Google's OS is exploding across Japan and it could open the region to Western developers, says Levi Shapiro.
Picture a market where iPhone zooms to number one and rival OEMs react to declining market share and diminishing ARPU by embracing Android. Sounds familiar?
Well, this is not the West but Japan.
Market leader NTT Docomo, which turned down the iPhone three years ago, is now saying “Konnichi Wa” to Android.
And its approach is providing a rare opportunity for Western content companies to penetrate the Japanese market – and may be a roadmap for other carriers.
Android, as ME readers will know, is on a tear. At time of writing there were 24 Android devices available from 61 operators in 49 countries, and 60,000 handsets shipping every day. At that rate, there will be 25 million Android handsets in use this year.
According to Strategy Analytics, Android has 8.3 per cent of the global smartphone market, against 43.2 per cent for Symbian, 19.9 per cent for RIM and 16.1 per cent for Apple. It’s Windows, at 6.8 per cent, that Android is hitting hardest.
What’s happening with Japan in Android represents a potential future scenario for other countries. The market is saturated, with net additions growing at three per cent per year.
Docomo controls half of the market, KDDI 28 per cent and Softbank – with its iPhone exclusive – has 19 per cent.
Half of Japanese customers pay for unlimited data plans (compared to only 25 per cent in the US) and more than 90 per cent use 3G. In fact, Docomo is the world champion in data revenue, with over $16 billion earned last year (Chetan Sharma Consulting).
Moreover, Softbank became the first major operator (outside of the Philippines) to earn more revenue from data services than voice.
But it hasn’t been all cherry blossoms for the Japanese carriers. Willcom, the small operator that started the unlimited flat-rate phenomenon, filed for bankruptcy last month.
At Docomo, aggregate ARPU for FY 2009 plummeted 6.5 per cent and market share sunk an alarming 1.1 per cent. Throw in a good old fashioned price war (led by Softbank) and the need for innovation becomes clear.
Docomo has chosen to innovate through Android.
It has aimed to stimulate innovation through the Android Developers Workshop in Palo Alto, which I helped organize. The event united Docomo’s top technical brass with leading content providers and developers like Getty Images, Reuters, MySpace, Foursquare, Shazam and 15 others.
At the workshop, Minoru Etoh, MD of Docomo’s Service and Solution Development department, promised support for Western developers and a slice of Docomo’s annual $1 billion R&D budget. This support includes the following:
* Linguistic translation
* Application porting
* Adaptation for Japanese culture
* QA testing
* Introductions to experts for ‘Japanisation’ of applications
* Operator specific APIs in Q3 2010
Etoh says: “So far Android in Japan has been calm. Though I believe we will see another avalanche to smartphones, when looking at the US smartphone market share of 30 per cent and the popularity of iPhone among the innovator segment of urban, 20-30 year olds.”
His view aligns with forecasts from Infinita that Smartphone penetration in Japan will double to 30 per cent in the next two years. In this scenario, Android will achieve five million cumulative sales by 2011, catching up with iPhone, which has already sold more than two million units.
The process kicks into high gear next month with the world launch of the Sony Ericsson Xperia X10 on Docomo.
In terms of apps, Google launched support in Japan for paid Android applications last October, but only a handful of the 30,000 available have been ported to Japanese. Clearly, Docomo recognises this will not occur without proactive support from the carriers. It plans to hold a second Android Developers Workshop in New York in June.
It already has support from developers such as Israeli mobile start-up Waze, which is making a crowd-sourced, ad-supported, community navigation tool for the operator. Meanwhile Scott Goldberg, director of mobile business development for MySpace, sees Android as a means to gain ground on the number one Japanese social network Mixi.
He says: “Android is such a flexible platform and provides so many cool features...things like desktop widgets, live wallpapers, quick search box, etc. You can design and build a front-end on Android that comes at one hundredth the time-to-market as building your own platform. Android is perfectly tailored to small, agile developer shops and large giants like Docomo”.
Docomo is not the only market for Android in Japan. KDDI will launch the Sharp ISO1 mobile internet device (MID) in June and link its ‘Au One Market’ to Android Market. Integration to KDDI’s billing platform will begin in late August. Number three player Softbank will also launch the HTC Desire later this month.
Of course, Google is hoping that such activity with benefit the Japanese mobile ad market, and expand it beyond the $800 million it generated in 2009.
Android represents a rare opportunity for Western content owners in the Land of the Rising Sun. Savvy developers should seriously consider support programs from Docomo and other carriers. This could be your chance to become ‘Big in Japan’.
* Levi Shapiro is a partner at TMT Strategic Advisors. Contact him as levi@tmtstrat.com
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