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WEB

Japanese Web outlook and predictions for 2011

by Akky Akimoto

Last year saw many changes for Japanese Internet users as people began to shift from Japanese social networks to international ones, and from regular cellphones to smart phones. The international influence was felt in other web-based areas too. So what can we expect for 2011?

Twitter: The 2010 results for Yahoo! Japan’s annual search rankings were not that different from those in 2009. But one buzzword that did jump up drastically was “Twitter,” which hit eighth place while previously it wasn’t even in the top 100. For Japanese Internet users, 2010 was Twitter’s year.

During the year, TV news and drama featured Twitter, and it gained many high profile users, including ex-Prime Minister Yukio Hatoyama. There were also about 100 books published with “Twitter” in the title.

However, there are some signs of stagnation.

One is the issue of tweets being made by “bots,” which are automated programs that simulate human activity. Japanese users have embraced chatting with these scripts, but the large number of bots and their tweets is making it difficult to know the real Japanese Twitter population.

Also, the media seems to have become a bit bored with Twitter. They are starting to report “the next big thing” — and that is Facebook.

Facebook: In contrast to Twitter, the Facebook phenomenon has not really taken off in Japan . . . yet.

Facebook opened its Japan office in central Tokyo in February. 2010, and the number of active Japanese users increased 50 percent in the last half of the year. At this pace, however, Facebook won’t be the same size as Japan’s big three social networks until 2014.

The manager for the company’s Japanese operation, Taro Kodama, declared the network’s “real name” policy will continue in Japan. He said that exposing yourselves on the social network will add a lot of benefits. But both Mixi and Gree encouraged real names in their early days (2004-2005), and that caused enough problems to make them change their policies and recommend aliases. It will be interesting to see if Facebook users will be any different.

With the recent release of the film “The Social Network” the Japanese media has been reporting on Facebook. This is similar to the coverage that was given Twitter a year ago, and Second Life a few years before that. As a result, people are testing out Facebook. But if even this movie buzz cannot increase the registration by much, then they have to rethink their marketing policy for Japan.

Personally, I think the safest way for Facebook to proceed in Japan is to purchase its local rival Mixi. Mixi’s value is falling because of tough competition from Gree and DeNA (Mobage Town), and Facebook could, if done carefully, gradually integrate users without losing them. At this point, though, they seem confident to go their own way.

Mobage Town and Gree: Looking at Japanese social networking companies: DeNA, which runs Mobage Town, one of the largest Japanese social network services, achieved a profit increase of 340 percent last summer. Their nearest competitor, Gree, had a 74 percent rise. Both companies’ business is built on simple free games in which users pay for extra items. Mixi, which mainly builds its business on social networks and advertising, is struggling to keep up.

Mobage Town and Gree, however, are getting complaints from parents who are seeing unexpectedly high bills from their children purchasing virtual items. Both networks advertise heavily on TV, much like pachinko companies do, and some people are suggesting that social gaming is a problem similar to gambling and should therefore be regulated. If this happens it will be a big problem for both DeNA and Gree.

Yahoo! Japan and Google: The other big news in 2010 was the search alliance made between Yahoo! Japan and Google. Yahoo! Japan gave up the search engine provided by U.S. Yahoo! and switched to Google’s engine, which means that more than 95 percent of searches made on PC in Japan are now Google-based. Google and Yahoo! attempted the same thing in the U.S., but it was stopped by antitrust fears. Japan Fair’s Trade Commission approved the Japanese deal in December.

Recently, Yahoo! Japan has been giving up its original services and switching to collaborations with various category leaders, such as Mobage Town for games, Zozotown for apparel and Google for search. If this strategy continues, I believe we will see more partnerships between Yahoo! Japan and other successful players this year.

Rakuten globalization: Rakuten is another active player in the domestic Internet market. Rakuten’s decision to make English its official office language last year naturally shocked its Japanese employees and many others in industry. The shrinking domestic population and market is an obvious risk factor for the future growth of many local companies, so it is not unexpected that executives are looking at foreign markets. However, there have been few examples of Japanese web companies succeeding overseas so far. Japanese car and electronics companies have managed the move overseas, largely because their products tend to speak for themselves. But web-service companies cannot avoid the language issue.

Groupon: The latest trend from overseas to hit Japan are “flash coupons,” as they are called here. After seeing the success of Groupon in the U.S., and following on from the company setting up a subsidiary here, around 170 companies have rushed to emulate the system offering time-limited, prepaid and social-media-based coupons.

At the start of 2011, however, there was a problem with Groupon Japan in the one area that Japanese consumers find most important — food. And symbolically it was demand for osechi (celebratory New Year’s dishes) that caused the fuss.

Bird Cafe, a Yokohama-based restaurant featured on Groupon, was unable to deliver quality osechi due to higher than expected demand. The company had been expecting 100 orders but received around 500. Instead of canceling orders they tried to fill them — but with disastrous results. Photos comparing the advertised products with ones actually delivered (and of obviously poor quality) accompanied the many complaints that appeared online. This became huge news in the Japanese media, and the CEO of Groupon U.S., Andrew Mason, even apologized via a YouTube video. Whether this controversy will affect Japanese companies using the flash-coupon business model remains to be seen, but Groupon Japan, which is said to have expanded to around 700 staff, is clearly planning to be around for a while.

Akky Akimoto writes for Asiajin.com. A Japanese version of this article is available on his blog at akimoto.jp. You can follow him @akky on Twitter.