Domestic social network pioneer Mixi Inc. has stumbled and the once rising star has been eclipsed by its giant U.S. competitor Facebook and domestic social game operators.
A media report Tuesday said Mixi founder Kenji Kasahara may sell his entire 55 percent stake in the company to other firms, and the rapidly expanding social game companies DeNA Co. and Gree Inc. may be candidate buyers.
Mixi the same day flatly denied that Kasahara planned to sell his stake. “What was reported is not true,” the company said in a statement.
Regardless of whether the report is true, analysts say the industry pioneer’s current woes stem from a recent sharp fall in advertising revenue, in stark contrast with Facebook’s worldwide surge.
Soon after Kasahara started Mixi in 2004, he elevated the service, which is based on anonymous users who basically register with nicknames, into the country’s largest social networking site and his own status as one of Japan’s leading young entrepreneurs. But growth slowed after globally popular Facebook entered the Japanese market in 2010.
Industry analysts say Facebook’s impact on Mixi was huge.
“The problem is Mixi’s service has not (effectively) changed for the past several years,” said an Internet service sector analyst at a foreign brokerage in Japan.
The analyst, who did not want to be named, said the number of Facebook users started to rise in Japan after the March 2011 Great East Japan Earthquake. Facebook already gained global attention earlier in the year over its role in the revolution in Egypt, where information was constantly updated for the world to see.
“Facebook continued to outshine, while Mixi didn’t do anything to raise its reputation,” the analyst said.
Tuesday’s report by the Nikkei Business magazine website that DeNA and Gree were among the bidders for a stake in Mixi followed the company’s earnings reports last week. Its group net profit for the business year that ended in March dived 45.8 percent from a year earlier to ¥749 million on sales of ¥13.3 billion, up only 0.8 percent. The firm also announced a management reshuffle.
Mixi has lost about 92 percent of its market value since December 2007 as rivals lured away Net-savvy users, according to Bloomberg.
To add more services, Mixi said in December that the firm joined forces with Twitter to strengthen their ground against Facebook. Despite the negative factors, the Internet sector analyst said Mixi still has growth potential, largely because of the unique demography of its users.
The number of Mixi users currently stands at around 15.1 million, which is just slightly lower than its peak of 15.5 million a year earlier. Facebook meanwhile has about 12 million users in Japan.
And Mixi’s users are dominated by women in their 20s, while users of Gree and DeNA are mainly men in their 30s and 40s.
“The presence of Mixi has relatively weakened, but it has very strong potential,” the analyst said.