Presentation on Asian best practices to a group of Silicon Valley investors, showing how Asian innovations can be relevant to Western markets. In addition to key ideas, several examples are included.

1. Lessons Learned from Asia
How Beijing, Tokyo and Seoul are relevant to L.A.
Benjamin Joffe, CEO | Plus Eight Star | Santa Monica, 2009.07

2. Here is the plan
0. Introduction
1. How Asia can innovate
2. China | 5Cs of Innovation
3. Japan | Mobile Galapagos
4. Korea | Ultra-broadband laboratory
5. Closing & Questions

3. 0.
Introduction

4. Benjamin Joffe
ベンジャミン
벤자민
本杰明

6. 4 years
1 year
4 years

7. www.plus8star.com

8. Innovation Arbitrage
China | Japan | Korea

9. 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)
– First commercial report on Tencent “Inside QQ”
– Partner of 3D social gaming startup Cmune
– Co-Founded Mobile Monday in Beijing

10. Our clients
EUROPE USA
ASIA

11. 1
How Asia can innovate

12. Claim #1
The biggest barriers to
understanding are our
assumptions

13. General assumption #1
Everything from USA is great

14. General assumption #2
Everything from Asia is weird
(and sometimes funny)

15. Two examples

16. Movie 1

18. Magnificent Seven Seven Samurai
(1960) (1954)

19. Movie 2

20. The Matrix Ghost in the Shell
(1999) (1989/1995)

21. Using best scripts & Talent
• Adapted from Asian movies
– Fistful of Dollars Yojimbo
– Star Wars Hidden Fortress (partly)
– The Ring (id.)
– Shall We Dance? (id.)
– My Sassy Girl (id.)
– The Departed Internal Affairs
• Asian movies succeeding “as is”
– Kungfu movies, Crouching Tiger Hidden Dragon…

23. Old Boy – Made in Hollywood
Directed by Steven Spielberg
Starring Will Smith
In theaters in 2010

24. Who came first?

25. Leveraging best practices

27. Claim #2
Innovation is a consequence of
Talent
Market size
Infrastructure
Investment

28. Internet Mobile
1.3 billion 3.3 billion
Source: Morgan Stanley, 2007

29. Digital Population
Country USA China Japan Korea
Population 300 mln 1,300 mln 130 mln 50 mln
Internet users 225 mln 340 mln 100 mln 35 mln
Mobile users 260 mln 650 mln 100 mln 45 mln
x5 1,680 mln
x2 Total 475 mln
x3 785 mln

30. IT Infrastructure
100%
Avg. 7 Mbps
80%
Avg. 15 Mbps
60%
3G users
40% C
hi
n
20% a Avg. 4 Mbps
www.plus8star.com
0%
0% 20% 40% 60% 80%
% of Internet connections measured above 5Mbps
(Source: Akamai, 4Q08)

31. Alexa Quiz
USA China Japan Korea
#1 Google
#2 Yahoo
#3 Facebook
#4 YouTube
#5
#6
#7
MySpace
MSN
Live
?
#8 Wikipedia
#9 Craigslist
#10 eBay

32. Alexa Quiz
USA China Japan Korea
#1 Google Baidu Yahoo JP / SB Naver
#2 Yahoo Tencent FC2 Yahoo
#3 Facebook Sina Google JP Daum
#4 YouTube Google China YouTube YouTube
#5 MySpace Taobao Rakuten Google
#6 MSN Netease Livedoor Cyworld
#7 Live Google Ameblo Nate
#8 Wikipedia Sohu Mixi Google KR
#9 Craigslist Youku Wikipedia Live
#10 eBay Yahoo Goo Facebook

33. Alexa Quiz
USA China Japan Korea
#11 AOL Soso Google (error)
#12 Blogger Ku6 MSN Tistory
#13 Amazon Kaixin001 Nicovideo JoongAn Ilbo
#14 Go Mop Amazon JP Chosun Ilbo
#15 CNN Live 2 Channel MSN
#16 Twitter PCOnline Nifty Gmarket
#17 Microsoft 56.com Yourfilehost Paran
#18 Flickr Yahoo CN Biglobe Auction
#19 ESPN Sogou Geocities JP Blogger
#20 Photobucket Tom Online Infoseek JP Friendster

34. Claim #3
Innovation is beyond technology
(it’s about services ^_^)

35. Technology?
e.g. LAMP stack
(Linux / Apache / MySQL / PHP)
+ HTML / Flash / AJAX…

36. Largely commoditized…

37. 2
China

38. Claim #4
China is innovating more and
more because of
five key factors

39. 5Cs of Innovation™

40. a. Copy

41. “Benchmarking”
“Inspiration”
“Best practice”
“If I have seen farther it is only by standing on
the shoulders of Giants.”
(Isaac Newton)

42. Pragmatic Entrepreneurs & Investors
Innovation ROI?
“Blue oceans”

43. Entry barriers
Technology?
Capital?
Talent?
Intellectual Property?
Censorship?

44. The Underpants Gnomes

45. Business Plan

46. Copy can backfire!

47. Japan: Mayonnaise

48. China: Whipped Cream

49. Copycats often die
• Market not sustainable
• Business model does not work

50. b. “China”

51. Scale / Geography / Demography
make some services viable

52. Already in 2007 ...$1 billion do not
(We even published a report…) appear overnight

53. Attention Threshold
=
1 billion dollars?

54. Market Capitalization
(June 2009)
3-15 bln? 21 bln
REAL MARKET CAP

55. Maybe simply not looking?

56. c. Combination

58. Will it blend?

59. Tencent (1998)

60. d. Competition

61. “Survival of the fittest”
(Herbert Spencer)

