TT-646 -- The Trouble with Kuchikomi, ebiz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, January 22, 2012, Issue No. 646

+++ INDEX

- What's New -- The Trouble with Kuchikomi
- News -- 17m smart meters sought by TEPCO
- Candidate Roundup/Vacancies
- Upcoming Events
- Corrections/Feedback -- Comments on Vietnam
- News Credits

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+++ WHAT'S NEW

This week the shares of Kakaku.com, the owner of a dining
recommendation megasite called Tabelog, saw its shares sink
to JPY2,417, off about 30% from the stock's recent high of
JPY3,400 four months ago. The reason for the plummeting
price was the revelation in the press late last year that
Tabelog rankings, until now supposedly free of influence
other than from the direct users of the site, had in fact
been manipulated by online advertising companies.

For around JPY10,000 to JPY30,000 the advertising companies
"tuned" their clients rankings by posting favorable
comments under fake user names. Although Tabelog has
rate-the-rankers functionality which is supposed to balance
out any attempt to manipulate the system by weighting user
recommendations against the reputations of those users, the
ad services firms obviously found a work-around.

Crowd-sourced recommendations (web "kuchikomi") is a big
business. Here in Japan Tabelog pulls in about a million
people a day, and as a result will have ad sales for this
fiscal year (ending March 2012) of about JPY2.5bn, up 58%
over last year. The most successful recommendation engine
globally is probably Amazon.com, which has about 65m
customers a month, about 10-20 times the traffic that
Tabelog does, although interestingly, just double the
number of page views per user (according to Alexa.com).
Another mega-engine which also relies on user
recommendations is Facebook. However, we have left them out
of this discussion because their messaging is supposed to
be about people you do know, not people you don't and thus
would need recommendations for.

[Continued below...]

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[...Article continues]

The big attraction of running a recommendation engine like
Tabelog is that it doesn't require major employee or
production costs -- although obviously there is a heavy
commitment to software. Instead, your users create the
content -- which can work so long as you are first on the
scene, you are big enough, and you are able to control
miscreants trying to game the system. Crowd-sourcing as a
content generator is the polar opposite editorial-driven
websites, such as those created by Recruit in the past, but
which are now far too expensive to compete with. Indeed, to
produce the tens of thousands of pages of commentary that
Tabelog has, Recruit would have had to spend some millions
of dollars, and indeed used to do so. As a result, Tabelog
has killed Recruit in this online sector.

Prior to Tabelog confirming that a recommendations-only
model could work, the leader in the online dining content
business was Gurunavi, which also understood that you
couldn't produce the content with in-house editors and
journalists. Instead, they had the restaurants themselves
produce the content. The problem was that the restaurants
would of course rate themselves as highly as possible,
which is why Tabelog became popular -- it was perceived as
the Peoples' source of information -- online democracy in
action.

But this casting of Tabelog as a reliable barometer of the
opinions of the many (versus the few) is why Kakaku.com's
stock price has taken such a hit. The bond of trust has
been broken.

Actually, we find it strange that the fact that Tabelog's
rankings can be manipulated is shocking to the Japanese
public, because crowd-sourcing of any kind is all about
high volume contributions which can only be checked
through software and user voting ("likes", etc.). These
automated controls really only work if there is a high
volume of content and users to act as a base line and to
flag against. However, the reality is that there are at least
100,000 restaurants in Japan and only the most popular of
them would have more than a couple of dozen
recommendations. So most of them are the focus of a low
volume user interactions, despite being on a
high-volume site.

It is this fact that the advertising services firms have
taken advantage of. It's a simple matter for them to set up
a "community" of fake users within Tabelog -- about 100-200
IDs would be enough, and have these fake IDs each build up
a posting history, with other fake IDs in the community
confirming their credibility and popularity. Tabelog's
software wouldn't notice this activity, and the client
restaurants would quickly see their rankings climb, for a
smallish investment of JPY500,000 or so.

Moreover, with their current model, the most Tabelog can do
is to threaten the fakers with being banned from the site,
causing them to simply sign up with another user account.
OK, Tabelog could ban the restaurants hiring the fakers,
but then competitors could attack each other by hiring an
advertising company to promote a competing establishment
until it was flagged and banned by Tabelog.

