[Translation]
`
`
`
`NTT DoCoMo, Inc. Gateway Business Division Content General Manager
`
`Takeshi Natsuno
`
`
`i-mode
`Strategy
`
`Why the world can’t catch up
`
`Nikkei BP Planning
`
`Twitter Exhibit 1010
`Twitter, Inc. v. BlackBerry Ltd.
`Page 00001
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`
`i-mode strategy
`
`
`Chapter 1 Success
`
`
`
`
`
`
`
`
`
`Page 00002
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`The IT business will either grow far beyond expectations,
`or not grow at all.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`22
`
`
`
`Page 00003
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`The IT (Information Technology) business will either grow far beyond expectations, or not
`
`grow at all. In this field, the likelihood of steady growth in accordance with projections is virtually
`nil. Based on this theory, “i-mode” can clearly be classified as falling under the former “grow far
`beyond expectations” category.
`
`The i-mode service was launched on February 22, 1999. On January 25, 1999,
`approximately one month before the launch, NTT DoCoMo held an unveiling event in Tokyo for
`the news media (Photo 1a). With actress, Ryoko Hirosue, who had been chosen to be the
`personality for commercials making an appearance at the event, the venue was packed with more
`than 500 members from the media.
`
`The event started with a presentation of the new service and new mobile telephone models,
`with the executive in charge of i-mode overall and the General Manager of the Gateway Business
`Division, Keiichi Enoki (currently, Director), kicking off the event. A reporter asked, “How many
`users are you aiming to acquire?” to which Enoki replied, “We would like to acquire two to three
`million users within a year of starting the service. We are aiming for ten million users in three
`years.”
`
`Event introducing the start of i-mode service
`
`(Photo credit: Takaya Yagyu)
`
`
`Photo 1a
`
`
`
`
`
`23
`
`
`
`Page 00004
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`
`Breaks 14 million (Oct. 31)
`
`
`
`
`
`
`
`(Source: DoCoMo)
`
`
`
`December
`
`November
`
`October
`
`September
`
`August
`
`July
`
`June
`
`May
`
`April
`
`March
`
`February
`
`January
`December
`
`November
`
`October
`
`September
`
`August
`
`July
`
`June
`
`May
`
`April
`
`March
`
`1999
`
`2000
`
`2000
`1999
`
`Fig. 1a Rapid increase in the number of i-mode users
`
`Breaks 13 million (Oct. 8)
`Breaks 12 million (Sept. 18)
`Breaks 11 million (Aug. 28)
`
`
`
`
`
`
`Breaks 10 million (Aug. 6)
`
`
`
`
`
`Breaks 9 million (Jul. 15)
`
`
`
`
`
`Breaks 8 million (Jun. 24))
`
`
`
`
`
`Breaks 7 million (May 26)
`
`
`
`
`
`
`Breaks 6 million (Apr. 15)
`
`
`
`
`
`
`Breaks 5 million (Mar. 15)
`
`
`
`
`
`Breaks 4 million (Feb. 14)
`
`
`
`
`
`
`Breaks 3 million (Dec. 23)
`
`
`
`
`
`
`Breaks 2 million (Oct. 18)
`
`
`
`
`
`
`Breaks 1 million (Aug. 8)
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`February
`
`Number of i-mode users (Unit: 10,000)
`
`
`
`High-paced growth exceeds own expectations
`
`The results far exceeded even this expectation of Enoki’s himself. On August 8, 1999, just
`six months after the start of the service, we reached our initial target of one million contracts. As
`a reference, it took thirteen years for the number of DoCoMo mobile phone subscribers to reach
`one million users.
`There is a reason why the one million mark was set as an important milestone. One million
`users would hit “critical mass.” That is, our bet was that once this threshold was exceeded, the
`number of users who saw others around them using the i-mode service and wanted to use it
`themselves would increase, propelling demand into the “positive feedback (positive growth)”
`cycle.
`
`As expected, once the number of subscribers reached one million, the pace of increase in
`the number of contracts quickened dramatically, and it took only two months to acquire the next
`24
`
`
`
`Page 00005
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`one million users after that.
