The July 15 issue of Business Week (Industrial Technology edition) featured a quarter-page story on our latest syndicated research report, titled Online Opportunities - Understanding the Japanese Web User. This is a great report - you can read more about it at http://www.tkai.com/services/research/1997.html or view testimonials from satisfied buyers at http://www.tkai.com/clients/testimonials.html.

Aside from our market research experience, I think that acting as Japanese Webmasters and online marketers for companies such as Neiman Marcus Direct, Cyberian Outpost, Saks Fifth Avenue Folio, Universal Forest Products and many others for more than two and a half years has given TKAI a perspective on the Japanese Internet market that is unparalleled in many respects. It has also given us the opportunity to blunder stupendously from time to time. Learn from our mistakes - read our report!

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What will the hot new Japanese Web applications be?

We've been asked recently what will be the hottest Web applications in Japan over the next few years. One I feel is poised for explosive growth is travel.

Ever hear of a Japanese travel company called HIS? Starting from scratch, President Hideo Sawada built up the firm, which specializes in discounted tickets sold to free independent travelers (FITs), into an industry powerhouse that has knocked JTB (the NTT of travel) for a loop.

Now Sawada is getting ready to make a major Internet play. Together, he and HIS are buying up convertible bonds that will make them the leading shareholder in an Internet software developer. Sawada plans by the year 2000 to start selling airline tickets and tour packages over the Internet, using original technology from the firm in which they are investing.

It all makes sense - Internet users generally fit the FIT profile - independent-minded, price sensitive and interested in going places. Count on seeing some real travel business being done over the Internet in Japan within the next couple of years.

Another hot sector should be entertainment information, and online ticket sales in particular.

Like visiting a travel agency, schlepping down to a ticket seller in Tokyo can be a major chore. Subways are efficient, but walking to the station, buying the ticket, walking down (or up) the stairs to the platform, waiting for the train, riding the train, walking back up through the new station, then walking to your destination can be very time- consuming, especially for the majority of residents who don't live a convenient two to three-minute walk from a station.

Online ticket sales solves this problem, and enables 24-hour automated order-taking. And once ticket sellers discover the adminstrative efficiencies and lower fixed costs that Internet sales provides, they may offer discounts to purchasers who buy online.

That's one reason entertainment info giant Pia has just struck a deal with (who else) NTT to launch an entertainment Web site that will offer an online ticket reservation service.

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More and better URLs

A JIR reader wrote suggesting that we include more URLs in the newsletter. Good idea :)

To start with, for all you ISP types out there, I'd like to recommend a hard-hitting (and very funny) essay by Bruce Hahne which can be found at <http://ifrm.glocom.ac.jp/doc/hahne.html>. Though it's six-months old, this essay still provides an excellent overview of the state of the Japanese Internet.

Also be sure to check out <http://www.gronski.com/jis/>. Slavek Gronski has a newsletter that will be of interest to JIR subscribers and a Web site that is very helpful for those interested in Japan's ISP scene.

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Required reading for JIR subscribers

I've subscribed to the English language Nikkei Weekly for years now, and find it an invaluable source of information on what's going on in Japan. Any JIR readers serious about monitoring Japan events should have a subscription. Now the Nikkei is online with a free trial subscription offer. Take a look at:

http://www.JapanOne.com/tk1.htm

or send mailto:
info@JapanOne.com.

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Interview with Dave Emery of InfoPlus

Last month we had the opportunity for both telephone and e-mail chats with Dave Emery of InfoPlus, who is involved in some interesting banner and Web work in Tokyo.

- Please tell us how you came to be living and working in wacky, wonderful Wagakuni (Japan).

Well, its a fairly common coming-to-Japan scenario. I'd been traveling around Asia for about a year and decided to come to Japan for six months or so to work, study etc., and now eight years later...

When I arrived I started studying Japanese and working part-time teaching English at a girls' high school. I found the Japanese language really difficult to learn but for some reason (that I'll have to talk to a psychiatrist about some day) I really enjoyed it. I eventually came to my senses, though, and found a job with a mail-order computer reseller (MacGallery) doing some translation and dealing with foreign customers.

- What got you into Web work?

It started when some of MacGallery's overseas vendors wanted to start communicating by e-mail rather than by phone. I was very interested in the Internet, so I took on the job of arranging access and setting up the software.

Our ISP account included space to put up a home page and I thought it would be a good idea to make that page into an advertisement. Since it didn't cost anything and I did all the work myself, nobody objected.

This led to the idea of actually selling things online. Management was sure that it could never work, but again, as long as I did almost everything myself and it didn't cost much, they were willing to humor me.

It was a lot of (enjoyable) work, but once the online shop was running and bringing in a significant number of orders I was able to delegate most of my other duties (which by this time consisted mainly of producing the company's magazine ads) and dedicate most of my time toward developing the Internet shop. I was also able to get some help with production.

