Monetizing Mobile Social Networks

Christopher Billich, Infinita Inc.

Social Networking Conference
Tokyo, May 8, 2008
Japan Mobile Market
Key Differences

Same cost
for On- and “Free” 80% 3G
★ User Experience Level Off-Deck Messaging penetration
access

Operators
Operators
control All handsets
★ Operator-Handset Maker handset SIM-locked
pay handset
Relationship Level makers
makers

Operator
★ Operator Business Model Email, not Revenue (Open)
Level SMS Share favors Standards
CPs

★ Regulatory/Government Competition on Network Technologies

Level
No spectrum license costs

© 2008 Infinita Inc.

Mobile Social Networking
Awareness and Adoption among Mobile Users (in %)

No Awareness
Awareness, but no Adoption
Adoption

Source: Impress R&D, September 2006/2007

© 2008 Infinita Inc.

Mobile Social Networking
mixi

★ Operated by mixi Inc.

★ On-deck on 2 of 3 carriers
★ Mobile and PC Social Networking Site
★ Business Model: Advertising (>90%),
Premium features (<10%)
★ #1 service in Japan SNS market
★ More than 13 million users
★ 15-20 billion PV/month
★ More than 60% of traffic generated via
mobile (up from under 20% 15 months
ago)
★ Key Points
★ Invitation-only
★ Clear mobile/PC differentiation
Source: mixi Inc.

© 2008 Infinita Inc.

Mobile Social Networking
mobagetown

★ Operated by DeNA Co., Ltd.

★ Off-portal site
★ Free, mobile-only site combining games +
social networking + avatars + mobile
commerce (and more)
★ Goal: #1 mobile portal in JP
★ Business Model: Advertising/mobile
commerce
★ More than 6m users in 18 months (now
more than 10 million)
★ ca. 18 billion page views/month
★ Core Enabler: Virtual currency
“MobaGold”

Source: DeNA Co., Ltd.

© 2008 Infinita Inc.

Mobile Social Networking
mobagetown

© 2008 Infinita Inc.

Mobile Social Networking
mobagetown: Business Model

Source: DeNA Co., Ltd.

© 2008 Infinita Inc.

Mobile Social Networking
mobagetown: Revenues, Registered Members, Page Views

Revenues in Reg. Members in 9.87 Page Views in 17,924

6,000 10 9.43 18,000
¥ million million million
9.03
5,162 9 8.65 16,000
8.13 14,927
5,000 7.79
4,628 8 7.43 14,000 13,383
6.89
7 6.44
4,000 12,000
6.03 10,793
6 5.46
3,135 10,000 9,239
5 4.84
3,000
2,507 8,000
4
2,000 6,000
1,562 3

2 4,000
1,000
1 2,000

0 0 0
FY06 Q4FY07 Q1FY07 Q2FY07 Q3FY07 Q4 Jun 07 Sep 07 Dec 07 Mar 08 Apr 07 Jun 07 Sep 07 Dec 07 Mar 08
Source: DeNA Co., Ltd.

© 2008 Infinita Inc.

Japan Advertising Market
Advertising Expenditures across Major Media 2007 and YoY Changes 2006/(2005)

+21.3% (+28.6%)
Mobile: only 1%
+3% (+0.9%) share, but
+59.2% (+35.4%)
growth

-5.2% (-3.8%)

-4% (-1.3%)

-4.2% (-1.9%)

+10.8% (+11.7%)
-0.9% (-1.2%)

Sources: Dentsu Communication Institute, February 2008; Production Costs + Media Spendings

© 2008 Infinita Inc.

Mobile Content vs. Mobile Advertising Revenues
2003-2007 (in US$ billion)

Mobile Advertising ★ Mobile Content revenues growing at

Mobile Content average annual rate of +17.3% and
slowing (last: +10%, est.)
★ Mobile Advertising increasing +56.5%
yearly and accelerating (last: +59%)
★ Advertising/Content Revenues Ratio
shifted from less than 1:20 to more than
1:6 within past 5 years

Mobile Content and Mobile Advertising Revenues in US$ billion

Source: Mobile Content Forum (July 2007), *Infinita Estimate (May 2008)

© 2008 Infinita Inc.

Mobile Advertising Market
Mobile Advertising Revenues, 2000-2011 (US$ million)

★ Mobile Advertising revenues to

almost double again within next 4
2007 actual figures exceeded years
Dentsu’s own previous estimate ★ Crossing the US$ 1 billion threshold
(US$ 556 million) by 12% by 2010
★ Mobile still undervalued as an
advertising medium by a factor of 4
(2006)
• Media Usage Share 4%
• Advertising Expenditures Share 1%

Sources: Dentsu Communication Institute (April 2007, estimates)

(February 2008, historical data)

© 2008 Infinita Inc.