`
`Another two months after reaching two million users, the initial target of three million users
`was exceeded on December 23, approximately ten months after the service was started on February
`22. In other words, this milestone was reached more than three months earlier than the initial goal.
`
`In the new year, in 2000, the pace of increase grew even faster. In the first half of 2000, it
`only took approximately a month and a half to get a million more subscribers to sign onto the i-
`mode service.
`
`The number of users steadily grew to four million, then five million. On August 6, 2000,
`that number reached ten million. The i-mode service grew quickly into a blockbuster product
`exceeding ten million users in just a year and a half after the service was started (Figure 1a).
`
`
`An increase of 1 million users in 22 days, an increase of 50,000 users per day
`
`Presently, the number of new i-mode service subscribers is increasing by one million
`
`contracts approximately every three weeks. This pace of increase has been continuing since around
`July 2000. This calculates to an increase on average of 40,000 to 50,000 subscribers per day. Even
`now with the number of contracts surpassing the 14 million mark (as of October 31, 2000), the
`momentum has not ceased. If anything, it is accelerating.
`
`For example, after reaching the milestone of 10 million subscribers on August 6, the
`number reached 11 million on August 28. In other words, in a matter of 22 days, an additional one
`
`
`
`
`
`
`
`
`
`
`25
`
`
`
`Page 00006
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`million subscribers joined the service. 21 days after that on September 18, the total number of
`subscribers reached 12 million, and 20 days after that on October 8, 13 million.
`
`
`
`One-third of Internet users are now i-mode users
`
`The intensity of this momentum was unexpected even for DoCoMo. DoCoMo President
`
`Keiji Tachikawa had to upwardly revise the projected number of subscribers as of the end of
`FY2000 (March 31, 2001) each time he held a regularly scheduled press conference.
`
`The initial plan for FY2000 was to acquire “17 million” contracts by the end of FY2000,
`but at the current rate, it is a virtual certainty that the number of contracts will exceed 17 million.
`Internally, DoCoMo has set its next target at 20 million.
`
`A comparison to the total number of Internet users shows just how surprisingly large this
`figure of 10 million as of August 2000 is.
`
`According to the “Internet White Paper 2000” compiled by the Japan Internet Association,
`the number of Internet users in Japan as of the end of FY1999 is believed to have been nearly 20
`million. Since the subsequent increase in i-mode users boosted this number even higher, it can
`probably be said that about one-third of Internet users in Japan are now i-mode users.
`
`
`
`
`
`
`
`
`
`
`
`
`
`26
`
`
`
`Page 00007
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`From DoCoMo’s perspective as well, the share of i-mode users has become extremely large.
`
`As of the end of October 2000, the number of DoCoMo mobile telephone contracts is 33 million.
`This means that one-third or more of these subscribers are already users of the i-mode service.
`
`No matter which of these figures you take, it is clear that i-mode is literally spreading
`“explosively.”
`
`
`i-mode was borne out of a sense of crisis
`
`How did this blockbuster service “i-mode” come into existence? Here is a little background.
`You may be surprised to learn, based on DoCoMo’s business performance which has been
`improving steadily over the past few years, that in fact, this was a service that was borne out of a
`sense of crisis at the Company.
`It is true that the mobile communication industry of which DoCoMo is a part has achieved
`remarkably rapid growth in recent years. Firstly, there has been a ferocious increase in the number
`of contracts. New subscribers of mobile phones in Japan grew by over ten million for three
`consecutive years between FY1996 and FY1998, and as of October 31, 2000, the total number of
`subscribers has reached 56 million (according to a survey by the Telecommunications Carriers
`Association).
`It is not only the number of contracts that have been growing. The market, too, has been
`rapidly expanding. Total sales of mobile network operators four years ago in FY1995 (April 1995
`
`
`
`
`
`
`
`
`27
`
`
`
`Page 00008
`
`

`

`[Translation]
`
`i-mode trategy | Chapter 1 Success
`
`
`
`to March 1996) was 1.4074 trillion yen, but in FY1999 (April 1999 to March 2000), that figure
`reached 5.2078 trillion yen. In just four years, the entire market grew by 3.7 fold.
