Yoko Tsukamoto buys plane tickets, reads the newspaper and checks
her e-mail online - not unusual for a modern Japanese woman. Except that
she does not use a computer - all of her online transactions are through
her mobile phone.
As a television producer, most days she is either on the road or
organising her next trip, so there’s little time to read a newspaper.
Looking up the latest news on her mobile phone saves her time.
Tsukamoto is one of more than five million Japanese who subscribe to
I-mode, the world’s largest internet-capable mobile phone service
operated by NTT Docomo. The internet in Asia is poised for explosive
growth - but not where you might expect it.
’The growth of the internet in Asia will be much faster than in the
West,’ Juliette Chow, an analyst at Lehman Brothers in Hong Kong, says.
’Because of the high penetration of mobile users and because the Asian
telecommunications infrastructure is more advanced than in the US or
Europe, it will grow far more quickly.’
In many countries the internet population is doubling each year. There
are nearly 44 million people online in Asia - a number some expect to
increase fourfold over the next several years.
In Japan, the largest internet market in Asia, about 18 million people
are online. There are several million more in Hong Kong. Add another 18
million in Korea and millions more in Australia, Thailand and the
One in two Singaporeans has access to the internet.
Most observers agree that the region’s history and geography will shape
the internet’s development in different ways from the US or Europe.
Asian countries have rebuilt their economies over the past 50 years,
installing the information highways essential to supporting higher rates
of internet use.
Singapore has spent about pounds 123 million in recent years on building
a high-speed, broadband network, and Korea was the first country to
approve code division multiple-access technology for mobile phones that
promise better quality access and a wider range of services than a
traditional cellular connection.
It’s not all of benefit to consumers, however. Japan has the highest
internet connection fees in the world, thanks to the decades-long
dominance of Nippon Telegraph and Telephone, which controls 98 per cent
of the local call market.
But there are great opportunities for mobile e-commerce, which avoids
high access costs and is ideally suited to the region’s
Asia is densely populated and increasingly urban. More crucially,
because it is about two to three years behind the US in internet use,
Asia benefits from the latecomer’s advantage. Executives are loath to
make the same mistakes as their US and European rivals although the
recent depression in internet stocks bodes ill.
Many of the differences emerging involve how people get online. High
access charges have discouraged people from logging on from home. In
Japan, where personal computer ownership is lower than in the US, people
use mobile phones, portable internet terminals and computer game
consoles to get on the net.
Starting next year, Sony plans to provide internet access on every
PlayStation 2 games console it sells. From one terminal customers can
send e-mail and download music, software and videos. With a console
costing around pounds 246, this makes the internet look like a bargain.
Sega already offers a modem on its Dreamcast games console and Microsoft
is believed to be working on a similar project.
’The way this market is developing in video games consoles they should
be on the same level with PCs in terms of relevance,’ Luigi Limentani,
an analyst at Nikko Salomon Smith Barney in Tokyo, says.
Analysts also expect terminals in convenience stores could prove popular
in markets such as Hong Kong and Japan. These terminals - where
customers can download music, make hotel reservations and play the stock
market - bypass high phone charges and eliminate concerns common in Asia
about disclosing credit card numbers online. They also turn the corner
store into an e-commerce trading post; customers can order books online
on their way to work and pick them up from the same convenience store
Limentani says: ’There is a convenience store 100 metres from everyone
in Tokyo. Convenience stores are the Trojan horse for bringing the
internet within the reach of the people.’
However, despite the differences with the US and Europe, the
opportunities for e-commerce can be found in familiar places. The early
favourites are in online banking, auctions, entertainment and services.
Marketing will follow as other e-commerce initiatives develop.
More than 40 per cent of retail stock and bond trading in Korea is done
over the web, giving it one of the largest online brokerage markets in
the world, according to Lehman Brothers. There, the leading brokers
include Daishin, LG and Samsung Securities.
In Hong Kong, online brokers such as Boom.com, the area’s first purely
online trading house, are making gains. And Legend, China’s leading
computer company, revealed plans to sell set-top boxes that would allow
people to trade equities online using a television set.
In Japan, Nikko Salomon Smith Barney estimates that online accounts
could number 1.5 million by the end of this year and trigger a painful
consolidation in the industry. There are already more than two dozen
online brokers, all charging commissions that are a fraction of what
they were a year ago.
The internet has precipitated deeper changes in Japan’s banking
Softbank, the country’s largest internet company, has signalled its
intention to move into banking. Sony and Ito Yokado, a Japanese
supermarket chain operator, have also applied for a banking licence.
Analysts say this may have serious consequences for traditional
Online auctions are fast replacing traditional newspaper advertisements
as the place to sell unwanted items or pick up a bargain. Japan’s
Rakuten online market, as well as Yahoo! Japan, are gaining popularity
with younger customers. In other countries such as Taiwan online
shopping malls are expanding.
