Why Japan is the king of mobile: the stats and facts

Japan has much higher mobile Internet penetration than the US or Europe. This high usage of the mobile Internet (and mobile data generally) means mobile advertising/marketing is considerably more advanced than elsewhere.
• There are good reasons why Japan is king of mobile – and it’s not just a cultural thing – and the mobile ecosystem in other countries would benefit greatly if these were emulated.
• The Japanese operators take much of the credit for fostering this environment (operators elsewhere, please check you are following their lead).
• And the mobile operators are reaping the awards: NTT DOCOMO, KDDI have the lowest churn rates (i.e. the highest customer loyalty) in the world; SoftBank is fifth. All three are in the top 10 for revenues. This is of 204 mobile operators measured by Portio Research.
• There are 15,000 official sites on NTT DoCoMo’s i-mode service (the largest operator portal in Japan) – that’s more sites than mobile ad network AdMob has on its entire global network – and that’s a fraction of the mobile sites in Japan.
• Everyone else benefits too – massively. Chew on this mobile sceptics: McDonald’s Japan mobile site has over 16 million registered users – that’s more than 12 percent of the Japanese population, and its mobile coupon service (two years old) is used by 4.5 million.

First to the statistics; then the lessons – both are inspired by/based on the excellent Insider’s guide to mobile Web marketing in Japan by Japanese mobile research guru Christopher Billich – a must-read for anyone interested in the future of mobile. The guide details McDonald’s and many other amazing case studies.

Mobile Web – putting the Japanese numbers in perspective

69 million Japanese accessed the Internet via their mobile device in 2009. That’s 62 percent of the 111 million mobile subscribers in Japan (calculates Christopher Billich, based on Telecommunications Carriers Association (TCA) statistics). *
• That’s more than twice the percentage in the US, which was 29 percent in 2009 (eMarketer), or the five top nations in Europe at 31 percent in Jan 2010 (comScore).
• The global penetration rate for mobile Internet is even lower than this at around 11-12% of mobile subscribers – this is based on estimates of global mobile Internet users in 2009 of 450 million (IDC), 505 million (eMarketer) and 530 million (Strategy Analytics).
* mobiThinking note: actually mobile data usage in Japan is much higher than the mobile Internet figure quoted. The monthly breakdown of statistics, by the Japanese TCA (in a service that puts regulators elsewhere to shame) includes “Internet provider services of mobile telephone” – for February this was 92.5 million or 83 percent of subscribers. This number was reduced by 25 percent by Billich to take account of data users that only use mobile messaging (largely email in Japan).

Mobile advertising – putting the Japanese numbers in perspective

Mobile advertising expenditure in Japan in 2009 was US$1.14 billion, according to a Dentsu report – though only in Japanese – (a large creative agency that part owns mobile media giant D2Communications, with NTT DoCoMo). That’s about US$10 per mobile subscriber.
• Estimates for US spend on mobile advertising in 2009 range from $184 million (Yankee Group) to $416 million (eMarketer), which is US$0.65 to US$1.46 per mobile subscriber (285 million, CTIA).
• To put the Japan data in perspective, consider this: estimates for global mobile advertising expenditure in 2009 are US$3.6 billion (Strategy Analytics) and US$3 billion (Morgan Stanley/eMarketer); and estimates for global spending on mobile marketing and advertising are US$7.5 billion (ABI Research). So, if we are measuring similar things here (which can’t be assumed), this means Japan could account for 15 percent of global mobile marketing and advertising or 31 to 38 percent of mobile advertising expenditure – either of which is striking – considering that Japan has less than 3 percent of global mobile subscribers.
* mobiThinking note: global figures for mobile ad expenditure are estimates and there is no standard for what is included. Until regulators and associations around the world start to collect this data (as they collect mobile subscriber numbers) in earnest, we won’t ever have a true picture of global mobile ad spend.

Why is Japan years ahead in mobile Web and mobile marketing?
• Billich offers the following reasons (see the Japan mobile guide for more details):

1) First and foremost, 75 percent of Japanese mobile data users are on flat-rate plans (first introduced in 2004 by au KDDI). Consumers have no fear of bill shock.
2) At over 95 percent, 3G handset penetration is extremely high, and network quality and coverage are both outstanding. This allows rich mobile content and engaging campaigns.
3) Japanese mobile network operators only take 10 percent of content revenues generated via their mobile portals (which are massive). Billich believes Apple, Nokia etc charge up to 30 percent, while some Western operators charge 50 percent or more.
4) The carriers approach has been “open garden” from the start, where Western carriers tried to keep consumers on their portals.
5) The standard messaging technology is mobile email, not SMS and MMS (which play no role in Japan), i.e. much richer content and cheaper to send.
* mobiThinking note: many Western publishers e.g. Reuters (see this interview with Ilicco Elia) are switching from SMS alerts to email and moving as much of their traffic off portal as possible to save on operator fees.
6) Japan has a very homogeneous handset base, as the operators have kept strict control of mobile development. This means developers and marketers don’t have the device fragmentation issues that are getting worse in the US or Europe.
7) Fierce competition for subscribers means very high-spec devices, and that cutting-edge technologies highly relevant to mobile marketing appear in Japan first, then trickle down to other markets.

* mobiThinking note: taking into account all these points – fierce competition, the investment in the best networks, best handsets, flat-rate data plans, low portal fees – it is all the more remarkable that the Japanese operators have the lowest churn rates on the planet and the highest revenues.

• Billich picks out only one issue for mobile in Japan, that is that mobile here has evolved completely independently from the rest of the world, so Japan suffers from a highly sophisticated case of “Galapagos syndrome”. This, he believes, will be addressed.
• This does not alter the fact that the rest of the world has everything to learn from Japan. The Insider’s guide to mobile Web marketing in Japan is essential reading for anyone interested in the future of mobile.

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