`During the same time period, DoCoMo’s performance also grew very steadily. At the end
`of FY1995, the number of contracts was approximately 2.21 million yen. By the end of FY1999,
`it jumped to 23.9 million yen, a more than 10 fold increase.
`Sales in FY1999 was 3.7187 trillion yen, growing to nearly that of the parent company
`NTT (Nippon Telegraph and Telephone Corporation). In terms of profits, while the ordinary profit
`of the NTT Group as a whole was 825 billion yen, of which approximately 500 billion yen, or 60
`percent of the total, was earned by the DoCoMo Group.
`
`
`The project was comprised of a diverse group of people
`
`Why, then, was there a sense of crisis when business performance was so good?
`In preparing for the launch of the i-mode service, the i-mode project within the company
`was begun back in January 1997. It all began with the President at the time, Koji Oboshi (currently,
`Chairman), appointing Keiichi Enoki as the project leader. His mission was to “develop a new
`mobile phone service.”
`It was also in this year that Mari Matsunaga, the author of the now famous “i-mode”
`incident and former editor of the job-transfer magazine “Travayu” was poached from Recruit. I
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`28
`
`
`
`Page 00009
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`also came to join this project in the same year at the invitation of Matsunaga.
`Interestingly, DoCoMo’s Gateway Business Division that was in charge of the i-mode
`service was a congregation of people with various backgrounds.
`First, Enoki, who was the Project Leader, was originally with NTT. When he first joined
`the company, it was the Nippon Telegraph and Telephone Public Corporation, and although he
`was the Tochigi Branch Manager until just before being assigned to this project, he was originally
`from the technology field.
`In addition to himself, the project was comprised of a diverse group of people, including
`young career employees recruited by Enoki using DoCoMo’s first internal job posting bulletin, to
`people like Matsunaga and myself from outside the Company, secondees from manufacturers, and
`others.
`
`Recruiting from outside the company or through internal company job postings may be
`considered common ways for a private company to gather human resources when launching a new
`business, but for DoCoMo, both were unusual methods.
`The project came together in this way as a result of circumstances such as that there were
`no project members at the start other than Enoki and that there was relative freedom in gathering
`the project members, but it may also be that it was the diversity of the project members that led to
`the success of i-mode.
`
`
`Aiming for the second S-curve
`
`
`Let’s now go back to the main subject.
`
`
`
`
`
`
`
`
`29
`
`
`
`Page 00010
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`
`First S-curve
`(= growth from increase in
`subscribers)
`
`Second S-curve
`(= growth from data communication)
`
`Revenue of telecommunications carriers
`
`Time
`
`
`
`Fig. 1b Aiming for the second S-curve
`
`
`In and around the time that this project was launched, Oboshi had presented as a growth curve,
`“the second S-curve” (Fig. 1b). It was presented in the form of a chart in the Company’s business
`policy that was published in July 1996 entitled “Transitioning from Volume to Value.”
`
`Speaking of 1996, this became the first of three consecutive years of the “era of 10 million
`new subscribers per year,” and the first year in which mobile communications began to flourish.
`This corresponds to the starting point of the first S-curve when the number of contracts started to
`grow rapidly.
`
`This was a period of great revenue growth for telecommunications carriers. This was the
`so-called “first S-curve” representing the “volume” growth curve.
`However, anyone could see that the rapid growth in the number of contracts would not last
`
`
`
`
`30
`
`
`
`Page 00011
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`for very long. Once all potential mobile phone users were reached, the growth would end there.
`
`The industry as a whole will soon reach 40 million mobile phone subscribers. The
`commonly held view at present is that the number of subscribers will eventually grow to about 80
`million, but back then, the general view was that the market would “saturate at 60 million.” This
`was because the number of land line telephone contracts at the time was about 60 million, which
`was used as a guide.
