21st Century Mobile Marketing

Global Insights into the World

s MostAdvanced Mobile Society: Japan

Christopher Billich, Inﬁnita Inc.April 11, 2008According to industry data released by Japan

slargest advertising agency Dentsu in lateFebruary, mobile advertising expenditures inthe Japanese market in 2007 increased byalmost 60% compared to the previous year,reaching ¥62.1 billion (ca. USD 621 million).This result tops even Dentsu

s own optimisticprognosis, published 12 months earlier, by12%. An impressive performance in anadvertising market close to saturation - totaladvertising expenditures in Japan only grew by1.1% from 2006 to 2007, and by 1.7%between 2005 and 2006.

Mobile advertising up 60% in 2007

For the ﬁrst time ever, online advertisingexpenditures (¥ 443.6 billion, ca. USD 4.4billion) exceeded combined radio andmagazine advertising expenditures, whicheach were down around 4% on a YoY basis.Newspaper advertising suffered even moreheavily at -5%, and TV advertisingexpenditures are down for the third year in arow.While the importance of mobile advertising isgrowing, it still accounts for a relatively smallshare of online advertising revenues (10.3%)and for a minor piece of the whole advertisingpie, which is still dominated by TV, print andsales promotion.

Disconnect between mobile mediausage and advertising spendings

Considering how media usage is developing inJapan, there is still clearly a disconnectbetween advertising spendings on traditionalmedia and mobile. Between 2000 and 2006,the share of time that consumers spend onmobile (relative to all forms of media) hasincreased four-fold to 4%, but mobile-relatedexpenditures still only account for 1% of alladvertising spendings. 25% of Japanesemobile data users today respond to mobilecampaigns and actually sign up for promotionsor make purchases as a result. Close toanother third click on ads, but do notparticipate in promotional offers.Thus, there is no question that mobileadvertising will continue to gain in signiﬁcancein Japan - a market where more than 4 in 5 ofa total 100 million mobile subscribers usemobile data services.So there clearly is a lot of room for growth inmobile advertising here, even though Japan isone of the most mature mobile marketsworldwide: Mobile advertising revenues areexpected to more than double between nowand 2011. Which factors have contributed towhere we stand today, what are the forcesdriving the industry at the moment, and whichchallenges and opportunities does the marketface in the coming years?

What makes the mobile web ﬂy inJapan?

Several factors combined have led to themassive adoption of mobile internet usage inJapan: First and foremost, the fast and earlyroll-out of third-generation network technology(used by more than 75% of all subcribers) andresulting ease-of-use for the user. Thewidespread promotion and adoption of ﬂat-ratedata plans since 2004, used by about a third ofall subscribers already is the second majordriver. Additionally, a revenue share modelfavoring content providers 9:1 over theoperator has led to an abundance of attractiveon-deck content. QR codes and mobile

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search, both pushed by the operators, makeoff-deck sites easily accessible as well.A factor that is particular to Japan is the powerbalance between operators and handsetmanufacturers. All handsets are SIM-lockedand exclusive to the operator, who controlsdevelopment and handles distribution. Thisgives carriers an elsewhere unheard-of level ofcontrol over the rollout of handset features andresults in a homogeneous distribution offeatures across the device base. Thus, Japanhardly has the problems of devicefragmentation causing the rest of the worldheadaches.Operators work together to create commonstandards and have steadily introduced onetechnological feature after another, enablinginnovative content and services, many of themcrucial to making mobile advertising asuccess. Examples include: Mobile email withfull HTML support since the very early days ofthe medium (as opposed to creativelyrestrictive SMS), robust mobile browsers, anda cross-carrier emoticon library - not to forgetphone cameras, QR Code readers, MobileFlash, GPS, 1seg digital terrestrialbroadcasting technology and FeliCa (RFID)chips for contactless transactions.While the particular nature of the operator-handset manufacturer relationship in Japanhas historical roots and cannot be replicated inother markets, other factors driving mobileinternet usage, and in turn mobile advertising,apply everywhere.

How did mobile advertising develop inJapan?

No structured approach to mobile marketingexisted during the ﬁrst few years after theemergence of the medium with NTTDoCoMo

s 1999 launch of i-Mode. The marketwas fragmented with an abundance of playersand formats, as a consequence, marketershesitated to pursue the mobile opportunity.

