TT-764 -- Crowdsourcing Just Getting Started in Japan, e-biz news from Japan

* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term
technology and media entrepreneur living in Japan.
(http://www.terrielloyd.com)

General Edition Sunday, July 13, 2014, Issue No. 764

+++ INDEX

- What's New -- Crowdsourcing Just Getting Started in Japan
- News -- Oklahoma farmer gets phone back from Japan
- Web Content/Tech Job Vacancies -- Account manager/Sales position
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Fighting lanterns in Toyama, Wine tasting in Miyazaki
- News Credits

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+++ WHAT'S NEW

This last week we had the good fortune to be invited to participate in
an expert panel for crowdsourcing at the Foreign Correspondent's Club
of Japan (FCCJ) in Yurakucho. We were invited to appear alongside two
major players in the crowdsourcing industry in Japan: executives of
Crowdworks and Lancers. Of the two, although Lancers got started
earlier, in 2008, it's Crowdworks that has been getting the media's
attention recently, largely due to the speed with which it raised
JPY1.4bn from some of the leading VC firms in Japan, as well as its
tie-up with Yahoo Japan at the start of 2013.

After a short presentation by your's truly, Crowdworks CEO Koichiro
Yoshida told the audience how he has a somewhat unique background --
being a failed entrepreneur, twice, before hitting the big time with
Crowdworks. An OK story, but what came after was more interesting, in
that he has set himself the goal of growing into the "next Softbank of
Japan". Pretty big footsteps to follow, given that Masayoshi Son is
still going strong, but no doubt fueled by the incredible 800%
year-on-year growth that Crowdworks has enjoyed since the company's
foundation in 2011. The company says it has so far mediated jobs worth
more than JPY12bn, and has 129,000 registered workers. Not bad for 3
years from zero.

The other speaker was a board member and the Biz Dev manager of
Lancers, Kazuhisa Adachi. He pointed out that even as Crowdworks is
growing strongly, Lancers is still the more experienced and larger of
the two organizations. Lancers claims to have handled about JPY30bn in
projects and has about 355,000 registered freelancers. We tend to
agree with Adachi that his company is the more experienced of the two,
not just because of size but also because he talked about the
transitioning of the company from a pure marketplace to an outsourcing
consulting firm with a crowdsourced front end. More about this later.

For those readers trying to remember what crowdsourcing is, basically
it's the use of unstructured crowds to get office/creative work done
remotely. It's basically this decade's answer to what used to be
called outsourcing, but unlike outsourcing it doesn't require the
managing company to know the workers at all. In fact, generally
speaking, crowdsourcing companies are marketplaces providing the tools
for buyers and sellers of services to meet each other, rather than
being employers of people -- although this might change.

Both competing leaders in the crowdsourcing space emphasized that
crowdsourcing is a positive phenomenon for society and workers. No
doubt this position is prompted by the fact that many in Japan (and
elsewhere) decry crowdsourcing as a means of cheap labor and
disenfranchisement of people having the right to a regular job.
Certainly these are fair comments:

1. As the Crowdworks presentation showed, customer companies can enjoy
massive savings from crowds -- rates around 1/3 to 1/4 of the going
commercial rate.
2. Jobs are typically project based, and once completed, the worker no
longer earns income.
3. Marketplace operators do not pay the social contributions normally
required for regular employees and so have little interest in them.

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[...Article continues]

So are crowdsourcing companies taking unfair advantage of their
members? Given that crowdsourcing is still in its infancy in Japan,
you couldn't say that a significant segment of the population is being
forced/coerced into working through crowdsourcing platforms -- yet.
But with the speed of growth of both companies, there certainly does
seem to be the potential for some radical job-work expectation shifts
in the future.

