This presentation was made for a seminar organized by NRC (Nokia Research Center) in Beijing in September 2010.

1. China & Japan’s mobile internet market
BO Yiqun, VP & Co-Founder | Great Wall Club | www.thegreatwallclub.com
NRC Beijing Annual Fall Conference| September 2010

2. 薄益群
BO Yiqun

3. www.thegreatwallclub.com

4. Biz platform for global mobile
internet executives
China  Asia  West

5. GMIC: #1 mobile internet conference
in China
+800 attendees, ~40% internationals, 18 countries, +50% executives

6. Monthly event Monday Dinner
GTrip Consulting

7. Agenda
1. Where we are?
2. Where is the money?
3. Is there any local innovation?
4. What can we learn from Japan?

8. 1. Where we are?

9. large

10. #1 digital population
Country
population 300 1300 127 50
Internet users 238 420 99 39
(MM) (2009) (Jun 2010) (2009) (2009)
Mobile users 286 805 112 47
(MM) (2009) (Jun 2010) (Aug 2010) (2009)
1/5 1,677 MM
<1/2
<1/3
= 558 MM
964 MM
Source: MIIT, Morgan Stanley, Wikipedia, Wireless Watch Japan

11. potential

12. High potential in China
Internet users 32% 77%
(MM) (Jun 2010) (2009)
Mobile users 60% 92%
(MM) (Jun 2010) (2009)
Over 50% additional
users from rural market
= Actively expanded
“Blue Ocean”
Source: MIIT, Morgan Stanley, Wikipedia, GWC

13. Mobile Internet taking off (1)
• Fixed-line For many users
• Mobile and SMEs,
Internet will only
be mobile
70
Penetration rate %
60 Mobile = 60%
50
40
30
20 Fixed-line = 23%
10
0
Source: MIIT

14. Mobile Internet taking off (2)
277MM mobile internet users, 49MM connect Internet
only via mobile
Cost of laptop
Traffic pricing
3G, Smart phone, Apps
We expect Mobile Internet market is going to boom
next year
Source: CNNIC, GWC, Aug 2010

15. No dominant yet
Mobile
operator
Service &
Handset
App
maker
provider

16. 2. Where is the money?

17. 3G
=
Girls
Gambling
Games

18. 3G
=
X
Girls
X
Gambling
Games

19. Mobile game market in China
1.8 bln RMB in 2009

20. What else?

21. Who makes money?

22. iPhone developer or Apple?

23. vs

24. 3. Is there any local innovation?

25. Low cost of handset making
• Low price
• Short time-to-
market
125~142 USD
• Over 90% of
functions are
directly onto
the MTK chip
Source: an e-commerce site, Jan 2010

26. “Obama” Endorses Chinese
“BlockBerry”
• “BlockBerry” made by HAFF-COMM
Source: The Wall Street Journal Blogs, Jun 2009

27. Low cost creates variety
Shaver phone
Cigarette case shaped
Barbie dressing case phone
PSP shaped, popular
games preinstalled
Watch phone
Car shaped
Solar power rechargeable
Super lens attachable
handset

28. Apple “peel”
From iTouch to iPhone
From iPad to laptop

29. Local features create
Job service in mobile just for
migrant workers
Fake info
filtering is
the key!

30. B2C instead of B2B
Company Operating Margin Online Ad / Total
rev.
NetEase 60% 13%
Tencent 48.6% 8%
Sohu 39.6% 34% Sohu’s online gaming biz lists in Apr 2009
Shanda 38.9% <4% with a market cap over 1.8 bln USD.  1st
IPO on Nasdaq since Nov 2008

31. Online payment popular in a
country with low-trust
Low trust E-commerce booming
• Few credit card • 142MM online shopping
– 2.3% of Chinese own credit users by June 2010
card – vs. 114MM for Amazon.com
and 90MM for eBay
• Bad credit system • Taobao GMV: $29B in 2009,
– Huge population
up 2x Y/Y
– Unbalanced economic
– accounting for 1.5-2% of
development
China’s overall retail sales
Alipay’s (brother company of Taobao) online escrow system helps both buyer and seller
build trust between each other, and largely accelerated online shopping market.
Source: Morgan Stanley, CNNIC

32. 4. What we can learn from
Japan?

33. 127 MM people
88%, or 112 MM mobile users

34. 3G started 10 years ago
~100% mobile are 3G today

35. mobile internet started 11
years ago with i-mode
94 MM mobile internet
users today
Source: NTT DoCoMo

36. High ARPU - mobile data service
makes up 30% of total revenue

37. Japan from 2004 to 2007
Source: Plus Eight Star

38. SNS is making money
• 5 SNS listed in stock market
• 4 in Asia
• 3 in Japan
• 2 nearly pure mobile
3 bln USD
4 bln USD

39. 2008
Users Mostly PC Mostly Mobile
users users
Market Value 30 (E) 3
(billion USD)
User Total (MM) +500 ~20
Revenue (MM 635 (E) 352
USD)
Profit Ratio Loss 32%
Business Model 97% Advertising(23
Advertisin %),Virtual
Yashikazu Tanaka g Goods and
CEO, Gree Games
Revenue from 3% 77%
User Fees
2nd youngest billionaire
in the world
Source: Gree, GWC

40. Zappallas
• Introduction Paid user percentage>40%,
way higher that that of
– Founded in March 2000 traditional internet (5-
– Started fortune-telling business in April 10%).Tencent's paid user Paying users
2004 percentage is 8% 1.5M
2.2 mln fortune-
(considering only active
– Went public in May 2005 (TYO:3700) users).
telling users
– Employees：171 as of April 2009
– Japan's largest mobile fortune-telling Free users
service provider 2.9 mln
• Facts –July 2009 20~34 Female Users
– 5,154,000 active users, of them
2,223,000 are paid users
– Far more female users than male users Male
– Average age of users: 29.1
– Runs 240 fortune-telling websites
Female
Source: Zappallas

41. Zappallas
• Financial Situation – 2008
Zappallas Revenue
– Revenue：103M USD
– Profit：26.3% Ad
– Market value：210M USD Mobile Commerce
• Business Model Paid content service
– Paid services: fortune-telling+ mobile email
– Mobile commerce
– Advertising
– Fortune-telling revenue makes up 40% of Japan’s
mobile internet revenue.
Source : Zappallas
According to i-mode, 5 of the top 10 fortune-telling
websites are run by Zappallas.