`
`With “60 million” being the perceived limit to growth, the current “40 million” is a burden
`that looms heavily over telecommunications carriers.
`
`From volume to value
`
`A slowdown in growth will mean lower profitability for telecommunications carriers. This
`is because in a “zero-sum game” in which the number of users do not increase, competition among
`service providers will head in the direction of competition to lower prices.
`Looking at the situation in the United States where the competition among land line
`services is fierce, all kinds of discounts are being offered such as promotions of a free first month
`or a partial refund of fees when subscriber contracts are changed. Once this happens, it becomes
`an exhaustive battle that only wears each other down. As a result of such grueling competition, not
`only may the ability of the telecommunications carriers to develop new services be diminished,
`
`
`
`
`
`
`
`
`
`
`
`31
`
`
`
`Page 00012
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`but there is also the potential risk that the level of service for the industry will be reduced.
`It was in this context Oboshi introduced the idea of a second S-curve. Essentially, he was
`showing that in addition to the conventional voice communication, by creating a new market for
`data communication, further growth could potentially be achieved.
`Even if the number of users did not increase, if the users were to use their mobile phones
`for a purpose other than voice communication, it would lead to increased revenue for
`telecommunications carriers. This was the so-called “second S-curve” representing the “value”
`growth curve.
`In order to realize this second S-curve, it would be necessary to pioneer new services that
`would entice users to use their mobile phones more and which would generate data traffic for
`telecommunications carriers. This was the backdrop in which the development of i-mode first
`began.
`
`
`
`The progression to text-based e-mails
`
`
`At the time, in 1998, there were actually signs that data traffic from mobile phones was
`
`increasing. An e-mail service using mobile telephones called “Character e-mail,” otherwise also
`known as “text communication,” was gaining popularity particularly among the younger
`generation who were already adept with the use of pagers.
`
`
`
`
`
`
`
`
`
`
`
`32
`
`
`
`Page 00013
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`
`One-way service
`
`Interactive/
`closed service
`
`Interactive/
`open service
`
`PHS e-mail
`Mobile phone e-mail
`
`Pagers
`
`Mobile phones
`
`Mobile
`phones
`
`E-mail on
`mobile phones
`
`June
`
`February
`
`December
`
`March
`
`1998
`
`1999
`
`Mobile
`phones
`
`1994
`
`1995
`
`1996
`
`1997
`
`Mobile
`phones
`
`2001
`2000
`“i-mode” service started by DoCoMo
`E-mail service started by NTT Personal
`“Short mail” service for mobile phones started by DoCoMo
`E-mail service between PHS handsets started by DDI Pocket
`
`
`
`Fig. 1c Text communication moves towards interactive and open services
`
`It was around this time that we started to see high school girls and college students looking
`
`at their phone screens or using the ten-key (the numeric keypad consisting of numbers 1 through
`0 plus the “*” and “#” keys) on their mobile phones while on the subway or walking around town.
`
`Handsets and services for character e-mails or text communication were transforming
`together with the growth of the younger generation users who were the ones that were creating this
`culture. First, it was the pager that grew rapidly from 1994 to 1996, but by 1999, it dropped sharply.
`Since text messaging on pagers were limited to unidirectional communications transmitted from
`the phone to the pager, this was the era of “one-way service” (Fig. 1c).
`
`
`
`
`
`33
`
`
`
`Page 00014
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`
`From one-way service to interactive service
`
`
`
`As pager use declined from around 1997, e-mail that could be transmitted using mobile
`phones and Personal Handyphone Systems (DoCoMo’s e-mail service for such PHSs was called
`“short mail”) began to increase. The generation that was sending messages to each other’s pagers
`using their numeric keypad on their phones were gradually transitioning to becoming mobile
`phone and PHS users. At this stage, two-way interactive messaging had become possible.
`However, at this point in time, e-mail exchanges could only be made between mobile
`phones or between PHSs. Furthermore, such e-mails could only be exchanged within the same
`telecommunications carrier network. This was the so-called “interactive/closed service” era.
