Next in our series on international Web markets is Japan. The information for this post was provided by Benjamin Joffe (CEO of Plus Eight Star Ltd) and Masashi Kobayashi (partner of Globis Capital Partners - one of the largest Venture Capital firms in Japan). We start off with an overview of the market, then list the main web companies in Japan. There is some extra commentary after that on why mobile dominates in Japan, the state of online advertising in Japan and its IPO market. There's something for everyone here! Thank you Benjamin and Masashi for the comprehensive and very interesting information.
Benjamin: Japan today enjoys not only the fastest but also the cheapest broadband infrastructure in the world, with over 20 million households connected to broadband (out of 46 million). Yahoo! Japan, through its Yahoo! BB service, is among the largest providers with over 5M users. You can get 8M to 50M ADSL for prices between $20 to $45 a month, and 100M fiber optics for a $200 set-up fee and $30 monthly fee. There goes the myth of 'Japan does not have the Internet'!
Masashi: As a result of the aggressive entry by Softbank BB (aka Yahoo! BB), Japan today enjoys a very cheap and very high-speed Internet infrastructure. In addition, on the mobile side there is a very large diffusion of 3G and 3.5G feature-rich handsets and a solid wireless infrastructure. One thing to point out is that even with the growing usage of video-based services like Youtube, or movie content, there is not much stress on the network. In March 2006, more than 2 million Japanese and 5.2% of Internet users used Youtube! (ref).
Benjamin: Japan is around 1.5 years ahead of US in mobile. It is difficult to come up with an estimate, but the market maturity goes way beyond simply: "do they have more 3G users?". Here are some data points:
A lot of people in Japan buy not only digital (music, games, videos) but "real" or "offline" goods on their mobile. They use auction services, blogs and use assisted-GPS powered navigation services to walk the city. And they have been doing so for already 2-3 years, at least. Market maturity is not only about getting a device in people's hand, it is also about the service offering and the actual usage rate. Same for Internet: you can have a great infra with high-speed and no innovation.
Masashi: Unlike Silicon Valley, there are only a few high-quality services in Japan. The main reason for this is that there are only a handful of high-quality entrepreneurs. When magazines publish articles about Web 2.0 in Japan, Mixi, GREE, Hatena and Drecom appear all the time, but there is little mention of anyone else.
MIXI
Benjamin: Japan's largest SNS is named MIXI and has gone last week (Sept 18) onto the Japanese Mothers stock market. Its market cap reached 109 billion yen (US$930m), which makes the IPO the seventh-largest on the Mothers market. Its CEO Kenji Kasahara (30 y.o.) set up Mixi in June 1999 when he was a third-year student at the University of Tokyo. The company initially operated a recruitment advertising Web site and launched a social networking service in February 2004. In the year ended March, Mixi posted a pretax profit of 900 million yen (US$7.5m) on sales of 1.8 billion yen (US$15m). A large part of the revenue comes from advertising. Mixi's membership totaled 5.7 million as of Thursday. About 70 percent are those in their 20s and younger.
Masashi: The company whose development is the most interesting is probably Mixi. Mixi is Japan's leading SNS service. Its number of pageviews is second only to Yahoo! Japan. In September this year, Mixi IPOed and is valued currently at 200 billion JPY ($1.7 billion). With its profits rising rapidly, Mixi has become the flagship of Web 2.0 businesses. There is good information about Mixi here (English PDF).