From our partner in Beijing, Benjamin Joffe, plus 8 star, innovation arbitrage, mobile & internet.
How was your year 2008? If you are
with a startup, you will probably have quite a story to tell to your
grandchildren already. To take a step back and prepare for 2009, I will draw
from my previous columns and share eight key ideas from 2008 as
we just entered the Year of the Ox.
1. Social networks are a business, and mobile ones yield
top profits
Despite what we still hear (”it’s not a business,” “it’s a fad,”
etc.), social networks are already a proven business (at least in some parts of
the world). In December, GREE in Japan was the fifth social network to go public
on the planet (for $1 billion, thank you very much), and the fourth
in Asia. Two of them (GREE and DeNA) are mobile-centric. All the Asian ones
(including Mixi in Japan and Tencent in China) are profitable with revenues
ranging from $100 million to $1 billion, and profit margins between 30% and 60%.
The king of revenue models for mass-market B2C social networks is
personalization with digital goods. Of course, if the valuation is purely
based on online ads, then quite a lot is left out of the picture…
2. Online communities are not only for
teens
In Japan, the service called So-net
M3 is an online community for medical doctors. It is also a listed company
and recorded $70 million in revenues in 2008 (mostly from big pharmaceutical
companies advertising on it). Most interesting is how it makes the industry less
dependent on medical representatives as middle men, bringing huge savings. Which
target group can you bring together? Which industry can you disintermediate or
make more efficient?
3. E-commerce is the next growth
engine
The phrase “Web 2.0″ now seems to have bad karma (you hardly
hear it anymore) and most of the “user-generated” and “community” sites showed
their true B2B ad-sales face. Page views are great but at the end of the day
what counts are sales. Conversations around brands will force them to be part of
the conversation and new models such as “social commerce” blended with SNS or
video sharing sites like Nico
Nico Douga in Japan, or “meta-shopping” such as Naver’s “Knowledge Shopping”
are showing new ways of selling products along digital content and conversation.
Mobile will play a key role: in Japan, mobile
commerce$7.2 billion, twice the mobile content market, close to 10 times the
mobile advertising market and almost as much as China’s total
online commerce market! is already worth
4. Privacy might become a
luxury
Have you been tagged on a picture? Did you know the startup
which won the competition this year at LeWeb, Europe’s largest Internet
conference, was a startup from Ukraine called Viewdle who can recognize faces in
videos. Worried? The only way to make things better might be to update the legal
framework in your country. Some more in our previous “Dark
Age of Transparency” column.
5. Online gaming is the most popular “21st century” form
of entertainment - and it is just getting started
It is already bigger than online ads in China,
and still growing at an alarming rate. It matters little that many of the best
content and business models came from Korea with companies like Nexon, NC Soft
and Hangame. If heavy-duty MMORPGs are still of fashion, the top money seems to
be in casual and gender-balanced games such as board games, music games or dance
games. Asian companies have a great head-start, will they be able to make
inroads in richer Western markets or leave the growing cake to local
players?
6. 3D environments will mix with 2D - is it Web
3.0?
The life after Second Life is coming with 3D communication tools
and worlds for kids, for teens, for the fashion-conscious, for socializing, for
brands, for education, for mobile or custom-built for brands! Several are based
out of Asia where the online gaming experience helps. Among them: iPart,
Frenzoo, Cmune, 1D, iLemon (China), Daletto World, Disney Wonder Days, PRUM,
Meet-me (Japan), PuppyRed, Nurien (Korea). The key to mass-market adoption will
be in-browser presence and integration within existing services such as large
SNS or E-retailers. More in “The
Problem With Virtual Worlds“.
7. The new and improved mass media
Korea was reportedly the first country to have its population
spend more time online than watching TV, apparently Australia
crossed the line too. How about your fellow countrymen? Advertising dollars
will be shifting gradually to online where you can tell “which 50 percent of
your advertising is wasted.” Will this be able to sustain services such as
online video sites whose usage grows and running costs seem to grow faster
than revenues?
8. Startups will go pragmatic
If you could still sell a Web 2.0 idea to investors in 2008,
entrepreneurs will have to show not only usage but also revenues. It also means
that copycats will not get automatically financed unless they have proven
business cases. Lucky companies like Xiaonei and Kaixin in China who raised
large amounts early enough will have time to experiment various models while
smaller players will need to find their silver bullet or become “too small to
die.”
+8*. 2008 was the beginning of the Age of
Convergence
E-commerce, SNS, virtual worlds and online games are coming
together, blurring the frontiers between categories, Web and mobile, online and
offline. Next time you meet up offline with your online gaming or discussion
group friends, or buy something on the Web based on a product recommendation you
saw associated with a video service, think for a minute about how much you
lifestyle has gone digital!
With our very best wishes and
looking forward to more innovation in Asia in 2009!
