8 years since commercial start of location based services (LBS) in Japan in July 2001

It will soon be 8 years since DoCoMo started commercial location based services (LBS) for mobile phones in Japan in July 2001. During these 8 years, Japan’s mobile LBS industry has grown and a range of differentiated mobile LBS services has emerged – indicative of how the LBS industry might develop in other countries in the next few years (Read our LBS-FAQ here, and our mobile LBS report here).

NOKIA’s recent acquisition of Navteq for US$ 8.1 Billion has drawn much attention to LBS for mobile phones.

The world’s first commercial location based service (LBS) for mobile phones – “i-Area” – was rolled out by DoCoMo in Japan in July 2001 – eight years ago! – is still going strong, and for some time also includes location dependent mobile search: you type “ramen” into the search box and back comes a list of ramen noodle restaurants for the neighborhood near you. “i-Area” is a pre-GPS service – no GPS is necessary. Like so much about Japan’s mobile internet eco-system, i-Area has a non-obvious complex business model fine-tuned over 8 years now.

GPS came later – KDDI introduced the first GPS phone in December 2001 – a little more than seven years ago – and today about 1/2 of all mobile phones have GPS in Japan. Japan’s Government requires all cellphones to have GPS built in. Therefore, within a few years, as users replace their older phones, 100% of Japan’s cellphones will have GPS, giving a boost to the mobile LBS industry.

Interesting companies? An undisputed leader is Navitime – offering “total navigation” to about 2 million subscribers – almost 2% of the population of Japan. Many people in Japan, including the author of this newsletter, cannot live without total navigation….

Bombarding subscribers with mobile discount coupons by SMS for shops in the neighborhood is often mentioned in western blogs about mobile LBS. I have not yet received a single one during the last 8 years of mobile LBS in Japan – although these do exist if you want them.

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+ 49% y-o-y net profit increase for KDDI

Japan’s telecom operators are a very bright spots in a dismal economic crisis. I think that’s not a coincidence.

Why? The deeper purpose of Japan’s location based services, QR-codes, mobile music, e-moji, wallet phones and keitai credit etc. has always been to make mobile phones inseparable from people’s daily lives, so that people would use their mobile phones a lot, even if there is an economic crisis. This strategy seems to work.

Japan’s second largest operator KDDI was the first to announce financial results this round:
– quarterly net income increased +49% year-on-year, and
– operating income increased +18.5% compared to same quarter last financial year.

KDDI is particularly interesting because KDDI is a model for the 3G roll-out by China Telecom in China, which was awarded a license to build a 3G network using the same CDMA2000 technology as KDDI.

KDDI was initially far more successful than both DoCoMo and Vodafone (now Softbank) to roll out 3G in Japan – as documented in detail in our 3G report. Analyzing carefully what KDDI did right, and the difficulties DoCoMo and Vodafone encountered, as well as proper exploitation in differences between technologies will be a must.

KDDI introduced many advanced services such as GPS (global positioning and related location base services LBS), full song mobile music, etc several years earlier than DoCoMo and Vodafone -> Softbank, helping the image of the brand and raising revenues (ARPU). This advance allowed KDDI to overcome the handicap of lower market share compared to DoCoMo. Read more below, and in our reports.

KDDI’s 3rd quarter net profits rose by 49% yoy.

Comparing 3rd quarter FY2009 (Oct. – Dec. 2008) with 3rd quarter FY2008 (Oct. – Dec. 2007) operating income increased +18.5% and net income increased +49%. These are spectacular results considering the terrible economic crisis going on now.

Notice also KDDI‘s very aggressive income growth targets forward to year FY2011 (shown for operating income, thin orange line).

Steadily increasing net annual incomes on the order of US$ 2 billion/year is not bad in times such we have now. Find a detailed analysis in our KDDI report.

Quarterly operating income of KDDI
Quarterly operating income of KDDI

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Coffee with the Foreign Minister of Austria in Tokyo

Was invited to coffee with the Foreign Minister of Austria, Mr Michael Spindelegger, at the Embassy in Tokyo. Minister Spindelegger is in Tokyo for celebrating 140 years of Austria-Japan diplomatic relations, and he gave a short presentation.

Another reason for the Minister’s visit to Japan is that both Japan and Austria are non-permanent members of the United Nations UN Security Council for the two year period from January 1, 2009 to December 31, 2010.