Mobile Advertising on mobagetown and mixi Mobile
Examples: Banner Advertising

★ Compensation model: CPM, weekly

★ Pricing: US$ 3,000 to US$ 9,000
★ Av. CPM: US$ 3-6
★ Targeting: Operator, Gender
★ CTR (mixi): 0.2-0.4%

Sources: DeNA Co., Ltd., mixi Inc.

© 2008 Infinita Inc.

Mobile Advertising on mobagetown and mixi Mobile
Examples: Exit Screens

★ Compensation model: CPM, weekly

★ Pricing: US$ 4,500 to US$ 7,000
★ Av. CPM: US$ 4.5-7
★ Targeting: Operator, Gender
★ CTR (mixi): 0.7%

Sources: DeNA Co., Ltd., mixi Inc.

© 2008 Infinita Inc.

Mobile Advertising on mobagetown and mixi Mobile
Examples: Mobile Email Advertising (Newsletters)

★ Compensation model: CPM

★ Av. CPM: US$ 10 (Newsletter) to
120 (Standalone Messages)
★ Targeting: Operator; Gender, Age,
Region (at premium)

© 2008 Infinita Inc.

Mobile Advertising on mobagetown and mixi Mobile
mobagetown x Coca Cola Tie-up

★ Advertiser: Coca Cola

★ Campaign Date: 05/07-06/07
★ Campaign Outline
• DeNA created special Coca Cola-
branded version of mobagetown,
accessible only to double-registered users
of mobagetown and Coca Cola Mobile
• Reach top scores on Coca Cola-branded
games to receive branded avatar items
• Coca Cola-branded Decomail graphics to
use in mobile emails to friends, thus
spreading awareness for the campaign
• “Coke Character” with avatar and blog
Coca Cola/mobagetown Tie-up Site • Campaign extensively promoted via tie-in
Source: Nikkei
with Coca Cola “The Coke Side of Life”
TV campaign

© 2008 Infinita Inc.

Mobile Advertising on mobagetown and mixi Mobile
mobagetown x Coca Cola Tie-up

★ Results (first four weeks of campaign)

• Almost 1 million sign-ups for Coca Coca
mobile site
• 185 million page views
• 5.6 million page views on Coke character
blog page alone
• 350,000 users connected with Coca Cola
character as friends
• 190,000 comments posted to the Coke
character blog
★ ...and the campaign lives on one year later

Coca Cola-branded version

of mobagetown (above),
branded games (top right),
branded Decomail (left)
Source: DeNA Co., Ltd.

© 2008 Infinita Inc.

Mobile Advertising on mobagetown and mixi Mobile
mobagetown x UNIQLO Tie-up

★ Advertiser: UNIQLO
★ Campaign Date: April 2008
★ Campaign Outline
• Download coupons for apparel retailer
UNIQLO and redeem for discounts on
relevant items at participating UNIQLO
stores
• Exclusive avatar items corresponding to
the goods purchased via entering the
unique product ID from price tag on
mobagetown
• Branded game, goal: “try on” the outfits
that are being promoted as part of the
campaign by jumping up to catch clothes
flying out of a clothes dryer

UNIQLO-outfitted Avatars and Branded Game

Source: DeNA Co., Ltd.

© 2008 Infinita Inc.

Mobile Advertising on mobagetown and mixi Mobile
mixi x CC Lemon Tie-up

★ Advertiser: CC Lemon (Softdrink)

★ Campaign Date: May 2008
★ Campaign Outline
• CC Lemon “Corner” set up on mixi
Mobile
• Branded games (Flash Lite)
• Branded profile backgrounds (“mixi
Collection”)
• “Keitai Soap Opera” (mobile novel)
published in daily installments

Source: mixi Inc.

© 2008 Infinita Inc.

Mobile Advertising on mobagetown and mixi Mobile
mixi: “Login Jacks” and Promotions

★ Login Jacks: Fully branded

versions of mixi Mobile login
Page linked to promotions
within the site (sweepstakes
etc.)
★ Promotional campaigns that
feature limited-edition products
and branded content

mixi Login Screen Jacks (left) and LAWSON promotion (right)

Source: mixi Inc.

© 2008 Infinita Inc.

mobagetown
Revenues Breakdown by Segment

Banner/Email Advertising Revenues from <18 yrs segment

Pay-per-performance Advertising
Avatar Item/Virtual Currency Sales

21% 100%

30% 70%
32%

47% 16% 84%

Source: DeNA Co., Ltd. FY2007 Q4

© 2008 Infinita Inc.

