Lessons Learned from Asia
How Beijing, Tokyo and Seoul are relevant to L.A.
Benjamin Joffe, CEO | Plus Eight Star | Santa Monica, 2009.07
Here is the plan
0. 1. 2. 3. 4. 5. Introduction How Asia can innovate China | 5Cs of Innovation Japan | Mobile Galapagos Korea | Ultra-broadband laboratory Closing & Questions
0.
Introduction
Benjamin Joffe ベンジャミン
벤자민
本杰明
4 years
1 year 4 years
www.plus8star.com
Innovation Arbitrage
China | Japan | Korea
What we do
– Worked with mobile SNS in Japan in 2003
• With avatars, virtual goods and GPS!
– Advise leading companies worldwide
• Microsoft, Adidas (E-commerce / Digital strategy) • IMVU (US | 3D chat / Virtual World) • MIH (China/S.Africa | Largest shareholder of Tencent)
– First commercial report on Tencent “Inside QQ”
– Partner of 3D social gaming startup Cmune
– Co-Founded Mobile Monday in Beijing
Our clients
EUROPE USA
ASIA
1
How Asia can innovate
Claim #1
The biggest barriers to understanding are our assumptions
General assumption #1
Everything from USA is
great
General assumption #2
Everything from Asia is
weird
(and sometimes funny)
Two examples
Movie 1
Magnificent Seven (1960)
Seven Samurai (1954)
Movie 2
The Matrix (1999)
Ghost in the Shell (1989/1995)
Using best scripts & Talent
• Adapted from Asian movies
– Fistful of Dollars – Star Wars – The Ring – Shall We Dance? – My Sassy Girl – The Departed Yojimbo Hidden Fortress (id.) (id.) (id.) Internal Affairs
• Asian movies succeeding “as is”
– Kungfu movies, Crouching Tiger, Hidden Dragon…
Old Boy – Made in Hollywood
Directed by Steven Spielberg Starring Will Smith In theaters in 2010
Who came first?
Leveraging best practices
Claim #2
Innovation is a consequence of
Talent Market size Infrastructure Investment
Internet 1.3 billion
Mobile 3.3 billion
Source: Morgan Stanley, 2007
Digital Population
Country Population Internet users Mobile users
USA 300 mln 225 mln 260 mln
China 1,300 mln 340 mln 650 mln
Japan 130 mln 100 mln 100 mln
Korea 50 mln 35 mln 45 mln
IT Infrastructure
100% 80% 60% 40%
C hi n a Avg. 4 Mbps
www.plus8star.com
Avg. 7 Mbps
Avg. 15 Mbps
3G users
20%
0% 0%
20%
40%
60%
80%
% of Internet connections measured above 5Mbps (Source: Akamai, 4Q08)
Alexa Quiz
#1 #2 #3 #4 #5 #6 #7 #8 #9 #10 USA Google Yahoo Facebook YouTube MySpace MSN Live Wikipedia Craigslist eBay China Japan Korea
?
Alexa Quiz
#1 #2 #3 #4 #5 #6 #7 #8 #9 #10 USA Google Yahoo Facebook YouTube MySpace MSN Live Wikipedia Craigslist eBay China Japan Baidu Yahoo JP / SB Tencent FC2 Sina Google JP Google China YouTube Taobao Rakuten Netease Livedoor Google Ameblo Sohu Mixi Youku Wikipedia Yahoo Goo Korea Naver Yahoo Daum YouTube Google Cyworld Nate Google KR Live Facebook
Alexa Quiz
#11 #12 #13 #14 #15 #16 #17 #18 #19 #20 USA AOL Blogger Amazon Go CNN Twitter Microsoft Flickr ESPN Photobucket China Soso Ku6 Kaixin001 Mop Live PCOnline 56.com Yahoo CN Sogou Tom Online Japan Korea Google (error) MSN Tistory Nicovideo JoongAn Ilbo Amazon JP Chosun Ilbo 2 Channel MSN Nifty Gmarket Yourfilehost Paran Biglobe Auction Geocities JP Blogger Infoseek JP Friendster
Claim #2
Innovation is beyond technology (it’s about services ^_^)
Technology?
e.g. LAMP stack
(Linux / Apache / MySQL / PHP) + HTML / Flash / AJAX…
Largely commoditized…
2
China
Claim #3
China is innovating more and more because of five key factors
5Cs of Innovation™
a. Copy
“Benchmarking” “Inspiration” “Best practice”
“If I have seen farther it is only by standing on the shoulders of Giants.”
(Isaac Newton)
Pragmatic Entrepreneurs & Investors
Innovation ROI? “Blue oceans”
Entry barriers
Technology? Capital? Talent? Intellectual Property? Censorship?
The Underpants Gnomes
Business Plan
Copy can backfire!
Japan: Mayonnaise
China: Whipped Cream
Copycats often die
• Market not sustainable • Business model does not work
b. “China”
Scale / Geography / Demography make some services viable
Already in 2007
(We even published a report…)
...$1 billion do not appear overnight
Attention Threshold = 1 billion dollars?
Market Capitalization
(June 2009)
3-15 bln?
