12 billion dollars worth of mobile social networking in asia

Benjamin Joffe, CEO | Plus Eight Star Ltd.

Mobile Social Networking Asia

Hong Kong | 2010.05

US$ 12 billion in Market CapLearning from Mobile SNS in Asia

“Social NetworkingIs Not a Business…”

MIT Technology Review(July/August 2008)

Let’s go home

TIME (April 2009)

Meanwhile…

Source: “What Asia can tell us about mobile SNS”, +8*, June 2008

Source: “What Asia can tell us about mobile SNS”, +8*, June 2008

Tour Guide

Slava PoluninClown

Introduction

Benjamin Joffe

4 years 1 year 5 years

What I Do Now

• CEO, Plus Eight Star | www.plus8star.com– Digital Strategy & “Innovation Arbitrage”

– Best practices from Asia’s web and mobile

• Partner, Cmune | www.cmune.com– World’s First 3D game on social networks

– On Facebook, MySpace and Apple.com

• Mobile Monday Beijing– Monthly forum for mobile professionals

– 35 events, 120 speakers, 3,000 participants

• Angel Investor, Advisor, Speaker

Paradise Paintball | World’s First Social FPS!

www.cmune.comwww.facebook.com/paradisepaintball

AWARDED“BEST NEW

GAME”ON MYSPACE(GDC 2010)

Quiz

Who are They?

Answers

Pony Ma, CEO, Tencent Yoshikazu Tanaka, CEO, GREE

#2 youngest self-made billionaire

in the world after Mark Zuckerberg

The US$12 Billion Challenge

Market Caps (May 2010)

$4.2B

$2.5B

$900M

$35.3B

Tencent 1Q 2010

• Results

– Total 620 million USD

– Mobile 90 million USD (14.5%)

– Net margin 42.7%

Tencent 1Q 2010

• If share of market cap

– 14.5% of 35 bln = 5 billion USD

Internet Trends, April 2010

Our Real Challenges

1. We are old

2. We are not users

3. We are from a different place

4. We have a lot of preconceptions

Questions

• Why are mobile SNS only successful in Asia?

• Why are GREE and MBGT worth more than Mixi?

• How does Tencent succeeds on mobile?

• What are the key factors for mobile SNS success?

• What’s ahead?

Context

Digital Populations

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

Internet users 225 mln 380 mln 100 mln 35 mlnMobile users 260 mln 700 mln 100 mln 45 mln

www.plus8star.com

IT Infrastructures

3G

use

rs China

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80%

3G: 72%Web: 68%Avg. 11.7 Mbps

3G: 95%Web: 59%Avg. 7.6 Mbps

3G: 25%Web: 25%Avg. 4 Mbps

3G: 2.5%Web: >1%

% of Internet connections measured above 5Mbps(Source: Akamai, 4Q09)

www.plus8star.com

The Story of Mobile SNS

Is the New so New?

ImaHima (Japan)(“are you free now?”)

250,000 users in 2001

Mogi(Japan, 2003)

Book | Mobile Social Networking

• Author: Tomi Ahonen

• 50 Case Studies!

– Published: 2009

– 10 EUR

It all started

(almost) by accident

Mobile Game Town(Initial Model)

• Mobile only

• Simple Flash Games

• Avatars

• Advertising (pageviews)

• Affiliate (“offers”)

Mobile Game Town

Source: DeNA

Mobile Game Town(Evolution)

• Mobile only

• Simple Flash Games

• Avatars

• Advertising (pageviews)

• Affiliate (“offers”)

• Direct Sales

• Partnerships with Game Publishers

• Open Application Platform

• Partnership with Yahoo Japan

3D Avatars

National Brands on Board!

Mobile Open Platform

• Launched January 2010– 40 partners

– 92 games

– Virtual goods, ads, avatars

– Leverage expertise from in-house games

– Some games also released on Mixi Mobile!

• Target: Become the #1 Social Entertainment Platform

Mobile App Platform (Oct.09)(330 apps as of February 2010)

City BuildingBy Liveware

Harvest MoonBy Liveware

ShopkeeperBy Geisha Tokyo

FurauniBy Konami

Revenue

Revenue

35M USD= games!

70 MUSD in Q3!

PV x2With apps

Ads CPA Virtual goods

#1 Mobile SNS in Japan

US$250M in 2008

Business Models Evolution

Gree(Initial Model)

• Web-based

• Real name

• Advertising

• Competing with Mixi!

GreeModel Change!

• Web-based > Mobile > Mobile + Web

• Real name > Nickname

• Advertising > Digital goods

• Competing with Mixi! > With MBGT!

