Back to Contents of Issue: December 1999

American road kill on Japanese information superhighway (Part 1)

by Steven Herman

Coming from a long line of Zen Buddhist priest ante-cedents, my drinking buddy Hidaka is not a man who loses his temper easily -- despite some cockiness picked up from decades in the States. So I am surprised when he forcefully tosses a copy of a Nikkei publication at the wall, barely missing a tray of drinks held by a Turkish waiter.

"It's ridiculous," is his cryptic reply when I ask him what's the matter. He retrieves the offending article, a xenophobic screed warning of impending American domination of the Internet in Japan. "Look at AOL, MSN, WebTV, and Yahoo!," he says, pointing a finger toward the bar. "They're all one step away from being American road kill on the Japanese information superhighway." I laugh. "Hey -- that's a great headline for a column." So here we are.

Over a sushi lunch, hours before Hidaka's Zen tantrum, as he grasps a tuna maki with his chopsticks, AOL Japan Manag-ing Director John Barber admits that "nobody's where they expected to be in Japan" in the online game, but he tells me not to measure AOL Japan's success by as simplistic a gauge as page hits (in most Japan lists, AOL doesn't rank in the top five). AOL Japan has 350,000 members, perhaps nine million Netscape downloads, and a million or so ICQ members under its Japan corporate umbrella. They may not be raking in the dough, but, at least, they've got the scale to break even, which is a heck of a lot better than many other players.

But just breaking even is clearly not AOL's long-term Japan game plan. Barber acknowledges they're seeking additional partners to create a larger entity. Aware that Steve Case's ego pales in comparison to Bill Gates, I ask John if he'd be willing to cut a deal with a Japanese partner for co-branding or even stripping off the AOL brand in favor of a better known Japanese brand. I know if I asked this of a Microsoft soldier, he'd be spitting up his tuna maki. John has better table manners. "AOL remains, for the foreseeable future, the flagship brand," he says calmly. "But branding is not a religious issue with us, it's a business issue." I can hear between the lines of that one, and when I see Hidaka later that night he says he long ago determined where AOL Japan should be going, but hadn't had a chance to ring AOL Japan's president, Kozo Hiramatsu. I said I'd be happy to pass on the message. Hidaka's advice for AOL? Merge with one of the top five Japanese ISPs owned by a huge consumer brand.

The Microsoft Network also made a big financial and manpower investment in Japan a few years back. MSN, according to Japan Access Rating, ranks sixth among domains, trailing Biglobe, Geocities, and Goo. MSN has faced the same woes here as it has State-side, including the revolving door of management and a weathervane for a strategic direction finder.

Hidaka grabs a handful of nuts from the little bowl on our table in a Nogizaka club that shall remain nameless, as it doesn't need the free plug here. Microsoft Network Japan is another entity I mention which has Hidaka shaking his head. "Considering MSN in Japan has, for many years, come installed in browsers and as a desktop icon in a significant chunk of computers sold in this country, it's astonishing that they're anything but number one," he says. I mention to Hidaka that Bill Gates, who has a liking for the Westin Hotel when he visits Japan, has been seen strolling solo on the streets of Ebisu without an aide or a bodyguard in sight. "Well, to the Japanese, they think he's just one of the MIS geeks working in Yebisu Garden Tower for Morgan Stanley Dean Witter or some company like that," Hidaka says. "Anyway, if someone did recognize him, what are they going to say? ÔBill-san, can you buy my company and fire my miserable boss?'"

The Turkish waiter plops down a beer in front of me, pointing to the label. "Why do they spell it with a ÔY' in front when it's pronounced Eh-bee-soo?" he inquires of Hidaka. "Why not?" he instantly replies and smiles, but the waiter neither picks up on the koan or the pun. Hidaka's remedy for MSN Japan? Money can get you what your brains and poor marketing can't in Japan, so tie-up with Hi-Ho or just use a couple billion Bill bills and buy a half a dozen other Japanese ISPs.

Steven Herman is a veteran broadcast journalist in Asia and Chairman of the Foreign Press in Japan. Access

Reference Japan Access Rating
¥ Next month: Whiter Yahoo! and WebTV.

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