digidenki Japan Digital Lifestyle

When the first Flashlite phones came out here in Japan in 2004, most mobile game developers just gave it a merciful smile. Sure not a true competitor in terms of technology and market share compared to for all those thousand of java powered mobile games in the market.

Over 80% of handsets support Flashlite

Looking at what mobile Flash was capable of at that time they might have been right. But time and technology has moved on. By the end of 2007 over 80% of all handset models could run mobile Flash applications and also mobile Flash evolved into a more powerful technology getting closer and closer to its PC based counterpart. DoCoMo in late 2007 launched its first mobile handset series which supports Flashlite 3.0, opening up the mobile platform to a wide range of rich media service.

It beats Java

Most of all mobile Flash has some very important benefits: compared to java, it is rather easy to develop applications for it. (It got easier with each version upgrade) And it can run on a wide set of handsets without the need to adapt it to specific handset models (a big cost factor for java based applications).

MobileGameTown from DeNA, one of Japans most successful mobile services with close to 7 million users relies fully on mobile Flash technology and offers hundreds of free mobile games.

Others get scared

The boom of mobile Flash games even created the first counter measures from the carriers: KDDI au one, Japans second biggest carrier, recently forbid official sites to feature free mobile Flash games as they were afraid it could kill au’s mobile game revenues. (Most of the paid games are using java or BREW technology).

In the past Japans number one carrier DoCoMo relied on Microsoft as well as on its own mobile services to attract and retain users but took a blow, back in 2007, with it’s DoCoMo2.0 campaign.

DoCoMo2.0 – NOT

The campaign, the services and the handsets did not excite Japanese consumer at all. Users were expecting a “web2.0″ concept but that was far from reality: The “2.0″ concept was about having 2 separate mobile numbers/mail addresses on one singe SIM card plus some small features like movement sensors and music download.

So if this is what DoCoMo2.0 was about then how will DoCoMo3.0 look like? 3 phone numbers on one SIM card? Not quite. The carrier was eager and willing enough to learn from its mistakes and made a big step from its closed ecosystem into the arms of the current online superpower: Google.

Getting in bed with Google

Early this year DoCoMo announced a long term strategic partnership with Google. This not only included the launch of Android devices lates this year but also the tight integration of Googles services in DoCoMos mobile ecosystem. KDDI already struck a small deal with Google a few years ago to integrate Google search on its carrier deck but this deal now goes far beyond that.

“Googlomo” mobile

DoCoMo will integrate services such as Youtube, Google maps, Google calendar Gmail, Picasa into its ecosystem and also provide them preinstalled on their mobile handsets. While Youtube and Google maps already have been launched on the i-mode platform the rest will follow later this year.

The future of mobile advertising

One even more interesting point is the integration of Googles AdWords system into the carriers deck. To top this Google will also offer display ads on DoCoMos services. So in a way Google will become the main ad service for DoCoMos platform.

All in all this is the first time for Google to fully roll out their scope of services to a mobile platform. And this platform is very big: DoCoMo has an installed user base of around 48 million mobile internet users. Over 80% of these users are 3G and 3.5G users. So this will be the big “real-life” test for Googles mobile future and the future of mobile advertisement.

The future of web2.0?

If you take into account that Japanese handsets are one of the most advanced handsets in the world today featuring GPS, RFID, WVGA screens and high-speed internet then this will might be the start of a new era which goes beyond what we have experienced as “web2.0″ in the past.
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Japan (and maybe Korea) is the leading high tech mobile countries on this planet. Different from other countries, in Japan the mobile phone, not the PC, is the device of choice for internet access. Now Over 80 million users access the internet through their mobile phones.

High Tech Mobile Workers
Millions of businessmen are equipped with high end mobile phones other countries could only dream about: Phones offer screen sizes of up to 800×480 pixel, some eve have integrated hard disks, document viewer software and OCR business card scanners. Connection speeds range from 250 Kbits up to 5 Mbit and many of the users are on a flatrate mobile data plan.

Old School Business
But when looking at the “business communication usage” of these mobile phones, over 70% only use them for making business calls. Only 8-10% use the mobile phone for checking or writing business related mails. More advanced functions like reading business documents on a mobile device (even it is possible) is something only a few tech geeks or web2.0 managers make use of.

The Non-PDA country
Mobile business devices like PDA’s never took off in Japan. This is also due to the fact that many phones were already capable of doing most of the things a PDA could do but also due to the fact that many simply do not want to spend their free “off-site” time dealing with business matters.

