Web 2.0 Is Hot in Japan...But Nobody Knows MySpace

Coach Wei (pictured), International Advisory Board member of Social Computing Magazine, writes: I was in Tokyo during the week of September 18th attending the 21st ProWise Forum, a business oriented information technology conference. Still feeling residual heat from the $900M Google/MySpace deal and the lonegirl15 phenomenon, I decided to talk about "Web 2.0" for my session. I picked Web 2.0 because I thought it would be very cool and novel to introduce this exciting web 2.0 phenomenon in US to the Japanese audience.

Boy, I was wrong. Japan knows web 2.0 – probably better than us in US.

First, I was surprised to find out that the subject of the keynote session before mine is also web 2.0. The speaker, Mr.Kurihara, is a thought leader in Japan who maintains a widely read  blog in Japan (I learned later that Mr.Kurihara is also a fellow MIT alumni graduated a few years before I did). I was a little concerned that the audience may be bored by my now-not-very-novel web 2.0 talk, especially Mr.Kurihana's session would be given in Japanese. I "nervously" sat through his session. Mr.Kurinhara spoke well. The audience seemed to be familiar with Web 2.0, and they responded to his talk very well. Due to my poor knowledge of Japanese, I can only guess what he was talking about from the occasional English words that popped out of his mouth. It made me a little more concerned because these English words are very much the same English words I planned for my session. But it was too late to change my slides. So I thought to myself maybe I should open my session with some exciting stories that the audience would resonate with. The story I thought about was MySpace.

Boy, I was wrong again! Nobody knows MySpace.

I opened my session by asking the audience "How many people have heard of MySpace? Please raise your hand". The audience became silent. Most people looked puzzled. Some of them were looking at each wondering what "MySpace" means. Nobody raised hand. My translator asked me quietly what I meant by MySpace. As I was desperately explaining MySpace to her, she suddenly said "Oh, that's like Mixi". All of a sudden, the audience got it - MySpace is the Mixi in US.

The First IPO of a Social Networking Site: Mixi

To my fellow blog readers, Mixi (http://www.mixi.jp) is the MySpace in Japan. Apparently very few people in Japan have heard of or paid attention to MySpace. Their attention is on Mixi, the biggest social networking site in Japan. Launched in February 2004 and membership by invitation only, It has grown to over 5 million registered users by July 2006. Its traffic ranking is 38 globally according to Alexa.com. Mixi's forecast revenue for fiscal year ending March 2007 is about $40M with a profit of about $14M. It is revenue mostly based on advertisement and 10-20% from premium services.

Mixi went public on September 14th 2006.  Its stock price jumped from about $15 to $32 on the first day and valued the company at about $1B. -Does the story sound familiar to people in US?

Mixi IPO is a good barometer for how the public market would value a consumer web 2.0 company, especially in Asia. A valuation benchmark that some people took from Mixi IPO is about $200 per member ($1B market cap with about 5M users). This benchmark would value US company Facebook at about $1.5B for its 7.5 million users.

Forrester Research analyst Charlene Li has a good blog on Mixi that is worthy of reading.

The Culture Element of Web 2.0

Web 2.0 in Japan is apparently thriving and exciting not any less, if not more, than US. An interesting observation is how much culture plays in "web 2.0". Websites like Mixi and MySpace are fairly culture dependent and they become part of the culture as well when they grow more successful. Simply copying a US web 2.0 consumer website to another culture may not work. Metropolis, a leading English-language magazine in Japan, writes that Mixi is "happening in a uniquely Japanese way: it's heavily mobile-based, it's privacy-oriented, and it's happening concurrently on both a mainstream and niche market level". Another example is MySpace China. Despite its wild success in US, MySpace has very little presence in China now. As a result, Wendi Deng (wife of Rupert Murdoch) decided to step in and build MySpace in China given that she knows both China and MySpace well.

LocationValue – A Company to Watch

Another web 2.0 company in Japan worthy of watching is LocationValue (http://www.locationvalue.com/), a company started by Masaru Sunagawa ("Sunny"). (Disclaimer: Sunny is a friend of mine). Sunny told me some of his thoughts a few years ago when he just graduated from Harvard Business School. Then he joined a GlobeSpan Venture Partners (a US venture capital firm in Boston and the bay area) for a few years where he gained significant experience in venture capital and business development. The most recent time I met him was October 2005 when he just kicked his company off the ground with a small amount of money. As I was trying to get together with him this time in Tokyo, I discovered that LocationValue just closed a $20M or so financing round and has been covered in national TV in Japan. Though still early, I think LocationValue is worthy of watching partially because I think very highly of Sunny and partially because I think Sunny’s vision of enabling and establishing a service market place by leveraging the web and mobile location-based service is big and has tremendous potential.

Enterprise Adoption of Web 2.0 in Japan

Talking about "Web 2.0" in Japan, what I was mostly impressed by is how Japan has been adopting web 2.0 in enterprise environments. There are a lot of confusions with "Web 2.0", one of which is the over-emphasis on consumer websites like MySpace and the lack of visibility on the enterprise/business side.

In Japan, they have been adopting Web 2.0 technologies for some incredibly complex and mission critical systems with great success: financial trading, current exchange, project management, insurance, and power/electricity management, etc.  Two speakers, Mr.Tatsukawa and Sakai, both from Hitachi Systems, showed some really impressive case studies and demonstrations in their session.
   
Some Screen Shots of Enterprise Web 2.0 Applications in Japan (Sorry, I don't have better resolution ones)

I definitely believe people in US need to see what they have done. I invited them to attend the upcoming AJAXWorld Conference in Santa Clara, and I will try to ask them to demonstrate some of their work during one of my sessions. The reasons that I strongly believe people in the US should see what they have done are:

• A lot of these systems are significant projects that requires teams of engineers and cost tens of millions of dollars. The success of such projects requires not only solid and robust web 2.0 technologies, but also significant experience and capability to manage such big projects;
• An important principal for web 2.0 is "Don't maltreat users". In US, we tend to put users at a lower priority. "Web 2.0" brought the users into a higher level of importance. However, there is no other country than Japan that understands "Don't maltreat users" better. We all know and love the consume electronics and cars from Japan. For enterprise web 2.0 applications, Japan seems to be truly outstanding as well. We have seen a lot of web 2.0 demonstrations from various US companies, a lot of which emphasizes sexiness rather than what is really important to users. - in contrast, if you see the demonstrations from Japan, you will see how they took care of every aspect of user-centricity: look and feel, screen layout, style, visual cues, navigation, efficiency, performance, etc. to the degree that you almost feel the Japan culture embodied within these applications.

In summary, I'll invite Mr.TatsuKawa and Mr.Takai to show some of their work during one of my sessions at AjaxWorld Conference. If you are going to be at AjaxWorld, I highly recommend you come and see the demonstrations.