Japan Internet Report No. 8  September 1996 Stay tuned for more intriguing news next month. In the meantime, we are pleased to present an interview with Mark Schrimsher, manager of Hole-in-One, Japan's most powerful home-grown search engine service. * * * * Please tell us a little bit about your background and how you came to be working in Japan. - I'm originally from Los Angeles. I have a B.A. in linguistics from UCLA, and a J.D. from UC Berkeley. I never practiced law, but instead became an art director at a magazine publishing company and continued in that career until I came to Japan. I initially came to Japan six years ago to improve my Japanese (which I had begun studying at UCLA) and to take the Japanese Language Proficiency Test. I found a job at Hitachi Business International (a subsidiary of Hitachi, Ltd.) helping them bring their electronic publishing operation up to date and have been here ever since. In the last three years or so I've functioned as a sort of in-house entrepreneur, starting projects in multimedia, internet contents production, and for the last year or so, a directory service/search engine for the Japanese internet, Hole-in-One (http://hole-in-one.com). Now my job is running Hole-in-One. What is Hole-In-One and what are Hitachi's goals for the service? - Hole-in-One was conceived as a value-added feature for an online virtual city that we were involved in. The service was deliberately branded as an independent service, and we do not promote the connection with Hitachi. The business model from the start was to get advertising revenue. That has been coming along slowly, and recently the number of inquiries has increased dramatically. In addition to this, there have been two other sources of income so far: the creation and "licensing" of custom designed versions (but based on the same database) for corporate customers to link to from their home pages, and the licensing of subsets of the Hole- in-One database, e.g., for inclusion on CD-ROM collections. Future possible revenue sources include the sale of marketing data based on the analysis of information gathered by our robot software. Online transactions could be a source of income, but that will be some time in coming in Japan. When we went online almost a year ago there were not so many directory services in Japan: a few small projects by students and small companies, and a few services connected to Internet providers. The big competition at the time was NTT's What's New in Japan page, more an announcements page than a directory service. Six months after we went online Yahoo came to Japan. Yahoo's brand recognition brought it immediate awareness on the part of the internet community, and they are number one here in this field. Yahoo is a formidable competitor, but they have benefited the industry by bringing credibililty and an understanding of the business potential: we don't get as many quizzical looks from businessmen and the media these days when we talk about Hole-in-One. A priority for Hole-in- One is to distinguish ourselves from Yahoo Japan; an advantage we have is that Yahoo Japan's moves are telegraphed months in advance--since they are an appendage of Yahoo in the U.S., they implement what has already been done in the U.S., several months behind the parent. On August 15 Hole-in-One introduced a full-text search feature for the Japanese internet. We use robot software (the ISpi superspider, by Interpix Software in Santa Clara, California) to crawl the Japanese web, and our users can search the full text of this data (using Bibliotheca, Japanese search software from Hitachi, Ltd.)--for people who are familiar with Alta Vista, we have that sort of functionality, but with Japanese language searching. The search results are presented in the same interface and layout of our category data searches. This is a first in Japan. Our robot search was rated number one among all Japanese robot searches the first week out by Kensaku Desk (http:/www.bekkoame.or.jp/ ~asaisan/), with more hits than any other robot on the test search terms, and praise for the tight integration of a category directory with a robot searcher. We have recently contracted with Netscape to be one of their Premiere Providers on their Net Search page in Japan. This is the page linked from the "Net Search" button in Japanese localized versions of Navigator. We knew how much our traffic increased from a similar arrangement with Microsoft Network/Internet Explorer, and Internet Explorer's market share in Japan is only 3%, compared to 77% for Navigator (according to the Internet White Book published by Impress). American internet users may be aware that the five big search engine companies in the U.S. each paid $5 million for a year-long link from Netscape; I can't discuss the contents of our contract with Netscape, but it was a big move for us. Yahoo Japan will be up there alongside us; as the other major American search engines come to Japan, they will probably participate, but I would be surprised if another purely Japan engine appeared soon. Any thoughts on the future of the Japanese Internet market? - This month, September 1996, will definitely be a watershed point in the development of not only the Japanese directory services industry but also online information providers in general. The services on Netscape will not only have an order of magnitude more hits than services not on Netscape, but they will have a much easier time of finding advertising and other income. Services that don't have the staff and infrastructure to maintain their databases, offer customer support, and develop and market new features for their products will slip further and further behind the leaders. I foresee a cluster of about four big search engines emerging and battling it out by the end of the year, and Hole-in-One will be among them. Mark Schrimsher Producer, Interactive Multimedia Projects Hitachi Business International, Tokyo mark@gol.com * * * * MPT unveils regional multimedia highway concept that calls for linking cable television networks, Internet The Ministry of Posts and Telecommunications (MPT) announced a "Regional Multimedia Highway" concept that calls for linking cable television networks with the Internet to provide lower-cost, higher- speed Internet connectivity and broaden cable television usage outside of Japan's metropolises. MPT will establish a new committee to examine the issue and drive the project through to completion by April of 1998. Until now, MPT had been promoting a scheme to provide nationwide fiber- optic circuit connectivity by 2010, but the new initiative calls for the use of cable television network circuits as infrastructure by which consumer homes, schools, and post offices would be connected to the Internet nationwide. DAITO CABLE TELEVISION, NISSHO IWAI to start cable-based Internet experiment in Tokyo's Daito Ward Tokyo-based DAITO CABLE TELEVISION will from September start an experiment in cooperation with NISSHO IWAI offering Internet access in