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5: Mobile-Specific Business Models are Essential

The emergence of the mobile channel gives business an excellent opportunity to learn from their past mistakes - or to repeat them.

The boom-crash phenomenon of the Internet in the late twentieth century resulted from traditional retailers (store and catalog) investing billions of dollars in extending their operations to the Internet without considering that the new channel might require them to take a different approach.

The emergence of "Web 2.0" has been hailed by some as a second chance to get it right: businesses have learned that the Web is different in fundamental ways, and require a fundamentally different approach.

The same is true of the mobile channel, as business with a successful internet model are attempting to extend that very same model to a new channel, more gingerly for the lessons of the past, but often making the same mistakes. As such, it serves as an excellent example and model to those who are considering their approach to the mobile channel.

The authors boast that Japan began to adopt the "Web 2.0" model long in advance of western markets: they had been working collaboratively rather than competitively to provide small bits of information that users can access and "mash up" to suit their own needs, and on the smaller platform of the mobile device. By this model, "consumption" is no longer a passive model where the user accepts what is given, but an active one in which the user makes informed choices as to the content the will consume, and aggregate from various sources to create a personalized experience.

Provided that business learns this lesson, it will be able to approach the mobile channel in a way that is successful from the start, rather than requiring a repeat of the same painful lesson.

WEB 2.0: NOTHING NEW FOR JAPAN

Web 2.0 was "well underway and profitable in Japan" years before the notion caught on in western markets: it began with an advanced broadband and mobile network with a sable ecosystem of carriers and service providers who collaborated and shared revenue.

Moreover, mobile was the driving platform in Japanese service models: it was more common for services to be launched first on mobile and then migrated to the desktop rather than the other way around.

In the Japanese market, the mobile phone has become the "preferred device" for accessing social media services: it makes the social network available anywhere a person happens to be, and mobile applications are generally more convenient, immediate, and easier to learn and use than PC based applications.

On the other hand, the functionality offered by the mobile platform is more primitive and limited than that offered by the conventional PC. This is not a matter of evolution, but one of necessity: mobile must be quick and simple to be useable. Applying the traditional PC model of complexity and broad feature-sets is contrary to the value of mobile.

CASE STUDIES

The authors present a number of case studies for the most significant Web 2.0 services that show innovation that could be considered to be the harbingers of Web 3.0. They concede that this information is highly perishable: much will have already changed and evolved by the time this book is printed.

Mixi

Social Networking Services (SNS) began appearing in Japan around 2002. They began as special-interest networks (hobby enthusiast, pop music fans) and eventually began to cater to a more general audience, eventually growing to an audience of around 20 million, or 15% of the population of Japan, with the average user spending about 2.5 hours per month on the service.

(EN: I've made the case earlier that "networking" is not new: it predates the Internet. Bulletin Board Systems, in the mid 1980's, provided "sites" where people with a common interest could gather an exchange information via mail, chat, boards, and file repositories. The technology has been better integrated, but its fundamental nature has not changed since the beginning.)

The leading service, "Mixi" held about 82% of the market in 2008, which is even more impressive considering that membership required invitation of an exiting member. It became a nexus where men and women in their twenties would meet, and many couples married after meeting through the service.

The core services of Mixi are similar to most services: there are personal profiles, diaries, communities, chat rooms, bulleting boards, and the like.

Entertainment preferences were of particular interest to the commercial sector: users were able to purchase books and music via links from the service to retailers, and it was eventually possible to "track" users preferences (by purchases, or even posts) to more effectively target market.

Mixi went mobile very shortly after its PC release and eventually offered nearly all of the features that the web site did. The company considered mobile to be a supplemental service, until it noticed that the mobile site became even more popular, in terms of page-views, than the PC site, the number being roughly double (5.81 billion on web, 8.85 billion on mobile) by 2008.

(EN: This is not necessary an apples-to-apples comparison. The common practice on mobile is to present smaller pages with less content, so a user on mobile might have to view eight or twelve "pages" to get the same content available on one Web "page." The numbers are impressive, nonetheless, but I sense that page-view was used instead of user sessions because they suggest mobile is more popular than it actually is.)

GREE

Another service, GREE, had the same basic components as Mixi, but began offering "advanced services" such as video sharing from the start, and was more accommodating to marketers, allowing them (especially record companies) to create their own profiles and add content for their users to download. Later, it offered software developers a distribution service for games and other software to the site's users.