So what can the recommendation engine operators do to
improve their content integrity?

In fact, in our own Metropolis group, we have been asking
ourselves the very same question. As many readers will
know, we recently started a travel website called
www.japantourist.jp. During the design phase, we wanted to
avoid manipulation of the system and to give our users a
more authoritative and trusted source of information --
editorial -- just like the old days when the publisher's
reputation was on the line and you could trust them. But
how to produce trustworthy editorial without the costs?

Our answer has been to create a crowed sourced content
system that has users produce content that aims to be of
editorial quality, then to check and approve those
submissions that meet a basic benchmark. Yes, the result
is not as polished nor uniform as regular editorial, but it
is light years ahead of straight user recommendations. Our
internal standard is 350 words, specific topic and
content coverage, and 3 or more photos of the location. To
make it all worthwhile for a user to undertake this extra
work, we provide incentives in the form of products and
services such as airline tickets, hotel rooms, and brand
name clothing and accessories. In this way, users are
highly motivated to make the grade. The results have been
extremely encouraging so far, with almost 200 contributors
signed up and 150+ articles a month (after just 3 months)
being posted.

Our guess is that Tabelog will come to the same conclusions
as us:
1. Contributors will have to pass a screening of some sort,
and because of the inconvenience of this, will have to be
incentivized. The incentives will have to be good enough to
be, well, incentivizing.
2. A level of content checking is needed that goes beyond
simple crowd-based checks and balances. It's Tabelog's
reputation on the line, and only a group of editors and
fact checkers will ensure that it can retain its reputation
as a trusted supplier of information.

*************

For readers who might be interested in contributing to
www.japantourist.jp, the site is open to anyone who can
write (we will tell you if it's good enough). The scope is
pretty wide and indeed, we are shortly starting a teens and
kids section, where they can write about their favorite places
in Japan.

...The information janitors/

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+++ NEWS

- 17m smart meters sought by TEPCO
- Class action pending against Olympus
- JAXA gets a virus
- Houses exempt from increased consumption tax?
- Japan wind capacity up 11.7 pct before new subsidy

-> 17m smart meters sought by TEPCO

As part of its restructuring program hashed out with the
government, TEPCO has decided to finally embark on a
modernization program in terms of its metering
infrastructure. The company will by FY2018 install around
17m smart power meters into consumer connections, so as to
reduce manpower costs and increase its (and the consumer's)
ability to understand what power is being consumed. ***Ed:
This move could have been made 10 years ago -- that's how
long this technology has been available. But we suspect it
was in TEPCO's best interest to keep power charges somewhat
obfuscated. Still, better late than never. Also
interesting to see that they are opening the bidding up to
foreign companies as well.** (Source: TT commentary from
e.nikkei.com, Jan 22, 2012)

http://e.nikkei.com/e/ac/tnks/Nni20120121D21JFF05.htm

-> Class action pending against Olympus

Olympus is in for a bit of a rude shock as the same legal
team that successfully pursued shareholder losses from
Livedoor some four years ago, is now re-banding in order to
sue Olympus. The legal team will start a web site and
solicit Olympus shareholders who lost money during the
dramatic plunge in the firm's share price last year, amidst
revelations of a massive accounting scandal and possible
de-listing. ***Ed: Of course, the hedge funds that jumped
in at JPY500 have made a phenomenal amount of money, so
those shareholders who did abandon ship must really be
kicking themselves. Fertile grounds from which to recruit
and conduct a class action law suit.** (Source: TT
commentary from e.nikkei.com, Jan 21, 2012)

http://e.nikkei.com/e/ac/tnks/Nni20120121D2001A29.htm

-> JAXA gets a virus

Probably not good to have a hacker messing with your space
rocket data, but that's the possible problem that JAXA has,
after it was discovered that a PC used for JAXA's H-2
unmanned Transfer Vehicle was infected. The space craft
carries cargo to the International Space Station.
Apparently the software picked up sensitive information
about the space craft and how it operates. ***Ed: Maybe it
sends dating emails to the astronauts as well? All a bit
embarrassing for JAXA.** (Source: TT commentary from
GMAnetwork.com, Jan 22, 2012)

http://bit.ly/zV1OLv

-> Houses exempt from increased consumption tax?