42. Zappallas
• Business Concept
– “Fortune-telling:the mobile content users never get tired of Service grows
steadily”
• Three types of content are checked by users everyday: Weather forcast,
News, and fortune-telling
• In Japan, fortune-telling also appears frequently on TV and print media,
especially on women magazines.
– Fortune-telling enables Zappallas to understand customer behaviors and make
effective marketing strategies.
• Users are required to fill in their personal infromation such as location, Masanori SUGIYAMA
birthday, occupation and blood type. Former CEO, Zappallas
• In order to get accurate results, users will provide accurate/commplete
information.
• Most users use the service everyday, enabling Zappallas to keep track of
their latest information.
• Even users who use the service only once will leave their information
stored in Zappallas servers.
– User DemographicsUnderstanding User Behaviors Effective Marketing
Strategies
– No one complains about the accuracy of fortune-telling, people do it for fun.

43. Operators dominate Japan's mobile
industry
• Operators dominate cell phone market
• Operators dominate mobile content market
• They invest in CP
Mobile UGC
Mobile SNS
Mobile commerce
Mobile portal

44. Japan's mobile commerce, twice the
mobile content market
• Beginning from 2004, Japan's mobile commerce sales exceeds that of content. In
2008, MC is about twice as much as CP.
Mobile
MC market
Commerce
(MC) 8.7 bln USD
Individual
Users 2008
Mobile
CP market
Content
4.8 bln USD
(CP)
Advertis Advertis Mobile Ad
ers ers market 2007
620 mln USD
Source: 总务省 (Japan), MCF (Japan)

45. Conclusion on Japan
• Not only high ARPU, but real mobile data
services, 30% of total revenue
• Key factors of success: network, data pricing,
handset, content
• Mobile operators dominate the market

46. About Great Wall Club

47. About Great Wall Club
• GWC, Global Mobile Internet CEO Club!
– Presently 73 members from China, Japan, Korea, Russia and Europe
– Headquartered in Beijing, having subsidiaries in Japan and Singapore
• Vision, Mission and Target
– To be a leading global business platform for mobile internet
– Friendship, Cooperation and Globalization

48. What We Do
• Build a worldwide CEO-level network in the mobile internet
industry
• Organize annual event: GMIC (Global Mobile Internet
Conference)
• Organize monthly events
– GWC Salon
– Internal Communication Meeting
– Monday Dinner
– Study Trip
– Summit
• Market research: Gport Weekly, other market reports

49. Our Members (partly)
Leilei WANG David WEI Xiaofeng SHAO Gaofei WANG Ke DING Renfei DAI Tao SONG
KongZhong, CEO Alibaba Inc., CEO Alipay, President Sina Wireless, GM Tencent Wireless GM China Unicom Newspace, GM Sky-Mobi, CEO
Xiangdong ZHANG Shuang LIU Bin LIU Yongfu YU Joshua MA Haila WANG Jerry LI
3g.cn, President Phoenix New Media, CEO Yicha, CEO UCWEB, CEO MadHouse, CEO Orange Beijing, CEO PP.cn, CEO
Yilong LAI Rong MU Zhihao ZHANG Song CHEN Jianwu ZHU Xi WANG Dongwan PU
Labox, CEO Bedo, CEO 12580, CEO Byread, CEO Lexun, CEO Easou, CEO Xunjie Network, CEO
Alex LIANG Xinyu LI Yongquan XIAO Gang WU Weiguo ZHAO Yongzhe JIN Yu LIN
PICA, CEO Talkweb, President d.cn, President 3GV8, CEO CEYUAN Ventures, President Senior VP, SKT China NetQin, CEO

50. Our Members
Europe
Kirill Pctrov Evgeny Kosolapov Jari P. PauI Asel Rune Bundesen
i-Free United Fun Traders Finland Investment Bureau Nokia Growth Partners NeoConsult
CEO CEO Senior BD Director Managing Director CEO
Japan
Akio Tanaka Masanori Sugiyama Hirokazu Mashita Masahiro Irie Hoshuyama Takayuki
Infinity Venture Partners ZAPPALLAS Hikari Tsushin Group, Yicha Japan D2Communications COO
Co-Founder CEO Chairman CEO
Korea
Jin Ho Hur Chongsik Kim Jeong Ho Kim Young il Lee James Song
Neowiz Internet INNOACE / KWISA NHN, Hangame Com2us GameVIL
CEO CEO CEO CEO & CTO CEO

51. Next GMIC
April 27-28, 2010, Beijing

52. Contact us
www.thegreatwallclub.com
Tel: +86 10 5167 2880
Fax: +86 10 5167 2887
yiqun@thegreatwallclub.com Address:
Room 0709-0711, Jing
Liang Building
No.16 East 3rd Ring
Middle Road
http://www.slideshare.net/greatwallclub Chaoyang District
Beijing, China, 100022

53. Thanks