WW-89 -- Mobile Marketing is the Mobile Internet

Wireless Watch Japan Mail Magazine
Commentary on the Business of Wireless in Japan
Issue No. 89, Tokyo, Monday, February 17, 2003
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An in-depth profile of three content & application providers that
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"We Rip the Faceplate Off Japan's Wireless Industry"
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in this issue
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++ Viewpoint: Mobile Marketing is the Mobile Internet

++ Wireless Notes:
** D2 Communication Mobile Ad Rates
** NTT DoCoMo N504iS - as TV Remote Control and OCR Engine

++ Noteworthy news:
--> Will Your Cell Phone Replace Your Wallet?
--> Preparing for 3G Day
--> Japan Dec Handset Shipments Soar, Demand Seen Robust
--> Cell Phones that Surf for News
--> Japanese Smart Cards Still Looking for Smarter Ideas

++ Events (promotion):
>> Super Rock Jam IV in Shibuya February 26!
>> SECOND ROUNDTABLE ON BRANDING IN JAPAN May 28

++ Sign of the times:
"Pervert Uses Tear Gas in Futile Attempt to Flee"

++ Subscriber statistics, corrections, credits, administrivia

----------------------------------

++ Viewpoint: Mobile Marketing is the Mobile Internet
{A little long this week; perhaps better to print and read off-screen}

Over the past few weeks, the WWJ staff have had the pleasure of producing a
series of Web videos for Tokyo's Center for Global Communications (GLOCOM), a
think-tank and research institute of sorts affiliated with the International
University of Japan (IUJ).

Last week, we posted an in-depth interview with Professor Jeffery Funk, one of
Japan's leading academic experts on the business models and success factors
associated with the wireless Internet (link below). When you're done reading
today's newsletter, take a few minutes to watch Funk's interview - it'll be time
well-spent.

My discussion with Jeff got me thinking about what has and has not succeeded on
the wireless webs here, and I thought it appropriate to present a brief review.

When you get right down to it, there is only a limited range of content you can
actually provide to a celly, namely: ring tones (sound files), pictures (image
files), moving pictures (video and 2D/3D graphic files), mini web pages (markup
language files), mail (text; both SMS and Internet standard), and Java and BREW
applis (executable files and data files).

Note that each of these fundamental content types is limited in some way by the
handset's memory, battery, display, audio chip, or processor, and by the
network's download speed and cost of data.

Using this these fundamental content types, you can then provide applications
(i.e. the recipient can execute the Java or BREW appli so as to do something -
like play a game), content (sound, images, videos, graphics, mail, mini web
pages), and services (like query a database to check train schedules or obtain a
map). Essentially, this is what any content provider has to work with. Providers
can also deliver other types of data (like GPS data) that the user doesn't
directly access but which gets used nonetheless to define which map should be
served.

Obviously, the provision of mobile content itself is a business model that works
- otherwise I'd be out of a job. ;-) In other words, there are companies that
earn revenue and profits by creating and then delivering mini web pages, text
mail, images, ring tones, and applis via the i-mode, EZweb, J-Sky, and H"
wireless Internet platforms operated by the carriers.

Subscribers pay to receive this content - almost always on a subscription basis
- which is entertaining, fun, useful, or otherwise worth paying for. But if this
were the extent of what content providers do with their content, the mobile
Internet would be relatively dull.

And while the provision of mobile content is profitable, this is not true for
every content provider (and definitely not true for the majority of content
providers, official or not). In precisely the same way that "selling books via
the PC Web is profitable" is a true statement for Amazon.com and not true for
anyone else (or very few others, anyway), it is also correct to say that, on
Japan's mobile webs, only few "pure" content providers have created a profitable
business. Why?

Like the case with Amazon, only the largest and most well-known brand names can
afford to create the content (which must be updated frequently) or attract a
sufficiently large audience (through mobile, PC Web, and off-line advertising
channels). It helps to have an existing content-creating mechanism in place,
like a newspaper or a karaoke music provider would have. Further, now that the
wireless webs here are mature, it's very difficult to convince the carriers to
allow any new content providers onto the official menus since all the categories
are fully occupied and, by policy, they limit competition on the portal.