21 bln
REAL MARKET CAP
Maybe simply not looking?
c. Combination
Will it blend?
Tencent (1998)
d. Competition
“Survival of the fittest”
(Herbert Spencer)
What happens when you have 4 Facebook 20 YouTube 10 MySpace 5 Match.com 3 Yahoo 4 Twitter
?
Hard spots
“Concepts”
Sociology Psychology
“Execution”
Marketing Business models Payment
e. Constraints
“Necessity is the mother of invention” (Plato)
Low GDP/capita
Small transactions / making millions from cents
Limited advertising
Alternative business models / B2B to B2C
No credit cards
Alternative payment systems, mobile, virtual currencies
No legacy industry
(is it a constraint?)
Leading Companies
mln USD
www.plus8star.com
Mobile content
Web Portal
IM
Portal + Games
Online games
Search engine
Online games
Only B2B e-commerce part
Gaming Profits in China
80% 70% 60% 50% 40% 30% 20% 10% 0% 0 100 200 300 400
www.plus8star.com
500
600
Note: Net Profit and Profit Margin for Tencent game and NetEase are the ones of the whole company.
Battlefield by Electronic Arts
Quote from EA???
When we started two years ago, there was a real question mark: Can the freeto-play model work as it did in Asia? The answer is an emphatic yes.
Ben Cousins General manager Battlefield Heroes team Electronic Arts
More innovation
Lihua | Order food over IM
Alimama | Ad exchange + Micro-retail
Babytree | Vertical for young parents
Huica | Mobile coupons
PPLive | P2P Internet TV
Hozom | Address book + SNS
iNezha | RSS-to-IM
Qifang | P2P Micro-lending
Digu | Twitter + Pics + Celebs
Lakoo | Appstore for non-iPhones
2
Japan
Claim #4
Japan is the world’s most advanced mobile market AND Too isolated for its own good
Most advanced
• Over 90% 3G users • Over 50% mobile TV • Over 50% NFC • Micro-payment since 1999 • “App store” since 2001 • Mobile music, mobile advertising, mobile commerce all ahead…
Mobile Market
• Mobile content | 4.3 billion USD in FY07
• Mobile commerce | 7.3 billion USD • ARPU
– Content = 40 USD/year – Commerce = 70 USD/user/year
Before & After 3G
2004 2007 1,140
1,200
1,000 800
1,186 1,091 862
Million USD
600 400 200 0
568 419 204 0 225 185 108 229231
500
Galapagos Syndrome
• No foreign mobile is strong in Japan • Too complex to survive abroad?
Some examples that work
“Social Networking Is Not a Business”
MIT Technology Review July/August 2008
And more (April 2009)
Mobile Social Networks?
Social Networks
Company Reg. users Usage Revenue 2008 Profit margin From users Market capitalization
Mixi 15 mln 2/3 mobile $120 mln 31% 5% $500 mln
DeNA 14 mln 100% mobile $320 mln 40% 80% $1.4 bln
GREE 8 mln 100% mobile $60 mln 63% 75% $1.2 bln
Mobile Game Town
Revenue Breakdown
Japan Game Market
[1 billion JPY = 10 million USD]
More successes
Golf Digest Online
• What is it?
– Golf online vertical
• Numbers
– 1.37M registered users – 128M USD, 6.9M USD profit, Listed
• Business models
– Ads, e-commerce (booking, products), subscriptions
Cookpad
• What is it?
– Cooking focused vertical
• Numbers
– 6.67 M USD rev., 1.76M profit – Profitable, IPO
• Business models
– Ads, subscriptions, lead generation
So-Net M3
• What is it?
– “Medecine” “Media” “Metamorphosis” – “Social network for doctors” / Vertical site on medical products
• Numbers
– 177,000 doctors – 85 M USD rev., 24 M net profit, Listed
• Business models
– Advertising, subscriptions, surveys, jobs
Various Virtual Worlds
• Services
– Nicotto Town (250K) – Ameba Pigg (350K)
• Content & business models
– 2D – Virtual items – Avatars and spaces
3
Korea
Claim #5
Korea is a window into the future of broadband AND Foreign companies leverage Korea’s ideas better
Online Games
• 1 billion USD market
– Larger than Japan with 1/3 population and 1/2 its GDP/capita – 1/3 of China’s
• Pioneer of
– Online gaming! – Virtual goods model
Kingdom of the Wind (Nexon, 1996)
Cyworld
• Real-name SNS • Beats FB and MySpace • Virtual goods
– Avatars – Page skins – BGM – Fonts!
• … since 1999!
Naver
• Google & Yahoo’s nemesis in Korea • Innovations
– “360 search” – Yahoo Answers – Since 2002!
• More
– Knowledge shopping, etc.
Alternative Media Models
• Citizen journalism | OhmyNews • Video Jockey “VJ” | Afreeca.tv • Online education | Megastudy
• Various smaller services with innovative concepts.
Contacts
www.plus8star.com benjamin@plus8star.com
+81 | Japan
benjamin0123 http://twitter.com/plus8star www.linkedin.com/in/benjaminjoffe www.slideshare.net/plus8star
+82 | Korea +86 | China Telecom & Internet + Added Value * High quality