Christopher Billich spent five years as head of research at Infinita in Japan, analyzing mobile Internet and marketing for a who's who of international clients eager to emulate Japanese success stories back home. This is Billich's guide to Japan, the World's most sophisticated mobile market, giving a glimpse of what mobile Web, marketing and services will look like in the future in those less-developed markets the rest of us call home.
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How big or advanced is mobile Web and mobile marketing in Japan vs. rest of world? What is the potential? What are the latest statistics?
• In Japan, there are 111 million mobile subscribers, 92.5 million of them use mobile data services – that’s 83 percent of the subscriber base, or 72 percent of the population (Telecommunications Carriers Association Japan, 2010). Factoring out people who only use the data capacity for messaging – about 1 in 4 users (according to ImpressR&D) – there are about 69 million mobile Internet users, which equals 62 percent of mobile subscribers in total.
• Mobile marketing and advertising expenditures in Japan in 2009 was 103.1 billion Yen, that's US$1.14 billion (according to Dentsu, in Japanese). This number includes all campaign formats, including text, display and search, and covers production costs and media spend. Year-on-year growth was 12.9 percent, which is quite low and can largely be attributed to the global economic crisis (previous year: 59 percent). Nonetheless, mobile was the only advertising medium with double-digit growth in 2009.
• Depending on which estimates are used, mobile Internet penetration in Japan is more than double the US or top European countries and mobile advertising expenditure in Japan is 15-38 percent of the total global figure (pretty impressive for a country with less than 3 percent of global mobile subscribers. See Why Japan is the king of mobile for a detailed comparison of statistics.
• The following slideshow is a good introduction to Christopher Billich and his insights.
The guide to Japan continues below...
Where are the key mobile marketing activities: mobile Web; advertising; text campaigns; applications etc? Do companies tend to work with or independent of operators?
• The most prevalent formats are display and text ads leading to microsites and/or permanent mobile sites, although delivering ads via mobile email to opt-in subscribers in the operators’ databases is also common. Furthermore, virtually all major mobile sites run their own membership/opt-in programs and distribute promotional offers and newsletters. Quick response (QR) codes are commonly used in print media, on packaging and on desktop Websites to link to mobile, and contactless transactions via Near Field Communication (NFC) are gaining ground in the retail and payments space.
• For most major campaigns, advertisers work with operators directly – or rather, operator subsidiaries: each carrier has a joint venture with one of the three largest advertising agencies in the country, which sell both operator deck and third-party inventory. The 800-pound gorilla (dominant player) is D2 Communications, jointly run by network operator NTT DoCoMo and ad agency Dentsu.
• Over the past two years, spend has been shifting increasingly from general portal sites, and specifically from the operators’ decks, to mobile social networks, blogs and video-sharing sites. Although it’s still a smaller segment, mobile ad networks are becoming more popular, a trend that I believe will accelerate. There are literally hundreds of thousands of off-deck sites, many of which are still underserved in terms of monetization. For comparison NTT DoCoMo, which has the largest deck, has 15,000 official sites on its i-mode service.
• Since 2006, the three main operators have expanded and updated their search functions through partnership: NTT DoCoMo and au KDDI both partnered with Google, while SoftBank Mobile works with Yahoo Japan (Softbank Corporation is a major shareholder). This helped to drive exceptional growth in mobile search engine advertising – mobile search ad spend almost tripled from US$94m in 2007 to US$248m in 2009 (Dentsu). Today search only represents 22 percent of total mobile ad revenues in Japan, but I believe that by 2012 that figure will be at least 40 percent, as technologies like voice search and visual search/imagine recognition make mobile searching much more user-friendly.
• There's also a lot of interesting stuff happening with augmented (or blended) reality (AR) technologies. AR was pioneered in Japan by Tonchidot with SekaiCamera (it's a bit similar to the Layar browser). Japanese retailer Tokyu Hands recently did a brilliant demo of its new layer within SekaiCamera that shows you products immediately relevant to your current environment. So, if you’re at the park, it may show you barbecue products, if you’re hanging out on the beach, you might see a surfboard. AR mobile marketing is still in its infancy and won't play a major role for a while, but I expect to see plenty of activity over the next couple of years.
• The following video gives a flavour of SekaiCamera – and the potential of AR.
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What is driving growth? What's holding it up?