This method of operation forced me to learn all aspects of building a Web site, from planning to graphics to scripting. While I never really got that good with the graphic design side of things (I was one of those kids who could never color inside the lines), I did fairly well with the scripting/programming end and I started to get offers for freelance work. I eventually left MacGallery to do freelance work on a full-time basis. Some of the work I've done includes CGIs that run Nokia Japan's Online Boutique, some dynamic javascript popup menus that appear the Nokia-Asia site and some of the Shockwave games and CGIs on the Heineken Japan site.

At the time I left MacGallery the online shop was receiving, on average, about two million yen worth of orders per day and increasing. While this was still only a small percentage of the company's overall sales, it certainly was enough to justify the effort of creating a Web site. It also shows that in Japan, the Internet can be a profitable vehicle for sales, particularly high- tech products.

- How do you assess MacGallery's rise and fall?

I think MacGallery was successful for several years because the company started off when the Japanese Macintosh market was in its infancy, gained market share by undercutting the outrageous prices of that time and grew its sales volume to such a point that it was hard for other companies entering the market later on to compete with their prices. Since they were selling by mail-order, the overhead was quite low which also gave the company an advantage.

The explanation given to the employees for MacGallery's going out of business was that company funds had been "mishandled," leading to cash-flow problems. This had apparently been an ongoing thing, but I guess the recent downturn in the Japanese Mac market brought the chickens home to roost a bit more suddenly than anyone expected.

You are now involved with banner advertising for Coca- Cola Japan. Can you share any insights from the results so far?

InfoPlus, an advertising and PR agency I joined recently, produces the Coca-Cola Japan Web site (http://www.cocacola.co.jp). As part of this ongoing project, we've just finished the second phase of an experimental four week run of banner ads.

We chose to run the ads on Hole-In-One, one of Japan's popular search engines, because of their knowledgeable people and their use of NetGravity to manage the ads. This allowed for quite precise targeting of ad views and provides excellent reporting, which is just what we wanted. For the first two weeks we ran 10 different ads with various targeting strategies. In the ad designs we emphasized strong Coca-Cola branding and animation as well as the prizes, games and give-aways available on the site.

For the next two weeks, we reduced the number of ads, altered a couple of the designs and refined targeting criteria, based on feedback from phase one.

We and the client are very pleased with the results. For the most part, they've fairly closely followed our predictions, with a couple of small surprises. We've achieved click-through rates well above the average, and accesses to the Coca-Cola Japan site have risen significantly. So far, our most successful ad has been one that consists of a Coca-Cola logo along with an animating pop-up menu and submit button. Over its two-week run it had an extremely good average click-through rate.

We're in the process of planning further banner advertising, based on these results.

- Where do you see the Japanese Internet going, and where will it take Dave Emery?

As far as commercial use of the Internet, it seems to me that the Japanese consumer has taken to it quite enthusiastically but that not so many Japanese companies have caught on to the Internet's possibilities as a medium for sales, promotion and entertainment. Even looking at various Japanese commercial Web sites, there are still relatively few that have gone beyond the first generation "Our Home Page" type sites.

The upside of this is that as the Japanese market catches up, there are enormous opportunities for the people who are involved in content production and the planning and creation of Internet sites. My hope is to keep learning and to remain a part of this growth.

David Emery
Internet Development Director, InfoPlus Ltd.
Tel 03-5379-2281 Fax 03-5379-2278
Email dave@skiddlydee.com, info@infoplus.co.jp

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Industry briefs

NIFTY starts feeling the heat from Internet

Tokyo-based NIFTY, operator of NIFTY-Serve, Japan's largest commercial online service, will start accepting banner advertisements on NIFTY-Serve from October. It also will team up with advertisers to develop cooperative marketing programs aimed at its 2.45 million-strong subscriber base. Finally, NIFTY plans to lower its subscriber fees as early as October. Amid intensifying competition from other commercial online services and the Internet, NIFTY is shifting away from its traditional strategy of relying on subscriber fees as its key revenue source, and is looking to develop advertising and co-op marketing efforts as a new revenue stream, say industry watchers.

More women in Japan using Web

Women now account for 17% of all Web users in Japan, according to the results of a YAHOO! JAPAN Web-based questionnaire answered by approximately 19,000 people between June 18 and 30. Previous surveys by the company found only about one in eight of the respondents were women. A YAHOO! JAPAN spokesman said the survey demonstrates that the Internet user population, long considered to be made up primarily of technically-oriented men, has broadened to include average consumers. Housewives accounted for 2.1% of all respondents, up from 1.6% in the second survey and only 1.1% in the first survey. NETSCAPE accounted for only 58.5% of the browsers used by respondents, down from 62% compared to the previous survey.

Restrictions on Internet phone services listed

MPT eliminated restriction on international Internet telephone services effective August 26, on the condition that service providers disclose regular traffic volume and revenue figures to the ministry. The ministry plans to make the report obligatory starting in January or April 1998. Companies such as AT&T JENS and RIMNET are already offering international Internet-based telephone services.

