Japan Market Update - SPECIAL TECH REPORT March 2004 Edition

Hi,

Welcome to JAPAN MARKET UPDATE - TECH REPORT, a special edition of PacRim's monthly Japan Market Update, where we update you on Japan's latest technology trends. The Internet in Japan has hit remarkable new heights with the rapid growth of ubiquitous broadband access. Not only is "off-the-shelf" broadband in Japan faster than in the US, it is also cheaper! Here at PacRim we feel the momentum of Japan's Internet trends and want to make sure you're up-to-date on the exciting activity!

Reaching Japanese Internet users is a major part of PacRim's expertise. From the "localization" of web sites into Japanese language and Japanese-language search engine optimization, to daily content management of Japanese-language web sites, we connect our clients with the vast Japanese Internet population. Our multi-cultural e-marketing services include a "suite" of solutions including JpMedia, JpWeb, JPulse (on-line research), and JpRes (on-line bilingual reservations booking engine).

PacRim also manages (conceived, developed, maintains, and owns) Hawaii's largest commercial web site for Japanese visitors called Hawaii-arukikata.com (http://www.hawaii-arukikata.com). This past year, we expanded the e-commerce activity on the site and launched unique marketing opportunities for our clients to connect with more Japanese consumers.

We can assist you in taking advantage of emerging industry "tech" trends with an on-line solution that will integrate your current and future marketing programs.

The JAPAN MARKET UPDATE - TECH REPORT will be on a quarterly basis. I welcome any suggestions or comments you have to improve the next issue.

Warmest Aloha,

Dave Erdman

*Japan Market News
-----Hawaii-Arukikata.com traffic hits 5 million page views per month
-----Hawaii-Arukikata.com adds 30th hotel for online bookings
-----Online ads growing in Japan
-----Ad clicks are leading to actual sales: a survey
-----Travel agencies expand offerings as online sales soar
-----Broadband rates still low: 50% less than U.S. average
-----High-speed Internet surges, exceeds 14 million users
-----No ordinary chat room: Off-beat FTTH broadband site is talk of the town
-----Mobile phone is ultimate wireless device
-----Advertisers pay to deliver mobile message
-----Smart cards go nationwide, smart cell phone around the corner

Takahisa Yuge, Marketing Director for the Chikyu No Arukikata GlobeTrotter Travel Information series will be one of the guest speakers at the Oahu Visitor Bureau's upcoming forum on the Internet in Japan. Mr. Yuge oversees the company's Hawaii series of guidebooks, special publishing projects for Hawaii, as well as integration of the Hawaii-Arukikata.com web site with GlobeTrotter's overall media and marketing programs. OVB has limited seats, so contact them if you are interested in attending.
IMPORTANT NOTE: PacRim will be scheduling individual break-out sessions with Mr. Yuge while he is in Hawaii. If you would like a one-on-one meeting with the industry leader, please contact Dave Erdman 949-4592 ext. 833. Mr. Yuge will be in Hawaii from April 1- April 7.

HAWAII-ARUKIKATA.COM TRAFFIC HITS 5 MILLION PAGE VIEWS PER MONTH

Hawaii-Arukikata.com is riding the wave of Internet growth in Japan. The site recently reached five million page views per month, translating to more than 240,000 unique viewers for the same period. After five years of steady growth, the site is now Japan's unofficial leader of web sites about Hawaii, reaching 12,000 to 16,000 people every day. The site is designed and maintained by our own team at PacRim Marketing, and is constantly expanding its information base and booking capabilities. IMPORTANT NOTE: If you have any news or updates to include in Hawaii-Arukikata.com, be sure to fax them to our editorial team at 942-5251. Back to top

HAWAII-ARUKIKATA.COM ADDS 30TH HOTEL FOR ONLINE BOOKINGS

Traffic to online travel sites is increasing worldwide each year, and the yen is following, according to a trend report by Cendant Corp. In Japan, travel industry leader JTB predicts $600 million in online sales by 2005. This prediction is a testimony to the nation's Internet expansion (see related articles below). Hawaii-Arukikata.com goes beyond the ordinary travel site by combining an in-depth guide to Japan's favorite overseas destination with the ease of online booking. In addition to selling tours, air tickets, and optional tours, the site's new hotel booking section guides users to Hawaii hotels offering packages, seasonal programs, and room-only rates (See how each hotel is featured at http://www.hawaii-arukikata.com/hotel). PacRim's bilingual hotel booking engine, JpRes, powers the e-commerce on the site, now featuring 15 hotels with 15 more coming online in the next 30 days. (Source: Cendant Media Center; Hawaii-Arukikata.com; Nihon Keizai Shimbun 2/16/04) NOTE: We also do private branding of our multilingual reservation engine, JpRes. If you are interested in a secure Japanese and English language booking system for your hotel, spa, or activity, contact David Keuning at 949-4592 ext 821. Back to top

