********************************************************** Japan Internet Report No. 33   December 1998 ********************************************************** In this month's issue: - The portable future - The mobile phone as fashion accessory - Developing for the portable future - What I did on the Internet in 1998 - Ashisuto director on Net businesses in Japan - To commerce or not in Japan? Part Trois/Finale - Inter@active Week covers TKAI, Japan, Asian Tigers - To all JIR subscribers ********************************************************** The portable future Mobile telephones, personal digital assistants (PDA), and other portable devices are poised to become key drivers of Internet usage in Japan. Consider this: One in three people (40 million) in Japan today uses a mobile telephone of some sort, either cellular or PHS. This is getting close to the critical mass needed for mobile telephones to come into extremely widespread use - maybe becoming nearly as common as home-use, standalone video game players. This is something that can't happen with personal computers as they exist today. PCs are simply too difficult to use for most people and too unreliable to handle everyday chores that demand 100% uptime. But there is tremendous latent demand in Japan for the capability to use e-mail and the Web with a portable, easy-to-operate, "non-PC" device. The cellular telephone, or some permutation of it, is best positioned to become this device. Mobile telephones are already evolving into Internet terminals. DDI offers P Mail, a service that enables subscribers to send e-mail messages directly to other handsets without passing through a store-and-forward server. And next month KANSAI CELLULAR will offer a service whereby cellular subscribers will be able to receive e-mail messages sent from PHS handsets. Meanwhile, NTT has seen strong growth in mobile telephone-based e-mail services. What other devices will evolve into Internet terminals? Personal digital assistants, a sector that has shown explosive growth this year. IDC Japan estimates that 1.61 million PDAs will have been sold in 1998, up more than 40% compared to 1997. Compare that 40% figure to relatively tepid PC growth... ********************************************************** The mobile phone as fashion accessory "Keihakutansho" (light/thin/short/small) and portability are two critical themes running throughout the entire spectrum of consumer products in Japan. The extraordinary growth in mobile telephone usage over the last few years, for example, was driven in part by success in making cellular and PHS handsets amazingly small - to the extent that they are now light and portable enough to be fashion accessories. Spend an hour at any one of Tokyo's coffee shops, and you'll be struck by the number of people sitting at their tables or at the counter with a cellular telephone in front of them, often adorned with colorful straps. It's not unusual to see these users gazing absentmindedly at their handsets, as if waiting for them to ring, or perhaps twiddling the controls to run through their telephone list or enter a new quick-dial number. It's become cool to have a portable phone, and now it's becoming cool to use it for e-mail. These users are prime candidates for Internet applications, and we'll see millions of them moving to the Internet for the first time in 1999... ********************************************************** Developing for the portable future IBM JAPAN has developed new software that automatically optimizes Web page displays based on the size of the user's screen, communication performance, and other parameters. On small screens, for example, the software displays only key portions of a page, referring the user to separate pages for details. The software, code-named "Dharma," is intended for use by Web site developers when designing pages for potential display on several different devices, such as PCs, PDAs, cellular telephones, televisions, and digital appliances. Web designers have to date been forced to design pages for specific devices, but Dharma eliminates this problem, according to a spokesman. IBM JAPAN clearly foresees a portable future... ********************************************************** What I did on the Internet in 1998 In 1998 I put my money where my mouth is with respect to Internet usage. Here are some of the things I did online: Shopped for a car, compared home loan rates and terms, bought and managed securities, checked stock prices, purchased airline tickets, books, music, computer peripherals/software, and information service subscriptions, searched for hotels, and printed out local maps of travel destinations, among other activities. Most of this was personal business; work-related usage would generate another long list. All this confirms my long-standing belief that "searchability" is by far the most important function the Internet provides. For example, decisions related to big-ticket items such as home loans and cars have a huge impact on the average family, but shopping for these items in conventional ways is so confusing, annoying and frustrating that we sometimes settle for less-than-optimal purchases. The Internet enables objective, consumer-controlled searches, information gathering, and comparisons, while avoiding sales pitches (or at least limiting them to easily-ignored banner advertisements). Whether or not a purchase is made, the Internet is the most efficient search tool ever available to consumers. But in my view, searches usually have to take place within a commercially organized database service to be efficient. Searching for general information using search engines still produces hundreds or even thousands of irrelevant "hits." ********************************************************** Ashisuto director on Net businesses in Japan This month we enjoyed an e-mail chat with Nobuaki Noda, Director of Ashisuto, one of Japan's leading software distributors. Mr. Noda wasn't available for a full interview, but here is an English rendering of one of his more telling comments: "In Japan, there isn't yet a model for an Internet-based business that is compelling to the average consumer. Moreover, there's a strong sense that, with the exception of a few ISPs, Internet businesses are unprofitable. In order to make profitable Internet businesses, I believe revolutionary new business models - ones matched to this day and age - are needed. You can't think about (Internet) businesses in terms of extensions of past models. Moreover, I think it will be exceedingly difficult to develop such revolutionary business models until communications charges - which represent the "infrastructure" of such businesses - come down." ********************************************************** To commerce or not in Japan? Part Trois/Finale Consumers in Japan make more online purchases with credit cards at U.S. stores such as Outpost.com, Amazon.com and REI than they do at Japanese online stores. In fact, it's remarkable how slow companies in Japan have been to embrace online retail commerce. As a number of JIR readers pointed out last month, some of the reasons include the overwhelming prevalence of cash transactions and direct bank-to-bank transfer payments, irrational paranoia about Web security, and the tremendous difficulty raising venture capital in Japan. But another key reason is that even the most successful U.S. online-only retailers are still unprofitable, and most Japanese companies are in no position to be losing even more money than they already are. They are waiting to see who the winners and losers are going to be, and who they can most successfully emulate. This wait-and-see strategy may be safe, but it's causing them to fall further behind. U.S. online retailers have outstanding opportunities in Japan, and we'll see a lot of exciting Japan-specific initiatives from them in 1999. We're working on some of these now - stay tuned :) ********************************************************** Inter@active Week covers TKAI, Japan, Asian Tigers Inter@active Week recently wrote about using the Internet to conduct Japan-specific research, using TKAI work as key examples. This article can be seen at: http://www.zdnet.com/intweek/stories/news/0,4164,373897,00.html Another Inter@active Week piece covered e-commerce in Japan and elsewhere in Asia, with some good quotes about business-to-business e-commerce in Japan. The full text is available at: http://www.zdnet.com/intweek/stories/prtarchivestory/0,4356,2168968,00.html ********************************************************** To all JIR subscribers Wishing you the greatest love and happiness in 1999, I remain, Sincerely yours, Tim Clark Editor To subscribe or unsubscribe to JIR, send any message to: subscribejir@tkai.com unsubscribejir@tkai.com Copyright 2002 by Ion Global and Digitized Information, Inc. All rights reserved ------------------------------------------------------------ Ion Global (USA) Japanese e-business specialists http://www.tkai.com/ Tel. (503) 235-4433 Fax (503) 235-4422 ------------------------------------------------------------