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Japan: A Hungry Market
That's Internet-Ready
By Spencer Tall
Companies that are Internet-related are proliferating quickly in the U.S., and although the domestic market is nowhere near saturated, these companies would be wise to take an early look at opportunities in Asia. Japan, in particular, with its rapidly growing Internet user base, is ready for new technologies.
With more than 60 million subscriber lines for a population of 120 million, Japan has the second-largest telecommunications market in the world. In addition, the Japanese have enjoyed greater success with integrated services digital network (ISDN) than has the U.S. More than 300,000 lines are in use in 2,895 service areas, primarily by businesses, so the Japanese are already somewhat Internet-ready. On-line services have gained popularity over the last two years, and their subscriber base is now nearing 3 million. As a result, the same Internet hype and excitement that has swept the U.S. has begun in earnest in Japan.
It is estimated that there are more than 2 million Internet users in Japan, and that number is growing by nearly 14 percent per month, with the majority using it for e-mail applications and Web surfing. Interestingly, most of the surfing is done on English-language U.S. sites rather than Japanese sites, fueling a demand for automated interpretation software. That's starting to change as Japan-based Web sites become more numerous, as well as more interactive and interesting. Companies like Fujitsu, with its Teleparc Web site, are taking an active role in creating sites for information exchange and shopping services. Access to these Web sites is free now, but as usage grows, they are expected to move to an advertising-and-subscription model.
In Japan, the majority of Internet usage occurs outside the home. This is in part because home computing is a relatively new concept there, and in part because the cost of an extra line into the home is exorbitant (roughly $700 per line for installation and 10 cents per three-minute local call). The proposed breakup of Nippon Telegraph and Telephone Corp., which is still in the discussion stage, and a move toward lower rates between 11 p.m. and 8 a.m. will help fuel this market's growth.
The demographic breakdown of Internet users reveals a market similar to that of the U.S. Nearly 90 percent of users are male, and the vast majority are under 30. They connect to the Net through Internet service providers (ISPs) and hybrid services offered by closed-system operators like Nifty-serve and PC-Van, Japan's largest on-line services.
The government is also heavily involved in both understanding the Internet and expanding its usage. Two ministries are currently in competition to lead the effort. Japan's Ministry of International Trade and Industry and the Ministry of Posts and Telecommuni-cations have set aside hundreds of millions of dollars to develop consumer-oriented electronic commerce. The Ministry of Finance (MOF) has also weighed in, creating a research committee last fall to study electronic payment systems. The MOF announced that it would target spring 1998 for the inauguration of such a system.
Private companies are also establishing consortiums to promote electronic networks and commerce. One of these, the Smart Islands Consortium, has recruited leading Japanese and U.S. technology companies to participate in the development of Web sites such as Smart Park, which will include spaces for shopping, entertainment and culture, as well as advertising. Plans for Edutainment Park are also in the works.
The opportunities for U.S. Internet technology firms to prosper in the Japanese market are numerous. Private consortiums and ISPs, along with government groups and corporate intranet users, are seeking new technologies, including interoperable security, language interpretation, digital imaging, 3D graphics, mapping and navigation, audio technologies, authoring tools, gaming content, payment schemes and session/hit tracking tools.
This year, the Internet and the Web will start to prove themselves as business opportunities, and Japanese companies will begin to think practically about how they can harness the power of the Internet to make their own businesses more efficient. Companies such as Netscape Communications Corp., RSA Data Security Inc., Verisign Inc. and a host of other U.S. and Japanese tools, services and content providers have been and will continue to sell their products in this hungry market. That's a good reason for Internet technology companies not to wait for the U.S. market to come into full bloom before venturing into Japan.
Spencer Tall is executive
vice president of Asia Pacific Ventures Ltd.,
a consulting and technology-transfer firm headquartered in Menlo
Park, Calif.
He can be reached at 75754,1207@compuserve.com
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Updated January 15, 1997