This is not the first time I've mentioned the lack of real profitability for all
(see WWJ No. 22, link below), and while there is still very little hard data
that I can cite to support this (since companies don't, for obvious reasons,
like to release such figures), numerous industry insiders have confirmed this
open secret on many occasions over the past 18 months.

So if the Bandais, Disneys, Cybirds, Nikkeis, and Taitos of the world have the
mobile content provision business all wrapped up, how can anyone else "do"
mobile content at all? The answer is that other companies continue to create
and deliver content and services (and new companies join in) as a way to create
demand for their other products. In other words, i-mode, EZweb, and J-Sky have
become far more important as one-to-one, always-with-you, always-on marketing
channels than they are as sales channels for ring tones, etc.

Also, "community-style sites, which offer activities for people to do one-on-one
(chat, mail, dating, share hobbies, fan clubs, etc.) continue to arise and
continue to attract a lot of usage.

Last week, I happened to buy a Dars chocolate bar, made by Morinaga KK. Sure
enough, the wrapper was promoting a campaign centered on "Kinki Kids" (a
hyperpopular music group) that has been running since November. There is a code
number printed inside each Dars chocolate bar; after registering at their
campaign site (http://www2.dars.jp/p4/pc/apply.jsp?rI=N4dojP1Al -> please
provide mail address, password, age, and gender = marketing gold!), you input
the code number from each of the Dars chocolate bars that you eat; this allows
you to accumulate points. The more points you get, the greater your chance to
win concert tickets.

And if you don't win: No Sweat! No one loses, since there are lots of secondary
prizes like Dars original tote bags (colored-keyed to match Dars' various
chocolate wrappers no less...).

Does Morinaga hope to make money from provision of mobile content? Nope - it's a
cost center for them. Does Morinaga hope to sell more chocolate bars, and maybe
build up brand loyalty? You bet they do.

Morinaga is a great example of the content providers that organize their
offerings into more sophisticated "mini platforms" that support sales,
marketing, and promotion campaigns for off-line products. In other words, they
provide mobile content (images, ring tones, etc.) as part of an overall
marketing effort (either for themselves or for clients) - usually combined with
PC Web or non-electronic channels.

In these cases, creating and delivering the mobile content itself may not be
profitable, but the overall marketing effort is.

-- Daniel Scuka
daniel@wirelesswatchjapan.com

Jeffrey Funk "Why Markets Outside Japan Missed the Mobile Web"
http://www.glocom.org/interviews/s_inter/index.html#0213funk

"The Dirty Little Secret of Japan's Wireless Webs"
http://www.japaninc.net/newsletters/?list=ww&issue=22)

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"We Rip the Faceplate Off Japan's Wireless Industry"
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=====================================================================

++ Wireless Notes
---------------------------------------------------------------------

** D2 Communication Mobile Ad Rates
Access D2 Communication's 2003 Picture and Text ad rates guide (in Japanese
only) at this URL. D2C is a JV between - You guessed it! - DoCoMo and Dentsu.
http://www.d2c.co.jp/data/pdf/PictureMailAD.pdf

** NTT DoCoMo N504iS - as TV Remote Control and OCR Engine
Take a look two-thirds of the way down this page; you'll see a screen shot of
how the N504iS can serve as a remote controller for your TV via the handset's IR
port. You can also see how it can be used to scan and then access a printed URL.

http://k-tai.impress.co.jp/cda/article/news_toppage/11750.html
http://k-tai.impress.co.jp/cda/static/image/2002/11/20/n504is012s.jpg
http://k-tai.impress.co.jp/cda/parts/image_for_link/37053-11750-6-2.html

++ Noteworthy News
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--> Will Your Cell Phone Replace Your Wallet?
http://www.yomiuri.co.jp/newse/20030211wo63.htm
Source: Yomiuri Shimbun , Feb. 11