There's a full explanation below of why mobile Web has been a massive hit in Japan - and therefore why mobile marketing/advertising is huge.
• As far as the mobile advertising goes, standardization in formats and efficiency measurement has been key in getting us where we are today. From a marketer’s point of view, mobile is a really attractive channel because of the precise targeting it allows, the high engagement potential because of its personal, always-on nature and the possibilities to use it in the context of cross-platform campaigns. Especially in the youth segment, it allows advertisers to engage audiences who are otherwise very difficult to reach. ROI is clearly and immediately measurable, and mobile marketing is very cost-effective: for example, spending US$30,000 for a banner on NTT DoCoMo’s i-mode deck will give you 15 million unique contacts in a week.
• Mobile advertising faces three challenges: first, many of the big creative agencies do not push mobile marketing heavily, perhaps because neither producing mobile campaigns nor selling inventory is particularly lucrative; second, the landscape is really fragmented from the media-planning point of view – running a campaign across all three carriers, and across on-deck and off-deck sites gets very complex very quickly; third, I think there is a generational issue: many of the decision makers on the brand side still lack an understanding of the unique possibilities that mobile offers, and the limitations that it has.
Which industries/sectors have shown the most interest in mobile Web/marketing in Japan? Is interest from local or international companies?
• In the early 2000s, most mobile advertising promoted mobile content and services, but the balance has shifted. I'd estimate that up to 60 percent of mobile advertising is now for goods and services. Both multinational companies and domestic ones participate.
• Predictably, the business-to-consumer (B2C) sector is the most active in mobile advertising – in 2008, 24 percent of large brands advertising on mobile were B2C, while only 1 percent was B2B (D2 Communications, June 2009).
• In terms of sectors, we are seeing most of the activity in fast-moving consumer goods: food and beverages, fashion, cosmetics. The restaurant and travel industries are investing heavily as well; and any business focused on young women. Japanese girls in their teens and twenties are not only very early-adopters and discerning consumers in this country, but they are also the heaviest mobile Internet users – this is reflected in mobile advertising.
Which brands/publishers are the most innovative with mobile? What are they doing? Which brands are investing the most in mobile Web/marketing?
Nike and Coca-Cola, along with Japanese beverage companies Kirin and Suntory, have all invested heavily and pushed boundaries, but the leader in terms of innovation is McDonald’s.
McDonald’s launched its first mobile site in 2003, introducing a mobile coupon system allowing customers to register to receive promotional offers and redeem them at the point of sale. This started with simple HTML coupons, later as downloadable Mobile Flash coupons. In May 2008, McDonald’s introduced an NFC-based version called Kazasu Coupons, which lets users download coupons through a mobile application and touch a reader/writer at the point of sale to instantly redeem their coupons, as well as pay for the purchase, and receive loyalty points. All of this happens in a matter of seconds – and it even works when the battery is dead.
This Kasazu system allows McDonald’s to plan the promotions according to each individuals purchase history; demographics (age, gender and place of residence) and contextual factors like time of the day, or what the weather is like – this is true engagement marketing and provides unprecedented insights to help with product and branch management.
This was a huge project requiring considerable investment in backend infrastructure and putting NFC reader/writers into 3,800 branches, even requiring setting up a dedicated mobile marketing joint venture with NTT DoCoMo. But the benefits – lowering cost by moving from paper to mobile-based coupons, reducing customer processing time, and achieving unprecedented sophistication in CRM – far outweigh the costs.
According to McDonald’s investor relations (in Japanese) there are over 16 million registered users on their mobile site – that's more than 12 percent of the Japanese population – the company’s mobile site generates more than 100 million mobile page views per month, and in less than 2 years, the number of users of Kasazu Coupons now exceeds 4.5 million.
The following video goes into more details, including a D-I-Y trial.
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Which mobile campaigns stand out particularly? Are these long or short-term campaigns; is there cross-media integration?
Few campaigns are standalone, generally being tightly integrated with other media channels. We see many campaigns now where mobile is actually the lead medium and the ultimate destination that all other communication efforts point to. It’s the glue that keeps everything together.
Two campaigns stand out particularly from the past couple of years both creating truly engaging experiences: AXE's Wake-Up Service Inc (Agency: Bascule) and Tohato's World’s Worst War (Agency: Hakuhodo), which encouraged huge numbers of mobile warriors to wage war, according to their favorite snack. Both of those links provide further information and videos.
