|
|
|
|
********************************************************** Recently we've started to see full-page newspaper ads for Japanese
dotcom companies and Web sites from heavy hitters - something that was a
rarity just a year ago. Here are some samples from the past month: http://www.uniqlo.com This low-priced retailer of casual clothing for everyman/
everywoman has taken Japan by storm, racking up amazing earnings amid generally sluggish consumer spending. It launched its first-ever online retail initiative late last month amid full-page color newspaper ads and television spots. Widely acclaimed as part of a brilliant integrated marketing campaign, the fully e-commerce-enabled Web site features a single garment (fleece overshirt) in 50 different colors. http://www.j-yado.com Search/reservations site for traditional Japanese
lodging, run by Asiacontent.com. Claims it will be the first travel
lodging site in Japan to offer "real-time market rates" that change as
listing sponsors try to book unsold room inventory at the last minute.
http://www.mytrip.net Domestic and overseas lodging and air tickets search/
reservations site that claims more than 600,000 registered users and
over 211,000 reservations booked in September. The site is very well-
designed and extremely fast. Noteworthy that a company capitalized at
less than U.S. $1.5 million with only 18 employees is taking out a full
page advertisement in the Asahi Shimbun... http://www.amazon.co.jp Amazon.com didn't take out full-page newspaper ads for
the launch of its Japanese site this month, but it didn't need to. It
got plenty of mileage out of already sky-high industry expectations,
plus media interviews with Jeff Bezos. The new site was of course much
discussed in the Japanese mailing lists and BBSs, and the test ordering
alone from pros and pundits banging on www.amazon.co.jp's order form
must have sent initial sales soaring. An auspicious debut, but still not
up to Uniqlo in terms of sheer traffic and buzz.
********************************************************** Interview with Frank Yu This month we enjoyed telephone and e-mail chats with Hong Kong-based Frank Yu, Principal Research Consultant at Web Connection Research. Frank`s sharp wit and spot-on insights into the Internet markets of Asia are drawing attention from the likes of CNN and the Far East Economic Review, and he will be launching his own monthly newsletter, Asia Internet Report, later this week. - Tell us the Frank Yu story. Where (and how) did you grow up, and what experiences shaped your career path toward becoming the Internet research expert you are today? I've always been fascinated by semiotics and how trends and patterns emerge in almost all natural and man-made phenomena. I guess in a way, it comes from my own childhood experience of having to re-learn a primary culture and language when my family and I came to the U.S. from the Philippines. Finding patterns and trends in everything makes life easier through heuristics and templating - an effective survival mechanism for someone going to a new culture. As far as trends and patterns in my life, I seem to be drawn to fields and industries where I can look for trends and patterns in data sets (how's that for self-reflective discourse). At Rutgers, I majored in Philosophy and Psychology with a computer science bent (now better known as cognitive sciences) and really got into analyzing and deconstructing everything from Jungian theory and metaphysics to Dadaism and the various types of sorting algorithms in data structures. Since that prepared me for little in the real world, after graduation I entered the U.S. Army as a Second Lieutenant in the Military Intelligence Branch. It was great training for global socio-political analysis and counter- insurgency doctrine, but more than anything else, it demonstrated to me that focused and timely intelligence is more effective than massive firepower. After graduating from the Army Intelligence Center at Ft. Huachuca, I switched into reserve status and began my studies at the JFK School of Government at Harvard University. In a way, the school really opened my perspective on things I had never considered seriously, such as the economics of developing countries and the role of the media. I had always wanted to fight the good fight in the Cold War but the USSR had the bad graces to collapse while I was in school. From my perspective, the Soviet Union's collapse was the result of inefficiency, and was brought on by ineffective supply signalling systems and the inability to price goods and services based on their actual value. That was when I truly appreciated the power of information in reducing transaction costs and the efficiency brought by free markets. Getting information to the right people at the right time is what it is all about. The world markets are excellent signalling mechanisms and are truly a semiotician's playground. I became a believer. After graduating from Harvard, I flew to the newly independant Baltics to work as an economic journalist fresh with the dogma of economists Jeffrey Sachs, Robert Reich, and the K-school idealism still rattling about. In the USSR, I was impressed by the eagnerness with which the younger generation of the former Soviet Union absorbed the new technologies of desktop publishing, fidonet, usenet, and computers - their passion reminds me now of the zeal that early Internet pioneers in the U.S. had for changing the world. They were aggressive, willing to take risks, and ingenious in utilizing limited resouces to create change in the face of sheer uncertainty. It was also here that I saw that my pre-conceived notions of the USSR from the military and academia fell far short of the realities that existed. Most of all, my