Internet fax machine to debut in North America

MATSUSHITA DENSO will by the end of August release in North America an Internet facsimile machine that can be assigned its own e-mail address like a PC. Two of the machines can send messages to each other using the e-mail address, or the machine can be used to exchange e-mail with ordinary PCs. The device was released in Japan in July at 780,000 yen ($6,555), but its price in North America has not yet been decided. The company claims it is the first to start full-fledged sales of an Internet fax machine in North America and hopes to make the device the de facto standard for Internet-based fax transmissions.

Number of ISPs in Japan doubles, says MPT

The number of Internet service providers (ISPs) reached 2,093 as of July 31, doubled the number compared to a year ago, according to MPT. Some observers predict the ISP market will soar 90% year-on-year to 114 billion yen ($974.4 mil) in 1997, while NTT anticipates that the number of Internet users will surpass 10 million within the year. DAIWA RESEARCH INSTITUTE estimates that more than half of the small to mid-sized ISPs are in the red.

PC server shipments soar in Japan

PC server shipments soared in the first quarter of fiscal 1997. According to a report issued by market research firm MULTIMEDIA RESEARCH INSTITUTE of Tokyo, PC server shipments reached 32,000 units during the April-June period, up 79% over the same period last year. NEC shipped 8,100 units in the quarter, up 88.4% year-on-year, accounting for 25.3% of total PC servers shipped in that period. COMPAQ (JAPAN) shipped 6,400 units, up 64.1%, grabbing 20% of the market. FUJITSU saw its market share fall to 16.3% though shipments reached 5,200 units, according to the report.

CYBER COMMUNICATIONS has bullish outlook

Tokyo-based CYBER COMMUNICATIONS, the Internet advertising joint venture founded by DENTSU and SOFTBANK, plans to quadruple its revenues to 2.0 billion yen ($16.9 mil) in fiscal 1997. CYBER COMMUNICATIONS started with a staff of ten in July 1996, but plans to boost its workforce to more than 20 by year end, and introduce a number of new Internet advertising techniques, including some that make use of "push" technologies and "sponsorship ads" that reside on client browsers. CYBER COMMUNICATIONS currently supplies banner ads to such search engines as YAHOO JAPAN, Mainichi JamJam and NIKKEI NET.

Booksellers take note

The Japan Publishing Industry Foundation for Culture (JPIC), an organization affiliated with MITI, will on September 30 convene a new consortium that will examine how the Internet can be used in the publishing industry. Members of the new group, tentatively dubbed JPIC Consortium, will include publishing giants KODANSHA and SHOGAKUKAN and leading book distributors TOHAN and NIHON SHUPPAN HANBAI. Specifically, the new group will investigate how order-to-delivery times can be shortened and online search capabilities improved, based on results of an electronic commerce experiment now being conducted by JPIC and another MITI affiliate that involves creating a database of standardized information about Japan's approximately 520,000 magazines and other publications.

DOUBLECLICK to enter Japan market

Internet advertising giant DOUBLECLICK of the U.S. has struck a deal with TRANS COSMOS, NTT and NTT AD to establish a joint venture Internet advertising firm in Japan September 1. TRANS COSMOS is investing 56% of the 180 million yen ($1.5 mil) startup capital, with the NTT firms and DOUBLECLICK providing 34% and 10%, respectively. The new firm will start operations in October with 10 employees, aiming for first-year sales of 300 million yen ($2.5 mil). New York-based DOUBLECLICK has banner tracking and reporting technology dubbed DART that many industry watchers consider to be state of the art.

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Where JIR's industry briefs come from

Our industry news briefs are sponsored by Digitized Information, Inc. of Tokyo, with whom we monitor Japan Internet-related events on a daily basis. Some of the stories are supplied to Computing Japan magazine as well.

Digitized Information has been monitoring high technology events in Japan on a daily basis since 1983, and is a critical source of information for those with a strong need to know what's happening in Japan's electronics and technology sectors. Give Aki Tsukioka a call in Tokyo at 3465-7069 for more information, or write to inquire about trial subscriptions (tell 'em JIR sent you).

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Do you find this ironic?

Am I the only one who finds it ironic that supposedly leading-edge Internet companies in the U.S. such as DoubleClick and Wired Ventures are cutting Japan deals with NTT, the government-controlled phone monopoly that is doing more than any other firm to keep Japan's telecom sector in the Stone Age?

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From around the world

This month we welcome new readers from Microsoft, Hakuhodo, Claris, World Trade Center, ichat, Airliquide Japan, AutoDesk, NeXt, WebTV and from Pakistan, Italy, Zambia, Australia, Brazil, Malaysia, India, Zimbabwe, Jordan, the Czech Republic, Canada, the UK. and of course Japan and the U.S.

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Copyright 1997 by TKAI and Digitized Information, Inc. All rights reserved

NOTE: Some JIR industry briefs appear later in Computing Japan magazine under modified titles.

JIR is co-sponsored by Digitized Information, Inc. of Tokyo, a leader in providing daily English language coverage of electronics industry developments in Japan.