Right now just 0.5% of the working population have chosen to register
with both companies, and their motivators seem to the following:

1. Arubaito. Most crowdsourced workers have a regular job or
alternative form of employment and are working from home after 21:00
or in the weekends -- so members are typically those who are
moonlighting.
2. Quality of Life. The sectors where crowdsourcing is most active are
typical of remote working, being software, design, writing, and data
entry -- meaning that they can be done far from the place of
sale/consumption. We heard of a number of examples from Yoshida and
Adachi, telling of people choosing to live in the countryside and who
work online to supplement income from rural jobs -- such as the
new-to-the-land farmer who is also a designer in the evenings.
3. Convenience. According to Lancers, many workers operating from home
are mothers with pre-school children. These ladies choose not to take
a regular job yet and want to do something to maintain their skills
and earn pocket money after the kids go to sleep.
4. Work Access. We also heard both companies say they have many
retired people as members. Lancers mentioned one gentleman who is 85.
Without crowdsourcing, he would be very unlikely to get work through
traditional channels.

Apart from the cheap labor question, there are two other negatives
that we can see with crowdsourcing. Firstly that crowdsourcing leads
to job insecurity, which will negatively impact knowledge workers in
the future. This actually came up as a question after the main
presentations. The responses given were interesting. Yoshida mentioned
that his company is going to provide job security to its remote
workers. He didn't go into specifics, but he appears to be planning to
introduce some form of benefits that will help remote workers in the
same way that social insurance does for regular workers. Sounds
difficult to do and expensive.

Adachi on the other hand said that his company will probably pivot
from being just a marketplace to becoming an outsourcing vendor with a
crowdsourcing front end. This sounds a lot more pragmatic to us.
Either way, we think it's obvious that the model needs to change
because it appears that neither company is making money, even as they
grow dramatically. We understand that this is a similar problem with
crowdsourcing sites abroad as well. Apparently as of the end of last
year, out of Crowdwork's 40,000 projects handled at that point only
0.05% were worth more than JPY500,000 in income to members (at 10%
commission, JPY50,000 to Crowdworks). Lancers has already realized
this growth trap and is going to try to increase the revenues per
project by taking control of the incoming work. Of course this also
means that the remote workers won't be making 90% of revenue any more.
As a guide, regular outsourcing companies take between 20%-30% of
revenues.

The second negative of crowdsourcing as it exists in Japan currently,
is the fact that it matches unknown buyers to unseen (and often
unknown) sellers in the crowd. So you are never quite sure what you
are buying. In TT-749 we discussed the unfortunate event of a young
Yokohama-based mother who handed over her two children to an online
child minding service for the weekend, only for her two year-old to
die of neglect at the hands of the 26-year old male minder, who was an
otaku based up in Saitama. At the time we pointed out that while an
extreme example, this is a problem with crowdsourcing as it exists in
its current incarnation -- essentially crowdsourcing is online
matchmaking and hasn't moved far from deai (dating) sites in terms of
morals and self-control. Incidentally, the incident is probably going
to spur the authorities to start regulating the sector, which will be
problematic while it is still in its infancy.

Our take is that crowdsourcing is going to both grow in prevalence and
evolve because it does offer compelling advantages, such as highly
efficient use of labor, proper matching of skills to need, and access
jobs that irregular workers may not otherwise have. Yes, there is for
now and for a while will continue to be a seller's market, whereby
there are more workers than jobs and therefore the hourly rates will
be low. However, as Lancers, Crowdworks, and their 200 domestic
competitors are learning, taking advantage of your crowd is pointless
if you can't make money yourself, so they are going to have to find a
better model -- which for both of them appears to becoming a hybrid of
online market and traditional outsourcing.

But we would posit that there is another way for these firms -- which
is to stay faithful to the original value proposition of
crowdsourcing, and instead allow the market to set its own prices for
skills and eventually let it work itself out. What is likely to happen
is that those people with desirable skills will get the lion's share
of the work, and those who do not will understand that they need to
start adult education and/or specialize in areas where there is not so
much competition. This will lead to an increase in knowledge quality
and scope, and allow companies to find a better spread of competent
vendors to choose from.

It will also cause, perhaps over 3-5 years, those remote workers
possessing sufficient skills and differentiation to become the
equivalent of bestselling authors and musicians today, and thus
achieve status and a lifestyle which would not have been possible with
a regular job. Of course, like the writing and music fields, it also
means there will be lots of hopefuls who will fall by the way, and one
wonders how deep to the core of Japanese values this will strike. If
the potential for failure is accepted and not regulated into
obscurity, such marketplaces will ensure that in the workplace of the
future, performance will be the main determinant of success, not just
showing up to the office and getting older, and Japan probably needs a
good dose of that.