62. What happens when you have
4 Facebook
20 YouTube
10 MySpace
5 Match.com
3 Yahoo
4 Twitter
?

63. Tough Spots
Sociology
Psychology
“Concepts”
Business models
Marketing
“Execution”
Metrics
Feedback loop
Payment

64. e. Constraints

65. “Necessity is the mother of invention”
(Plato)

66. Low GDP/capita
Small transactions / making millions from cents

67. Limited advertising
Alternative business models / B2B to B2C

68. No credit cards
Alternative payment systems,
mobile, virtual currencies

69. No legacy industry
(is it a constraint?)

70. Leading Companies
mln USD
1,200 www.plus8star.com
1047
1,000
800
600 522
429 452 468 439
400 370
200
97
0 Kongzhong Si a
n Tencent Sohu N ease
et Bai u
d Shanda Al aba
b
i
Mobile Web IM Portal + Online Search Online Only B2B
content Portal Games games engine games e-commerce part

71. Gaming in China
Profits of 9 listed companies
80%
Profit margin2008 (mln USD)
70%
60%
50%
40%
30%
20%
10%
www.plus8star.com
0%
0 100 200 300 400 500 600
Revenue 2008 (mln USD)
Note: The profit Margin for Tencent game and NetEase is taken as the one of the whole company.

72. Battlefield by Electronic Arts

73. When we started two years ago, there
was a real question mark: Can the free-
to-play model work as it did in Asia?
The answer is an emphatic yes.
Ben Cousins
General manager
Battlefield Heroes team
Electronic Arts

74. More innovation

75. Lihua | Order food over IM

76. Alimama | Ad exchange + Micro-retail

77. Babytree | Vertical for young parents

78. Huica | Mobile coupons

79. PPLive | P2P Internet TV

80. Hozom | Address book + SNS

81. iNezha | RSS-to-IM

82. Qifang | P2P Micro-lending

83. Digu | Twitter + Pics + Celebs

84. Lakoo | Appstore for non-iPhones

85. 2
Japan

86. Claim #5
Japan is the world’s most
advanced mobile market
AND
Too isolated for its own good

87. Beyond Voice & Beyond Telecom
50% 50%
92%
3G Mobile TV NFC
40%
50%
95%
Flat-rate Data Data ARPU Non-SMS Share

88. 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!

89. Mobile Market
• Mobile content
– 4.3 billion USD in FY07
– 40 USD / user / year
• Mobile commerce
– 7.3 billion USD
– 70 USD / user / year

90. Before & After 3G
2004 2007
1,186
1,200 1,140
1,091 www.plus8star.com
1,000
862
800
Million USD
600 568
500
419
400
204 225 229231
185
200 108
0
0

91. Galapagos Syndrome
• No foreign mobile brand is strong in Japan
• Too complex to survive abroad?

92. Some examples that work

93. “Social Networking
Is Not a Business”
MIT Technology Review
July/August 2008

94. And more (April 2009)

95. Mobile Social Networks?

96. Social Networks
Company Mixi DeNA GREE
Reg. users 16 mln 12 mln 8 mln
Usage 2/3 mobile 100% mobile 100% mobile
Revenue 2008 $120 mln $320 mln $60 mln
Profit margin 31% 40% 63%
From users 5% 80% 75%
Market capitalization $500 mln $1.4 bln $1.2 bln
www.plus8star.com

97. Mobile Game Town

98. Revenue Breakdown
[1 billion JPY = 10 million USD]

99. Japan Game Market
[1 billion JPY = 10 million USD]

100. More successes

101. Golf Digest Online
• What is it?
– Golf online vertical
• Numbers
– 1.37M registered users
– 128M USD, 6.9M USD profit, Listed
• Business models
– Ads, e-commerce (booking, products),
subscriptions

102. Cookpad
• What is it?
– Cooking focused vertical
• Numbers
– 6.67 M USD rev., 1.76M profit
– Profitable, IPO
• Business models
– Ads, subscriptions, lead generation

103. So-Net M3
• What is it?
– “Medicine” “Media” “Metamorphosis”
– “Social network for doctors” / Vertical site on
medical products.
• Numbers
– 177,000 doctors
– 85 M USD rev., 24 M net profit, Listed
• Business models
– Advertising, subscriptions, surveys, jobs

104. Various Virtual Worlds
• Services
– Nicotto Town (250K)
– Ameba Pigg (350K)
• Content & business models
– 2D
– Virtual items
– Avatars and spaces

105. 3
Korea

106. Claim #6
Korea is a window into the
future of broadband
AND
Foreign companies leverage
Korea’s ideas better

107. Online Games
• 1 billion USD market
– Larger than Japan with 1/3 population and 1/2 its
GDP/capita
– 1/3 of China’s
• Pioneer of
– Online gaming!
– Virtual goods model
Kingdom of the Wind (Nexon, 1996)

108. Cyworld
• Real-name SNS
• Beats FB and
MySpace
• Virtual goods
– Avatars
– Page skins
– BGM
– Fonts!
• … since 1999!

109. Naver
• Google & Yahoo’s
nemesis in Korea
• Innovations
– “360 search”
– Yahoo Answers
– Since 2002!
• More
– Knowledge shopping, etc.

110. Alternative Media Models
• Citizen journalism | OhmyNews
• Video Jockey “VJ” | Afreeca.tv
• Online education | Megastudy
• Various smaller services with innovative
concepts.

111. Contacts
www.plus8star.com
benjamin@plus8star.com
+81 | Japan
benjamin0123 +82 | Korea
http://twitter.com/plus8star +86 | China
Telecom & Internet
www.linkedin.com/in/benjaminjoffe
+ Added Value
www.slideshare.net/plus8star * High quality