`Next came the “interactive/open service” era. That is, it became possible to send and
`receive e-mails between mobile telephones that subscribed to different carriers as well as with
`personal computers connected to the Internet. This was the age in which it became possible to
`exchange e-mails via the Internet with any handset that had an Internet connection.
`The development of i-mode coincided exactly during the start of this interactive/ open
`service era. There was no doubt that interactive and open services were going to flourish. In
`developing i-mode as well, consideration was given to maximizing such merits as usability and
`fees.
`
`
`
`
`
`
`
`
`
`
`
`
`
`34
`
`
`
`Page 00015
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`
`From talking on mobile phones to using mobile phones
`
`
`DoCoMo’s business policy of “transitioning to value,” put another way, was to increase
`“opportunities” for using mobile phones.
`In launching the i-mode service, the Public Relations Department created the catch phrase,
`“From talking on mobile phones to using mobile phones.”
`As this tagline states, a variety of service menus were created to appeal not only to the
`young people who were the mobile phone trend leaders but also to as broad an age range of users
`as possible. I refer to this as the “contents portfolio.” The portfolio consisted of a wide range of
`content such as the checking of bank balances and the making of deposits, making ticket
`reservations including airline tickets, restaurant guides, train transfer information, dictionary
`searches, on-line shopping, on-line games and the like (see the picture at the beginning of this
`book).
`
`Of course, the expectation was not that a particular user would use all of these services.
`What we had in mind was the overall balance. We put together a wide range of products so that no
`matter the generation, gender, hobbies, or preferences of the user, they would be able to find a
`service they could use.
`These service menus were considered jointly by service providers and DoCoMo and were
`
`
`
`
`
`
`
`
`
`
`
`35
`
`
`
`Page 00016
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`commonly referred to as “official websites.”
`These official websites initially began with menus from 67 companies, but then rapidly
`increased to 665 companies offering approximately 1,200 service menus as of October 2000.
`DoCoMo’s official menu can be found by following the “i-menu” provided on the homepage of
`the i-mode service.
`
`
`
`Content enrichment generated positive feedback
`
`
`In addition to these official websites are a huge number of Internet sites created specifically
`for i-mode users. These are known as “voluntary sites” of which there are some 28,000 sites as of
`October 31, 2000 (according to the search service and directory “OH! NEW?” available on i-mode).
`DoCoMo refers to these as “general websites.”
`These general websites can be accessed by entering a URL (Internet address) that begins
`with “http://” on the screen of a mobile phone in the same manner as for general Internet use.
`The reason why DoCoMo cites a reference regarding the number of these general websites
`is because it does not itself manage these. Like the Internet, it would be impossible to accurately
`
`
`
`
`
`
`
`
`
`
`
`
`
`36
`
`
`
`Page 00017
`
`

`

`[Translation]
`
`21 types of i-mode
`compatible terminals
`(As of Oct. 31, 2000)
`
`
`Expansion of use by
`corporations
`Intranet packets, VPNs, etc.
`come into existence one after
`another
`
`
`i-mode strategy | Chapter 1 Success
`
`
`
`account for the number of such sites, nor does DoCoMo have any intention of doing so. DoCoMo
`believes that these should be provided by various businesses and individuals based on the services
`that they want to provide.
`The rich service menu that is the combination of these official sites and general sites is the
`driving force for users to join the i-mode service, one after another.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Number of i-mode users
`Approx. 14 million
`(As of October 31, 2000)
`
`Content/ applications
`665 partnering companies
`(As of Oct. 31, 2000)
`
`Natural proliferation of
`i-mode compatible sites
`Approx. 28,000 sties,
`20 search engines
`(As of Oct. 31, 2000)
`
`
`(Source: DoCoMo/ Digital Street)
`Fig. 1d The positive feedback cycle on i-mode
`
`
`As the number of users grew, the service menu, too, expanded. As the service menu
`
`expanded, more and more users wanted to use it. With this repetition of positive feedback, more
`than 14 million users came to accept i-mode (Fig. 1d). The key to i-mode’s growth cycle can be
`said to be the enrichment of its content.