Standardization and cross-industryefforts

To solve this problem, each of the operatorsestablished a joint subsidiary with one of themajor advertising agencies. These jointsubsidiaries serve three main purposes:(1)to develop and implement standards informats, targeting and metrics,(2)to act as sales representatives for operator-owned services and content providers

on-deck sites,(3)to work with the operator in developing newproducts and services that spawn newmobile advertising opportunities.It should be emphasized here that the operatorsubsidiaries work together closely with eachother, as well as with the mobile content andmedia industries. So well-oiled a machine isthe system that advertisers are able to bookcampaigns across all three operators throughany one of their joint subsidiaries, keepingtransaction costs for marketers to a minimum.In addition to this construct, non-operatormedia sales reps market some of the officialsites as well, this is specifically the case forsome of the larger content providers.Independent agents cater to the plethora ofoff-deck sites, often in the form of GoogleAdSense-type affiliate ad networks. Off-decksites operate on the same basic format,targeting and metrics standards as on-deckones, with slight variations.

The early days: banners and email

Until about two years ago, mobile marketersrelied mostly on banner ads, text ads andmobile email advertising. One of the moreprominent operator initiatives from this era isthe Tokusuru Menu, which lists campaigns andpromotions on the deck.Another one are carrier-driven, opt-in mobilenewsletters that aggregate promotions andcampaigns from different advertisers.Needless to say, many off-deck sites use opt-in newsletters as promotional tools for theirown and third-party advertising as well.However, in light of operators

strict anti-spammeasures and consumers

increasing warinessof message overload, mobile email advertisinghas been decreasing in popularity.

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With regard to compensation models formobile media, the traditional setup reliedheavily on CPM and ﬁxed-time pricing. Morerecently, marketers are beginning to favorperformance-based models (CPA and CPC),although traditional pricing approaches are stillwarranted for branding-oriented campaigns.About a third of the brands currently using themobile to advertise are actually contentproviders promoting their own sites, so tosome degree, one segment of the industry isdriving another. About 30% of Japanesecompanies have a mobile site in addition to aPC web presence, but only about a quarter ofthem use mobile advertising as a marketingtool today, showing that there is still muchuntapped potential.The advertisers

reluctance can mainly beattributed to the time factor. For a new mediumto find strong acceptance in advertising, it firsttakes consumers to adopt it on a large scale,and then traditionally-oriented agencies tounderstand the benefits, challenges and rulesof the medium. Lastly, this thinking still needsto trickle down to marketers. While manyadvertisers active on mobile today praise themedium for cost-effectiveness, targetabilityand transparency, some cite creativerestrictions and lack of emotionality asproblems.

Today: Large-scale tie-ups and brandedcontent

But looking at some large-scale campaignsfrom 2007, it becomes clear that the thirdscreen is quickly developing into a first-ratemarketing channel.Both Coca Cola and NIKE ran majorcampaigns on a a site called mobagetown,which since about late 2006 has been, hands-down, the most popular mobile site in Japan.The site operates on a model of free browser-based flash games, social networking andavatars that users can dress up from a choiceof more than 10,000 digital items. These canbe purchased with a virtual currency obtainedby clicking on ads, and registering with orshopping on affiliate sites. Mobagetowncurrently generates about 17 billion pageimpressions per month from a good 9 millionregistered users (for comparison: the top pageof Yahoo! Mobile clocks in just under 4 billionpage impressions, NTT DoCoMo

s i-Modemenu itself at an estimated 5 billion).In Coca Cola

s case, a fully branded version ofmobagetown was created. This was onlyaccessible to mobagetown members who alsohad an Coca Cola Mobile member account orsigned up for one. Once in, users were able toplay Coca Cola-branded games, usepromotional Decomail elements (graphic-heavy mobile HTML mail with animations) andobtain exclusive Coca Cola avatar items. Thecampaign was a massive success, with morethan 1 million users signing up to Coca ColaMobile over the course of the four-weekcampaign run. It generated 185 million pageviews, 350,000 users became “friends” withthe Coke avatar, and 190,000 comments wereleft on the Coke character

s blog. And thecampaign clearly lives on - almost one yearlater, users still sport the brand

s virtualclothing online.Similarly, NIKE promoted one of its collectionsvia mobagetown, giving users virtual versionsof the clothes to be found in NIKE stores, todress up their avatars. Additional “limited

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