The Current Situation of Net-business in Japan

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1 CIGREF ISD Symposium Centre Universitaire Malesherbes Paris, France The Current Situation of Net-business in Japan Masao Kakihara, Ph.D. Yahoo! JAPAN Research September 24, 2009

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5 Market Situation 4

6 Social Penetration of the Internet Social penetration of the Internet usage is proceeding further rapidly Supply side Broadband Mobile internet Cheap revolution Demand side Digital native Social use of the Web Multi-device usage Social penetration of the Internet (a) E-commerce (B2B, B2C) (b) Online services (c) Digital contents 5

7 Broadband Internet 6 Source: OECD Information Technology Outlook 2008

8 Mobile Internet (Thousand) The number of mobile phone subscriber agreements in Japan 100,000 86,998 81,520 80,000 69,121 75,657 86% 60,942 60,000 51,139 40,000 31,527 41,530 35% Internetenabled 20,877 20,000 10,204 3G ,378 1,713 2,131 4,331 Source: Mobile Content Forum, Japan

9 Cheap Revolution Diffusion of free software and on-demand services - Linux - Apache - Amazon EC2/S3 etc. Radical fall of market entry barriers Rapid price decrease - Chips - Storage - Internet access etc. Constantly changing market environment 8

10 The Rise of Digital Native Internet use by age, percentage of individuals Source: ITU Use of Information and Communication Technology by the World s Children and Youth,

11 Social Use of the Web The Web as a platform Collective intelligence Architecture of participation Remixable data Mashup Web 2.0 is already everyday life 10

12 Multi-device Usage for Web Access Distribution of Internet-accessing devices in Japan Only from PC 15.1 mil. [16.6%] From mobile devices 75.1 mil. [82.6%] From PC AND mobile devices 62.0 mil. [68.2%] From PC 82.6 mil. [90.8%] From PC, mobile, game, AND TV devices 4.8 mil. [5.2%] Only from mobile devices 8.2 mil. [9.0%] From game and TV devices (5.7 mil. [6.2%]) Source: Ministry of Internal Affairs and Communications, Japan White Paper: Information and Communications in Japan

13 The Web as a Commodity The Web has been tightly connected to and deeply embedded in the real world The Web News Music Search SNS Mail Map Movie Tool PC Mobile PDA Game device Real world Office Home On a visit On the move 12

14 Some Snapshots of Japan s Net-Business 13

15 Net-business in Japan E-commerce B2B (not discussed here) B2C Auction etc. Online services Portals, News, Search, Mail Social services etc. Digital contents Music Video Game etc. 14

16 Market Size (Billion Yen) ,715 Market size of Japan s Net-business , (estimation) , B2C e- commerce 1050,3 Internet auction 841,3 575,2 Internet advertising Blog and SNS 456,2 548, ,2 Online payment ,8 61, ,2 365,5 Security Music Online game Mobile contents 90,6 47,6 Video on demand E-commerce Online services Digital contents Source: Nomura Research Institute IT Market Navigator

17 E-commerce (B2C) Online shopping/auction platforms are huge Rakuten (No.1 online shopping mall) Yahoo! Auction (No.1 online auction platform) 16

18 E-commerce (B2C) Direct sales channels are now flourishing UNIQLO Online (Top casual apparel maker & retailer) Sony Style (Sony s online sales channel) 17

19 Online Services Major services are ad-driven, oligopolistic markets Portal Search News Mail Yahoo! Yahoo! Yahoo! News Yahoo! Mail goo (NTT) Google Major newspaper s sites Hotmail/Live Mail Gmail 18

20 Online Services Yahoo! JAPAN Portal 19

21 Online Services Social services are developing on an unique trajectory, particularly in mobile business mixi Mobage-Town Gree Top SNS 17 mil. users Mobile portal 15 mil. users 10s and 20s: 70% Mobile-based SNS 10 mil. Users Focusing on game 20

22 Digital Contents Mobile phones drive the digital contents market (Billion Yen) 400 Digital contents market in Japan Music Online game Mobile contents Video on demand Source: Nomura Research Institute IT Market Navigator

23 Digital Contents Paid mobile contents are expanding Mobile novels Paid games 22

24 Digital Contents Video services are still struggling The merger of Yahoo! Movie and GyaO 23

25 The Way Ahead 24

26 Monetization Problem The economic recession hit ad sales Even online ad market is shrinking Significant damage and risk to ad-based Netbusiness A need for search of new monetization models From ad-dependent monetization to multiple monetization Re-designing the whole business models 25

27 Monetization Models for Net-business Ad model Tenant model Profit Margin model Paid service model 26

28 Information retrieval / Evaluation Page-view / Purchase / Transaction A Closer Look at User Behavior Grasping the nexus of action streams that flow through both the real world and the web world Action-stream The Web Real world Real world -Motivation -Intention Click-stream -Resultant activity -Consequence Action-stream Source: Kakihara, M (2008). From Click-stream to Action-stream, IFIP8.2 OASIS Workshop, ICIS2008, Paris 27

29 Real-Web Convergence The real world and the web world are mutually penetrated in our everyday lives Focus on gates through which both worlds are connected Device Payment User account Net-business in Japan is vividly presenting such emerging phenomena 28

30 Thank you! Masao Kakihara, Ph.D. Yahoo! JAPAN Research Tokyo, Japan 29

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