The chill-out digital nomad
Unlike their counterparts in the US or Europe, the typical Japanese businessman does not spend his out-of-office time on accessing company mail or working on a digital document or presentation. Instead they use this time to “chill-out” trying to escape the hectic business life by reading, sleeping or playing games. Here Japanese use their mobile phone for writing private mails, reading about the latest news, listening to mobile music or playing mobile games.

The smartphone age
In 2006 Japan saw a new category of mobile phones:”smartphones”. While other countries already had smartphones in their markets for quite a while, Japan was a “late adopter”. Even the range of available devices increased month by month, selling a smartphones to Japanese consumers turned out to be a challenge:

The fruitless Blackberry
RIM together with DoCoMo introduced their Blackberry service and device in 2006. Unlike the rest of the world Japanese users did not care much about what the device had to offer. Up until today the main clients for Blackberry in Japan are foreigners or foreign companies. It needs to be seen if the service will also be able to win the hearts of Japanese businessmen.

For many Japanese owning a smartphone also includes the pressure to devote more of their “off-time” to business matters. (apart from making phone calls). This is especially true for the generation over 35. So selling smartphones to this age group will be a difficult task to handle. But there is a target group who might happily embrace the new business mobility:

The NewBiz
Young Japanese businessmen represent a new breed of digital nomads: Different from their older colleagues they are eager to devote their free time to digital business communication. They spent their student life with services like Gmail, Mixi, iCal and Navitime. They would rather look up a company on Google and find out about their reputation on GREE rather than checking the newspaper or consulting an older colleague. Being able to communicate and access information at any given time is a key part of their daily business. There is a chance that they will embrace the recent smartphone boom and make room for a new work style: the new digital nomad, “un-chilled”!

What needs to be seen is how this will change the typical Japanese off-site working style in the next 3-4 years and also how it will affect the usage patterns of mobile devices. If Japanese salarymen will trade in their mobile entertainment for mobile business needs to be seen.

Mixi is Japans most popular SNS service with a claimed market share of close to 80%. When conversation in the media come to SNS, Mixi is also the most mentioned Social Network Service. Mixi had around around 7 million in August 2007 a quite impressive number achieved in less than 3 years. After going public last year the stock value doubled within 12 hours. Mixi turned into the Japanese showcase for 2.0 success. So far the good part. But looking a bit deeper into the service reveals that the glory days of rising users numbers seems to have reached its limit. More and more users move away from Mixi looking for alternatives. The reasons: too much advertisement and too little added value.

Heavy Competition
Competitors like Gree for example offer the possibility to upload and watch videos, other platforms allow users to play games, listen to the playlists of people in their network, locate friends using GPS or even enter into mobile 3D worlds.

Mixi tried to keep-up by introducing video and music functions a few month ago but still Mixi stays what it is: a pure SNS service with some extra services attached to it.

The New Breed
If sheer user number speak for themselves then these two example can show where developments are going:

MobileGameTown (MoBaGe) by DeNA combines casual mobile games and SNS services. Just within less than 6 month registrations surpassed 6.5 million and they are still growing. And different from Mixi (which is web and mobile based) MoBaGe is only available on the mobile phone

“Maho no Island” is a mobile novel platform which allows users to write their own novels on the mobile phone and submit it to the site. The site offers thousands of novels written by users. They even published a book featuring some of the novels and it sold over millions of copies and made it into the best seller charts in Japan. Maho no Island also offers SNS functionalities to its 5.5 million mobile users.

Beyond SNS
All of these services did not start as a SNS service but they offered a unique value on its own with SNS as an added value to its users. And this is where the trend goes.

For example LISMO, KDDI AU’s mobile music service started to offer a function called “Utatomo” in 2006 for finding people with similar interests based on a users individual play list and their general interests helping the company to increase their overall music sales by 15%.

Conclusion
The time of SNS only services will soon be over. (Expect for maybe specific B2B or special interest SNS offers). In the future a SNS service will not be able to survive simply by providing a social networking functionality as a core service. Instead SNS functions will become part of other services helping to drive personalization (through the data gathered), drive loyalty and in the end to drive sales.

With everybody talking these days about Apples $600 iPhone, Samsung selling a Prada phone and Porsche Design preparing their $800 Porsche Mobile Handset the question arises where the upscale market for mobile phones is going. Especially for Japan　-the home of brand luxury- this is an interesting topic to cover.

Different from other parts of the world Japanese are not used to pay more than 30,000 Yen (~$250) for a new handset no matter how fancy it might be.