EXTRACT: Credit card companies plan to launch a service called Kei-Credit on an
experimental basis starting in March. The companies are considering the use of
cell phones to allow card holders to shop more conveniently. Kei-Credit will
allow cell-phone users to buy products at stores using their phones. Credit card
companies JCB, Toyota Finance, Sumitomo Mitsui Card, and UC Card will offer the
service next month on an experimental basis, in collaboration with KDDI Corp.
Each credit card company has invited 500 people to test the service. The number
of outlets at which the test subjects can use the credit card function on their
cell phones also is limited to about 10 department stores and restaurants in
Tokyo and Nagoya. To accommodate the new function, stores need to install
special equipment to read data transmitted by infrared rays.

COMMENTARY: You may be tempted to write this off as yet another,
not-ready-for-prime-time e-wallet exercise. But I think timing is everything and
spring 2003 may be the right season for this sort of service to finally earn a
consumer stamp of approval. There have been many other such trials in the past
two years, none of which led to really successful services. But this time, they
may get it right. Department store Printemps Ginza plans to introduce the system
in its seven restaurants as well as in other shops on every floor. Maybe it'll
become hard not to use the service? And although it takes a few seconds to
transmit the CC data via the special au phone's IR port, the process should
still be faster than waiting for the clerk to fish out a pen (to sign the
traditional CC paper slip). And au phones in general are hot these days (see Dec
handset results two items below). Finally, consumers are getting use to using
their keitai's IR port for things like TV remote control (see Wireless Notes
above) and as smart cards (see news item below). 2003 may just be the
keitai-as-CC year.

----------------------------------

--> Preparing for 3G Day
http://www.guardian.co.uk/online/story/0,3605,894016,00.html
Source: The Guardian, Feb. 13

EXTRACT: Britain's first next-generation mobile phone network, 3, launches next
month. So it seems like a good time to look at the lessons from the Japanese
market, where 3G has been available for 18 months, and ask when we'll really be
enjoying the benefits of 3G in the UK.

COMMENTARY: Among others, this story cites the following as the lessons to be
learned from Japan's 3G experience:

** KDDI has been more successful in getting users to pay than DoCoMo. KDDI 3G
ARPU was 9,240 yen vs. 7,750 yen for DoCoMo.
** First movers don't always win. If so, DoCoMo would be in the lead; they're
not.
** KDDI launched 3G using a technology that worked with existing 2G
infrastructure. So it provided (almost) nationwide coverage from Day One.
(DoCoMo eschewed backwards compatibility in favour of new W-CDMA technology that
had very limited coverage at launch.)
** DoCoMo's original marketing proposition was built on speed. Speed (i.e.
bandwidth) is "an elusive benefit to all but geeky early adopters." So, in
practice, while DoCoMo's network was technically available first, KDDI's 3G
service was "beneficially available first" and provided all the must-haves
consumers wanted, including as 100% coverage.

These are all excellent points. Remember, however, that only DoCoMo has the
super-deep pockets to wait out the doldrums until its new 3G technology can be
expanded nationwide and new-tech handsets come down in price. The 3G race in
japan is by no means over yet.

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--> Japan Dec Handset Shipments Soar, Demand Seen Robust
http://in.tech.yahoo.com/030213/137/211hw.html
Source: Reuters on Yahoo, Feb. 13

EXTRACT: Japan's domestic shipments of cell phones posted year-on-year growth
for the second straight month in December, an industry body said on Thursday, as
new-model camera phones breathed life into a saturating market. Handset
shipments gained 27.1 percent from the same month a year earlier to 3.96 million
units, the Japan Electronics and Information Technology Industries Association
(JEITA) said.

COMMENTARY: Demand is predicted to remain strong, especially for upgrades and
conversion of existing subscribers as 2003 sees new handsets come to market
featuring million-pixel cameras and other advanced features. Japan's three
leading carriers launched a total of 8 new models in November and December of
2002. Note that handset shipments had fallen year-on-year for 17 consecutive
months until October 2002.