The author suggests that the major strategic difference is that Mixi remained aloof from mobile carriers, whereas GREE teamed with them, which enabled GREE to gain their support in offering more advanced services to subscribers. Also, GREE was open to anyone, rather than requiring users to be invited to join.

(EN: The latter is of interest, and I thought to seek out a chart that indicated the growth in the user base of Gmail, which switched from an "invitation only" service to "anyone can join" in 2007. Didn't find one, but there was a separate chart of "monthly unique visitors" that suggests traffic more than tripled within a few months of opening the floodgates.)

In 2006, GREE partnered with Japan's second-largest cellular service (KDDI) to make it a branded and "official" SNS engine for the carrier, eventually mashing the two into a single service "Au One GREE"

In addition to getting promoted directly to subscribers, integration with the carrier enabled GREE to have direct integration into on-device utilities, such as the camera and photo album, music collection, and other services that made it more convenient for users to upload or download files from the remote service.

The combined service got off to a slow start, but then took off: subscribers doubled within six months and , after partnering with other mobile providers such as DoCoMo and Softbank, the user base increased sevenfold. At present, the service has an 11% market share, is the fastest-growing mobile SNS in Japan, and averages 10,000 new users per day.

Nico Nico Douga

Nico Nico Douga (NND) began in 2006 as a service that enabled users to post and share videos and comment on clips by embedding comments directly into the video stream "in real time" - enabling users tuned into the same program to communicate with one another. This was conceived as a competitor to another bulletin board community (2channel) which featured online videos side-by-side with text-based chat. The NND service quickly grew to 8 million members.

At the onset, NND leveraged YouTube to serve video, but as volume grew, YouTube shut them out and they had to develop their own video-sharing platform. This enabled them to split their service into two parts: a public site that anyone could use and a member-only site which required a subscription fee of 500 Yen (about six dollars) and offered higher-quality video, premium content, and more sophisticated management tools.

The site went mobile in 2007 and grew within siox months to a channel-specific user base of 900,000 users (170,000 premium users), then to 2 million the following year. In addition to the standard services, mobile users can upload and share their videos captured with their mobile phones.

There is also a revenue-sharing service that enables those who upload video to place product promotions that will appear as chat when the video is launched. The video's owner receives a share of the advertising revenues.

It's noted that YouTube, who unceremoniously dumped them, began the same revenue model in 2008, teaming with Amazon and iTunes.

SNS and User-Created Mobile Content

Mahou No Island began as a free homepage service for mobile and PC users in 1999, its distinction being that it was possible to develop a fairly robust personal home page using only the mobile phone. Revenue for the service was generated primarily from ring tone sales.

In terms of popularity, the site gained six million registered users and 3.5 billion monthly page-views by 2008.

The key differentiator between MNI and other social platforms was the ability for users to upload original content - in effect, to write and publish a digital novel for others to read - which became popular, to the point that around a million "novels" were stored on the service, most of them written on mobile phones.

In an astonishing move, MNI worked with a few Japanese publishers to print some of the highest-ranking novels on the service. Given the decline in the market for print fiction, this seemed like a foolish move - but instead, it started a new book boom in Japan, selling over seven million books, including one title (Koizora) that sold over a million copies.

Following this success, MNI introduced a new service in 2007 for independent artists to upload and promote their music on the site and later partnered with record companies to release albums by MNI's more popular artists.

In late 2008, the company again expanded, this time to enable users to produce video, including video dramas based on some of the novels on the site. The first was published to DVD in December 2008.

This exemplifies how the mobile platform can serve as a content creation and distribution medium (EN: Though the notion of "creation" is a bit odd - it's mentioned that people write "novels" on the mobile device, but I expect music and video are produced on other platforms) and create trends that can leverage and revitalize traditional media.

Mobage Town

Mobage Town is a site that combines games, social networking, and location-based services. The service is a mobile pure-player that grew to over 11 million users in its first two years, becoming the second most popular social networking service after Mixi, with a market share of 13% and is offered as an optional service by most Japanese carriers.

Mobage specializes in "one button" games that can be played on most handsets, either by a single player or multiplayer. Players create a brief profile, which includes an avatar that is placed on a virtual map of Japan that displays the locations of users.

The avatars are a differentiator for the service - users begin with a basic avatar, then need to purchase clothing, props, and background using in-game mobile currency, which can be purchased or earned by doing things like bringing in customers to the service through referrals.

