Monthly Archives: November 2010

The Fallacy of the Japanese Mobile Internet Comparison

Japanese mobile phone keypad (Model Vodafone V...

Image via Wikipedia

Last week, renowned Internet and Technology analyst, Mary Meeker gave her annual presentation about Internet Trends at the Web 2.0 conference.  She made some very bullish predictions about online advertising and about mobile web adopotion.  In fact, she predicted that mobile web usage will overtake PC-based web usage by 2012.   To back up this claim, she cited the similar trend in Japan as a predictor for what will happen in the US/globally. Now I’m the last person to be a bear about mobile, but I did want to dispel a common myth about Japan.

People commonly point to Japan, and Asia broadly as being more technologically advanced than the US, particularly with regard to adoption of consumer electronics and mobile technology.  Reasons given include cultural stereotypes – they just like gadgets more than Americans and government regulations – the Japanese government has taken various steps to ensure high-speed mobile networks developed quickly.  In general, it’s common to paint a picture of Americans and our government being luddites compared to Japan and that consequently we will follow the technology adoption path of Japan, just years later.

I also once believed the myth about looking to Japan’s mobile adoption and usage as a blueprint for the future of the US mobile market, but when I did some more research about Japan, I found out what actually happened there and how significant differences make the comparison fairly worthless. As I understand it, the mobile web took off and surpassed the PC web in Japan for the following reasons:

1. Typing in Japanese on a PC keyboard is actually quite cumbersome relative to typing in English.  An innovative system was developed to allow input of Japanese characters using predictive algorithms on the numerical keypad.  This allowed people to actually type in Japanese faster on their mobile phones then on PC keyboards.   Also, due to the use of Chinese characters (Kanji) for much of the Japanese written language, mobile screens can display much more content in Japanese than a comparable  screen displaying English.

2. The Japanese government made efforts to promote cheap mobile internet access the country through a series of de-regulatory moves. Conversely, for some reason, the government didn’t do this for home broadband which remained slow and very expensive and hence had very low adoption.

3. In Japan, a significant amount of the population commutes by train and not by car as in the US. Particularly in the Tokyo area, commuters spend a significant amount of time on cramped trains, where cellular coverage is robust (even in the US where people commute via train – much of the time service is non-existent).

These factors created an almost completely opposite environment than we have in the US.  In the US, home broadband reached a near ubiquitous footprint before people really started adopting the mobile web.  Even now, speeds are still significantly higher at home/work than they are for the mobile web.  Most importantly though, no matter which type of mobile keyboard or touchscreen, mobile input for English is much slower/more cumbersome than on a full PC keyboard.  Small screens also mean small amounts/snippets of content being displayed.

For a long time, carriers in the US offered a slow and expensive mobile web with sub-par devices for consuming/creating content.  The iPhone started a revolution that has changed all of this (even gaining significant traction in Japan).  Like all disruptive technologies, initially some of the things people do with their phones are surprising, like reading full length books on a tiny screen.  I do believe though, that as these devices get better, their mobility and more intuitive UI will continue to eat into the amount of time we use the web on PCs.  I also think that a whole new set of people, both in the US and abroad will experience smartphones as their first and potentially only computers.

So, in short, I disagree with Mary Meeker about looking to Japan as a model, but don’t fundamentally agree with the outcome, although I think that her timing is aggressive.  Maybe she intends to include tablets as mobile? If so, 2012 could happen.  If not, I think we’re a few more years out from that reality, after all currently just .

Other examples of mis-attributing mobile adoption patterns in Japan include:

1. Mobile Payments using NFC (Near Field Communication) – Japan has long been a country devoid of credit cards, for cultural and regulatory reasons.  Thus there was a huge advantage to using mobile payments vs. cash.  The US has a very different culture of payments, with credit cards playing a prominent role.  Therefore, it’s unclear if the US will follow the same trajectory as Japan in this area either.