ONLINE ADS GROWING IN JAPAN

By next year, Japanese companies will pump almost ten times more money into Internet advertising than on radio, according to latest reports by Japan's leading advertising firm, Dentsu Co. Fourteen million broadband users and counting make up the backdrop for this media shift, and Internet ads will be playing catch-up as they increase in volume by an estimated 40 percent in 2004. Overall advertising expenditures have declined slightly over the last three years, spelling trouble for other media (namely television, radio, and newspapers) as spending on online ads increase. In a separate report, IT consulting firm IDCJ predicts that 40 percent of Japan's Internet advertising will be a form of streaming media by 2006. Citing the proliferation of Japan's highspeed Internet users, the report also noted a decline in traditional banner ad efficacy. (Sources: Dentsu report; Internet Watch 10/11/02; Terrie's Take 2/22/04) Back to top

AD CLICKS ARE LEADING TO ACTUAL SALES: A SURVEY

According to an online poll conducted by Japanese research firms InternetCom Co. Ltd. and InfoPlant Co. Ltd., 46 percent of surveyed web users claimed to have clicked on an Internet ad up to ten times in the last three months, and 41 percent clicked more than ten times. A healthy 34 percent of those surveyed said they followed the ad to an actual purchase. The most popular purchases resulting from an ad were food products and media (books, CDs, and games). (Source: Japan.internet.com 12/28/03) Back to top

TRAVEL AGENCIES EXPAND OFFERINGS AS ONLINE SALES SOAR

Japan's brick-and-mortar travel agencies are feeling the heat of the nation's latest Internet surge. Online bookings are skyrocketing for at least three of Japan's top agencies, reporting an estimated combined sales of 80 billion yen (approximately $747 million) for the 2004 fiscal year. Top-ranking JTB, followed by Kinki Nippon Tourist Co., and Nippon Travel Agency, have overhauled their web sites to accommodate high-volume transactions and to offer better online booking services. Kinki Nippon Tourist is also doubling their online travel staff. The three agencies project combined sales of over 100 billion yen (approx. $934 million) by 2006. (Sources: Nihon Keizai Shimbun 2/16/04) Back to top

BROADBAND RATES STILL LOW: 50% LESS THAN U.S. AVERAGE

At $27 for 8-Mbps, Japan may be offering the world's lowest price-point for the fastest broadband Internet access. Telecom giant NTT and Yahoo!BB (a joint partnership with Softbank) are head-to-head in competition, each holding about a 36 percent share of the broadband subscriber market. Their price war has driven monthly fees to $27, roughly half of what U.S. broadband users pay for a tenth of the speed. In recent weeks Yahoo!BB has been rocked by data leakage scandals in which consumer data and private information was leaked. But despite the setback and resulting profit losses, Yahoo!BB remains defiant that it will gain 6 million subscribers by September 2005 through heavier spending on sales promotions. Costing double but rising rapidly (see article below) are fiber subscriptions -- approximately $50 per month -- which, at 100-Mbps, makes our click feel like a crawl. (Sources: http://www.too-much.tv; http://www.ntt.com; http://www.bbhikaku.jp) Back to top

HIGH-SPEED INTERNET SURGES, EXCEEDS 14 MILLION USERS

Latest reports from the Japanese Ministry of Public Management, Home Affairs, Posts, and Telecommunications showed that broadband access is still increasing at a brisk pace, with approximately 34,000 to 36,000 new users per month. The ministry tabulated total broadband users in February at 14 million and counting, a stunning 68.7 percent increase from the year prior. DSL remains the most popular broadband choice with 10.6 million users, and cable a distant second with 2.5 million. But FTTH (Fiber-To-The-Home) usage overwhelmed the competition by quadrupling its subscribers from last year, and will likely hit the million-user mark by the end of March. A 2003 government survey of 30,000 households revealed that 34 percent of respondents used high-speed Internet access as opposed to dial-up; that percentage is certain to rise by the next survey. (Sources: http://www.internet.watch.co.jp 2/27/04; Ministry of Public Management, Home Affairs, Posts, and Telecommunications) Back to top

