What does an advanced Japanese mobile commerce and entertainment provider do in China?

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Yesterday night at Mobile Monday Beijing #29 Wang Yong, CEO of DeNA China shared with us his humble plans for China. I say humble as Wang must have mentioned 3 times during his presentation that replicating DeNA’s extremely successful Japanese services in China is impossible. Before I will describe why Wang did not expect DeNA to do very well in China I will briefly introduce DeNA.

DeNA?
DeNA is the biggest mobile social network in Japan. Currently it has 632 employees with a market cap of USD1.5 billion. Their most popular service is called Mobile Game Town (Mobagetown), a service that primarily attracts users by offering free games and that monetizes through advertising. Other services of DeNA include several successful m-commerce related portals such as Mobaoku (mobile C2C), Pocket Affiliate (Japans largest mobile advertising affiliate network), Mobagetown L (services targeted at Ladies) and Mobakore (fashion retail, 79% female users). DeNA has around 14.2 million users in Japan that are good for 18 billion page views per month.

As one of DeNA’s most popular services Mobagetown was launched back in 2006 it offered games for free. As a result users were rather young at that time: over 70% were teenagers. This has changed in the last few years, currently over 60% of DeNA users are over 20 years old which means they can spend money and are worth more to advertisers. DeNA has over 500,000 partner sites to advertise to mobile users. Wong explains that, among others, advertisers can place ads on the front-page, place text ads between search results, and advertise through (mobile) mail. Moreover Mobagetown has partnerships with big brands to integrate their brand in the service. For instance users could at some point get a Coca Cola avatar.

Content
The most important content for DeNA is avatars. “Avatars are very important content for us, avatar sales are still the biggest” says Wang. Actually DeNA was the first company to offer avatars on mobile. Users can choose from many ways to interact with their friends through their customized avatar. They can chat, play games, compete, give gifts etc. Users are even able to have a pet that they can feed and interact with. This year DeNA will roll out 3D avatars and will start providing options to “go outside of the DeNA world.” For instance users can bring their avatar into games at game centers or use them at karaoke bars by uploading it. I’m not sure what this is going to look like, but it is certainly something to keep an eye on.

MUGC
User generated content (generated on a mobile device!) is very important for DeNA. A few almost unbelievable examples: in Mobagatown users have created over 530,000 novels and there are over 26,000 songs made by users themselves. Moreover users create their own recipes and upload + share their own karaoke videos. A more recent services launched in February 2009 allows users to upload their own illustrations made on their mobile.

China = Tough
After introducing DeNA Wang continued to talk about what DeNA is doing in China, and as it turns out: it’s not much. DeNA has been ‘active’ in the Chinese market for over 2 years, mainly doing market research. But Wong seems to be rather humble, almost pessimistic about DeNA succeeding in China. The main reason he mentioned for his rather negative attitude is that in contrary to Japanese users, in China users are not willing to pay for content.

As a result DeNA will start attracting users the same way they did in Japan 3 years ago: by offering free games and setting up a free mobile gaming portal. “In China our strategy will be creating big games with big brands and make money through virtual items” explains Wang. But this will not be the main focal point; offering games will merely be a tool for attracting attention as “we are very good in mobile social services, so we will try this first”. Besides social services another point of focus will be mobile commerce services, Mobaoku is the largest mobile auction site in Japan “we will try this in China also, but it will be hard.” Wang understands that a key factor for success in the Chinese market is flexibility. He thinks DeNA has always been quite flexible, unlike most other Japanese companies that traditionally do not want to change. Other than the fact that Chinese mobile users are not willing to pay for content a whole range of challenges were discussed:

  • In Japan there are only a few devices so the market is pretty standardized. In China there are many mobile device players: screen sizes differ, operating systems differ, which makes it a lot harder.
  • In China the competition is much harder compared to Japan. Japan is small and closed. “Here we need to start from the beginning” explains Wang.
  • In November 2008 mobile traffic exceeded PC traffic in Japan. This is the result of fixed data plan. It will likely take a while before the 3 mobile operators in China start offering fixed data plans.
  • China mobile launched a mobile SNS last month. This indicates that they are willing to interfere in the mobile services market which is a big threat for all mobile service providers. The big operators have all the research, a huge user base and the power to change the fee for their own good. Wang: “I worry about this, but I also think there is always need for other services.  Therefore we have to differentiate.”

Wang concludes with: ”We will not be able to copy our success. We are here to meet friends and share insights. This market is very different so we need new ideas for China.

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