The trend recently is for campaigns that create an experience that lasts several months – years even – providing an ongoing engagement that stretches the definition of the word campaign.
• Adidas Japan is running a mobile and online promotion leading up to the FIFA World Cup called Nakama, where players create a personalized avatar (animated character) and become a virtual member of Japan’s National Team (along with 10,000s of other supporters). The aim is to form a team with your friends, and the bigger your team gets, the more actual National Team players join you (as avatars). Players can communicate with teammates, including the national players, and participate in sweepstakes for Adidas products as a group. Most of the interaction happens on mobile, but the desktop site shows all the avatar players lined up on a soccer field with a map to show where the other players are based.
• Another good example is an ongoing Honda promotion called K-tra (Agency: Dentsu), which started in November 2008 and is still ongoing. This is a virtual mobile hitchhiking game that allows people experience mobility through other people’s real-world movements, with a strong social component. Whenever checking in to the game on their mobile, participants have the option to pick up other players’ avatars, which have been dropped off at that location previously, take them along for the ride and then drop them off somewhere else when they check out of the system. Players receive points for the distance their avatar travels and the amount of souvenirs they collect. Participants can keep track of their Avatars online and receive messages from them.
The following video contains more information on K-tra.
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What are the most popular mobile sites in Japan?
• Mobile social networking: In terms of pure reach and traffic, the most popular sites are the three major social networks, where mobile access dwarfs desktop access (the statistics are from the investor relations reports of each company): Mixi Mobile (the 18.6 million users generate 22.5 billion mobile page views/month versus 5.1 billion online page views) is quite similar to Facebook, while mobile-only Mobagetown (15.8 million users, generate 38 billion mobile page views/month) and Mobile GREE (16.7 million users, 24.7 billion mobile page views/months versus 0.3 billion PC page views) combine social networking elements with free games and virtual goods/avatars. The combined traffic of these three outranks Yahoo Japan’s (the biggest mobile portal and search player in Japan) 10:1. Ameba, a blog platform and community site, is another popular mobile destination.
• Social utility sites: The most popular services are Ekitan Norikae Annai, a train schedule service (essential to navigate Japan’s highly complex public transport system), and Weathernews, as well as Navitime, the leader in the navigation space.
• Food: The McDonald’s mobile site is huge (see above), another popular one in the food category is Gurunavi, a restaurants listings, reviews and community site.
• Mobile Commerce: Rakuten, Japan’s version of Amazon (although Rakuten is actually an umbrella site for thousands of independent stores, rather than a retailer itself), and Tsutaya (CD/DVD sales and rental).
Who are the key players?
• Mobile network operators: NTT DoCoMo, au KDDI and SoftBank Mobile.
• Mobile media sales: Carrier/ad agency subsidiaries like D2 Communications and Mediba, which hold a lot of inventory and are heavily involved in developing new technologies and mobile marketing formats. Beyond this, a number of carrier-independent mobile media sales representatives, the largest of which are Cyber Communications (owned by Dentsu), Digital Advertising Consortium (DAC) and CA Mobile.
• Creative agencies: Heavyweights Dentsu, Hakuhodo and Asatsu DK, plus a number of innovative smaller players that largely specialize in digital including mobile, like Bascule and UltraSuperNew.
• Mobile ad networks: Both Yahoo! Japan (together with Overture) and Google (together with Admob – which it plans to acquire) are heavily involved, both for paid mobile search listing and for contextual ads throughout their content network. Additionally, there are several domestically focused networks like adways and Pocket Affiliate and Pocket Match – the latter are operated by DeNA, one of the major content providers, which also runs Mobagetown.
• Industry associations: Global organizations like the Mobile Marketing Association carry little weight in Japan – the industry here organized early and independently. The three main relevant industry associations are the Mobile Marketing Solution Association (MMSA), the Mobile Content Forum (MCF) and the Japan Internet Advertising Association (JIAA).
What makes mobile marketing different in Japan compared to abroad?
There are seven reasons why the mobile Web – and mobile marketing with it – took off in such a major way in Japan. People who don’t know the market well tend to attribute it to cultural factors, but I think that’s a gross oversimplification. The whole mobile ecosystem is set up in quite a different way.