NO ORDINARY CHAT ROOM: OFF-BEAT FTTH BROADBAND SITE IS TALK OF THE TOWN

Japan's first interactive web portal is creating quite a buzz these days. It's free. It's 24/7. And it features celebrities living in an apartment building, with live webcam broadcasts from their rooms. CasTY -- as the site is called -- is the brainchild of Tokyo Electric Company (TEPCO), in an effort to market its fiber optics ISP business. The online community also broadcasts original, unscripted talk shows and various hobby-oriented workshops. TEPCO doesn't have conclusive data on the success of the casTY experiment, but marketing representative Arihiro Ayata reports that user feedback has been positive. "We've created that 'word on the street,' which is what we wanted," Ayata said. Fiber optics is Japan's most expensive, yet fastest growing, broadband alternative (about $50 per month and up) that clocks speed 100 times faster than DSL or cable. If anything, the bizarre concept has certainly paid off. See casTY for yourself (Japanese text only), at http://www.casty.jp (Sources: TEPCOHikari Marketing Dept.; Broadband Watch 2/22/02; BB Guide 2/3/03; casty.jp) Back to top

MOBILE PHONE IS ULTIMATE WIRELESS DEVICE

Gone are the days of simply "mobile" phones. While surveys show that customers still consider sound quality and ease-of-use as key points for buying a phone, newer features such as a Global Positioning System (GPS) and high-speed data communication are rising up the scale. "The cellphone is now a way of life," says Hiroki Wai, a 30-ish network engineer who awakens each morning to his favorite ring tone, sends and receives dozens of emails, connects remotely to his PC, downloads and listens to music, reads novels and newspapers on his commute, and finds his way to a downtown cafŽ, all thanks to his trusty phone. Japan's cell phone culture is so pervasive that some experts believe the device is becoming an extension of personal space. The term "oyayubi zoku" -- or "thumb gang" -- even describes the generation of cell phone users vigorously punching messages into their keypads, oblivious to the world around them. As third generation (3G) mobile technology gives way to the next, and high-bandwidth becomes commonplace, Japan's mobile phone positions itself to replace every imaginable device -- from PDAs to your wallet (see article below) -- leaving the Japanese little to carry around save for a driver's license (if you drive), and perhaps a lipstick (if you use one). (Sources: The Straits Times 03/09/04; japan.internet.com 5/13/02) Back to top

ADVERTISERS PAY TO DELIVER MOBILE MESSAGE

In Japan, cutting-edge phones and fancy features can easily run monthly cell phone bills above $200. But for about a penny per message, Japanese content provider Bit-isle, Inc. will insert a one-line ad into incoming and outgoing email. It may not sound like much, but an average user who sends or receives 20 emails a day can make about $10 a month, and those who use more can earn up to $100. The free, membership service is called "etmail," and the money earned is transferred to your bank account -- cold cash for doing what mobile users do everyday, regardless of whether they actually read the ad. Bit-isle's main pitch is to help mobile users offset their monthly expenses by making a few extra bucks. Furthermore, etmail structures a direct, yet consensual relationship between advertiser and consumer, eliminating unwelcome spam messages. Bit-isle started the service in January, and expects to enroll half a million users by July 2004. While Japan's tech industry and consumer advocacy groups continue to fight spam, etmail may signal the next wave of online advertising. (Sources: Bit-isle Press Release 1/15/04; etmail.jp; foma.ntt.docomo.jp) Back to top

SMART CARDS GO NATIONWIDE, SMART CELL PHONE AROUND THE CORNER

In our December 2003 issue of Japan Market Update, we reported on an upcoming mobile technology that will allow cell phones to make debit purchases (click here to see issue). A recent industry report suggests that DoCoMo's new cell phone will nail a lucrative market when it is introduced this summer. "E-money" use is proliferating, as smart card users top 3.4 million, and 10,000 nationwide stores are expected to install Sony's card readers by mid-2004. The smart card system -- which Sony and NTT DoCoMo call "Edy" and are currently testing in cell phones -- allow shoppers to buy train tickets, purchase goods, and make bill payments instantly, without swiping or authorizing. Game alleys and vending machine operators are quickly embracing the new technology; gamemaker Sega Corp. converted 100 machines at a Tokyo game arcade to accept Edy cards last month, and plan to install the system in 500 facilities within the next three years. The technology has also touched smaller, regional outlets; a supermarket chain in Miyagi prefecture began promoting Edy cards combined with a loyalty program, giving discounts based on the amount spent during the previous month. "We'd like to open the way for it to serve as an alternative to cash in the future," said Kazumasa Miyazawa, corporate officer and planning director of bitWallet, a joint venture among Sony, NTT DoCoMo, and 24 other companies including Mitsubishi, Toyota, and KDDI. Numbers show "the way" is most certainly open. (Source: Kyodo News 2/12/04; Mobile Media Japan 4/2/03) Back to top