April 2007 - A Mobile Society

Mobile technology and usage has exploded in Japan, and marketers have responded with cutting-edge applications and campaigns. Can the West bridge the gulf?

By Tom Dellner

They sound like scenes from a science fiction film, or perhaps a futuristic thriller. A man leaves his apartment, embarking upon his morning commute. At the train station, he reaches into his pocket and removes a small, hand-held device. He pushes a few buttons on a touchpad and the train fare is purchased-payment is automatic. No ticket is issued; the conductor simply scans the device.

Walking from the train station to his office, the man notices hundreds of advertisements-on buildings, billboards, benches and on passing busses and trucks. Seeing a billboard with an image of a product that interests him, he simply points the device at the ad. A screen on the device instantly displays more information about the product. By pushing a few more buttons, he configures the product to his specifications and purchases the item-all without breaking stride. His account is automatically debited.

On the way home in the evening, he walks by a vending machine. Thirsty, he points the hand-held device at the machine and a soft drink is automatically dispensed. Arriving home, he holds the device up to his apartment door; the lock opens. He relaxes on the couch in front of the television. The hand-held device’s screen displays information about that evening’s programming, while its touchpad allows him to navigate from channel to channel.

Although these scenarios may seem like science fiction, they’re already in use in Japan. In fact, many of these technologies have been widely available for years and are central to the urban Japanese lifestyle. And the mysterious hand-held device? A typical mobile phone.

While cell-phone usage is ubiquitous in the U.S., the mobile phone is much closer to the core of Japanese life. In the U.S., while 35 percent of mobile phone users engage in text messaging (as reported by Forrester Research), only 12 percent use their phones to surf the web, according to eMarketer. In Japan, not only are mobile phones present in 95 percent of households, a full 76 percent of users browse the Internet on their phones, as reported by eMarketer. Display screens are larger, with higher resolution. Connection speeds are fast.

“Imagine having an always-on, high-speed Internet connection in your pocket,” says Gene Keenan vice president of mobile services at Isobar International, a marketing services network headquartered in London. “That’s what it’s like in Japan. Whereas in America, it’s like dial-up connection in your pocket. If you’re lucky.”

The mobile web is also far more advanced in Japan. In fact, it’s so developed that it almost doesn’t make sense to refer to a “mobile web.” “A content provider with any sort of PC web presence does so equally well on the mobile web,” says Daniel Scuka, editor of Wireless Watch Japan and co-founder of Mobikyo, a Tokyo-based media provider and business networking organization helping companies establish contacts within the Japanese wireless industry. “There’s really no distinction between the PC and mobile web.” Says Uri Weingarten, vice president of business development for Index Global Rights-a Japanese company that globally distributes rights to specialized content in the mobile and new media fields-”Companies know they have to be on their customers’ phones in order to survive. It’s that big a part of their customers’ lives. If they don’t have a presence on the mobile web, they’ll be replaced by a competitor who does.”

Text messaging is far less significant in Japan. With most mobile phone users browsing the Internet with a high-speed connection, e-mail is far more prevalent.

While the statistics are interesting-and impressive-the “wow factor” strikes when one observes these technologies, and the mobile marketing campaigns that utilize them, in operation. To a person uninitiated to Japanese mobile marketing, perhaps the most fascinating is the use of QR codes.

QR (“Quick Response”) codes-also known as 2-D barcodes-were developed by a Japanese company named Denso, first used for inventory management in vehicle manufacturing. They store information similar to barcodes, but in a square or circular dot-matrix pattern. For our purposes, think of a QR code as a hyperlink for the physical world; a marketer can place a QR code almost anywhere: on the pages of a catalog or print ad, on a billboard or the side of a bus-or even on the merchandise itself. When a camera phone is pointed at a QR code, it images and interprets the code and launches the phone’s browser, which opens to a website associated with the campaign.

“It’s the Holy Grail in a way, enabling perfect time, perfect place marketing,” says Keenan. “Imagine a billboard advertising a new car model. You love the look of the car. So, you point your phone at the billboard and it reads the QR code on the ad. Up pops a web page where you can learn more about the car, configure one to your preferences and arrange for a test drive at the nearest dealership. It’s all immediate; it’s instantaneous engagement. Without the technology, maybe 90 percent of people would forget about it by the time they got home. This allows the consumer to act on the initial impulse.”

Nowhere is the use of QR codes more prevalent than in the trendy Tokyo suburb of Shibuyu-a popular youth entertainment and shopping district. “Advertisers will hire fleets of trucks to drive around all night with a simple ad and a QR code displayed on the vehicle. A phone can read them from 20 or 30 meters away,” says Scuka. “Typically, the codes will take you to a landing page where there will be a coupon for a discount on the product and an opportunity to register for the advertiser’s weekly e-mail marketing newsletter, which will offer additional promotions and discounts. People are very accepting of these newsletters. There’s usually a second-level registration, as well, where the consumer is entitled to perhaps a steeper discount in exchange for more demographic information.”

A downside to the QR codes? “They’re ugly,” says industry expert and consultant John Hadl, whose clients include Procter & Gamble, among many others. “American advertising agencies would resist ruining their creative with the codes.” A second generation of codes-called color codes-are on the way, which are much more pleasing to the eye and could be easily integrated into the graphic elements of an advertisement.