• Partnership with Mobile Operator KDDI

Gree

Gree Home

Advertising

Avatars & items

Games

Advertising & Affiliates | 25%

B2C virtual goods | 75%

60% avatars40% games

4Q09 Revenue81M USD

Profit50M USD!

Usage & Demographics

• PageViews

– 99% Mobile

– 24.7 bln/month

• Demographics

– Gender parity

– 75% users 20+ y.o.

Mixi: From PC to Mobile

Unit: 100M PV

PV (mobile) PV (PC) Users

Unit: 10K Users

Application platformintroduced

Monthly PV 27.6B– Mobile (80%) 22.5B– PC (20%) 5.1B

2009.122008.122007.12

Tencent

• #3 Internet Company in the world– After Google, Amazon

• 570 million active IM accounts

• 428 million active SNS accounts

• 23 million paying subs. for mobile services

QQ IM & QZone

WAP Brower

Chat room

Game

Info: finance, book, news

Music player

E-mail

Qzone (blog)

Movie

Source: Inside Tencent Report 2009www.plus8star.com

PC-Mobile Connection

Cross-platform gaming

QQ Show service available on PC and mobile

Tencent IR, May 2010

• “Increase in subscription to our bundled SMS packagesas we enriched the privileges and features”

• “WAP portal traffic increase, reinforcing leading position in the free WAP portal industry.”

• “Growth of MVAS business dampened by the suspension of billing for WAP services by China Mobile since 30 November 2009 and decline in legacy mobile voice value-added services.”

• “Visibility of our MVAS business remains low as industry continues to face significant regulatory uncertainties”

Sticking to it

IM was not making money and our competitors moved to other ventures. I did not have other ideas so I stuck to it. Pony Ma

Founder & CEOTencent (QQ)

Tencent#1 SNS in China

US$1 bln in 200890% From Virtual Goods

(40% Net Margin) Market capUS$35 bln

(more than eBay)

Some Interesting Curiosities

One Mobile SNS to Rule Them All?

• Cyworld Mobile

• N-Plugs

• Dear Profile

• Face Check

• Disney Wonder Days

• Eki-Moba

• Helpers Network

• World Camera

Cyworld Mobile

1.Guest book

2.Photo album

3.Friends list

4.Diary

5.Plaza

6.BBS

7.Club

8.’My Cy’ (settings)

About service fees

Find subscribers

Registering for fixed payment

My picture

Mini hompy/

Emotion expression

Cyworld Zone: Map, Video

Item shop

N-Plugs: 6 degrees mobile SNS

Main Screen

① Alert List

② Find People

③ Mobile Home Page

④ Social Query

⑤ Search Engine

⑥ Sharing folder

⑦ Friend list

⑧ Online hard drive

⑨ Option

⑩ Customer center

“Dear Profile” by Rakuten

• Craze among junior high-school students.– Launched in April 2002

– 85% brand awareness for users between 13-15 y/o

– 9 million accounts (2008)

• Simple Friends-matching SNS

• Very low privacy & trust levels

Profile page- Display photo- Gender, age, blood type- Email address for contact: real mobile email display (no messaging function)

Face Check

• FSE (Face Sensing Engine) by Oki Electric

• Start in April 2007

• 30 million by end of June

• 100 million by Nov 2009

• Then what?

Disney Wonder Days

Disney HillsWhere users have their home

Market PlaceBuy items

Toon TownDisney characters’ residence area.

Central ParkMeeting area

Select an area

Fitting Room

“Eki Moba” by Excite

• Launched by portal Excite in February 2007

• Targets train commuters

• Originality– 3D Flash avatars– Virtual currency can be exchanged for real

money in banks and post-offices

• Eki Moba offers the following services– “Circle” community function– Chat / Smileys– Casual flash games / Ring-tunes– Shopping– Diary / Forum / Calendar– Translation / Fortune telling / Weather

forecast

Advertising in Tokyo train station

Profile page

Buying items & playing games

RegistrationPartnerContract

Registration

Convenience Store manager

Student

Freelancer Housewife

Restaurant manager

convenience store

ex-worker

Work demander

Need a helper for a short period in a

precise place

PartnerUser who can

confirm the skills of another user to establish trust

WorkerWant to use free

time in an efficient way. Want to use

one’s skills

@

Job market SNS “O-Tetsudai Networks”

My plan cancelled today, I have time…

How to find someone to take care of my baby for just an hour?

The girl at the register caught a cold today. How to replace her?

I just had some time between my shifts! I’m so lucky!

