Mobile From East to West

Benjamin Joffe, CEO | Plus Eight Star | Jeju, Korea, 2009.09

Agenda

0. Introduction

1. “The West”

2. Japan

3. China

5. Discussion

0.Introduction

ベンジャミン

本杰明

벤자민

Benjamin Joffe

4 years

1 year

4 years

www.plus8star.com

China | Japan | South Korea

Cross-Market ConsultingTelecom & Internet Innovation

Innovation Arbitrage

What we do

– Worked with mobile SNS in Japan in 2003• With avatars, virtual goods and GPS!

– Advise leading companies worldwide• Microsoft, Adidas (E-commerce / Digital strategy)

• IMVU (US | 3D chat / Virtual World)

• MIH (China/S.Africa | Largest shareholder of Tencent)

– Published reports

• Inside Cyworld

• Inside Tencent (Clients include Harvard Business School)

• Inside Taoabao (Upcoming)

Our clients

EUROPE USA

ASIA

30 events | 107 speakers | 3,000+ members | 1,500+ companies

3D Facebook Game Team

1. The West

Digital Population

Country USA China Japan KoreaPopulation 300 mln 1,300 mln 130 mln 50 mln

Internet users 225 mln 340 mln 100 mln 35 mlnMobile users 260 mln 650 mln 100 mln 45 mln

1/5 1,680 mln

1/2 Total 475 mln

1/3 785 mln

IT Infrastructure3

G u

sers

% of Internet connections measured above 5Mbps(Source: Akamai, 4Q08)

China

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80%

www.plus8star.com

Avg. 15 Mbps

Avg. 7 Mbps

Avg. 4 Mbps

Social games&

iPhone games

From University Caféto Sand Hill Road

THE iPhone

• Sales

– 5.2M in 2Q09

– 22M iPhone users (+16M Touch)

• Applications

– 65,000 applications

– 1.5B application downloads

• Myths?

Source & Recommended Read: Strand Consult - The Moment of Truth, a Portrait of the iPhone

Global Market

• Mobile Services Market in 2008

– Total 8.6 billion USD

– Mobile games 3 billion USD

– Apple 150 million USD! (=1.7%)

• Handset Market

– Total 250 million / quarter

– Apple 5.2 million (=2%)

Source & Recommended Read: Strand Consult - The Moment of Truth, a Portrait of the iPhone

Games

Images

Gambling

LBS

Social Networking

Mobile payment

Enterprise

The iPhone Effect

• Application stores

– App stores are not new

• Touch screen

– Touch screen is not new

• Developers make money?

– Not so sure

Source & Recommended Read: Strand Consult - The Moment of Truth, a Portrait of the iPhone

Realities

• Mobile broadband >> iPhone

• Free apps are cannibalizing revenues

– And driving iPhone sales.

Source & Recommended Read: Strand Consult - The Moment of Truth, a Portrait of the iPhone

2. Japan

3G penetration in Japan>90%

Beyond Voice & Beyond Telecom

3G Mobile TV NFC

Data ARPU Non-SMS ShareFlat-rate Data

In addition

• Business models

– Micro-payments since 1999 (“i-mode”)

– “App store” since 2001

• Content

– Mobile music, mobile ads, mobile commerce…

– Financial services by mobile carriers

• LTE at 300Mbps starts next year!

48 millioni-mode users

87.7%3G users

Applications!(January 2001)

Unlimited30 USD

Unlimited10-40 USD

1.5 MB 6.5 MB~

10 USD

40 USD

KDDI’s Double Flat Fee(introduced in May 2005)

X? 76%

Flat-rate data users

Flat-rate data: 2004What happened since?

Mobile Market

• Mobile content

– 4.3 billion USD in FY07

– 40 USD / user / year

• Mobile commerce

– 7.3 billion USD

– 70 USD / user / year

Before & After 3G

1,186

204

419

0

108

229

500568

1,091

862

225185

231

1,140

0

200

400

600

800

1,000

1,200

2004 2007

Mill

ion

USD

www.plus8star.com

90% of digital musicsold in Japan is mobile

Digital music revenues in Japan

Source: Infinity Venture Partners, 2008

Mobile Gaming Market=

Online Gaming Market

Japan Game Market

[1 billion JPY = 10 million USD]

Mobile Social Networksmake A LOT of profit

Some ads

SNS+

Free games+

Virtual goodsHomepage

Revenues 2008 (E)

$200 mln $60 mln

Profit margin (E)

40% 63%

Average Revenue From Users (E)

75% 75%

Market Capitalization(March 2009)

$1.4 bln $1.2 bln

Other Services

Mobile books

Digital books: Internet vs. Mobile

Source: Infinity Venture Partners, 2008

Flat-fee data plansare introduced

Several best-selling novels in Japan in 2007 were written on mobile phones

One full bookshelf for mobile novels at Kinokuniya, Japan’s largest bookstores chain!

The two volumes of this book “Koi zora” (“Loving sky”) sold…

“Koi zora” sold over 2 million copies(10 USD / book)

Even on TV!

Mobile TV penetration in Japan and Korea is over 40%

Business model = Free

Galapagos Syndrome

• No foreign mobile brand is strong in Japan

• Too complex to survive abroad?