studies and my training never captured the perspective of the common person and their motivation. After my U.S. $50/month contract and my student loan grace period ended, I returned to the U.S. in one of the greatest white collar recessions that the country has ever had. Like most over-educated Americans in the early 90's, I temped. During one assignment doing a due diligence record review stint at National Westminster ("Bankers to the Queen"), a stuffy 302-year-old British private bank, I was asked to stay and ended up in the trading room trading emerging market debt. Altogether, I spent six years at Natwest and learned that finding trends and patterns in the markets was not just fun but quite lucrative as well. From New York City, I transferred to the Hong Kong branch as an Equity Analyst during the 1997 handover and the subsequent Asian economic crisis. When Natwest retreated globally back to London, I went home in late 1998 to work for a mutual fund company as an Asia analyst. That's where I learned the craft of momentum analysis, while working at the firm that created the technique back in the early 70's. Instead of doing spread sheets to find a company's value based on cash flow or net present value, we looked for global trends in the markets, media, climate, body language, or any other data point we had to indicate global or industry trends that we could invest in. We read the news and broker research, and surfed the net furiously to find data points and establish trends. We were generalists and became minor experts in whatever industry was hot at the moment, be it biotech, Internet, or advertising. I looked at suicide rates in Japan, popular fads in Europe, and political news in China. We knew the supply/value chains of several industries and were familiar with emerging technologies. We were holders of DoCoMo, Softbank, PCCW, and Cathay in 1999. I attended the NYC roadshow IPOs for Chinadotcom, AsiaInfo, Pacific Internet, and Satyam Infoway, and I became well versed in the Asian Internet space as an investor with U.S. $14 billion in capital from our company. For 1999, we became the #1 international fund in the 3 year category (the fund was only 3 years old) and racked up 137% return for that year. In April 2000, I resigned after my bonus was paid out and returned to Hong Kong. I was bored and I love being in Asia. - Which areas of the broadly-defined "Internet space" are you most interested in? Which countries? I think that post-digital convergence in the entertainment industry is leading the charge in the Internet space. Music, video, games, and even books will be redefined in the digital age. Of course, the concepts of intellectual property may need to be tweaked, as well as revenue models for artists. However, what they may lose in per-unit margin revenue of digital product they may make up for in increased volume and market share on a global scale. It may be that the distributors - not the artists per se - will take the hit, or as they say in economic terms, "pay the rent." In Asia, which except for Japan has a population skewed towards persons under 25, the potential for music and entertainment applications is immense. The Internet has reduced the prohibitive costs of distribution and purchasing so much that even school children in Mongolia can access the same music, at the same time, as teenagers in Stamford, Connecticut. The power of Asian youth to affect the development of the Internet in their countries has been constrained to some extent by the fact that Asia's youth market has only recently attained the spending power that American teenagers had in the 1950's. Japan, a far more advanced economy than neighboring countries, may give some hints as to how the rest of Asia's teenagers and markets will develop. China also bears watching - with cellular penetration still in the single digits, the country already has the second largest mobile market in the world, and going forward, China and India will emerge as the demographic big gorillas of consumer markets, dwarfing the rest of Asia. Much as the baby boomers set trends in the U.S. market, in the next few years Chinese and Indian youth will define style, tastes, and youth attitudes for Asia, and the Internet will be the medium that distributes it. - In Japan, entertainment and so-called "lifestyle" applications are the primary drivers of consumer Internet usage, especially in the new cellular sector. Is this the case throughout the rest of Asia as well? What accounts for this difference in usage between Asia and the U.S.? Asians seem to have a proclivity for entertainment products. That may be because the education system is still somewhat driven by rote learning, and pressures from both home and school drive students to seek an outlet. It may also be that the level of entertainment products here is simply better than in the U.S. Look at current and previously popular toys and trends - everything from Mutant Ninja Turtles, Power Rangers, Pokemon, video games, Transformers, and Hello Kitty cuteness - and you will see Asian influences. Most adults in the U.S. tend to look down upon and discount anything that smacks of cuteness and childhood, but in Asia there is more tolerance and a sense of irony in clinging to childhood icons. One thing that made a strong impression on me was seeing a photo of a gangland shooting of Macau triad members in a car and noticing that behind their dead slumped bodies, the upholstery of their car seats was covered with cute Japanese cartoon characters. Even the big long haul trucks here shipping goods from China have little Doraemon or Ultraman plastic characters on their dashboards. Asians seem to be less uptight about indulging in the open consumption of their favorite entertainment icons.