• Location-based Part-time jobs

• Skills / location / time-slots

Sekai Camera by Tonchidot

Sekai Camera

Sekai Camera

Location: Place Engine

Takeaway Ideas

Why do users care?

• Time-filler– Day breaks– Entertainment

• Social value– Social capital– Serendipity– New encounters

• “Real” (as in “measurable”) value– Business, jobs, discounts, etc.

The Value of Freeloaders

• A bar with only 10% of patrons?– Spend for all others + profit

– Fortunately, servers and pixels are cheap

• Contribution of freeloaders– Virality

– Social Proof

– Engagement

– Re-engagement

Parallel with Mobile Users

• Question: Is a user with $0 ARPU good?

It depends…

• On your acquisition costs

• On your maintenance costs

• How many people call her

• How happy she is

• How many new users she recruits

• How many services she uses & introduces around

• How famous she is

• Etc.

What to do now?

• Understand psychology and sociology

• Understand the “real” and perceived value created

• Reinforce social graph

• Make payments painless– “Micro-transactions on iPhone” – Inside Social Apps, 2010.04

• Sell data plans

More about “Innovation Arbitrage”

Thanks!

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

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Innovation Arbitrage

About +8*

• Innovation Arbitrage

– “Bringing proven best practices and business models from Asia”

– +8* (Plus Eight Star) is the leading cross-market consultancy on mobile, telecom and Internet

in China, Japan and Korea.

– We work with large companies, SMEs, investment firms and governments worldwide to bring

them strategic advice and the best practices from advanced Asian markets.

There are more ideas

outside of your country

than inside.

Tom Kelley

Author, The Art of Innovation

• Our expertise

– Internet: our work covers

social media, communities,

ecommerce, online gaming

and virtual worlds.

– Telecom: we have extensive

experience with mobile and

telecom services (e.g. mobile

marketing and advertising,

mobile commerce, mobile TV

and mobile communities).

82 | 8© Copyright 2010. All rights reserved. www.plus8star.comMobile & Internet

Innovation Arbitrage

Our Clients

EUROPE

USA

ASIA

83 | 8© Copyright 2010. All rights reserved. www.plus8star.comMobile & Internet

Innovation Arbitrage

Selected References

• Adidas | E-commerce and mobile commerce market analysis and strategic

recommendations for China, Japan & Korea

• Bouygues Telecom | Cases studies of leading Asian Web 2.0 services and virtual

worlds

• Deutsche Telekom / T-Online | Benchmark of Korean mobile & Internet

convergence strategies

• EU-China Information Society | Research on e-commerce and virtual worlds to

support the regulatory dialogue between the EU and Chinese authorities

• Microsoft | Analysis of Japan’s key players and market catalysts for mobile

commerce market positioning in China

• DeNA | Benchmark of leading SNS in China and South Korea (DeNA operates

Japan’s leading mobile social network)

• China Mobile | Benchmark of Korean leading online communities

• Sands Capital Management | Evaluation of investment opportunities in social

networks in China

• MIH / NASPERS | Analysis of leading online verticals in China (MIH is the largest

shareholder in Tencent, China’s leading online community)

• IMVU | Benchmark of monetization and engagement best practices in Asian virtual

worlds & SNS (IMVU is a leading US-based 3D virtual world & chat)

84 | 8© Copyright 2010. All rights reserved. www.plus8star.comMobile & Internet

Innovation Arbitrage

Customer Testimonial | IMVU Inc.

COMPANY: IMVU Inc.

Lee Clancy, VP Product Management & GM of Direct Revenue

August 2009

Q Has the service performed by +8* met your expectations?

A The consulting services provided by +8* met IMVU's expectations. Benjamin and his team showed a deep

understanding of major Asian virtual worlds and gaming companies, as well as their potential implications

for IMVU. In our communications with them, they were very responsive to our follow-up questions and

completed their final deliverables on-time.

Q How have you used or plan to use this research within your company?

A Only a few weeks after +8* delivered their findings to IMVU, we had already identified and roadmapped

various product enhancements that were a direct result of our learnings from the +8* study. What is more,

we have since launched pilot versions of those new features that have received extremely positive feedback

from IMVU users (e.g., "My Pets" mode). Additionally, +8*'s comprehensive report is an invaluable

reference that I consult often when considering new product enhancements.

Q What decided you to hire +8* for this project?

A We chose to hire +8* for this project because 1) they had a strong professional track record, which we

confirmed with representatives from several blue chip clients of theirs prior to the study; and 2) we felt that

their area of expertise and past studies were strongly aligned with our research needs.