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***------------------------****-------------------------***

+++ NEWS

- Shallow 6.5 earthquake hits Fukushima
- Oklahoma farmer gets phone back from Japan
- May orders slump badly
- Genuine lion-ripped jeans
- Hell to pay for Benesse leak

=> Shallow 6.5 earthquake hits Fukushima

If like us you were woken up at 04:30am on Saturday by your cell phone
going off with an earthquake alert, you'll have been happy to learn
later that morning that the tremor wasn't as bad as was initially
feared, nor was the ensuing tsunami. The warning came from the Japan
Meteorological Agency and was issued because the 6.5 magnitude
earthquake epicenter was so shallow, just 11km down -- meaning that
severe surface shaking in the off-shore location was expected to cause
a 1m tsunami. Experts warn that there will be more aftershocks of
similar magnitude over the coming months. ***Ed: What concerns us most
is not the earthquakes, but the potential effect on the facilities
where they are transferring fuel rods at Fukushima. The last thing we
want is for the cooling tank, which is still just under half full, to
tip over...** (Source: TT commentary from ktla.com, Jul 11, 2014)

http://bit.ly/1mXmsrb

=> Oklahoma farmer gets phone back from Japan

As a nation, the Japanese are famous for their honesty, but usually
the anecdotes only get heard in Japan. However, readers of a newspaper
in Oklahoma got a surprise to learn that a local farmer who'd lost his
phone in a grain elevator had it posted back to him 8 months later by
a friendly grain worker at a company in Japan. The farmer was
unloading grain from a truck into the silo when his phone slipped out
of his shirt pocket. Given how enormous these silos are, he knew that
he'd probably lost it for good and was disappointed to lose the photos
of his daughter's wedding that it contained. Imagine his surprise when
the phone was returned to him by a grain depot worker based in
Hokkaido, in full working condition...! (Source: TT commentary from
huffingtonpost.com, Jul 08, 2014)

http://huff.to/1rhSCNq

=> May orders slump badly

A key economic indicator, that for capital spending, fell by a record
19.5% in May, the worst drop in machinery order forecasts since
records started. The dramatically bad data indicates that Japan may
not have the post-consumption tax soft landing it was hoping for, and
that in fact the Q4 spending surge prior to the consumption tax
increase was opportunistic and not a sign of positive Abenomics. Prior
to the numbers coming out, economists were generally expecting a 0.7%
increase in the indicator. ***Ed: Market discussion now centers on
whether the drop really was due to the post-tax blues, or a deeper
malaise with the nation's export markets and therefore companies are
cutting back accordingly.** (Source: TT commentary from reuters.com,
Jul 10, 2014)

http://reut.rs/1nruLKW

=> Genuine lion-ripped jeans

Yes, you read that title right. Fashion label Zoo Jeans is offering
jeans that have been "aged" by actual zoo animals, such as lions,
tigers, and bears. The label is working in conjunction with the Kamine
Zoo in Hitachi City to raise funds for the zoo. They are advertising
the animal-sculpted clothing as the "the only jeans on earth designed
by dangerous animals." The way it's done is that sheets of material
are attached to tires and balls that the animals then play with and
chew on. One clothing retailer said the tears were too irregular to be
fashionable -- but we don't imagine that will detract from the unique
value proposition being offered shoppers. A bit like saying a Picasso
doesn't look right to be considered art. ***Ed: What a great PR
idea...! (Source: TT commentary from adweek.com, Jul 10, 2014)