Frank Yu ********************************************************** DoCoMo's 3G services: show me the money How is DoCoMO going to make any money? We're not usually in the habit of worrying about the financial health of our favorite monopoly - they seem to do just fine on their own - but it's hard to see how the numbers will work for its 3G cellular service. DoCoMo is expected to spend from 9 to 18 billion dollars on building its 3G network, which will offer data transmission speeds far superior to the current i-mode service's sluggish 9.6 kbps. At the same time, feisty telecom underdog KDDI has announced that it will slash data transmission fees for its so-called "2.5G" cellular service to as little as 1/100 of current rates, and DoCoMo has followed suit - the company has announced that it is considering instituting reduced rates for data transmission when it rolls out its new high-speed service in May 2001. Users must have been happy to hear that - at current prices, users of EZweb, KDDI's Internet-enabled cellular service, are paying 2,700 yen per 1.2 Mb to send and receive data, while i-mode users pay 3,000 yen. So setting lower rates makes sense - it's hard to imagine very many users paying over U.S. $100 a pop to download a 5 Mb MP3 or watch one minute of streaming video, and support for these and other data-heavy applications is the main reason for building new cellular networks in the first place (in DoCoMo's case, its 3G network will also improve the poor sound quality of its current voice service). But slashing data transmission rates means it will take a lot longer to recoup the funds spent on infrastructure, and 4G networks, with more enormous capital requirements, are looming on the horizon... We think that one area where DoCoMo will be able to take up some slack is third-party billing services. A planned settlement and distribution partnership with Lawson - a convenience store chain with over 7,000 locations throughout Japan - looks set to grow the value of the m- commerce market substantially. And naturally, DoCoMo will make its settlement and distribution service, as well as spaces in its virtual mobile mall, available to outside merchants for a small fee... ********************************************************** A few spaces left for our Japan e-business briefing in Santa Clara 11/29 San Francisco is sold out, but there are still a few spaces left for our Japan e-business briefing in Santa Clara 11/29 (see last month's JIR for details). I always look forward to visiting the Bay Area - lived there for a total of eight years on three different occasions, and have marveled at the changes in Silicon Valley over the past 25 years... ********************************************************** Asia Internet Report debuts this week We are starting a new publication called Asia Internet Report, and want you to be the first to try it out. We are therefore going to send the first issue to everyone on this list later this week. I know I promised that I would never send you any unsolicited mail other than JIR, but hey...I lied! If you prefer not to receive this new once- monthly publication, I do promise that, as with JIR, there will be user- friendly unsubscribe instructions in every issue. But please give it a read. Frank Yu is a wonderful commentator, and there will be plenty of guest experts coming on board to make Asia Internet Report the source of insight into Asia's exploding Internet markets. ********************************************************** Tim Clark Editor Please use the online forms to subscribe or unsubscribe to JIR. Copyright 2002 by Ion Global All rights reserved ---------------------------------------------------------- Ion Global a chinadotcom company http://www.ion-global.com / http://www.jir.net/ Tokyo Tel. (813) 5464-0384 Fax 5464-0387 U.S. Tel. (503) 235-4433 Fax 235-4422 ---------------------------------------------------------- |