This growth is triggering expansion in other parts of the economy,
including in technology jobs. Muneaki Ueda, the vice-president of
Pasona, Japan’s leading temporary staff agency, says he has been
over-run with requests for information technology workers since last
year. ’Business is better than ever,’ he explains. ’Almost all
corporations are outsourcing more work than in the past and the internet
is changing the paradigm of work altogether.’
Recruit, a top publishing company, claims that nearly every recent
graduate in the country looking for a job with a private company has
registered with its online employment agency. Its website boasts 12
million page views a day.
But many people believe entertainment - movies, music, computer and
travel - will become the largest areas of revenue online. Bodysonic,
once a manufacturer of vibrating chairs before it reinvented itself as
an internet company, transmits ghost stories on the mobile phone network
in Japan. The service receives several thousand calls every day.
Although most Asian internet companies with e-commerce facilities are
still in their infancy, there are few clear winners. And in internet
time, where entire industries can flourish or perish in a matter of
months, the long-term winners and losers may be hard to predict.
The names to watch include: Yahoo!, the US group which has been
gathering partners in Japan, Korea, and China; Softbank, the Japanese
internet conglomerate headed by Masayoshi Son; and Pacific Century
CyberWorks, the Hong Kong-listed company headed by Richard Li, son of
tycoon Li Ka-shing. Microsoft is also likely be a player in the
However, in Asia as elsewhere, the internet is not just an economic but
a cultural phenomenon. Although the region has produced the most
impressive economic growth in the world, it has also resulted in
incredible inefficiencies. The internet promises to eliminate layers of
costly middlemen by allowing companies to negotiate through
’The consumer is going to benefit - especially in Japan,’ Limentani
says. He expects business-to-business e-commerce to eliminate 75 per
cent to 95 per cent of the intermediaries involved in retail sales.
Business-to-business e-commerce is ideally suited to Asia where
manufacturing led the economic recovery after World War II and suppliers
have traditionally been closely involved in the manufacturing process.
Business-to-business e-commerce sales are expected to rise from dollars
2 billion in 1999 to dollars 32.6 billion in 2003, according to the
International Data Corporation.
Another important effect of the internet is on the social roles of men
and women. By creating new labour demand and bringing entire stores to
consumers’ computer screens, the internet elevates women’s status in the
new economy. About 40 per cent of new internet users in Japan are women,
according to the interactive agency, Flying Colour.
Women are also the biggest spenders in Japan, because men often leave
the family finances to their wives, and younger women are choosing to
stay single longer to bankroll their shopping sprees and trips
Women are behind some of the most popular internet ventures - the I-mode
phone that Tsukamoto uses was invented by a woman. And unlike banks or
trading houses, many internet companies eliminated gender-based hiring
and promotion policies nearly a decade ago. In the fast-moving battle
for dominance in the internet world, companies such as Fujitsu and Sony
were desperate for capable employees regardless of gender. Some even
hope that this will make it easier to find a marriage partner.
As for Tsukamoto, the internet is making it easier for her to connect to
her heritage. Her latest goal? To buy tickets for kabuki, or traditional
Japanese theatre, online using her mobile phone.
THE OUTLOOK FOR ONLINE ADVERTISING
Todd Newfield, the chairman of Flying Colour, an interactive planning
and creative agency based in Tokyo, expects online advertising revenues
in Asia to grow to dollars 1.25 billion by 2003, from just a fraction of
that number today. Nikko Salomon Smith Barney predicts that internet
advertising revenue will exceed that of posters by 2003, reaching a
total of Y389 billion (dollars 3.78 billion) by 2005.
If these predictions become reality the implications are enormous for
marketing in Asia, especially as global advertising groups such as WPP
and Interpublic strengthen their presence by investing in local
Many observers believe companies will stick with traditional agencies
because of historic relationships and important connections with
But others predict the internet could offer huge opportunities for
Chinadotcom, the Hong Kong-based portal, has been raising revenues
through its advertising activities.
Paul Smith, an analyst at HSBC Securities in Tokyo, says: ’The internet
will accelerate change in the industry and encourage consolidation among
agencies because the new entrants have the skills to deal with
Dentsu and Hakuhodo, the first and second-ranked Japanese agencies,
created internet divisions only late last year. Executives admit they
are concerned about the possible arrival of experienced interactive
agencies from the US and Europe which offer better services online at
Already, American companies such as ValueClick are gaining ground in
Japan. New Japanese companies, with names like CyberAgent, are cropping
up every day to serve a growing number of internet start-ups.
’The issue is whether new economy companies will use Dentsu or not,’
Jonathan Hendriksen, the president of ValueClick Japan , says. He
expects revenue growth to jump next year after e-commerce companies
mature and Japanese consumers do more shopping online.
According to Hendriksen, ’the market is still trying to sort itself out.
It is a mixed bunch - there are gems and rocks.’