2. QR codes– These visual or 2D barcodes have become relatively ubiquitous in Japan as ways to decode information from ads/billboards and elsewhere.  It is unclear if the commuting patterns or other cultural factors make this technology more well-suited to Japan or if the availablity of better cameras in their phones and native decoding software are the only reasons this took off in Japan but is facing slower adoption in the US.

3. SMS – people may point to SMS as something the US adopted later than other countries and might theorize that Japan preceded us with this trend too. The reality is that in Japan, mobile e-mail is much more prevalent than SMS and has been forever. This further serves to demonstrate that the differences in mobile usage across countries sometimes relate to key cultural, environmental and demographic differences, not just one country being ahead of another in technology, regulations or otherwise.

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Groupon may be the Costco of E-commerce

Costco

Image via Wikipedia

Groupon has become such a retail/local/commerce phenomenon over the past couple of years that there are rumors of Google thinking of buying them for more than $3 billion.

I’ve been thinking for a while that Groupon’s success and psychology remind me of another very successful and pioneering retail model – Costco (fka Price Club).  What do I think they have in common?

For both of them, one tends to:

  • Buy things we never would have thought we needed or may not even have heard of
  • Feel immense satisfaction for saving so much money on these aforementioned questionable necessities
  • Brag to others about the great deal one got
  • Buy things in questionably necessary quantities
  • Stockpile goods for use at a future date – in both cases we ignore the time value of money (which may be quite reasonable in today’s interest rate environment) by buying things we know that we won’t get occasion to use for weeks, months or even years.  In Groupon’s case – all of their goods expire. At least some of the stuff you buy at Costco (like toilet paper) can last and last….(I think we still have trash bags from a trip to Costco from 5 years ago – when we lived in CA).

In both cases, competitors have tried to emulate the new retail model.  In the case of Costco – there’s Sam’s Club and BJ’s.  Unfortunately for Groupon, there are hundreds of imitators due to the lower cost of entry into the market. Even so, in both cases, the innovator maintains a healthy lead and market share and “owns” the category.

Costco uses many visual techniques to remind shoppers of the great deals they’re getting. They call their stores warehouses and design them as such.  Groupon uses the limited time nature of their deals to create another psychological impression of value.

Groupon has even further improved upon one aspect of Costco though.  While Costco gets people to come in to buy staple-type products and then sells them a whole variety of other stuff, Groupon doesn’t even need to attract people, it pushes these deals at them every day via e-mail.

Maybe Groupon should consider Costco’s membership model where Grouponers would have to pay an annual fee to get access to these great deals, or maybe that could be a premium Groupon membership.  This might even further cement the psychological notion of the great deal.  EditDan Entin correctly points out in the comments that Groupon requires a membership, albeit free, to see/access their daily deals.  This is definitely part of a “membership” paradigm on the web for e-commerce, including flash-sale sites like Gilt, which emphasize membership for ongoing deals vs. SEO or search for products/deals generally.

What do you think, is Groupon the Costco of the Web?

Could the Verizon iPhone be a Sprint iPhone?

Many people, myself included, are excited for the rumored launch of a Verizon iPhone to finally come true in “early 2011.”  However, this hasn’t been publicly or officially confirmed by either Apple or Verizon.  Why not? Well, Apple certainly likes to announce things very close to launch so it’s possible that the deal is done and just not yet announced.   But Apple also is notorious for using well-placed “controlled”  leaks in the press to:

  • Gauge public sentiment/forecast demand
  • Gain the upper hand in negotiations

It seems that press leaks have been coming from Verizon as well.  Before the unofficial leaks prompted articles in places like the Wall St. Journal and Fortune Magazine,  Verizon’s CEO, Ivan Seidenberg publicly “denied” that they would get the iPhone, taking a page from Apple in terms of negotiating by trying to test the public response to such a statement. Even as recently as today, Ivan Seidenberg was quoted in the Wall St. Journal as saying:

“If the iPhone comes to us, it’s because Apple thinks it’s time,” he said. “Our interests are beginning to come together more but they have to take steps to align their technology with ours.”

