Japan & Mobile

Conventional wisdom in the mobile industry is that Japan and South Korea are the most advanced mobile markets worldwide. Just need to look at Japanese facts to be convinced: 3G penetration over 80% (with the announced launch of Super-3G in 2010 by NTT DoCoMo; that is to say 9 years after the initial 3G launch), ubiquity of mobile Internet usage, use of mobile phones as wallets, QR-codes environment and many many other innovative services such as "mobile books". Last one I am aware of is the launch of mobile phones that will enable you to open your car ("digital mobile key" to be launched next year in partnership between Nissan, Ntt DoCoMo and Nec).

Needless to say there has been endless speculation in the last few years about how to extrapolate trends in those markets into Europe and the US. Is Japan (or South Korea) only a few years ahead of the mobile innovation curve or is there something specific in the Japanese culture as often explained? It is an extremely complex question and I think there are many different factors to take into account. Indeed, it might well be that Japanese are spending much more time in public transport (vs the US "car" culture) and that they may have a specific relationship with their "keitai". However, there are also plenty of other factors to take into account, among which:

- geographical constraints such as distribution of the population. Japanese and South Korean populations are extremely concentrated among dense urban conurbations. Around 45% of the population of South Korea is in the immediate area around Seoul while respectively 6% of the population of the US is around NYC and another 7% around LA. So what? Well, the return on investment when rolling out a new network is quicker and it is easier to deploy, which is why Japan launched 3G more than 7 years ago, at a time when Europe had not even started struggling with WAP.

- role of operators and their relationships with handset manufacturers. Operators have worked hand in hand with their suppliers to specify services and to make sure the user-experience would be compelling. This is one of the reasons of the i-mode success (with 91% revenue share for content publishers). NEC, Sharp, Panasonic are the main brands while the leading worldwide handset manufacturer has a market share below 5 percent versus a global average around 40 percent. Also, operators particularly DoCoMo have supported the costs of deploying new infrastructures (e.g, QR codes, NFC) to create a new ecosystem that would benefit all the stakeholders in the value chain.

- Japan is a very homogeneous and diversified mobile market. On the contrary and despite the adoption of the GSM standard, Europe is still very fragmented with as many different regulations and languages than there are countries. Consequently, return on investment is easier for players who do not have to deal with many different players and environments. Having failed to export their model abroad (i-mode alliance or difficulties of Japanese handset manufacturers to gain market share elsewhere), Japanese mobile stakeholders have started to diversify the portfolio of their offerings and to make the most of the mobile channel to the benefits of media companies.

Between internationalization and diversification, Japan has chosen the second strategy contrary to European players.

It clearly means there is a lot to learn from this market but that you have to be very cautious when extrapolating trends and trying to replicate innovation. I see many PRs about the tremendous potential of mobile advertising and QR Codes, based on Japanese success stories. It is true that mobile advertising in Japan has grown from more than 110% between 2006 and 2007. According to Dentsu and other local players, it represented slightly more than 500M euros in 2007! Half a billion! Right. But isn't that only around 5� / mobile subscriber / year? I know the real ratio is about regular users of mobile media services but still you get my point.

Jupiter recently published a report on music intitled Digital Music in Japan: Assessing the Dominance of Mobile. You can access it here.

One of the things I am most excited about now that Jupiter is part of Forrester is to have access to proprietary Forrester data on the Japanese market (and many other Asian countries) via Technographics. And also to have colleagues based in Japan.