Austria's Foreign Minister Michael Spindelegger
Austria’s Foreign Minister Michael Spindelegger

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

3G mobile diversity in China

China’s Ministry MIIT granted three different 3G cellphone licenses on January 7, 2009:

  • a TD-SCDMA license to China Mobile (457 million GSM subscribers)
  • a wCDMA license to China Unicom (133 million GSM subscribers)
  • a CDMA2000 license to China Telecom (43 million CDMA subscribers acquired in 2008 from China Unicom, 216 million fixnet phone subscribers, 38 million broadband subscribers)

MIIT estimates that the operators will invest about US$ 41 Billion for 3G over the next two years, ie about US$ 20.5 Billion/year – about the same annual rate as Japan’s 3G investments every year over the last 8 years since 3G introduction.

Network technology diversity (instead of the Government deciding on a single radio technology standard) means that China’s mobile market a few years down the road may have some similarities to Japan’s today. Several Japanese companies, including “time machine company” SoftBank are working to bring 3G mobile services and technologies from Japan to China.

In our opinion, competition between different 3G radio network technologies is one of the factors driving Japan’s 3G success story.

MIIT decided not to abandon CDMA2000, in order to enhance competition between technologies. Another factor may have been that Japan’s CDMA2000 operator KDDI was initially much more successful in bringing 3G to market than competitors DoCoMo and Vodafone (which sold Japan operations to SoftBank).

In Japan it was not market leader DoCoMo or Vodafone, but KDDI with CDMA2000 winning the 3G introduction battle. Better be prepared for surprises in China too, and don’t underestimate China Telecom.

US$ 41 billion for 3G in China over 2 years is similar to the figures for Japan.

Japan’s mobile operators have invested a around US$ 15 – 20 Billion every year for more than 10 years (for details see our JCOMM report), very similar in size to expected annual 3G investments for all of China.

Japan’s 3G introduction took about 8-9 years (from October 2001 until 2009/2010 – Japan’s last 2G phone was shipped in December 2007). Therefore we expect 3G introduction to take about 10 years for China – could be faster because China can learn from 3G introduction in other countries.

China's planned 3G investments compared to Japanese mobile phone network investments
China’s planned 3G investments compared to Japanese mobile phone network investments

China opts for network diversity – like US and Japan

The figure below – from our JCOMM report about Japan’s telecom sector – shows the 2G -> 3G transition in Japan, where several networks with different technologies compete in the market place. We believe this competition between different technologies is a key factor for the rapid success of 3G in Japan.

China having chosen multiple competing technologies, we may see a similar 3G success story as in Japan, however with much larger subscription numbers.

Japan's mobile network diversity - overview of competing networks
Japan’s mobile network diversity – overview of competing networks

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Mobile marketing with QR-code

Customized QR code using in-built redundancy to display color and embedded graphics

If your business requires interacting with lots of people in Japan, if you are offering services to consumers, or just as a convenience offered on your business cards – think about QR codes:

Eurotechnology Japan blog: Mobile marketing with QR-code

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5 top tips for mobile marketing?

Answering the question: “What are the 5 top tips for mobile marketing”

Our company worked for several of the world’s largest consumer companies on mobile marketing here in Tokyo/Japan.- Many of Japan’s mobile trends usually move to Europe and US within about 3-5 years. So here are some tips from our work on mobile marketing in Tokyo/Japan:

1. Leverage spontaneity: use the “here & now” effect of mobile

Mobile phones are among the very few privileged items almost all people carry on their body at all times and allow people to react on the spot. Mobile phones allow people to buy “here and now”, on the street, on the toilet, from bed, changing trains, waiting for a bus etc. Successful mobile marketing campaigns use this “here and now” effect. As an example, see the iPod campaign in Tokyo-Shibuya, or the North-West Airlines campaign in Tokyo/Shinjuku (discussed in detail in our QR-code report).

2. Provide real value

Things work best when people perceive and actually receive real value. For example, an airline seat, or a share purchasing/selling transaction at the moment they want it. Don’t disappoint people by promising value, which you don’t deliver.

3. Make it fast: close a transaction in seconds not minutes

Mobile phones are mostly used in short bursts. Attention span is short. Apple’s iPod campaign allowed people to buy an iPod from the Apple store via mobile phone here and now, in a very short time (find a detailed description in our QR-code report)

4. Do innovate if its really new – but don’t re-invent the wheel

Japan is a huge mobile laboratory – many mobile business models discussed in Europe or US now have already been tested out years ago in Japan. Read our reports, ask us, search on the internet, or do thorough market research in Japan

5. Treasure security – your mobile sites need to be more secure than websites, not less secure

Customer data lost via mobile phones, or a hacked mobile banking site is just as disastrous as if the same occurs for a fixed line traditional website. Mobile sites can potentially be broken from remote locations in your own country or from a country you wish you never had to deal with.

We worked on security of mobile financial industry sites. Ask us for more.

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