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Wednesday, Sept. 1, 2010

TECHNOLOGY

Gree, Mixi innovators say Japan Web firms need global strategy


Staff writer

Web services such as Twitter and YouTube have entered Japan and become familiar tools in the arsenals of Japanese Web surfers.

But Netizens in other countries might be hard-pressed to identify the Japanese equivalents to these services, even though they are popular at home.

At the Web Innovation Share (WISH) 2010 event held in Tokyo's Roppongi district on Aug. 28, some of Japan's leading Internet service providers discussed how local Web firms can penetrate the global market.

They said that while having a vision for the global market is essential, especially within Asian countries, it is difficult to compete globally without having some level of success in the domestic market.

They also said Japan should beef up systems that help Web entrepreneurs get financial support in order to concentrate on growing their products until business models are created.

The event, which attracted about 550 people, featured presentations by 15 startup companies that feature innovative Web products with the potential to do well overseas.

"People often say that the global market is 10 times bigger than Japan's, but you also have to face 10 times as many rivals," said Gree President Yoshikazu Tanaka.

Gree is Japan's biggest social- networking service with more than 20 million users. Joining Tanaka on the panel was Mixi Chief Operating Officer Akinori Harada and DG Incubation Manager Hiroki Eda.

Mixi is Japan's No. 2 social-networking service, and DG Incubation Inc. invests in IT startup companies and recently began a project called Open Network Lab to support engineers who wish to provide their services globally.

"Since the global market is bigger, you may have more chances, but you also have chances in the domestic market," said Tanaka. "In many cases, I think it's difficult for services that haven't succeeded in Japan to have any impact in the global market."

Harada added that Internet service operators in California's Silicon Valley usually start out locally and gradually promote themselves nationally.

"In Silicon Valley, dozens times the number of Web businesses have been founded than in Japan, but I think there is not a single one (from Silicon Valley) that has succeeded in Japan from the very beginning," said Harada.

Entering the global market is an upcoming challenge for both Gree and Mixi, which are largely unknown outside of Japan. Tanaka stressed the importance of penetrating the Asian market, which is growing rapidly.

"Without conquering Asia, I don't think you can conquer the global Internet market," said Tanaka.

Discussion mediator Motohiko Tokuriki, CEO of Agile Media Network Inc., which hosted WISH 2010, pointed out that Japanese firms are often criticized for not attempting to compete in the global market.

Harada added that a vision for the global market should be part of a company's strategy from day one.

"Many Japanese companies enter the global market after they have nearly conquered the domestic market and find there is nowhere left to go. But such (a late decision) is not ideal," said Harada.

Tokuriki also mentioned that he thinks it's unfortunate that there are many Japanese Web companies that provide impressive individual services, but many of them do not seem eager to grow or do not have the knowhow.

Eda of DG Incubation agreed with Tokuriki and added that the venture capitalists of Silicon Valley actually find inspiration in the technologies and ideas of Japanese engineers.

Proving Tokuriki's position, the products presented by the 15 startups after the discussion were all innovative, with many focusing on recent trends such as social networking and e-books.

An award was given to Paperboy & Co.'s service Puboo, which enables users to write, create, publish and sell e-books easily on Amazon's Kindle and Apple's iPhone and iPad.

Bypassing the need to collaborate with publishers and editors, Internet users can go through every process of e-book publication on Puboo's website. The service itself is free, with a 30 percent commission paid to Papaerboy & Co. when books are actually sold.

Other Web services included a social translation service called Conyac that enables customers to request translation of text in 47 languages, from ¥0.3 per word or a fixed monthly fee ranging from ¥990 to ¥9,990. Customers can also request translation through Twitter, and users can get a reply in just a few minutes.

While Japan has ideas and technologies, panelists seemed to agree that when it comes to creating business models and financially supporting innovation, the country needs improvement.

When asked how he had sustained Gree's finances while single-handedly maintaining the service, Tanaka revealed an episode where he borrowed money through his credit card's cash service, which generally comes with high interest, to pay his server fees.

"I was scared that I'd go bankrupt," laughed Tanaka.

Tanaka created Gree as a hobby when he was still working for online shopping mall Rakuten, Inc. and decided to establish the company in 2004.

He admitted that almost everyone told him he would fail because they thought Gree would not be able to compete with Mixi, whose business was already taking off.

He said that while Mixi already had dozens of employees, Gree just had Tanaka, who himself thought Mixi would provide tough competition.

"I thought that if I had quit, my existence in this industry would be destroyed," he laughed, likening the success of the service to a fight for survival.

While Tanaka hinted that he was almost forced to expand, there's little doubt he had some kind of plan and was successful in its execution. This could be a sign of good things to come for Gree.

Harada also touched on the issue of how newly created Web services can secure financial stability as they gather enough users and establish a business model.

He said that as long as the number of users is growing, companies can persuade investors to offer funds by providing a vision of the company's future.

"They should give it a try. I think you can collect some funds," Harada said. "Many people just don't really try."



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