TT-389 -- Mixi and SNS phenomenon, ebiz news from Japan

General Edition Sunday, September 3, 2006 Issue No. 389

- What's new
- News
- Candidate roundup
- Upcoming events
- News credits

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For those of us still struggling to use our cell phones and PCs, there is a whole new world of Internet activity and interaction going on that we will have to stay up with if we want to sell online to anyone under the age of 30. One of these hot new business sectors is that of Social Network Services (SNS), which lets millions of people find new friends and relationships online by matching profiles and forming groups.

By Social Networking, we do not mean "Deai", or dating sites, but rather portals that allow people to type in their profiles and only hear from others with similar interests. In the US, the most famous of these is, which has more than 100m members and as of August was the second most visited domain on the Internet, with 20m visitors, just behind Yahoo which had 21.1m.

Here in Japan, the SNS of note is Mixi, a site incubated and funded by well known Bit Valley proponents Kiyoshi Nishikawa and Satoshi Koike of the Netage Group. Mixi recently announced that it has more than 5m members and that in July it had more page views than Rakuten. Both Mixi and its biggest competitor, Gree, are growing dramatically.
The two sites have added about 2m more members in just the last 4 months, and are expected to keep growing at a rate of about 20% per month for some time to come. Indeed, Mixi's own press archive shows that as recently as August of last year, the number of members was just 1m -- revealing a quite amazing level of growth.

This huge increase hasn't gone unnoticed by the majors.
Both Yahoo Japan and Rakuten entered the SNS market earlier this year. However, right at the moment, all eyes are on Mixi. With so much traffic, coupled with a savvy business model, the company recorded a net profit of JPY987m
(US$8.58m) on sales of JPY4.79bn (US$41m) in the last fiscal year. As a result, the company plans to IPO on the Mothers market on September 14th.

Looking at the Mixi website, it is interesting to see that the company initially relied on their closely-related FindJob recruiting business to fuel income and profits for the first 3 years, and only after the number of users reached the millions did they then push hard for ad and other revenue opportunities. This has been a very smart way of overcoming the negative-income results of most other SNS hopefuls.

Already diversifying further, Mixi recently announced that it was starting a music download business. We guess that once you have the numbers in an online marketplace -- and especially when the users are a somewhat captive audience since they have to use your services to reach their online friends -- you can pretty much sell anything you like. It only takes a 0.1% take-up on a new product or service to create 5,000 new customer enquiries...

Another web site, also incubated by Netage, has taken the revenue focus one step further. The site is Yubitoma, which is dedicated to letting the Japanese stay in touch with their school friends. Although few Westerners have heard of it, the site has been going since 1996 (the company started in 1990) and now has over 3.4m members.

[Continued below]

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Unlike Mixi, Yubitoma is more focused on the relationship between its members and one particular subject -- their old schools. The creators of the site know just how much importance the Japanese give to life-long relationships started at school, ranging from "yochi-en" (kindergarten) through to university, and how this translates into a human network for business and social success. Thus while Yubitoma is a slower burning business than Mixi, it nevertheless appears to be just as successful. In particular, its management have been quite innovative in ways to make money from their member base. These include doing low-cost, quick-turnaround online market research, and even offering a Yubitoma Visa credit card.

Investors are watching the Mixi IPO carefully, because after some slackening in demand in the middle of this year for new stocks, Mixi is being touted as being THE stock to reignite the public's demand for small issues. No doubt part of the build up in expectations has been the fact that in the USA was bought out as a loss-making business by Rupert Murdoch's News Corp. for a cool US$580m last year. Although this seemed like a crazy price back then, in the passage of the last 12 months the service is now rumored to be worth about 10 times that sum.

Given that Mixi is growing at a similar speed but is already profitable, the underwriter is going for the high end and is putting a market cap on the company of JPY109bn (US$947m), i.e., if the 70,500 shares are valued at JPY1,550,000/share. If this turns out to be the final listing price, then the company will raise at least JPY10bn in cash on the 6,600 shares being offered. Again, an amazing achievement.

One interesting side light on this listing is the incubation company behind Mixi, Yubitoma, and another 50 internet companies -- Netage. This company itself went public on Mothers on August 30th, on the strength of an 88% surge in consolidated sales to (US$16.5m) and a 1200% increase in pretax proft to JPY360m (US$2.6m).
Actually, these don't seem like big numbers, but seeing as how NetAge is sitting on 16% of Mixi's stock and even bigger positions in many of its other portfolio companies
-- the asset base of Netage is quite impressive.

And that spells a lot more high-profit revenue over the next few years, and makes the company look much like a smaller version of Softbank Investment. Take a look at the list of major shareholders at Netage (you can check it out at and you'll see that the line-up reads like a who's who of the internet sector. Among the big names are Transcosmos, Mikitani, Globis, Usen, Orix, and others.

Clearly the founders of Netage are well connected as well as savvy operators.

Lastly, if all this talk about IPOs has whetted your appetite for starting a company, you're in luck. Our last Entrepreneur's Handbook seminar for 2006 will be held at a new location in Shinjuku on Saturday, September 30th. If you would like to receive an intensive run-down from an expert in the field (your's truly, Terrie Lloyd) on how to set up and run a successful company in Japan, then please email us at See for more details.