• But Ideas are valid

3. China

0

100

200

300

400

500

600

700

800

Key market figures

Sources: MIITT, CNNIC, +8*

Mobile users | 673 million

• Mobile and Internet users growing fast

Internet users | 338 million

Fixed-line subs | 320 million

Broadband subs | 90 million

mill

ion

High Growth Potential

0

10

20

30

40

50

60

Internet | 25%

Sources: MIITT, CNNIC, +8*

Fixed-line | 24%

Mobile | 50%

Penetr

atio

n r

ate

%

Three operators

• China Mobile: the mobile leader

– GSM + TD-SCDMA

• China Unicom: the balanced operator

– GSM + WCDMA

• China Telecom: the broadband leader

– CDMA1X + CDMA2000

Fixed-lineMobile Broadband

Sources: +8*

Huge market, but low ARPU

41.7

75

63.6

0

10

20

30

40

50

60

70

80

China Unicom China Mobile China Telecom

Sources: Company Reports, 1H2009

ARPU (RMB)

1 USD = 6.8 RMB

10 RMB = 1,750 KRW

3G started this year

WCDMA TD-SCDMA CDMA 2000

0.1 mln 1 mln 1.1 mln

• Largely expected by the government• Big issues on handsets

• Started late• Waiting for iPhone in Q4

• Better subsidies than China Unicom• Better handset quality than China Mobile

Fetion - IM 12580 – Voice Search Mobile Newspapers

PIM - Telephone Book BackupStreaming Mobile TV

12530 - Mobile Music

Mobile Game 139 - Mailbox

Source: China Mobile

China Mobile’s Service Strategy

Fetion - IM 12580 – Voice Search Mobile Newspapers

PIM - Telephone Book BackupStreaming Mobile TV

12530 - Mobile Music

Mobile Game 139 - Mailbox

Source: China Mobile

China Mobile’s Service Strategy

1M songs85M members

>15M USD/month#1 newspaper in

China! (23M users)

20M requests / month

37M active users147M registered

Growing fast

4M active users20M registered

6M USD / month

Overview

Gaming • From single player game to MMO.• Emerging sector

Music • Mature market thanks to Ring Back Tone business• Strong revenue maker

LBS • GPS getting popular• Mobile LBS early stage

Portal • Getting mature (content and user base)• Web companies and pure mobile players

Browsing • Getting mature (user experience, user base)

SNS • Getting mature (user experience, user base)• Both pure mobile SNS player and mobile extension of PC-based SNS

TV • Emerging market• Both broadcasting and streaming• Lack of business model• Interesting technologies enabling streaming on 2.5G

Popular Services

Tencent / QQ case

• Tencent– #1 online community in China,

leveraging IM

– 400 mln active accounts

– 1 bln USD revenue in 2008

• Mobile extension of QQ: 20% of revenue– WAP, mobile client, SMS

– PC-Mobile synchronization

– Good multimedia experience in 2.5G network

WAP Portal

Chat room

Game

Info: finance, book, news

Music player

E-mail

Qzone (SNS)

Movie

Mobile QQ clientintegrates various services

PC-Mobile Connection

IM + QQ Show (avatar service) available on PC

and mobile

Tencent / QQ case

Mobile search: Soso Mobile browsing Mobile music Mobile QQ mini player

Mobile Qzone (SNS) Mobile email Mobile game Mobile video

Learn from the best!

“Inside Tencent” Report2009 Edition

Detailed Analysis, 20 Interviews, 280+ pages

Handset Market size• 160 million mobiles

sold in 2008– Another 50 mln

phones sold in grey market (not accounted for)

Nokia 38.9%

Samsung 18.6%

Motorola 8.8%

K-Touch 8.1%

Lenovo 3.9%

Sony-Ericsson 3%

Jinli 2.5%

LG 2.3%

Konka 2.2%

Amoi 2.1%

Bird 1.5%

Changhong 1%

Haier 0.9%

Others 6.3%

Top 3 for years

66% of the market

Handset Market size: MTK• 160 million mobiles

sold in 2008– Another 50 mln

phones sold in grey market (not accounted for)

• Note: MTK phones– All domestic makers

have migrated to MTK

Nokia 38.9%

Samsung 18.6%

Motorola 8.8%

K-Touch 8.1%

Lenovo 3.9%

Sony-Ericsson 3%

Jinli 2.5%

LG 2.3%

Konka 2.2%

Amoi 2.1%

Bird 1.5%

Changhong 1%

Haier 0.9%

Others 6.3% Sources: Analysys International, ZOL

“We make anything you can imagine”

Barbie dressing case phone

Cigarette case shaped

Watch phone Super lens attachable

PSP shaped, popular games preinstalled

Solar power rechargeable handset

Car shaped

More Creativity With MTK366 days stand-by, dual-

SIM, super powerful battery

Big thunder phone

Dark light for money

authentication

Spider-Man design

Market Impact

• Foreign brands threatened by MTK phones

– Feature phones for <2,000 RMB (300 USD).

– Nokia’s China sales down 30% in 2008.

• Key results

– 90% of China’s mobile phone chipset market.

– 160 million chipsets shipped in 2007.

– 95% orders from China customers.

From Shanzhaiji to Shanzhai culture

iPhoneManufacturer: Apple

One SIM cardPrice: >4,000 RMB

iOrange: Fake iPhoneManufacturer: iOrangeMade on MTK platform

Dual-SIM cardPrice: 900 RMB

iPhone

• iPhone 3G: 8GB

• iPhone 3GS: 16GB, 32GB 4Q2009

oPhone: Android Phones for China Mobile

DELL Dopod LenovoPhilips LG Hisense

4. Conclusion

1.3G + Flat-rate

2.New usages

New business models

3.Innovation Arbitrage

THAT’S WHAT WE DO

Discussion

www.plus8star.com

benjamin@plus8star.com

benjamin0123

http://twitter.com/plus8star

www.linkedin.com/in/benjaminjoffe

www.slideshare.net/plus8star

+81 | Japan

+82 | Korea

+86 | China

Telecom & Internet

+ Added Value

* High quality

Contacts