Mobile marketing in Japan has not yet reached that eerie, almost Orwellian stage where a consumer walking by, say, a Starbucks is instantly served an ad with a coupon for 20 percent off a latte. “Research has clearly shown that consumers don’t expect or want that sort of pinpoint location-based marketing,” says Scuka. “However, there is a significant amount of more generalized location-based marketing. For example, consumers who opt-in for this service will be sent a number of offers as soon as they enter a particular shopping or entertainment district, with promotions and coupons from a variety of shops and restaurants. Since it only has to be accurate within 100 meters or so, these campaigns can utilize GPS, but they will work with basic cell location, too.”

“There’s not a lot of push-based location marketing,” says Sandy Agarwal, managing director of Enpocket, a global provider of mobile marketing and advertising services. “But we have seen many successful pull-based campaigns. For example, consumers, while browsing on their mobile phones, can click on a retailer’s banner ad and instantly receive a list and map of stores nearest their immediate location.”

Another interesting and recent development in mobile technology is the wallet phone. Utilizing a technology developed by Sony, called FeliCa, wallet phones are mobile phones with an imbedded integrated circuit (IC) chip that can be used in a number of ways: as a pre-paid cash card or as a debit or credit card. Consumers can use the so-called “wallet phones” to make fast and easy purchases on mobile or PC websites (according to Weingarten, PCs are now being developed that can read the chip-you simply swipe your mobile phone over the computer screen), or offline at retail locations or even vending machines. (The chips also can be used to transfer cash between individuals or as passkeys to enter secure buildings.)

“With the wallet phones, the Japanese carriers are now able to grow into the financial services area,” explains Scuka. “Not only is the carrier set up as a credit provider, they are opening up the platform to retailers who now can issue credit through the carrier. The consumer only sees the retailer’s brand name, not the carrier’s. This is a huge growth area for Japanese mobile-there’s no predicting how far it will go.”

Perhaps the most powerful aspect of mobile marketing, as evidenced in Japan, is the way in which the phone seamlessly connects channels in ways never before seen. It is phone, e-mail interface and Internet browser. Hyperlinks and click-to-call integrate these mediums. QR codes link to print and outdoor marketing-and even to the merchandise itself.

The phone is beginning to interact with television in interesting ways, too. “Our company, Index Global Rights, has helped develop an application for mobile phones that works essentially as a remote control,” says Weingartner. “To oversimplify, you see your channel guide on your phone. You scroll through it and click on the program you want to watch and the TV is changed to that channel. In addition, a website is automatically loaded on your phone with episode guides and more information about the show and its stars-and the opportunity to purchase DVDs and other merchandise related to the show directly from your phone.”

Color codes, mentioned above, can be read by a mobile phone directly from the TV screen. The mind boggles at the possibilities this presents, e.g., commercials that automatically load websites to your phone with the opportunity to make an immediate purchase via the wallet phone feature.

So what led to this explosion in mobile technology and usage? Call it a perfect storm of cultural, societal and technological factors. A gadget- and fad-obsessed culture. An on-the-go population largely clustered in or near major metropolitan areas, looking to be productive or entertained while commuting. Plus, an ecosystem of innovative carriers (led by NTT Docomo, which developed the world-leading iMode mobile Internet service), application developers, handset makers and marketers.

“The most important factor has to do with culture,” says Scuka. “But I’m not talking about end-user culture; I’m talking about business culture. The carriers have done an absolutely incredible job of coordinating the value chain. They’ve gotten handset manufacturers, application developers, chip developers and technology providers all lined up so that when services are rolled out, they’re clearly defined, work well, they’re easily adopted and they have integrated marketing and advertising campaigns to support them.”

This, and the power of NTT Docomo, has brought a consistency and ubiquity to the user experience. Carriers use the same technology platform. Handsets have standardized keyboards and function keys. Technologies, applications, websites and campaigns tend to work well, regardless of handset or carrier.

Contrast this to the fragmented American market, where two or three platforms are used by the major carriers. There’s little standardization among handsets. End users are often unaware or confused about their phones’ capabilities, or about the costs associated with these features. Application designers or marketers developing websites or marketing campaigns have to expend great time, effort and expense to ensure that their products and campaigns can be utilized by the greatest number of consumers, regardless of carrier or handset type. Often, this means designing to the lowest technological denominator.

Can American carriers get on the same page to provide a more ubiquitous user experience? “I think it’s unlikely,” says Hadl. “Someone would have to scrap millions-perhaps billions-of dollars spent on the existing systems. I think it’s more likely we’ll see companies develop middleware that makes it all work together. We’ll get there, but it will take some time.”

That being said, mobile marketing in the U.S. continues to gain steam, and there have been hundreds of campaigns that have been extremely successful by any standard. And industry experts point to Apple’s new iPhone as a likely stimulus to dramatic technological innovation, especially for mobile Internet browsing.

“Apple, which has already re-invented the music industry, overnight has turned into bush league 20 years of phone engineering,” says Keenan. “I think they’ll lead the way in terms of re-invention of the mobile phone, bringing the same ease of use of the iPod to the mobile phone, and we’ll see a huge uptake in the mobile web as a result.”

We would appreciate your feedback. To submit comments, please e-mail the magazine at [email protected].


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