In addition to the gaming platform, Mobage offered me-too services of other networks - enabling users to write "novels", upload original music files, etc. - that have garnered some degree of popularity.

Lismo

While the Apple iTunes service has a market share of 70% to 80% of digital music in most markets, it has less than a 15% share in Japan, where most music downloads are done direct-to-mobile rather than via the PC. In the Japanese market, the Lismo service of KDDI Corporation dominates the music service sector.

Lismo originated on the PC platform, then integrated PC and mobile platforms, then provided support fo mobile-only users. While there remains a PC component (to contain a music library, rip CDs, and manage playlists), the mobile software can be used independently, unlike iTunes in which the device is dependent on a PC as a "base" for music purchasing and storage. There is also an integrated "digital radio" service that enables users to listen to music without having to purchase it, though they may choose to purchase any song they hear for use at their own convenience.

In addition to playing and storing music, Lismo users can create personal profiles, share playlists, and interact with other users individually or in communities. Music companies are able to promote albums and artists and sell concert tickets.

Lismo also has ancillary services that enable the user to manage personal data - to back up or transfer items such as text files (blogs) or images between their mobile device and their PC without a wired connection: an online repository is a "master" data center for both computer and phone.

It's suggested that the company may be looking to expand its offerings to video - to enable mobile users to watch television-like broadcasts or programs and movies, and to purchase them for use between their mobile device, PC, and video equipment (including home theater system and in-dash video in vehicles).

The latter is of significant interest, as the ability to use the mobile device as a "master" device that enables video and audio to be played on any other device is presently unexplored, and would completely eliminate the need for a PC, which has generally been an awkward mediator for music and video.

S Town

Softbank Mobile offers a platform that blends social networking with mobile gaming, messaging, avatars, and virtual environments. The demands of the latter meant that only high-end handsets could support it at first, but the hardware has largely caught up.

The service caters to girls, late teens and early twenties, and provides a full 3D environment on the mobile interface where "citizens" can interact freely or in private chat rooms with others of similar interests. Each player creates their own virtual space, and can travel the virtual "town" to visit and be visited by their online acquaintances.

The virtual environment is the main draw of the service - similar to Second Life, except that it is mobile and can be accessed anytime and anywhere. (EN; The description continues, btu it's largely similar - people create environments, games, and stores, and trade in virtual cash in addition to avatar-based interaction.)

As yet, the service is not commercially viable, but the author insist it is a "great example of the potential of the mobile platform and 3D virtual worlds."

Widgets and G a d g e t s

The author explains the notion of "widgets," lightweight applications with simple functionality that were tried, and failed miserably, on the personal computer, but are gaining popularity on the Mobile platform. Most mobile "apps" are simple multi-task widgets that enable users to perform a simple task (check your stock portfolio or get a quick weather forecast for your location) without having to wade through the navigation of a more complex application or Web site.

NTT DoCoMo's first widget-like application, I-channel, launched in 2005: it was a flash-based news ticker that let the user subscribe to different channels to get a "feed" of headlines and the ability to click through to a more detailed story. This was a fee-based service that attracted over 15 million subscribers.

Softbank Mobile partnered with various developers to launch widgets based on the Mocoa application, which provided a mobile access to the Yahoo instant messaging client, with a user-interface designed specifically for the mobile platform.

The first "real" mobile widgets were launched in late 2007 by KDDI. Branded as "Au One Gadgets," these were browser-based applications running in the Opera browser that provided user with quick access to preset services (news, weather, sports results, pictures, mail and messaging, etc.)

The common platform enabled third-party developers to offer widgets, much like the Apple App store for iPhone, available directly through the phone, so that users could choose items that suited their needs and manage them in a quick-access menu.

SUMMARY

From these case-studies, the authors derive a checklist of considerations for those who are interested in developing successful mobile services:

THE TAKEAWAY

Japan is ahead of the curve on Web 2.0 when compared to western markets, and companies in this market are offering value to consumers that is not culture-specific. Developers in other markets would do well to heed the lessons learned by Japanese companies.

More importantly, approaching mobile must be done with a clear understanding of the importance of the device, in and of itself, to the user. This is a key lesson that will be repeated frequently, as it is central to the success or failure of any mobile venture.

Especially consider that the PC is an entirely different kind of device that has along history of bloated, self0-contained applications that demand much of their users - the mobile platform turns that completely around.

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