85 | 8© Copyright 2010. All rights reserved. www.plus8star.comMobile & Internet

Innovation Arbitrage

Speaking Engagements

• Speaking Engagements

– Regular keynote speaker & moderator in IT,

Media & Investment events.

– Engagements in 2008/09/10• CHINICT (Beijing, Upcoming)

• Global Mobile Internet Conf. (Beijing , Upcoming)

• Echelon 2010 (Singapore , Upcoming)

• Mobile Social Networking Asia (Hong Kong , Upcoming)

• Virtual Goods Forum (London)

• Stanford University (Entrepreneurship)

• Berkeley University (MBA)

• SXSW Interactive (Austin)

• PICNIC (Amsterdam)

• Virtual Goods Summit (San Francisco)

• Inside Social Apps (San Francisco)

• eComm (San Francisco)

• Ad:Tech (Beijing)

• Ad:Tech (Shanghai)

• Ignite (Amsterdam)

• Ignite (Beijing)

• Ignite (Paris)

• Mobile Asia Congress (Hong Kong)

• Lift Asia (Jeju, Korea)

• ITU Asia (Bangkok)

• Infinity Ventures Summit (Sapporo, Japan)

• LeMobile 2.0 (Paris)

• Asia Venture Capital Forum (Hong Kong)

• Graphing Social Patterns (Washington, D.C.)

• iGaming Asia (Macau)

• Unite Conference (San Francisco)

• China Mobility International Summit (Beijing)

• 3G Summit (Kunshan, China)

• Red Herring Asia (Hong Kong)

• China Internet Forum (Beijing)

• Media’08 (Sydney)

• China Internet Forum (Beijing)

• Wireless Developer Forum (Beijing)

• Open Web Asia (Seoul)

• XMediaLab: Virtual Worlds (Seoul)

• Mobile Monday Global Summit (Helsinki)

• Mobile Monday Global Summit (Kuala Lumpur)

• EU-China Virtual Worlds Conference (Beijing)

• EU-China eCommerce Regulatory Workshop (Beijing)

• Startonomics (Beijing)

• UnConference (Singapore)

• BarCamp (Shanghai)

• La Cantine (Paris)

• Mobile Focus (Stockholm)

More information at www.plus8star.com/presentations/

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Innovation Arbitrage

Media Coverage

• Media Coverage

– Our research and views have been quoted by numerous media outlets on topics ranging

from Telecom and E-Commerce to Social Networks, Gaming and Virtual Goods.

– Selected media: Forbes, The Economist, The New York Times, International Herald Tribune,

The Guardian, Advertising Age, VentureBeat, TechCrunch, ReadWriteWeb, Gamasutra, etc.

More information at www.plus8star.com/press/

87 | 8© Copyright 2010. All rights reserved. www.plus8star.comMobile & Internet

Innovation Arbitrage

Event Organizer & Advisor

• Founder & Organizer: Mobile Monday Beijing

– Mobile Monday is the leading network of mobile industry

professionals, counting over 50 chapters around the world.

– We founded the Beijing chapter of in 2006 to support the ecosystem.

– Results: 35 events, 125 speakers, 3,000+ participants (avg.100).

• Co-Organizer

– Startonomics (Beijing, May 2009)

– Startup2Startup (Beijing, May 2009)

– Open Web Asia (Seoul, October 2008)

• Advisor

– TEDxBeijing (November 2009)

88 | 8© Copyright 2010. All rights reserved. www.plus8star.comMobile & Internet

Innovation Arbitrage

Contact

• Benjamin Joffe, Founder & CEO

– 10 years experience with Telecom & Internet in Asia.

– “China’s Top 100 mobile industry influencers” in 2007 & 2008.

– Senior Expert for the EU Delegation to China.

– Regular speaker at events on mobile and Internet in Asia.

– Fluent in English, Japanese, French with working knowledge

of Mandarin, Korean and Spanish.

• Contacts

– benjamin@plus8star.com

– benjamin0123

– http://twitter.com/plus8star

– www.linkedin.com/in/benjaminjoffe

– www.slideshare.net/plus8star

Beijing Office (HQ) Tokyo Office

Oriental Kenzo, Tower A-20D Flat Hagiwara 2D

48, Dongzhimenwai, Dongcheng District Setagaya-ku 6-36-8

100027 Beijing, P.R. China Tokyo, Japan

Tel: +86 (0)10 8447 7985 info@plus8star.com

+81 | Japan

+82 | Korea

+86 | China

Telecom & Internet

+ Added Value

* High quality