----------------------------------

--> Cell Phones that Surf for News
http://www.ojr.org/ojr/technology/1044577803.php
Source: Online Journalism Review, Feb. 6

EXTRACT: On a cell phone someday soon, you'll be able to instruct a personal
news-gatherer to scour a dozen media sites for headlines within minutes after
they are posted. Are you a football, baseball or soccer fan? A new technology
will dish up a playback of your favorite team's winning goal. The technology
turns cell phones into computers that can download and execute programs just
like PCs. The new cell phone programming, which has taken off in Japan, could
make mobile phones a mainstay for news delivery. Though the technology is
available in the United States, wireless carriers have not employed it there to
the degree that they have in Japan, which has 59.5 million mobile Internet
users. With its wireless-crazy populace, Japan's experience could provide
Americans a glimpse of the future for news delivery via cell phones.

COMMENTARY: A well-written story (if I, the author, may say so myself ;-))
looking at how Java is being exploited to provide more and more real-time
distribution of news and information.

----------------------------------

--> Japanese Smart Cards Still Looking for Smarter Ideas
http://www.canada.com/news/story.asp?id=8CFBFA4B-5F03-498F-A321-27EABC3F...
Source: CP/AP on Canada.com, Feb. 15

EXTRACT: Way too busy to waste any time, on-the-go commuters stream through
Tokyo train stations, chatting on mobile phones, listening with disc-player
earphones, and flicking "smart cards" instead of stopping to pull out tickets.
Although the technology is generally a novelty elsewhere, gadget-loving Japanese
commuters have embraced the cards - plastic embedded with a tiny computer chip,
permitting payments without the hassle of coins or making change. Here, the
challenge is not getting people to use them, but figuring how to expand the
system for shopping, concert tickets and other electronic wallets. Tokyo
commuters outdo them all: About 5.6 million people - or roughly half the
possible users - have the green-and-silver Suica cards introduced about a year
ago by East Japan Railway Co. "It's so convenient," says 18-year-old Yusuke
Hirohama, a high school student, who uses Suica just about every day. "It's a
breeze to use."

COMMENTARY: This story, oddly, fails to mention mobile. Make no doubt about it:
the "Suica" smart cards cards have created an extremely fertile test bed for
smart card functionality to be transferred to mobile. Those 5.6 million people
using Suica mentioned above? I think virtually all of them also carry cell
phones. The technology was developed by Sony, who is also one of the powerhouses
behind the Edy e-money plan (as is DoCoMo). Last fall, I asked the Edy folks for
an interview related to their mobile plans - they answered: "we are not ready
yet to speak." Hmmmmm... something's cooking...

++ Events (promotion)
---------------------------------------------------------------------

>> Super Rock Jam IV in Shibuya February 26!

Service Sector Entrepreneurship by Foreigners in Japan

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Wednesday May 28th 2003
http://www2.economistconferences.com/doc/ap/brand03/i.htm

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- Brand management in crisis and recession
- Delivering global brands in foreign markets
- B2B targeted versus consumer sector branding
- Global and local case studies of failure and success

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++ Sign of the Times
--------------------------------------------------------------------------------

Pervert Uses Tear Gas in Futile Attempt to Flee
http://www12.mainichi.co.jp/news/mdn/search-news/
871145/mobile-0-1.html
Mainichi Shimbun, Feb. 15

A man has been arrested after he used tear gas in a futile
attempt to escape from a Tokyo video store where he had
been caught filming up a woman's skirt, police said
Saturday. Police said that the man used his camera-equipped
mobile phone to film up the skirt of a 20-year-old woman
who was browsing through videos and CDs in the shop. A
store employee noticed and screamed out at him. The man
ran toward the employee, whipped out a can of tear gas and
sprayed it into his face before racing toward the store
exit.

... obviously, keitai owner's manuals will have to be updated with
additional safety warnings about not using cell phones together
with tear gas ...

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