Avatar Items/Virtual Currency Sales
mobacasino

★ Launched in early April 2008

★ Virtual casino featuring multi-player
Roulette, Black Jack and Poker
★ To play, users need “Casino Coins” which
can be obtained in exchange for Moba Gold
★ User rank rises with play frequency, enables
access to higher, more exclusive floors of
the casino
★ Goals
• Deliver gaming content more appealing
to adult audience
• Create additional “outlet” for MobaGold
currency beyond avatar items

Source: DeNA Co., Ltd.

© 2008 Infinita Inc.

Avatar Items/Virtual Currency Sales
mobacasino

“Insert
MobaGold”

Source: DeNA Co., Ltd.

© 2008 Infinita Inc.

Avatar Items/Virtual Currency Sales
Freemium Games

★ From late April 2008, DeNA will

release exclusive mobile games
developed in cooperation with top-
tier games publishers
★ Adopted from well-known role-
playing and simulation titles from
other platforms
★ Basic play is free - MobaGold
necessary to unlock multi-player
mode, buy in-game weapons and tools
★ Proceeds from sales shared with
publishers (rather than licensing)
★ Goals
• Deepen games portfolio
• Create additional “outlet” for
MobaGold currency beyond
Source: DeNA Co., Ltd. avatar items

© 2008 Infinita Inc.

Mobile Advergaming
Dentsu/Robot “TsuiTsui”

Source: Dentsu

© 2008 Infinita Inc.

mobagetown
Evolution from Social Networking/Games Site to Mobile Portal...

Source: DeNA

© 2008 Infinita Inc.

mobagetown
...and Mobile Search Engine

“For search, too:

mobagetown.”

“A new
experience in
mobile search.”

© 2008 Infinita Inc.

Mobile Search/Content-Matched Advertising
Search-related vs. Non-search-related Mobile Advertising Revenues, 2007-2011 (US$ million)

Search ★ Mobile search-related revenues

Non-search accounted for 16% of mobile
advertising last year...
★ ...and will increase 5-fold to reach
more than 60% of all mobile
advertising revenues by 2011

Source: Dentsu Communication Institute (April 2007)

*Note: graph based on 2007 estimate (US$ 556 million),
actual Search-/Non-search data for 2007 (US$ 621 million) not released yet

© 2008 Infinita Inc.

Mobile Search/Content-Matched Advertising
...on mobagetown and mixi Mobile

★ Format: Text ads

★ Compensation model: CPC
★ Pricing: bidding mechanism (price set by
advertiser)
★ mobagetown
• Search: proprietary solution
• Content-matched ads: Overture
★ mixi Mobile
• Search: Google
• Content-matched ads: Overture

Overture-delivered content-matched ads on mixi Mobile communities

Top of page (left), bottom of page with Text Ad (right)

© 2008 Infinita Inc.

Mobile Search/Content-Matched Advertising
Local Search Advertising on mobagetown

★ Formats: Text ads relevant to search area

★ Compensation model: CPC
★ Pricing: bidding mechanism
★ Location-based advertising network
“AdLocal” service provided by Cirius
Technologies, Inc.
★ Advertisers can specify proximity (during
an address- or map-based search)
★ Targeting: genre/product category, time
of day, day of the week, area radius (1 to
10 km), weather (e.g. “show my
advertising only if it is raining”)

Source: Cirius Technologies

© 2008 Infinita Inc.

Key Points

★ Mobile Social Networking

• Still lots of room for growth, but latecomers facing strong lock-in effects
• MoSNS rapidly becoming a feature, not a service
• Users gravitating towards using MoSNS as search resource

★ Mobile Advertising
• Baby steps along a rocky road - but great potential
• Moving towards deep tie-ups and branded content
• Shifting from CPM to Pay-for-performance
• Search and Content-Matched Advertising gaining significance

★ Revenue Streams beyond Mobile Advertising

• “Freemium” content and services outside core SNS functionalities

© 2008 Infinita Inc.

Infinita
Scope of Services

Non-domestic Clients

★ Mobile and PC sites/apps ★ Outbound market intelligence

production and consulting
(foreign clients for
JP market)

Technical Research and

Development Consulting

★ Inbound market intelligence

★ Mobile and PC sites/apps and consulting
productions ★ Domestic market intelligence
(domestic JP market) and consulting

Domestic Clients

© 2008 Infinita Inc.

Infinita
Selected Clients

© 2008 Infinita Inc.

Thank you!

www.infinita.co.jp/research
billich@infinita.co.jp

© 2008 Infinita Inc.