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

Part 1. Japan’s Mobile Phone
Market Overview

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

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

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

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

Source: Japan Ministry of Internal
Affairs and Communications, 2008 <ul><li>In 2008, about 62m users accessed Internet from both PC and mobile phone </li></ul><ul><ul><li>82.6% of mobile phone users browsed mobile Internet from their phones in 2008 </li></ul></ul><ul><ul><li>In 2009, this number increased to 84.3% (see Chart 6) </li></ul></ul>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%)

<ul><li>Social networking is on mobile
radar but has plenty room for growth </li></ul>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

Part 2. Mobile Social Networking
in Japan

<ul><li>When logged in from a
mobile phone, almost 60% of users play games </li></ul>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

<ul><li>Social network user demographics skew
toward female users </li></ul>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

<ul><li>Among most used features are
blogging, gaming and messaging </li></ul>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

<ul><li>Late coming and lack of
relevant local offering keep global brands at bay in Japan </li></ul>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

Twitter in Japan: growing but
yet to make an impact <ul><li>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 </li></ul><ul><li>By now, Twitter in Japan is high-jacked by the male audience (75% of Twitter users) </li></ul>Table 1: Stats of Twitter usage in Japan, US & UK, April 2009 Source: http://www.netratings.co.jp/New_news/News05272009.htm

Facebook in Japan: relying on
organic growth <ul><li>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 </li></ul><ul><li>Lack of localized apps makes Facebook less appealing compared to mixi and likes </li></ul>Table 2: Facebook Japan vs. Facebook USA and mixi Japan, November 2009 Source: http://csp.netratings.co.jp/nnr/PDF/Newsrelease12242009_J.pdf

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

7.1% Mobage Town Gree mixi
18.2% Source: Mobile Marketing, March 2008; n=352 <ul><li>About 30% of respondents reported actively using multiple mobile social networks </li></ul>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%

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

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

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

Mobage town offerings at glance
Source: Company

mixi offerings at glance Source:
Company

Social network revenue model: Gree
primer Source: Company

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

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