So the question is will 2010 be the year of the Mobile Handset, the Tablet, Mobile Advertising, App Stores, Location Based Advertising, Social Advertising, Social Search, Social Media, IPO’s, the Mobile Google or even the year Brand Advertising Moves Online, Newspapers start making money out of content and Disney buys Electronic Arts? Or will it be the year that we all discover it’s all been done before in Japan?
As I’ve said before Silicon Valley is 10 years behind Japan in the race to the MobCon. For the past decade the Americans, the Europeans and the Australian’s have been stuck in a kind of World Wide Web Ground Hog Day trying fix what went wrong with the dot.com while Asia, and Japan in particular, moved on to the next wave of the MobCon.
So let’s see what Japan’s experience can tells us about what we may, or may not, see over the next decade.
We’ll begin with the Tablet. Obviously with the anticipated release of Apple’s iSlate(?) and the success of Amazon’s Kindle during the pre-Christmas sales there is a lot expectation that 2010 will be the year of the Tablet.
You probably don’t remember that Sony released their eReader back in 2006. It is now in its third iteration and is still awaiting that break through moment. Apparently world wide sales have been in the 100,000’s. Will Apple or Kindle or the Nook provide the breakthrough in 2010 or will they join the long list of previous eFlops? (See Why Have Tablets Flopped? Here Are Five Reasons). Certainly one suspects the future of Newspapers and Magazines will be tied very closely to the success of the Tablets. So you can expect a lot of press coverage next year.
What about Mobile Advertising? You’ve heard the hype, get ready for the reality… Better Phones, Better Networks and Better Content all mean… You guessed it Better Ads. Or does it? Morgan Stanley’s Mobile Internet Report (Complete) reveals that Advertising accounts for 40% of the revenues on the internet but only 5% of revenues on the Mobile Web in Japan. That’s not good news for all those developers looking to make money out of advertising to people on the move.
So although there may be a lot of interest in Location Based Advertising the news this month that Zynga, the world’s most successful social games developer, is testing SMS Alerts clearly suggests SMS will continue to be the Killer Mobile App.
On the positive side the ARPU for Mobile Advertising in Japan is $10. While in the USA it is still only $1. The revenue split in Japan today is about 80:20 in favour of search advertising. Which I guess is why so many analysts think the future of Mobile Advertising is Google.
A breakdown of the advertising spending in Japan this year suggests that old media will still be the dominant advertising platform for at least the next 5 to 10 years.
$67 Billion Old Media vs. $7 Billion New Media with just under $1 Billion of that spent on Mobile Media.
Turning our attention to Social Media we discover Mobile access to Mixi, Japan’s largest social network provider, now accounts for over 70% of the traffic. This suggests the future of FaceBook, MySpace and LinkedIn will be Facefone, myPhone and LinkedTel.
Interestingly, Mixi is not Japan’s largest Mobile Social Network. This honor goes to Moba-ge-Town whose ARPU of $21 is seven times that of the latest estimates for FaceBook.
A breakdown of Moba-ge-Town’s revenues indicates that Mobile Advertising represents 48% of their income. So maybe social advertising does have a future. Interestingly, games represent only 9% of revenues and perhaps this is not the future most social game developers are anticipating after all the hype surrounding online gaming in 2009.
Over the past decade Mobile Web Revenues in Japan have grown from $6 Billion to $33 Billion. At $176 (ex Data/ $425 inc. Data) the ARPU in Japan is 3 times that of the USA.
So there is a lot to get excited about for the players in the MobCon Value Chain. A breakdown of Japan’s Mobile Internet Revenues indicates that 2% is generated by Advertising, 11% on Paid Services, 21% on eCommerce purchases and 66% Data Access.
So it is still the Telcos who are extracting the bulk of the revenues out of the Mobile Web.
However this revenue growth does little to hide the dramatic fall in the market value of Japan’s Telcos. In 2000 they had a combined market valuation of $510 Billion. Today it is just $116 Billion.
So while they have overseen a 5 fold expansion in the value of the mobile web their market value has crashed to 1/5th of its initial value. This is probably the key take away from the Morgan Stanley report. Even the gate keepers to the world’s most advanced Mobile network are struggling to make it pay over the long term.
So could this be a new take on the Analog Dollars = Digital Pennies problem? Probably not, but it certainly looks like yet another interesting case study in who’s profiting from the MobCon.
Finally, let’s take a look at what Sony’s recent history can tell us about Disney acquiring Electronic Arts.
As I said before the iPhone was what Sony’s PSP should have been. Apple’s App Store has revolutionised the media value chain. In fact both Apple and Google have both proven you no longer have to own the whole media value chain to be the profit leader on the desktop or mobile web. You just need to own the gateway that connects customers to the media when they want it and in what format they want it.
Today the media congomerates are looking increasingly inflexible in their approach. Not only in America but also in Japan. So although Japan is 10 years ahead of Silicon Valley on the raod to the MobCon it is in reality no closer dominating the global MobCon.
The future belongs to those who can reshape the network in real time. This means those who are clever enough will give the Mobile Web a miss and move onto the next wave of the MobCon. Will we see this happen in 2010? I doubt it. But, in saying that, I’d like to be surprised.
Posted on December 29, 2009
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