Tokyo's Daito Ward, using JAPAN TELECOM lines and Internet access points provided by INTERNET INITIATIVE JAPAN (IIJ). The experiment will involve use of DAITO CABLE's cable transmission network to transfer records between the Daito Ward office and consumer and corporate volunteers. The three-stage experiment will eventually involve approximately 40 consumer households and 100 PCs. DAITO hopes to commercialize a cable-based service next summer after evaluating the performance and cost-effectiveness of the cable modems used in the upcoming experiment. MUSASHINO MITAKA CABLE to start Internet connectivity service in October MUSASHINO MITAKA CABLE TELEVISION will start a cable network-based Internet connectivity service in October. Individual dialup 28.8Kbps service will cost 3,300 yen ($31) per month for ten hours of usage, but with no local telephone charges. LAN access at speeds ranging from 192Kbps to 10Mbps will start somewhat later and have not yet been priced. The service will be open even to those who don't subscribe to MUSASHINO's cable television services. The company hopes to win 10,000 subscribers five years from now. NEC to move into Internet appliance market NEC will move into the market for home appliances such as televisions and telephones that incorporate Internet functions. The company will develop a dedicated MPU based on standards defined by DIBA of California, a leading Internet appliance venture firm, and plans to release a series of home-use Internet appliances sometime next year. It will also seek to furnish the MPU to other companies and make the processor into the industry standard for such devices. The move into the Internet appliance industry by major players from both Japan and the U.S. is lending more credibility to the much-ballyhooed potential of the fledgling market, and intensifying the competition to develop workable product. SM4 planning high-end Internet connectivity service for individual users Chofu-based SM4, an Internet services venture firm started by university students, will in September start offering high-end Internet connectivity services designed for individual users. Amid vicious price competition in the dialup connectivity sector, SM4 foresees strong needs from upper level business managers and other high net worth individuals who prefer personal instruction and outcall service to telephone or e-mail-based support. The company plans to charge a 100,000 yen ($926) registration fee and a 50,000 yen ($463) monthly fee, limiting the number of subscribers so that it can provide highly attentive service, including 24- hour outcall support. Japanese version of Smart Valley Initiative to get underway in September A Japanese version of Silicon Valley's Smart Valley project will get underway in September with approximately 100 participants from industry, government, and academia. The new cooperative organization, Smart Valley Japan (SVJ), will function as the Japan branch of non-profit SMART VALLEY INC. (SVI), exchanging information and undertaking cooperative projects with sister organizations around the globe. SVJ will also work to bring information technology to Japan's non- metropolitan areas and support regional development of data communications-related research. The new organization, which will be supported by MPT and MITI, plans to have between 500 and 1,000 members by April of 1997. Corporate participants now include NEC, HITACHI, NTT, ASCII and RIKEI, plus a number of universities and research institutes. NTT, partners to launch street corner Web page production service NTT and two Tokyo-based partners have developed a standalone device to be placed outside of convenience stores and game centers that will allow passersby to create their own World Wide Web home pages on the spot. The PC-based device is equipped with a CCD camera, microphone, and other input devices that will allow users to put digital photographs, text and audio messages into their own pages, which will reside on the Web for several weeks for about 1,000 yen ($9), including production and hosting. The partners foresee the devices costing about 1.0 million yen ($9,259) when produced in quantity. NTT hopes the project will lead to increased sales of ISDN lines and greater use of the Internet by high school and college students. LION OFFICE EQUIPMENT releases coin-operated Internet machine Osaka-based LION OFFICE EQUIPMENT has released Coin Internet, a standalone coin-operated Internet access device. The new product, which consists of an NEC PC, a coin unit, Windows 95, a terminal adapter and other components all housed in an integrated unit, can be operated even by a complete PC novice and requires no intervention from an operator, according to LION. The 937,800 yen ($8,683) machine can accept 100 or 500 yen coins and can be set to run for any length of time the operator determines. LION hopes to sell 200 units the first year. BANDAI DIGITAL ENTERTAINMENT to offer expanded memory, greater Mac compatibility for Pippen BANDAI DIGITAL ENTERTAINMENT (BDE) plans this fall to release 2M and 8M expansion memory modules for the Pippen Atmark Internet device it cooperatively developed with APPLE COMPUTER. Because the device runs on a CD-ROM that must load the Mac operating system each time the unit runs, the standard 6M memory package is insufficient for some applications. BDE will also work to get Mac software developers to provide packages with the Mac operating system built in, so that the Pippen device can run more personal computer applications. CASIO COMPUTER to release playback device for use with online karaoke tune service CASIO COMPUTER will on October 21 release a 26,000 yen ($241) dedicated playback device equipped with software that Nifty-Serve subscribers can use to download karaoke tunes at prices ranging from 200 to 300 yen ($1.85-2.78) per song. CASIO, which sees the new business as an extension of its electronic musical instrument operations, will also allow single-use downloads at 40 yen ($0.37) per song. The company will start the service with an online library of about 2,000 karaoke songs and foresees first year hardware sales of approximately 10,000 units per month. Payment settlements will be handled by NIFTY. SEGA to combine karaoke, Internet applications in new device, services SEGA ENTERPRISES will next spring release Super Prologue 21, a dedicated communications device that can both download and play karaoke tunes from remote locations and browse the Internet at large. The new device, the price for which has not yet been determined, will feature an internal modem, a dedicated CD-ROM, and its own browser. SEGA foresees applications in bars and karaoke rooms whereby the unit can be used to browse the Internet when it is not being used for karaoke singing. The company foresees sales of 47,000 units by April of 1997. * * * * Hope you all got some vacation time in during August. See you next month! Tim Clark Editor Copyright@1996 by Digitized Information and Ion Global All rights reserved