TT-597 -- Will Facebook Fail in Japan? E-biz news from Japan

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A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, January 16, 2010, Issue No. 597


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An article in the New York Times and a commentary between a
Facebook software engineer and Mark Zuckerberg, have once
again kicked off speculation that Facebook is having a
tough time here in Japan and looks like it could become a
re-play of eBay, MySpace, and various other US internet
ventures that have tried to set up here and have failed.

The NYT article was quite detailed, revealing that Facebook
currently has 2m users registered in Japan, just a tenth of
those registered to each of Mixi, Mobage, and Gree. The NYT
reporter speculates that while Facebook has as much 60% of
all Internet users registered to it in the USA, the hurdles
for Facebook to gain decent market share in Japan may be

The biggest reason given for Facebook's poor showing so far
is that it requires (theoretically anyway) the user to use
their real name and is set up for the user's real persona
to be represented on the web. This is the antipathy of what
Japanese users want from the Internet, which is anonymity
and the ability to participate in forums without fearing
identification for what might otherwise not be socially
acceptable behavior or comments. A recent web survey found
that over 80% of Japanese users are in fact reluctant to use
their real names on social media sites, so there is
something to this argument.

However, the fact is that you can easily use a pseudonym on
Facebook if you want to, and there doesn't seem to be an
active policing against doing so by Facebook. So what are
the other reasons for Facebook's poor showing to date?

We'd say that the biggest impediments are being late to
market, it's a lot harder when you have to catch up with 3
local communities already sitting on 65m subscribers
between them, and the lack of need by Japanese users to
interconnect across borders. Of course there are some
internationalized Japanese, and we imagine that many of them
are already on Facebook and connecting with their friends
abroad. But they are probably using the site for the
convenience of their overseas friends, not because it has
stronger appeal to them for local daily usage.

The fact is that currently Facebook doesn't offer anything
superior to what is already out there, and so why should
people change?

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[...Article continues]

But we bet that Facebook won't stay small in Japan for
long. If you follow the news, you can see a pattern
emerging of alliances and leveraging that will gradually
ease Facebook into the fabric of Japanese web users. In the
last few months there has been an alliance for example with
Recruit, Japan's leading free paper publisher (Hot Pepper
and various other titles). The tie-up allows college
students to find jobs by networking with graduates from
their schools.

This is a clever and well-timed idea because there is a
vacuum in the school friends network sector. There used to
be a major schools connection network called Yubi-Toma, but
it went through a scandal and although relaunched last year,
isn't trusted by your average netizen. Since Recruit is deep
into recruiting, this tie-up offers a nice connection to its
main business, and we assume will create revenue for both

Then of course also late last year was the market entry
of games creator, Zynga. That company's Facebook
game, Farmville, has a huge following and may do well here,
creating the "pull" that Facebook needs to win users.
Games are clearly the major attraction for social networks
in Japan, and both Gree and Mobage (by DeNA) have
eclipsed Mixi, a more traditional diary-based SNS site,
because of their freemium model games. Can Zynga create
more hits that will resonate with Japanese users? Given that
Zynga took over a Japanese company which is already
producing titles, we think it is only a matter of time.

Another alliance, which had us scratching our heads,
was with Mixi itself, the entity that Facebook in theory
would depose if it became successful in Japan. In late
October, the Nikkei ran a short article in which Facebook
said it was "partnering" with Mixi to allow users of each
site to share information, links, and other digital assets.
Maybe in this way, Facebook hopes to offer Japanese users a
way around the "real name" policy?

Actually, we think not. More likely this is a pragmatic
way for Mixi to open up a door way to international users,
while Facebook is probably pursuing a policy in Japan of
being friends with anyone who will have it. OR, just maybe,
this is a deeper relationship and we'll read about Facebook
buying out Mixi in the months to come. It wouldn't surprise
us if this happens, and would certainly pole vault Facebook
into the main market.

In any case, Facebook really only opened its Japan office
late last year, and so it's early days to be speculating
what the Facebook strategy will be. If we were them, we
would attack the lesser culturally specific portion of the
Social Media market first, which is games and mobile
applications. Facebook has plenty of resources to be able
to do this, and now with a JPY5trn market valuation, they
have plenty of willing partners as well. We're sure that
Softbank at least, being an investor in Zynga, will be
working with Facebook to line up those partners into some
kind of alliance. This could get interesting...


Lastly, if any readers fancy themselves as the Mark
Zuckerberg of 2020 in Japan, and need some pointers on how
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...The information janitors/



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+++ NEWS

- Daikin may buy US rival
- CDMA iPhone on the way?
- Innocent man gets JPY92m compensation
- Suntory has JPY300bn M&A war chest
- 1.41m families on welfare

-> Daikin may buy US rival

Osaka-based aircon maker Daikin has announced that it is
considering a massive US$4bn takeover of US rival maker
Goodman Global. The company is one of a number of bidders
for the Goodman business, after its owners, private equity
firm Hellman & Friedman, put the business up for sale. The
purchase would make Daikin the largest air conditioning
maker in the world, edging out another US company, United
Technologies. (Source: TT commentary from, Jan
14, 2011)

-> CDMA iPhone on the way?

According to Taiwan parts supplier insiders, it appears
that Apple may be preparing a CDMA iPhone handset for sale
in China, Japan, and South Korea. This would be interesting
news for Japan as the only CDMA carrier is KDDI, a
major competitor to Softbank. ***Ed: Certainly we'd be
overjoyed to see a carrier compete with Softbank. Their
service is so darned slow -- we are now using an eMobile
portable WiFi/3G hub to get an alternative way on to the
web.** (Source: TT commentary from, Jan
12, 2011)

-> Innocent man gets JPY92m compensation

Probably no amount of money will make up for the 17 years
taken from 64-year old Toshikazu Sugaya, who was imprisoned
in 1993 for life for the alleged murder of a 4-year old
girl abducted from a Pachinko parlor. Sugaya was convicted
on the basis of DNA found in the toddler's underwear, but
he protested his innocence and finally managed to get the
Tokyo High Court to re-test the DNA sample in 2006. Sure
enough, it wasn't his... He is to receive JPY92m in
compensation, representing the maximum possible
compensation allowed by the government. ***Ed: If there was
ever a case for Japan to stop imposing the death sentence,
this would be it.** (Source: AFP article at, Jan
13, 2011)

-> Suntory has JPY300bn M&A war chest

Suntory Holdings CEO has revealed that his company has a
JPY300bn war chest available for acquisitions, following a
failed merger attempt with Kirin back in 2009-2010. The
company's last major acquisition was France's Orangina
Schweppes. The CEO has said that he wants to raise income
levels earned overseas to 25%, up from 23% today, and to
move overall sales to JPY2trn by 2013, up from JPY1.75trn
today. ***Ed: It will be interesting to see what kind of
companies Suntory will go for. So far they're active in the
"junk drinks" sector, but there are some very interesting
healthy drinks makers on the rise in the USA and Europe
that could be good targets. Also interesting to see just
how much cash some of these major Japanese companies have
for global purchases.** (Source: TT commentary from, Jan 14, 2011)

-> 1.41m families on welfare

There are plenty of people still doing it tough in Japan.
According to a new Welfare Ministry report, there are a
record 1.41m households now living on welfare, up 9,400
from September, and 136,000 more than 2009. The households
represented 1.96m actual people. The Ministry says the
major cause of the rise is the ongoing loss of jobs in the
labor market. As a result, it will spend JPY3.5bn this year
to help people on welfare re-enter the workforce. (Source:
TT commentary from, Jan 12, 2011)

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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