November 2000

Recently there's been alot of talk about business models, and how most of wireless in Japan is just entertainment, not "real" services. Considering the billions of dollars spent every year on games, music, and movies, I don't see how it's not a real business. Specifically, the most popular services on i-mode are ring-tones and games, and most of the users are the young student crowd; late teens to early twenties. I argue that going after this young market first was the right way to establish wireless services, and trying to capture the up-market business users first is why most WAP services in Europe are struggling.

Across the first world, and specifically in Japan, there is a huge demographic of young people with lots of cash. The early 90's bubble-pop in Japan has done little to quell the demands for brand-name goods, CDs, and most recently, wireless entertainment.

These kids are realists with lots of time to kill and plenty of money to spend. The top end kids in their early to mid-twenties have a reasonable income from part-time jobs and minimal expenses because they still live with mom and dad. High school and college kids also have plenty of support from the parental units and even fewer expenses. The group as a whole is incredibly brand, trend, fashion, and entertainment conscious. Game Centers, Love Hotels, and Karaoke Boxes are booming. And wireless entertainment services are riding the wave, too.

More importantly, this youth market is techno-savvy and always willing to try the latest cool thing, as long as it's endorsed by SMAP, AvexTrax, Disney, or any one of the many brands/idols/stars that are worshiped and followed with religious fervor.

Compare the youth market in Japan to business users in Europe and the US. Business users don't have time to waste; they want proven applications that work efficiently and are cost-effective. They are not risk-takers. They don't use MS Word because it's better than Word Perfect, they use it because it's established and proven, and everyone else uses it.

Business users are not willing to risk business opportunities or profit to prove a new technology's usefulness. Business users do not try new things because they are cool. Business users can't even satisfactorily make phone calls with their cell phones when they want to, so they'll be damned if they'll test some brand-new, expensive technology when they have such a hard time just getting a bloody dial tone when they need one.

Now, which market would you target for a brand new, unproven technology and service?

Lest you think this fashion-mad generation-Y of Japan is an anomaly, look at the countries in Europe that have the highest wireless data use and cellular phone penetration and you'll see the same thing. Kids in Finland and Sweden swap millions of SMS messages a day, customize their ring-tones with the latest pop tunes, down-load screen-saver graphics for their phones, and generally engage in time-killing, totally non-mission-critical-yet-entertaining activities.

A typically hype-filled European WAP ad goes something like this: Busy young exec in suit is told by boss to go to Paris to close The Big Deal. He jumps in a cab and heads to Heathrow. By the time the cab drops him off, he has reserved a seat on the next flight out, shuffled the stocks in his portfolio, and checked his email. Just as he's pulling up to curbside check-in he video-emails his fiancee, telling her he'll bring back some perfume from Paris before blowing her a kiss. The voice-over extols the virtues of the Internet in your pocket.

A typical i-mode commercial: girl waiting in line for something, obviously bored out of her mind, pulls out her phone and amuses herself by sending emails to her friends, feeding her digital online gerbil-robot, and downloading a new penguin screen-saver. Voice-over reminds how fun, cool, and easy it is.

Lesson learned: know your audience, and deliver what you promise. Failure to do so results in the kind of backlash we're seeing in Europe now. What's worse, next year when GPRS makes connectivity faster and easier, when services are more mature and prolific, and handsets are improved, WAP players will have an even harder time convincing users to try WAP. They will have to win back users who've already tried WAP and got burnt, overcome all the negative press, and target a totally different market that's already perfectly happy with cheap, prolific SMS services.

Unfortunately, WAP players in Europe are already hyping the joys of streaming video to the handset that 3G's fat-bandwidth will "soon" deliver. Meanwhile, Japanese operators realistically expect 3G to deliver modest data speed increases and, more importantly, voice quality improvements...

Thus ends my current beef. Gochiso-san.

Beef back to the Chief of Beef: renfield