The market
The Japanese are well known for their love of luxury goods. Not only wealthy people, but most of the middle class as well, expect that they can and should have luxurious items, even if they are minor ones like a Louis Vuitton wallet or a Prada keychain. For some global brand companies the revenue generated in Japan account for over 70% of their global revenue.

A “luxury guide” lists the top “luxury goods” in Japan:
For example a 6 liter bottle of wine for about 2.4 million yen, a Patek Phillippe watch for 200 million yen, a 15 million yen bonsai, and the like. Electronics are absent from the luxury offerings that do include jewelry, art, antiques, furniture, and hotel stays.

Luxury Electronics
There are high-end electronics available in Japan today. One of the most expensive televisions retail for about 4 Million Yen. Sonys “Qualia” brand stands as a symbol of luxury electronics

Characteristics of Luxury Goods
When observing the types of items that are prized as luxury goods, there are some broad characteristics that can be identified.

Price - Luxury goods must be priced higher than normal goods that serve the same purpose. Example: A mobile phone strap with a gold design that sells for 20,000 yen, an order of magnitude more than normal straps.

Materials and Workmanship – Luxury automobiles always stress the fine materials used for interiors, as well as exceptional fit and finish of their bodies. Luxury furniture, such as Japan’s exquisitely made storage chests and treasured ceramics, are also prized for these characteristics.

Scarcity - Rare items are highly valued. This holds true for antiques, samurai armor, limited runs of designer t-shirts, and services such as stays in exclusive hotels.

Elitism – Going hand in hand with scarcity is the Japanese worship of the elite. An item that associates its owner, correctly or not, with the cultural or financial elite can be a luxury item. So we see middle class teenagers carrying Louis Vuitton handbags to school.

Perceived status (rank) – Also related to elitism is Japan’s fixation on rankings. There are “best 10” lists for everything imaginable, and people pay attention to them. This is one reason Japanese companies have traditionally focused on market share rather than profits. In Japan, if you can become the biggest or most recognized, you have a real advantage.

Purchase Experience – When purchasing a luxury, the setting is extremely important for both products and services. A massage experienced in the privacy of an elegant hotel room is different from one taken at a public bath. The buying experience is an important part of the product. There are, of course, discount sellers for those for whom owning the item is sufficient. But even for them, the existence of extremely luxurious flagship stores for designer goods lends the impression that the consumer shops there.

After purchase care – Sellers of luxury goods are expected to provide exceptional service for the life of the product. The knowledge that if a handle breaks, or a seam comes apart, that the store will gladly fix or replace the item without any embarrassment to the client is very comforting. This implies that the seller has a long-term commitment to the buyer, something that is very highly valued in Japan.

Use Experience – the buyer must get some extra benefit from the experience of using the product. Whether it be the benefit of being seen carrying a Coach suitcase, the tactile joy of a perfect teacup, the touch of a fur coat, or the pampered experience of an exclusive spa, the consumer must feel that using the product is something special.

Mobile Phone Luxury?
Mobile phones can incorporate some luxury characteristics. The price, scarcity, materials, purchase experience and after-purchase service that signal luxury are within some level of control of the manufacturer and seller. Yet there are other aspects that are much more elusive, like elitism.
Talking with consumers about the idea of luxury mobile phones, often revealed a quizzical looks. While the idea seems appealing to them, the concept seems hard to grasp. It looks like they are much more open to the idea of “customizable” luxury than to “out-of-the-box” luxury.
This can also bee seen in the market today. While users spend around 20,000 Yen for a mobile phone they spend much more than that on having their phone designed by nail artists or on buying limited edition colours or straps.

Conclusion
Mobile phones can certainly be made to be expensive, high end, function-packed electronic wonders. But bein perceived as a luxury item is an extra challenge. The products and services that the Japanese view as luxurious tend to have a different, more classic slant than the ultra-modern multi-use image that a handset evokes.
The difficulty of establishing a mobile phone as a luxury item is made even more clear by the fact that no electronics have broken into the world of “luxury products” in Japan so far. There is still a fundamental disconnect between feature-based electronics that will soon be superseded by new, better models and the experience of use of a luxury item, which often has classic styling and may be used for many, many years. Where there seems to be a chance is the field of customizable or special edition phones.
This could either be a special edition, limited design version of a standard phone or a combination of design coves/straps/accessories bundled with the phone. In the last 2 years new design phones and limited edition covers had been introduced in the market but not to a level that can be regarded as “luxurious”.
Japan is the worlds leading luxury market so it will be interesting to see with what concepts companies will come up in the next months. In general the mentioned characteristics of luxury goods will be the rules everybody has to follow.