Interesting to see that the DPJ is already saying that it
may exempt house purchases from any raised consumption tax,
in order not to damage the housing market. Interesting,
because this means that until now consumption tax has been
a sacred cow and nothing was exempt. Once this concept is
broken, it won't take long in our opinion for other items
to become exempt. In particular, we think certain types of
food will be exempt -- particularly rice. This would be an
ideal way to compensate the farming community for any
short-term damage caused by TPP, and would not be a tariff
related to imports. (Source: TT commentary from
bloomberg.com, Jan 21, 2012)

http://bloom.bg/ySHXuU

-> Japan wind capacity up 11.7 pct before new subsidy

With almost all of its nuclear power plants off-line and
most to stay that way, Japan really needs to hustle to get
its renewable energy resources off the ground. One of the
most under-utilized resources is wind energy and in the
year ending March 2011 the nation apparently had its
slowest increase in generation capability in over ten
years. The reason for this has apparently been a
combination of new building regulations implemented in
2007/2008, as well as the slowing after the Lehman Shock.
***Ed: It's expected that a new feed-in tariff subsidy for
renewable energy sources will significantly boost
generation capability from this year onwards -- our guess
is that the build-out will go up by a factor or 10 over the
next 3 years, providing land usage regulations are eased.**
(Source: TT commentary from reuters.com, Jan 20, 2012)

http://reut.rs/yNQ2fG

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

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

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+++ CANDIDATE ROUND UP/VACANCIES

=> BiOS, a Division of the LINC Media group, is actively
marketing the following positions for customers setting up
or expanding in Japan, as well as other employers of
bilinguals.

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with experience providing helpdesk and desktop support
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escalating to the next support level when appropriate.
They will also be required to provide desk side assistance,
inventory management (PCs, printers, mobile phones, data
cards, etc.) and AD/Exchange account management.

Due to the technical nature and demanding work environment,
this position is suitable for someone with solid experience
as a helpdesk/desktop support engineer or equivalent, with
experience for more than two years. In addition, since this
role requires direct coordination both in English and
Japanese, daily-conversational level English and
native-level Japanese will be required.

Remuneration is JPY4.5m – JPY5.5m depending on your
experience and skill level.

** POSITIONS VACANT

- Sales Team Account Manager, BiOS, JPY4M – JPY5M
- Field Support Engr., global telco, JPY6M – JPY8M
- Global Network Operator, Japanese IT co, JPY3M – JPY3.5M
- Network Engineer (Osaka), global IT co, JPY4M – JPY5M
- Proj. Mgr, global LCD/ceramics maker, JPY8M – JPY11M

Interested individuals may e-mail resumes to:
tomohiro.kimura@biosjp.com

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+++ UPCOMING EVENTS/ANNOUNCEMENTS

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This is an ideal opportunity to find out what is involved,
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***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors@terrie.com.

*** In TT645 we covered some reasons why Vietnam is the
country of choice to replace China for Japanese
manufacturers. We had a surprising number of readers who
have personal experiences in that country -- or perhaps not
so surprising, given the closeness between Japan and
Vietnam -- and we reproduce a couple of those comments
here.

=> Reader comments:

Reader 1:

I lived in Vietnam for a year when I was a student at
Waseda, my MA was on Vietnamese educational system in a
Communist/Capitalistic/Confucian paradigm. Ties to Japan
go way back to Japan's days as pirates, when they would
steal from the Chinese and sell goods in north Vietnam,
very interesting history between the two countries.
Vietnamese also have a deep dislike of the Chinese, which
I'm sure isn't lost on the Japanese...

Ask a Japanese person over 60 after they visit Vietnam,
they always say " Natsukashii". Love that place.

Reader 2:

The Vietnamese are more receptive to training than the
Chinese. They will actually follow procedures once taught,
while Chinese workers tend to think that they know better
and will short-cut things if they can. Japanese managers
working in China are prone to messy brain explosions after
about a year.

***********************************************************
END

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+++ ABOUT US

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

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