Read more at Wsj.com

It does seem that Apple has begun to source CDMA chips for their iPhones.  One would think that meant that a deal with Verizon is sealed, or if not, it would certainly erode their negotiating power.  However, I presume that this particular negotiation is protracted and complicated as it involves two of the more stubborn companies with regards to their staunch positions, arrogance and market size.  I would guess that they’re still haggling over:

  • Retail pricing
  • Subsidy to Apple
  • Verizon content/branding on the phone
  • Retail rights
  • Customer service rights/responsibilities
  • Share of monthly revenues
  • Share of app revenues

Apple negotiated an unheard of deal with At&t, gaining every concession it wanted in terms of pricing, control, etc. and changing the dynamics with carriers forever (much needed in many ways).  Apple is likely to want to replicate most of this deal with Verizon.  However, Verizon is likely to reject many of these terms on the grounds that they won’t have exclusivity.

Since Verizon must know about Apple’s sourcing/manufacturing of CDMA-ready technology, the only way that Apple can maintain negotiating power is to have a BATNA (Best Alternative to a Negotiated Agreement).  I posit that Apple’s BATNA is none other than Sprint.  Sprint is the only other CDMA carrier in the US and is the carrier that has suffered the most in terms of lost subscribers to At&t for the iPhone and to Verizon for Android devices and others. Sprint would likely agree to a much better deal (for Apple) than Verizon, having a much smaller subscriber base and being, in general, in much more desperate shape.

So, if my scenario is to be believed, one would assume a boardroom standoff. I imagine a long, red-lined Apple/Verizon contract with a few key unresolved issues and a big game of chicken going on.  Both sides are trying to use the media and subsequent consumer response in their negotiations to prove that they don’t need each other. I think the deal will likely get signed, but I also wouldn’t be shocked to have Steve Jobs tell Ivan Seidenberg where he can shove his Android phone and launch the iPhone on Sprint. As we observed with the last minute scuttling of Facebook integration with Apple Itune’s Ping social network, Steve is quite willing to play hardball on deals.

Thoughts? Eager to hear what people think in the comments.

Look for more about a potential Verizon iPhone in subsequent posts.

One footnote- CDMA is also used in Korea and in Japan (in addition to their GSM networks) so Apple’s CDMA production will serve those purposes as well.

E-books, Anonymity, and Serendipitous Meetings

I’ve been thinking a lot about how e-books and digital consumption of magazines and newspapers eliminate the conversation starters that happen today around what people are reading in public spaces. Of course – sometimes this is welcome. We don’t always want everyone to know what we’re reading (or listening to), but we always had the ability to shed the book jacket or cover it with something else, or leave certain reading material at home. But on many an occasion, I’ve met interesting people based on what I was reading or what they were reading, or discovered an interesting book based on a stranger’s recommendation.

Last week this hit home even further. I was on the New York City subway reading Do More Faster by Brad Feld and David Cohen. A stranger approached and asked what I thought of the book so far. He had heard of it and was considering buying/reading it. I told him that it was great so far and that sparked a conversation about technology entrepreneurship. We exchanged contact info.

A Picture of a eBook

Image via Wikipedia

The stranger is now no longer a stranger, he’s Ray Wu. We’ve already corresponded a few times and plan to meet again at a meet-up this week. It was a great serendipitous meeting that would never have happened if I was reading the book on my iPhone or iPad as I’m apt to do.

So what’s the solution? In the analog world, it was not considered narcissistic or odd to “broadcast” the book you were reading in a cafe or the books you’ve read in the past on your bookshelf. But any digital solutions I can think of to bring this serendipitous and passive discovery of what others are reading into the e-book age seem contrived and by definition somewhat intentional/narcissistic.

There are so many ways to make new and serendipitous connections now online – I think Twitter is perhaps the most interesting, but are some other digital advancements eliminating others?

What do you think? Is this an issue? Any ideas for preserving this cool way of meeting new people/learning new things?