1) First and foremost, 75 percent of Japanese mobile data users are on flat-rate plans (first introduced in 2004 by au KDDI). This has been THE crucial driver for adoption of mobile Internet usage overall, period. As a result of the removal of the psychological cost barrier for data access, first mobile content and mobile Web usage soared, followed quickly by the rise of the mobile advertising business.
2) At over 95 percent, 3G handset penetration is extremely high, and network quality and coverage are both outstanding, so user experience is great even for data-intensive sites and applications – enabling marketers to deliver very rich campaigns, which often make use of Mobile Flash elements (campaign sites, games, etc.).
3) Japanese mobile network operators wisely never tried to get into the content business themselves, but have always been following a platform strategy, taking only 10 percent of content revenues generated via their portals, while content providers are paid out an average 90 percent of revenues. This has created an abundant portfolio of attractive content, resulting in strong consumer adoption.
4) The carriers approach has been “open garden” from the start: while operators do focus on their portfolio of official sites and some operator-proprietary services, from the very beginning of i-mode in 1999, anyone that wanted to could easily create off-deck mobile sites as well, and consumers could easily access them at the same data access costs as on-deck sites. This trend has accelerated with the widespread adoption of QR codes and mobile search.
5) The standard messaging technology is mobile email, not SMS and MMS (which play no role in Japan), each handset has a unique email address and the cost of emails is included in the user's data plan. Japanese mobile email is much richer than SMS or MMS – they can contain up to 10,000 characters, you can embed multiple links, emoticons (smiley faces etc) and graphics, and attach files.
6) Japan has a very homogeneous handset base, which is due to the unusual relationship between operators and handset manufacturers: The former define the device specs to a large degree, then buy the production runs from the device manufacturers and distribute at their own risk. Thus developers and marketers rarely have to deal with device fragmentation issues, because the carriers control the device roadmap.
7) Add to this fierce competition for subscribers in the marketplace, and you get a market with very high-spec devices, and many technologies highly relevant to mobile marketing – from picture messaging to Mobile Flash to GPS to NFC – appear in Japan first, then trickle down to other markets.
Although other markets are starting to catch up, the level of sophistication of mobile marketing in Japan is still years ahead of the rest of the world. The downside is that Japan’s mobile ecosystem has evolved completely independently from the rest of the world, so Japan suffers from a highly sophisticated case of “Galapagos syndrome”. I believe the Japanese industry is starting to take a more open approach, though. They understand that the age of insular solutions is coming to an end.
If you are more interested in the evolution of the mobile Web industry in Japan, I recommend watching the 8-part mini series on Infinita.tv. Episode one is below.
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What is the most exciting thing about mobile?
Everything that’s been happening so far only offers a tiny glimpse of what’s to come in the next decade or two, it’s still really early in this game. We are approaching a scenario where you have one primary device that is the “magic wand”, which you use to identify yourself, then access and manage your data, content, social connections, brand affiliations etc. via the nearest screen available – whether that’s on the device itself, in your car, on a TV somewhere, or a projector. With data and services residing in the cloud, and interaction happening across a multitude of devices, it will get truly interesting.
We will soon reach a point where more objects and machines will have wireless connectivity built into them than there are cell phones, which will have huge implications for marketing. Any store, any vending machine, any outdoor display, many products themselves even will “know” your preferences and your current context – can you imagine the shoes you are trying on suggesting you choose a different color based on what they know about your wardrobe.
Within 3-5 years, I believe that mobile devices will become our primary payment devices displacing the wallet – that’s another absolutely massive shift.
Where should people go for more information – reference sites, books etc?
With regard to the Japanese market, the amount of resources available in English is very limited. In terms of Websites, Wireless Watch Japan, Asiajin and Mobile in Japan feature interesting stuff. My former company Infinita Inc. also publishes a lot of free reference materials, with presentations here and a video blog here which cover interesting developments in the Japanese mobile industry.
About the author
Christopher Billich has spent the past five years living in Japan and until February 2010 served as SVP, Research & Strategy at Tokyo-based mobile strategy consultancy Infinita Inc. He is a regular speaker at industry events and conferences worldwide, and the author of a string of publications on the Japanese mobile industry. Christopher is currently in the process of relocating to Europe in pursuit of his next adventure in mobile, and can be reached at cbillich [at] gmail [dot] com.
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