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+++ NEWS

- 10 minutes to destruction
- Cool iPod-equipped music robot
- No surprises in top retailer rankings
- Oil reserves can cope
- Consumer loan limits being defined

-> 10 minutes to destruction

An interesting piece from Stratfor on the Self-Defense Force and its US$1.8bn build-up of a ballistic missile defense system reveals that the expected flight time of a missile from North Korea to a Japanese target is just 10 minutes. This apparently explains why the Japanese implementation of largely US technology and systems will diverge from that for the USA, where incoming missile flight times are expected to be at least 20-30 minutes. The article states that there will be 3 layers of protection, with the first being the much publicized installation of Patriot PAC-3 missiles around the country. The next is the outfitting of Kongou-class destroyers with RIM-156 missiles and software, and the third phase is for Star Wars type technology which can shoot down missiles with lasers and kinetic energy. ***Ed: In case you were wondering, Japan's defence budget in 2005 was US$45bn. (Source: TT commentary from, Sep 1, 2006)

->Cool iPod-equipped music robot

Tokyo-based robot maker ZMP has released a new "speakers-on-wheels" robot which accepts an iPod music player plugged into its head. Once activated, the robot rolls around the rooms in your apartment playing tunes on from the iPod. When so programmed, the Miuro robot rolls and twists in time with the music being played. The new unit costs JPY108,800 -- quite pricey for what could turn out to be a very irritating toy! (Source: TT commentary from, Aug 31, 2006)

->No surprises in top retailer rankings

The rankings of the top 3 retailers in Japan remained the same as for the year before, with Aeon (JPY363bn), Uniqlo (JPY359bn), and Shimamura (JPY325bn) in that order.
Following them are Takashimaya, Marui, Mitsukoshi, World, Isetan, Daimaru, and Daiei. The notable thing about the rankings over the last two years is that even though Japan's economy is improving, the public is obviously hooked on buying value for money, such as Shimamura's JPY1,500 business shirts, and similarly low-cost items at both Aeon and Uniqlo. (Source: TT commentary from, Sep 1, 2006)

->Oil reserves can cope

Quantifying the Japanese government's healthy obsession with building up oil reserves, a senior official has stated that the nation now has about 168 days worth of oil and petroleum products stockpiled. The announcement came as speculation rose over Japan's vulnerability to Iranian oil sanctions if the US or the UN decided to take action against Iran over its alleged development of nuclear arms.
Currently Japan imports about 15% of its oil from Iran.
(Source: TT commentary from, Aug 31, 2006)

-> Consumer loan limits being defined

The controversy surrounding limits about to be placed on consumer finance loans continues, but at least things are starting to clarify. The Financial Services Agency (FSA) has recommended: a) a maximum of 30% of a person's yearly income in consumer finance loans to any one individual, b) a total cap of JPY1.5m on money loaned from nonbanks, with further amounts subject to a thorough credit check, c) a cap of 20% on interest, with the exception of short-term loans worth JPY300,000 or less and 12-month loans of JPY500,000 or less -- where the maximum interest charged can be 28%. In addition, money lenders will be be required to prove a minimum net worth of JPY50m, rather than the current JPY3-5m, when they renew their licences.
(Source: TT commentary from, Sep 1, 2006)

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

Logistics: The So-Fast Corporation

Seeing is believing: see our company in action

So Fast Corporation, an innovative logistics company, is offering tours of its Heiwajima warehouse.
See why 8 of 10 foreign company presidents choose So Fast after a visit. Read in the autumn issue of J@pan Inc Magazine why SNOVA Corporation selected So Fast and are glad they did.

For details or appointment, contact Katsuhiko Kakuchiyama.
Phone: 03-5753-3101

Logistics warehouse Dates:
Sep 1 - Oct 31
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No listing this week.


Entrepreneur Association of Tokyo - September 12th

Speaker: Alex Serge Vieux, Publisher, CEO of Red Herring "Building great companies in the face of adversity"

Mr. Vieux has kindly offered to fly out from California to speak at EA-Tokyo's September seminar. He will be drawing on his extensive expertise as a high-tech journalist, entrepreneur, professor, and advisor to the French government. Mr. Vieux is currently responsible for steering the growth of the organization and guiding the publication's vision.

Date/Time: September 12th 7:00 pm
Location: City Club of Tokyo - Maple Room (Canadian Embassy)
Language: English


Tyler Foundation

The Tyler Foundation for Childhood Cancer presents: Sports Extravaganza 2006, September 29 through October 1.

Cricket and rugby celebrities from the UK, South Africa, India, Australia and New Zealand will come to Tokyo for 3 days of sport, fun and fundraising! Sports Dinner at the Grand Hyatt, Golf Day and Celebrity Cricket match.
All proceeds benefit children with cancer in Japan.

Shine On!

For more information on the Sports Extravaganza 2006, see:

ICA Events - Sep 21

Speaker: Andrew Perons, Manager, Risk & Compliance, Strata Works K.K.
Topic: "Corporate Governance - Changing Regulations
and Implications"

Details: Event details at (RSVP)

Date: Thursday, Sept 21, 2006
Time: 6:30 Doors open, buffet dinner included
Cost: 3,000 yen (members), 5,500 yen (non-members) Open to all - Location is Foreign Correspondents' Club

Start a Company in Japan

Entrepreneur's Handbook Seminar: 30th of September

If you have been considering setting up your own company, find out what it takes to make it successful.
Terrie Lloyd, founder of over 13 start-up companies in Japan, will be giving an English-language seminar and Q&A on starting up a company in Japan. This is an ideal opportunity to find out what is involved, and to ask specific questions that are not normally answered in business books. All materials are in English and are Japan-focused. Fully revised for new commercial code.

More details:

IT events announcements are priced at JPY50,000 per week.
For more information, contact



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