Amazon is to start data MVNO in Japan

According to Nikkei newspaper, Amazon Japan is planning to provide mobile data service as an MVNO. It has been rumored that Amazon will start selling Kindle in Japan for some time, but this article refers not to Kindle, but just "SIM card".  It says the plan is a prepaid plan with 1980 yen per month (approx. $23) for 500MB.  Base service is provided by NTT DoCoMo, and Amazon is buying the capacity from its MVNO, Japan Communications (so Amazon will become a grandchild of DoCoMo, so to speak), and it can be used by any DoCoMo smartphone/tablets.

That means Kindle will most likely be DoCoMo-based, one way or another.  Kindle is said to be coming out this summer in Japan.

Nikkei does not specify any source on this article (typical for their Sunday speculation article), so please take it as a grain of salt.

Michi

IPO winners and losers in Social Media 2011-12 so far

 

People talk about Facebook IPO as "failure" so much, but I kept hearing the same story - disappointing IPO of social media stocks - since last year, so I went ahead and made this chart.  There were 19 "social media" IPO's last year according to Mashable, and I also added Yelp and Facebook which went public this year.

My impression was right, most prominent IPO stocks have not been doing well.  Among them, LinkedIn and Zillow are the stellar exceptions.

It makes me happy to see the very bottom pair, FriendFinder and Jiayuan are both dating/adult sites.

Of course, Facebook IPO is in a totally different world, as the sheer size ($16 billion) is more than 10 times of last year's biggest, Yandex (Russian search engine, which raised $1.3 billion) and the impact is so much bigger.  It is just one week from IPO, so things may change over period of time.  But still, the Wall Street side story sounds very different from the dot-com bubble time.

In the meantime, over here at Silicon Valley, the air feels bubbly.  So many insiders made money out of these IPO's, and the housing market is soaring again.  Things look differently from this side of the coast, as usual.

Michi

Japan's (former) top SNS Mixi reported considering strategic options

Japan used to be one of the very few blank spots in Facebook's world map, along with Brazil and China.  Now, finally, FB is conquering Japan, driving the former king to the corner. Nikkei Business reports that Mixi, which used to be the top social network service in Japan, is on the sale block, although so far there is no formal announcement.

Mixi's demise is not only by Facebook's invasion, but also by its own "ad dependent" business model, Nikkei says.  Mixi lost good chunk of ad sales after Lehman-shock in 2008.  Their arch rival Gree turned itself into a mobile social game company quickly and found a gold mine in subscription+in-app sale business.  Mixi tried to emulate it, starting 2011, but it was too little, too late.

What amazed me was the current size difference between Mixi and Gree.  Mixi's annual sales as of fiscal 2011 (end in March) is 13.3 billion yen, net profit is 750 million yen, while Gree's is expected to be at 170 bil. sales/50bil. yen net profit.  Market cap also is in different digit, with Mixi 25 bil./Gree 340 bil. yen.  Another biggie in this space DeNA is also in the same range as Gree.

The article reports that Mixi is talking to multiple prospective buyers and players such as Gree and DeNA are expected to place a bid.

As a casual observer, it strikes me that even in Japan, the famous "Galapagos" market, Facebook's technical advantage finally wins out.  Popular media often talked about "anonymous net culture in Japan vs. Facebook's real identity policy", but the point is definitely not there.  It is the power of vast data behind it, the technological skill to extract the essence from it, and the existence of ideology of how to utilize that essence.

Yes, it was the power of Facebook, but I believe it was not just "aggressive American" thing or "sheer size".   Mixi have neither technological power nor ideology.

Here is the original Nikkei article and my previous post about Gree:

http://business.nikkeibp.co.jp/article/topics/20120514/232015/?rt=nocnt

http://www.enotechconsulting.com/2012/05/japanese-government-plans-to-regulate-highly-speculative-mobile-game/

By the way, after this report, Gree, DeNA and other mobile social game companies decided to stop providing "comp-gacha" games.  That is another source of confusion in this part of the industry, as these companies are expected to lose huge profit.  Turbulent time is expected in Japan's web/mobile industry.

