Many European mobile businesses point to the incredible runaway success of Japan's mobile internet sector and conclude that m-commerce will be just as successful in Europe. But why have the Japanese been so successful? What lessons can we learn? First, take a look at the figures.
By the end of April, there were nearly 37m mobile internet subscribers in Japan. i-mode leads the market with 23m subscribers, followed by KDDI's AU/EZWeb with 7.2m and J-Phone with 6.7m. (Note that following its recent purchase of BT's stake, Vodafone now owns 47% of J-Phone, and observers expect J-Phone to become DoCoMo's main challenger.)
I-mode is certainly a phenomenon: 40,000 subscribers join each day. And it is not hard to see why. I-mode subscribers tap into a huge range of services including games, news, banking and shopping. At the push of a button, every i-mode phone allows access to 1,600 DoCoMo-endorsed sites, some free, others charging up to $2.50 a month.
DoCoMo handles the billing and keeps 9% of the revenue. The handsets, which use Compact HTML (cHTML) rather than Wap's WML, are available in a wide range of styles,some with colour screens. Japanese consumers report their top three reasons for wanting an i-mode phone are to communicate with friends, to obtain urgent news and to kill time.
Nearly half use their handsets while commuting and more than a quarter while watching TV. The most valued service, by far, is email. Two-thirds of users send email via their handsets every day, with novelty ringing tones coming a distant second. When asked what they would like in the future, Japanese users ask for more financial services, transit schedules and ticketing, and location-based services such as maps.
And that is only the beginning. Matsushita Refrigeration has developed a vending machine that sells alcoholic beverages and cigarettes to adults - but only after confirmation of the would-be purchaser's age from mobile phone registration data sent by DoCoMo servers. This could be eclipsed by a new service offering cashless purchases of drinks from vending machines.
Coca-Cola Japan, DoCoMo and the trading company Itochu have teamed up to link Coke's 1m vending machines throughout Japan with i-mode phones. A loyalty scheme will reward consumers with points that can be exchanged for soft drinks or branded merchandise.
Finland's Sonera started similar services some time ago and Virgin Mobile is experimenting with similar technology in the UK. In Europe, Wap's poor reception has been blamed on a number of problems: over-hype from suppliers, poor handset design, the use of circuit-switched GSM (thus taking a long time to connect and limiting the data rate to 9600 bits per second), small monochrome screens among others.
To tackle some of these, the Wap Forum has been defining Wap 2.0 to be XHTML compatible, with security features that provide better support for transactions. But the promise of XHTML compatibility, colour graphics, animation, large file downloading capabilities, location-based services and streaming media may not be sufficient to win customers. That is because it isn't handset design, colour or cHTML creating the robust i-mode market in Japan.
It is simply a better business model. I-mode, uses a packet-switched network, like GPRS, which means it is always on and inexpensive. Consumers pay only for the data they send and receive, not for the time they are connected. (Each email costs consumers only about a penny. Nevertheless, since people use it so much, the revenues are piling up.)
As for third-party content, DoCoMo provides interfaces to its billing system, giving both content providers and consumers a straightforward and easily understood business model. The main difference between the European wireless world and the Japanese i-mode world is that in the latter, content providers can get paid. Here in the UK, mobile operators have no way to collect money for access to Wap sites , nor could they pass a portion of it on to content providers because their billing systems weren't built to do this. Even if I created the best Wap site in London, I would still starve.