http://bit.ly/1kjT7kW

=> Hell to pay for Benesse leak

Of all the sectors that you wouldn't want to have a customer data leak
in, after banking, home education for children would have to be near
the top of the list. So it must be with a sense of crisis that Benesse
is having to confront the issue of its massive 20.7m customer leak.
The data was apparently stolen by an employee of Okayama-based Synform
Company, an IT outsourcing company, and sold on to list brokers. The
list was then sold to at least one well-known customer,
Tokushima-based software company, JustSystems, which used the data to
solicit customers for its own distance learning services. ***Ed: A lot
of speculation about the heat that the new CEO Eiko Harada must be
facing over this huge problem. However, we think that given the
timeline, probably Benesse and Harada knew BEFORE he was hired that
they had a data leak problem. Instead, we wouldn't be surprised if he
was brought in as the new outside CEO so that the company would have a
chance of surviving the fall-out.** (Source: TT commentary from
the-japan-news.com, Jul 12, 2014)

http://the-japan-news.com/news/article/0001420125

NOTE: Broken links
Some online news sources remove their articles after just a few days
of posting them, thus breaking our links -- we apologize for the
inconvenience.

***------------------------****-------------------------***

+++ WEB CONTENT/TECH VACANCIES

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We are interested in both Japanese and foreign job applicants. The key
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***------------------------****-------------------------***

+++ UPCOMING EVENTS/ANNOUNCEMENTS

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Date: July 24th (Thursday)
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-----------------------------------------------------------

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

=> No corrections or feedback this week.

***------------------------****-------------------------***

+++ TRAVEL DESTINATIONS PICKS

=> The Tsuzawa Yotaka Andon Matsuri, Toyama
Toyama's Fighting Lanterns

This festival lantern takes well over a month's worth of hard work and
late nights, according to a 60-something woman we just befriended. It
also took reams of crumpled washi and swaths of clothing stained red
with food dye. Thanking her for the information, we joined her team at
the behest of everyone in it as they paraded their boast-worthy
lantern through town. Along the way, we saw another lantern-toting
group, then another, and yet another. The lanterns must be over five
meters tall, and we began to realize why they all have multiple
meters' worth of thick tree trunks jutting out from the bottom. Taking
a closer look at the other teams as you pass them by, you realize that
each group's happi and hairstyles are a little different, the songs
and chants they are shouting, the drumbeats they are playing, the
dances they are performing, unique to each.

These groups represent different areas of Oyabe City, a rural
community in western Toyama. The lanterns they are pulling around are
the physical manifestations of their hopes for plentiful crops, and
their respect for a 360-year-old summer tradition. Truly, the finished
products are a sight to behold. Their creators sure think so. You can
tell by the way they invite you to listen to stories about their work
as they pour you a glass (or ten) of sake.

http://bit.ly/1kQBCZA

=> Tsuno Winery in Miyazaki
Eminently drinkable product, and unbeatable view

Miyazaki gets pretty hot and wet as early as late April, and wine
lovers might be excused for thinking you cannot produce decent wine in
such a climate. Yet the Tsuno Winery is proof that you can, indeed,
produce perfectly enjoyable wine here. Owned by the town of Tsuno, on
a hill overlooking the sea, it is one of several popular wineries in
the prefecture and one that is quite accessible, as it is not all that
far from Miyazaki city. Unlike many of Miyazaki prefecture's tourist
spots, which tend to be scattered among remote mountain hamlets, the
winery is located close to the coast and therefore offers relatively
easy to access by public transportation. If you do have a car, being
close to Miyazaki and Hyuga cities makes it easy to find even if you
are not confident in your map reading skills.

We stopped by the winery on the way to Bokusui Koen and were happy to
discover that for 100 yen each, you could sample any of the numerous
varieties on offer both at the café as well as the wine shop. In fact,
a few of the offerings are even free. We were particularly taken by a
Syrah and a Pinot Noir, both from 2009. The only one who was not
rewarded immediately was the wine-loving driver, who had to be content
to wait to enjoy a bottle of Old Campbell Early 2006, a variety
similar to the Concord grape, until dinner that evening.

Although we did not have time to enjoy the salads and sandwiches on
offer at the Tsuno Farm Café located on the premises, they looked
inviting and, yes, wine is on offer. If you are driving, be aware that
you should only partake of the non-alcoholic beverages in the café,
and definitely avoid the temptation of the wine tasting.

http://bit.ly/1rhS4XS

***------------------------****-------------------------***

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Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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