The Asian Markets

Yesterday I met with several diplomats from Asia (Japan, Korea, China, Singapore, Thailand and more). They came to see the incubator model here in Israel, so they visited JVP Studio which is the incubator in which GamearraY grew.

Now, I have already written about the importance of Asia, and in particular Japan and Korea in the mobile market. But when I was asked by the Japanese delegate why do Israeli companies prefer doing business with Europe and the US, my spontaneous answer was "force of habit".

Usually when asked this question, people will say "cultural difference" or something like that. And while it's true that there are huge differences in the culture, but there are also differences between Israeli culture and the US & European culture and still Israeli companies feel confident approaching these markets at early stages (and are doing quite well there...)

It is my feeling that while there is some more profound cultural gap between Asia and the western world, in the modern business world the "culture" is becoming a lesser factor, since the real "culture" guiding businessmen is actually some sort of a global "business culture". The only problem is that it takes time to these changes to be realized, and since before Asian markets were not very open to western companies, people still think that and already have the instant answer of "cultural differences".

I may be oversimplifying things, and I know that there are a lot of nuances, but still, I think that Asian markets are more open today than they have ever been, and it is worth exploring the Asian option, especially in the mobile market.

Korea and Japan - Mobile pioneers

I met today with executives from KOTRA, the commercial section of the Korean embassy. It made me think (again) about the the gap between the western markets (US/Europe) vs. the Far-east Asian markets, and Especially South Korea and Japan (China is also an interesting place to look at, but entirely different).

I think that there's a huge potential in linking western innovations to the Asian markets. Now, don't get me wrong, these markets have also enough innovation of their own... But still it seems to me that some of the mobile content products I have personally seen in the past year could be a perfect match for these markets, but instead the developing companies are first targeting the western markets, since they are easier to reach, which is of course a sound decision, but it seems that along the way the Asian opportunity is forgotten altogether.

It seems that advanced mobile content services are greatly adopted by the Japanese and the Koreans. And it all starts from the handsets, if you have an antique handset, you can't download any content at all. Handsets in Korea and Japan are more sophisticated, but this has nothing to do with their availability or prices.

Nowadays, you can get a great device even in Europe/US, but problem is that people are just not "buying it"... It seems that a rather small proportion of the population even cares about the advanced features. I really don't know the Korean/Japanese cultures to be able to figure out why there's such a huge difference, but I guess it's worth exploring.

It seems that these cultures have pioneered the advancement in mobile content. The only question when evaluating a product that launched successfully in Korea/Japan is whether it will be successful in western markets (with a certain delay) or will it not be applicable at all. Take Cyworld for example (The link here is to the US site just in case you are not fluent in Korean...). This virtual community built by SK Telecom and launched in Korea back in 1999, is something we are just now starting to see in western markets, and it seems to connect quite well with the whole personalization trend across the web and the mobile.

Now let's look at the numbers: In a research by Juniper the Asia Pacific region which has dominated the market since its inception is forecast to contribute 38% of cumulative revenues in the next 6 years. It also mentions that Japan and South Korea are the most dominant within that region.

By the way according to the research, Europe is the second region with 31% and North America comes in third with 22%. However, in terms of the number of content downloads, Asia is and will be accountable for 60% of downloads in the world (!). The gap between the numbers (38% vs. 60%) is due to the lower prices of content downloads there (mostly influenced by the other economy factors there).

According to another research revenues from mobile gaming this year only in South Korea by itself will exceed $275M. And this is where the worldwide market is estimated at $1B-$3B, which means that's approximately 10%-30% of the worldwide market for a single country.

These numbers are amazing, and what's more amazing is that western companies don't find the time/resources to explore opportunities there. However, as Trip Hawkins, the CEO of Digital Chocolate (who also founded EA, the #1 gaming company, valued at more than $15B) says in a recent interview: "If you look at Japan and Korea, you can see where the world will go." BUT: "The markets of Japan, Korea, and China are relatively closed. You can only really do business if you are located there, and you also have to be pretty intimate with the cultures. Most mobile companies are not large enough to operate like a Microsoft."

The good news are that some companies do find a way to pass these barriers. For example, Newt Games, a french company, which launched Mogi Games in Japan (with KDDI). Mogi is not only an M3RPG (=mobile MMORPG), which is already a challenge in western markets nowadays, but it also adds an LBS aspect to the game. Mogi players have to collect virtual items that are "placed" in physical locations. For instance, an apple can be placed in a specific address in Tokyo, to get that item (which you see on the map in your phone) you would have to actually go to that address, or contact a teammate that is close by. I can't begin to describe the different challenges here in western markets. Just defining the audience that would be interested in all these things (or even finding them...) would be quite difficult.... However, in Japan it all makes sense.

Anyway, I can write forever on this subject, so I'd better stop here, but I am planning on researching this subject more in-depth. If I'll have something new - you'll hear about it first...