My CTIA report is on WirelessWire News

I wrote a series of "CTIA report" on Japanese publication WirelessWire News. http://wirelesswire.jp/Inside_Out/201205080858.html

http://wirelesswire.jp/Inside_Out/201205091511.html

http://wirelesswire.jp/Inside_Out/201205102204.html

http://wirelesswire.jp/Inside_Out/201205111022.html

I wrote on the first day that there seem to be more people on the floor than past years, but a friend at a booth told me booth traffic was "horrible".  Either way, this year they have changed the dates and format, and attracted vast number of small companies (including a whole bunch from China and Latin America), so I saw a tide shift in CTIA direction.  Interesting to see how it evolves next year.

This year, contrast between the keynote sessions and show floor was quite clear.  Keynote speakers unanimously agree that "US has regained the global leader position in mobile", which I believe is true, but the show floor was really fragmented, with a lot of big name vendors perpetually absent.

Some may see it as a disappointment, but I felt that it is a conscious effort of CTIA organizer that they want to start from the beginning - the bazaar of small vendors selling to many small buyers (carrier and others), thus stimulating innovation, whatever from traffic off-load to stupid phone skins.

As the mobile thunder is already stolen away by Apple and Google, it may be a good strategy to go.

Japanese government plans to regulate highly speculative mobile game

Japanese government plans to regulate highly speculative mobile game Yomiuri Newspaper reports on May 5 that Japan's Consumer Affairs Agency is ready to request game providers to stop the so-called "comp-gacha" type mobile social games.

"Comp-gacha" is made of two parts.  One is "card game of completing a set".  You will get a rare card as a reward by completing a card set.  Another is "gacha", which literally means a capsule toy dispenser in Japan - you insert a coin and turn a handle, then a cheap capsule toy is dispensed randomly.  You don't know what you will get, so it is a sort of game of chance.  In "comp-gacha" mobile game, the goal is to complete a set of cards, and you pay to buy each card but you don't know which card you get till you actually do.  It is a kind of a poker game, where you have to pay for each card.

One problem is that often people keep paying till they get a good card, and get over-charged.  It is so easy to keep buying the new cards through "carrier billing" - you pay for the in-game purchases through telephone bills.  It is also said that the game providers are arbitrarily controlling the issuance of cards to each user, so they make players feel "almost there" early on, but make it extremely difficult to get the last few, thus making the players continue to pay for a long time.

Another is that the reward cards are sold for a surprisingly large amount of real money at online auctions (such as Yahoo! Auction), making the whole scheme a "gamble" with real money.

These problems have been discussed on media for some time by now, and the mobile game industry has formed an industry association to self-regulate the matter recently, but my impression is that the industry effort has been too little, too late, unfortunately.

Japanese mobile game companies are so profitable because of this scheme, but I feel that the general consumer sentiment is not supporting it.  I am hoping that the industry will take a swift action - it is always BETTER LATE THAN NEVER.

More M2M, Chinese vendors and payment issues at CTIA next week

More M2M, Chinese vendors and payment issues at CTIA next week I will be at CTIA conference in New Orleans next week.  I skipped it last year, breaking my consecutive attendance of 10 years, so I am looking forward to it.

According to FierceWireless, this year's attendance is looking good at this moment, after moving the dates to May from March, based on exhibitors' request.  It is actually nice for me too, as March is too close to MWC in Barcelona and I am too busy in March due to many of my clients' fiscal year end (hence the deadline of projects).

It looks like the trending issues will be M2M and payment.  Also some notable vendors will be absent, e.g. RIM and Nokia, and instead, there will be lots of Chinese vendors targeting at vertical M2M devices.

I hear that the payment was also hot in Barcelona.  I also know that M2M growth is a long-term trend.  And by the way, of course, no Google or Apple in the conference - the main reason that CTIA conference has slipped off from the center of mobile universe.

So far, no surprises.

iPhone as a source of ARPU

Yeah, yeah, everybody has been talking about iPhone yesterday and today.  iPhone is just invincible, and carriers have love-hate relationship with iPhone, hence they would rather diversify into more OS platforms and have high hope for Windows phones. Hmmm...  Sounds like another case of "seller's interest" first,  "consumers' interest" last...

As always, iPhone issue comes on the top headline of the earning announcement, but looking beyond it, I found the results interesting.

Sprint says they have recorded 1.1 mil. net new subs, and sold 1.5 mil. iPhones, of which 44% are new subs.  Sounds like iPhone is a great attraction to new users, but in fact, in their TOTAL (including Nextel) number, they still have lost 192K customers and net additions come from prepaid and wholesale.  iPhone works just to ease the pain for them.

