THE I-MODE DIARIES by Julian Lai-Hung, CEO Gocapital.com.
11/22/2001 Author: Julian Lai-Hung, CEO, GoCapital.com
THE MOBILE INTERNET IS OXYGEN – JAPAN IS BEGINNING TO BREATHE BUT EUROPE IS SUFFOCATING. Monthly series of viewpoints and insight from the world’s largest and most advanced mobile Internet market. Contact julian@gocapital.com
The best description I have heard of the mobile Internet was that it was like oxygen – it has the potential to permeate aspects of our personal and working lives giving us valuable services anytime, anywhere. In fact, the same thing was said of the PC-based Internet way back when, but the mobile finally has the capacity to deliver on that promise. Unfortunately for us Europeans we are suffocating. There is a place however where people are starting to breathe very well thank you very much – Japan. The difference in the success of the two markets is staggering – Japan has over 30 million mobile Internet users and is adding 2 million each month – Europe has well … I’m not sure but my brother said his friend used WAP once so that’s at least one. You’d think that given that European industry has so much to lose by not delivering on the mobile promise (for example, recovering the scandalous cost of those UMTS licenses in UK and Germany) we would be trying our best to understand what is happening in Japan and derive as much learning as possible. Instead, we are surprisingly ignorant of the best case study the world has of what can happen in a successful mobile Internet world. The most common argument that is used is that Japan’s success is a ‘Japan thing’ that can’t be reproduced elsewhere. Examining some of the evidence that is used to support this claim shows how we may be missing some huge learning opportunities:
Misconception #1 “Japan’s mobile Internet success is driven by teenage girls downloading cartoon characters and melody rings” Firstly, demographic data issued by both NTT Docomo and KDDI (Japan’s second largest mobile operator that never gets a mention in the shadow of I-Mode but still has more mobile Internet users than any operator in Europe) less than 7% of users are below the age of 19. Furthermore, over 60% of all users are male. It is true that melody rings and cartoon character downloads have been popular however, but this fact has blinded us to the other exciting services both entertainment and non-entertainment emerging in Japan.
Misconception #2 “Japan’s mobile Internet is successful because they don’t have PC Internet access and therefore turned to the mobile”. Japan’s online PC penetration at the time of I-Mode’s launch in February 1999 was around 14%. This compares with around 40% in the US at the time. However, when compared with 18% in the UK and 12% in Germany, Japan doesn’t seem so different. So why isn’t mobile Internet as successful in Europe ? As I-Mode co-founder Mari Matsunaga explains in her book ‘The I-Mode affair’, the truth is that when NTT Docomo launched the service they tried very hard not to mention the Internet at all – most new users were motivated by the simple fact that they had a bunch of cool services available.
Misconception #3 “iMode is technologically inferior to WAP” This is something that comes up every now and again and it completely misses the point. WAP is a technology standard, a set of protocols and iMode is a brand name and a business model. When I asked Takeshi Natsuno (who has also just published an I-Mode book called ‘I-mode strategy’ - only in Japanese now but soon in English) what he wanted Europe to learn most from Japan, he said “The Internet way of thinking – not the Telecom way of thinking” iMode services are delivered through simple cHTML pages and use standard Internet protocols that developers are already familiar with. Easy to develop, great services, and importantly a clearly defined business model. The result has been an Internet growth path in users – a growth path that resembles the growth in PC-based Internet users at its beginning.
Misconception #4 “Japanese spend a lot of time on public transportation and therefore have more time than us to use their mobile phones” The average commute in Tokyo is 1.5 hours. Many Japanese travel much longer in order to reach their place of work. For many Europeans, this would be reason enough to change jobs, but in Japan it can also be a great opportunity to use your mobile phone. Nevertheless, the fact is that Japanese use their mobiles everywhere – and mostly while waiting around for someone. One of the key messages emerging from Japan is that the mobile is a great way to kill time. It is clear to me that Europeans and Americans have more free time than the Japanese and are just as likely to use their mobile phone to kill time if the right services are there.
So what are the key takeaways from the Japan experience ? Well, the care and attention to the quality of the customer experience is something we could all emulate – that quality comes from (1) fantastic handsets – believe me you haven’t really seen a handset (and let’s face it, most of us haven’t) until you’ve seen the handsets available in Japan: more variety, lighter, colour screens, excellent sound, batteries last ages, they look better, are more reliable and easy to use than the ‘bricks’ they sell in Europe; (2) great services – you can only get great services when there is an environment that allows service providers to make money and innovate. Japan’s packet-switched network helps and so does the fact that the business model for services providers is clear. It’s very interesting that the debate at industry conferences in Europe tends to revolve around how to make money, whereas at equivalent conferences in Japan it is about what new and exciting services we can innovate next.
This last point on business models is the real rub - it would be easy to conclude that we just need to copy what the Japanese are doing. Unfortunately it is not quite as straightforward as that. The biggest difference is the industry value chain – in Japan, essentially NTT Docomo is the value chain - dominating all aspects from handset specification (manufacturers don’t even get to put their brandname on the handset), to interface with the customer to even content services (in spite of the fact that NTT Docomo claims it wants to provide the content platform and not the content on that platform) In Europe, the value chain is different from country to country and the hard truth is that we will have to muddle through in our own fragmented way – this means mobile operators and service providers guarding their own turf and sometimes moving in the same direction but more often than not moving in different directions. What we can hope for is a quicker path to the industry ‘end-game’ by each and every one of us understanding exactly what is happening in Japan and learning and adopting as much as possible to our own situation – something we are quite far from since we don’t really understand what is happening, resulting in a poor quality debate. We may also find that Japan is a good place for us to launch and test new products and services even before our home markets given all the world’s users are in Japan. Europe really doesn’t have time to hang around – the danger comes firstly from Japanese handset manufacturers – they will have around 2 years experience of making and selling 3G phones even before one European has touched any in their own markets. This means Nokia, Motorola and Ericsson will see their market shares fade away. In addition, there is NTT Docomo – the world’s third largest company in terms of market capitalization and a $35Bn revenue giant – a company that has the world’s largest mobile market as its cash cow, doesn’t have the handicap of a crippling UMTS license cost, and is also forced to look overseas by law since its market share is capped by the Japan government. If Europe doesn’t start creating oxygen soon we’ll find that we’ll be breathing from Japan’s reserves.
About the author
Julian Lai-Hung is a Wharton MBA, trilingual in French, Japanese and English with over 5 years Japan Internet industry experience as former Senior Managing Director of Digital Magic Labs (DML.COM) - one of Japan's leading web developers with offices in Tokyo, Singapore and San Francisco. Prior to DML.COM, Julian worked for Fujitsu/ICL, leading joint sales teams into Fujitsu's largest client - NTT and NTT group companies including NTT Docomo. Through his experience with DML.COM and as an associate with the Communications, Media and Technology practice of Booz Allen and Hamilton London, he has helped launch numerous online businesses both in Japan and Europe. Julian spoke on Japan's wireless Internet sector at the M2000 conference in Stockholm, December 5th/6th 2000. Email julian@gocapital.com to receive a copy of the presentation.
About Gocapital.com
Gocapital is a market entry consultancy and new venture development firm that uses unique cross-cultural skills and experience to launch European e-business into the Japan market and Japanese e-business into European markets with a strong focus on wireless Internet.
