1) Japan has a mature mobile phone market with over 89% penetration and growth of 4% year-over-year. Mobile phones are the most popular communications device surpassing PCs and landlines. 2) Mobile social networking is growing in popularity in Japan, with the top 3 networks being mixi, mobage town, and Gree. These networks attract users through gaming, communication features, and virtual communities. 3) The mobile social network landscape is still evolving, with competition increasing around features, developers, and monetization strategies like premium content and advertising.

1. Japan Mobile SNS Study January 2010 mixi facebook gree mobage town twitter Yahoo! Days

2. Part 1. Japan’s Mobile Phone Market Overview

3. Japan’s mobile phone market is in a mature phase The saturation is here with penetration rate standing at 89% The growth is modest with 4% up YoY (Aug. ’08 - Aug. ’09) (see Chart: 3) Japan is a dominantly postpaid market Just 1.3% of accounts are prepaid and they are decreasing There are two types of mobile phone standards in Japan: cellular and PHS Among country’s 113.7m wireless subscriptions, 96% account for cellular phones Remaining 4% go to Personal Handy-phone System (PHS) Japan mobile phone market is well developed

4. Source: Telecommunications Carriers Association, August 2009 Last year Japan’s wireless market grew by mere 4%

5. Source: Japan Ministry of Internal Affairs and Communications, 2008 Mobile phones, including PHS, are the most owned communications devices In popularity they surpass personal computers and fixed line telephones Mobile phones outshine landline telephones & PCs in Japan

6. There are three main cellular standards employed in Japan: PCD, CDMA & WCDMA 2G: cdmaOne (a CDMA flavor) and PCD, a home-grown standard vanishing from the scene 3G: CDMA and WCDMA evolutions Japan cellular phone market has almost completely switched to 3G standards Just about 5% of accounts are still 2G In 3G, WCDMA takes lion’s share as three operators support it vs. single CDMA operator WCDMA operators are NTT DoCoMo, Softbank and eMobile; KDDI au backs CDMA Data usage is abundant due to high 3G penetration and advanced devices available Among 109m cellular connections, 84.3% have data plans added on 3G penetration stands at 95%, making Japan the leader in 3G

7. Source: Japan Ministry of Internal Affairs and Communications, 2008 In 2008, about 62m users accessed Internet from both PC and mobile phone 82.6% of mobile phone users browsed mobile Internet from their phones in 2008 In 2009, this number increased to 84.3% (see Chart 6) Chart: 7 Internet Access in Japan by Device Type, 2008 Mobile phones are in the driving seat when accessing Internet PC & mobile phone users 61.9m (68.2%) 4.7m (5.2%) Mobile phone only 8.2m (9.0%) 0.1m (0.1%) Game device/TV only 0.02m (0.0%) 0.7m (0.8%) PC users 82.5 (90.8%) Game device/TV users 5.6m (6.2%) Mobile Phone Users 75.0m (82.6%) PC only 15.0m (16.6%)

8. Social networking is on mobile radar but has plenty room for growth Source: Mobile Marketing Data Labo., Aug. 2009; n=2,010 (multiple responses allowed) Chart: 8 Japan Internet Services Accessed from Mobile Phone in August 2009 Breakdown of mobile Internet usage in Japan

9. Part 2. Mobile Social Networking in Japan

10. When logged in from a mobile phone, almost 60% of users play games Source: Mobile Marketing Data Labo., Aug. 2008; n=3,880 Most users access social networks from mobile Source: Mobile Marketing Data Labo., Aug. 2008; n=2,926 Chart: 9 Access methods of social networks in Japan Chart: 10 Main SNS features used on mobile phone

11. Social network user demographics skew toward female users Source: Mobile Marketing Data Labo., Aug. 2008; n=6,898 Japan’s social networking demographics Source: Mobile Marketing Data Labo., Aug. 2008; n=3,478 Source: Mobile Marketing Data Labo., Aug. 2008; n=3,420 Chart: 11 SNS usage / awareness in Japan

12. Among most used features are blogging, gaming and messaging Source: Mobile Marketing Data Labo., Aug. 2009; n=3,880 (multiple responses allowed) Chart: 14 Features most used on social network sites (including both PC and mobile phone users) Social networks attract users by multiple features Good selection of games is an important attribute of successful social network in Japan

13. Late coming and lack of relevant local offering keep global brands at bay in Japan Source: Mobile Marketing Data Labo., Aug. 2008; n=3,880 (multiple responses allowed) Chart: 15 Mobile Social Networks Accessed In Japan, 2008 Home-grown social networks rule in Japan Chart: 16 Mobile Sites Used for Communication, 2009 Source: Cross Marketing, Sep. 2009; n=2,993 Foreign players struggle to get footing in Japan Big three dominate the social networking marketplace in Japan

14. Twitter in Japan: growing but yet to make an impact Twitter’s reach in Japan is comparatively low but with such personalities like Japan’s prime minister Yukio Hatoyama joining the service it can get more traction By now, Twitter in Japan is high-jacked by the male audience (75% of Twitter users) Table 1: Stats of Twitter usage in Japan, US & UK, April 2009 Source: http://www.netratings.co.jp/New_news/News05272009.htm

15. Facebook in Japan: relying on organic growth Having started offering localized home page in May 2008, Facebook relied on organic growth in Japan reaching out to 2.3% of Internet users by November 2009 Lack of localized apps makes Facebook less appealing compared to mixi and likes Table 2: Facebook Japan vs. Facebook USA and mixi Japan, November 2009 Source: http://csp.netratings.co.jp/nnr/PDF/Newsrelease12242009_J.pdf

16. Source: Companies’ reporting numbers Mixi is a leading social networking site in Japan by user base

17. 7.1% Mobage Town Gree mixi 18.2% Source: Mobile Marketing, March 2008; n=352 About 30% of respondents reported actively using multiple mobile social networks Chart: 7 Mobile social network member overlap Mobile social network membership overlap is common in Japan 6.8% 7.1% 4.8% 10.5% 13.9%

18. Source: Company’s reporting numbers Marketers must target mobiles as the main vehicle for serving ads Mixi and other social networks in Japan get most page views from mobile phones

19. Mobage Town is a game-centric social network with a focus on delivering fun and entertainment experience Mixi is focusing on creating the value of communication among real life friends through social apps and games Gree is a virtual online community where users can socialize with each other through avatars, play games and earn or buy virtual goods Differentiation strategies of big three social networks in Japan Availability of games and entertainment content is pivotal for success of SNS in Japan Big three are in the race to match up each other offerings; In Japan, real user identity is often hidden behind the virtual avatar Chart: 20 Brand positioning of big three in Japan Entertainment-centric Communications-centric mixi mobage town gree

20. Mobage demographics: games appeal to younger male audience By gender By age mixi mobage town gree Source: Company’s reporting numbers Female Male

21. Mobage town offerings at glance Source: Company

22. mixi offerings at glance Source: Company

23. Social network revenue model: Gree primer Source: Company

24. Premium content and ad sales equally contribute to revenue Source: Company mobage town sales breakdown

25. Near future outlook: opening APIs and luring developers Source: Companies Battle for developers’ mindshare begins: availability of third-party applications will become a competitive advantage for social networks in Japan Mixi payment program for developers provides advertising vehicles, billing, consulting help and 80% cut of revenue generated by application Mobage Town: providing OpenSocial-based APIs for social gaming