AT&T's net new sub number was smaller than Sprint, particularly in the key "postpaid" category.  Their new additions mostly come from "connected devices", 230K out of TOTAL 726K net additions.  They sold 4.3 mil. iPhones and obviously they are mostly upgrades.

Verizon is apparently the only one that is still hanging on to the traditional good carrier business, with 501K postpaid new subs out of 734K TOTAL.  They sold 3.2 mil. iPhones.

So it looks like iPhone is just eating up other post paid subs and not so much contributing as the "attraction" to the new customers.

What it actually DOES is to squeeze in ARPU from the existing customers.  AT&T's ARPU reached at no less than $64.46, compared to VZ's $55.43 and SP's $59.88 (all postpaid - if you include prepaid it will be a whole another story).  I am a bit surprised that VZ has lower postpaid ARPU than SP - I don't know why.  There are different explanations in AT&T's announcement for ARPU increase, but generally speaking, it is the "smart phone data plan", in the big picture.

Anyway, at this juncture, major carriers led by AT&T are moving towards "ARPU oriented" and they are taking all sorts of little tricks to increase the rate here and there.  Indirectly for that purpose, iPhone sales for the carriers are still very important.

Apple should build plants in Mid-West, instead of burning cash

Yesterday Apple announced that they are paying dividend and will acquire companies. I have always wondering - why don't they build a factory in the U.S., if they have money to burn?  Japanese auto companies, for a long time, have made SO MUCH effort to build and operate plants in the U.S., even though it could increase their production cost.  Why?  because they wanted to be a part of U.S. community, not just through their products but also by providing jobs to the local community.

As seen in SOPA incident, Silicon Valley companies have suffered weak political position in Washington.  I think it is not just they don't spend enough money on lobbyist, but also because they don't provide enough jobs (=buy voters) in the U.S. Heartland.  They are building data centers, but data centers don't hire people like factories.  They provide so many jobs in China, but not in the U.S.

Build more factories, not just in China, but also in Mid-West.  The Heartland.  It will help not just people in the Heartland, but also Apple's long-term reputation.

Finally, Japan started to feel the pain of mobile data

The news of DoCoMo data service outage is much hyped in Japan. On January 25, eastern half of Tokyo Metropolitan Area suffered from the outage for almost 5 hours, due to an increased signaling traffic caused by Android phones, combined with DoCoMo's "miscalculation" of traffic in switching over to a new network equipment (uhh... really??). DoCoMo's executives, including President and CEO Takamochi Yamada getting 20% pay cut for 3 months. The carrier is adding tens of billions of yens in their network investment due to this incident.

Ouch!

Yes, they are finally feeling the real pain. Smartphone user number is still much smaller in Japan compared to the U.S., and they are still learning how to cope with it.

The problem has been well acknowledged in the US for the past several years, and AT&T+Ericsson team has been working very hard on this issue. So I was thinking that Japanese major carriers are well prepared for it, but I guess not. I am not quite sure what EXACTLY happened, and I still have a slight doubt that they are sorta expecting this and are getting prepared for rate increase by hyping it up...

As a separate matter, there was a huge problem in so-called "sp-mode", DoCoMo version of IP-based SNS service earlier in the month, and KDDI is suffered from a smaller network problem unrelated to smartphone issues.

Tough times for carriers, for sure.

Related article (Japanese)

My article on SOPA

I have a monthly column on Nikkei Business Online (Japanese), and a new article got just uploaded. It is about SOPA, and "California Civil War" between Silicon Valley and Hollywood.

One aspect of SOPA is the new type of "trade friction" against overseas pirate sites, and it became a political issue because it relates to jobs. I explained the basic facts about the debate, about Hollywood's position ("protect media workers' jobs") and Silicon Valley's position ("but it is too much for us, and it does not work").

The heart of the matter is that Hollywood is now aggressively trying to establish a system to harvest enough money from online video/music business, and that money gets distributed among many people in guild/union of media workers. In contrast, I think that Silicon Valley does not have a convincing system of distributing wealth among many people (not just top nerds but all the way to regular middle class workers).

It will take some time till we can establish such system... or can we??