan
  • 81. Claim #5 Japan is the world’s most advanced mobile market AND Too isolated for its own good
  • 82. Beyond Voice & Beyond Telecom 50% 50% 92% 3G Mobile TV NFC 40% 50% 95% Flat-rate Data Data ARPU Non-SMS Share
  • 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. 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. 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. Galapagos Syndrome • No foreign mobile brand is strong in Japan • Too complex to survive abroad?
  • 87. Some examples that work
  • 88. “Social Networking Is Not a Business” MIT Technology Review July/August 2008
  • 89. And more (April 2009)
  • 90. Mobile Social Networks?
  • 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. Mobile Game Town
  • 93. Revenue Breakdown [1 billion JPY = 10 million USD]
  • 94. Japan Game Market [1 billion JPY = 10 million USD]
  • 95. More successes
  • 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. 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. 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. Various Virtual Worlds • Services – Nicotto Town (250K) – Ameba Pigg (350K) • Content & business models – 2D – Virtual items – Avatars and spaces
  • 100. 3 Korea
  • 101. Claim #6 Korea is a window into the future of broadband AND Foreign companies leverage Korea’s ideas better
  • 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. Cyworld • Real-name SNS • Beats FB and MySpace • Virtual goods – Avatars – Page skins – BGM – Fonts! • … since 1999!
  • 104. Naver • Google & Yahoo’s nemesis in Korea • Innovations – “360 search” – Yahoo Answers – Since 2002! • More – Knowledge shopping, etc.
  • 105. Alternative Media Models • Citizen journalism | OhmyNews • Video Jockey “VJ” | Afreeca.tv • Online education | Megastudy • Various smaller services with innovative concepts.
  • 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