`
`
`
`
`
`
`37
`
`
`
`Page 00018
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`
`More than 95% are active users
`
`
`Not only does i-mode have a lot of subscribers, but many users use it frequently and it is
`permeating into their lives. Let me introduce some statics that illustrate this.
`
`First, the usage rate is extremely high. The figures as of September 2000 indicate that of
`the 12.33 million users, indeed approximately 87% accessed the Internet at least once during the
`last week of September (Fig. 1e). Similarly, the percentage of users that used e-mail during that
`one week period was approximately 78% of the total number of i-mode users.
`
`I will also note that the total number of e-mails that are transmitted via i-mode overall has
`
`
`Last week of March 2000
`Number of
`i-mode users
`
`5.41 million
`
`Last week of September 2000
`
`12.33 million
`
`Approx. 2.3
`times
`
`Percentage of users that access the
`Internet at least once a week
`
`Number of
`users that access
`the Internet
`
`2.77 million
`
`Approx. 3.9
`times
`
`10.8 million
`
`(Source: DoCoMo)
`
`Fig. 1e Usage rate of the Internet access service
`
`
`
`
`
`
`
`38
`
`
`
`Page 00019
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`reached 80 million per day. That calculates to an average of 7 e-mails per day per user.
`
`Based on a sample survey as of June 2000, users who only subscribe but do not use the i-
`mode function at all, that is, users whose usage fees are zero, comprise only approximately 5% of
`users overall. This number is surprisingly low. I have not seen any publications of similar usage
`rate statistics, but I would venture to guess that there probably is not another mobile
`communications operator that has a non-usage rate as low as this.
`
`Making users aware of i-mode at the time of subscription
`
`
`Why is it that there are so few users that do not use the i-mode function, you ask? The
`answer is simple. It is because the users that subscribe to this service come in already having a
`strong sense of wanting to use the services provided on i-mode to begin with.
`The monthly usage fee for i-mode is 300 yen. When a new mobile phone is purchased, the
`sales outlets always ask, “The fee is 300 yen a month. Would you like to subscribe to i-mode?”
`Unless the customer answers, “I would like to subscribe” at the time of the mobile phone purchase,
`they will not be able to use the i-mode service. Thus, users who are not interested in using this
`service would not come into the store in the first place.
`Meanwhile, what about the other telecommunications carriers? It seems that some carriers
`consider a mobile phone purchase to come unconditionally with a subscription, while others
`consider a subscription to an answering machine service as coming automatically with a
`subscription.
`
`
`
`
`
`
`
`
`
`39
`
`
`
`Page 00020
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`
`What happens when the basic service for a mobile phone, or a separate optional service
`such as an answering machine service is sold as a set together with an Internet service? It is clear
`that it results in a relatively larger number of users who have phones with an Internet function but
`have never used it.
`Increasing superficial numbers for appearances sake holds no meaning for service
`providers that provide users with added value services. What is important to service providers is
`not the superficial number of users but the number of users who actually use the services.
`The high frequency of usage of i-mode seems to be closely reflected in the frequency of
`use of value-added services that are provided in addition to i-mode.
`For example,
`the video and CD rental and sales business of “TSUTAYA”
` known as the Culture Convenience Club has had great results utilizing i-mode. This company
`
`
`
`
`
`
`40
`
`
`
`New title release Dec. 14
`
`Dec. 14 E-mail
`recommendation
`
`
`Dec. 21 E-mail
`ranking
`
`TOL TSUTAYA member
`Non-TOL TSUTAYA member
`
`
`Dec. 22 E-mail
`ranking
`
`Dec. 29 E-mail
`ranking
`
`Dec. 7 E-mail
`recommendation
`
`
`Dec. 8 E-mail
`notification of trial
`audio
`
`
`Trial audio service starting
`Dec. 8
`
`Rate of purchases
`
`
`
`
`December 1999
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`(Source: TSUTAYA ONLINE)
`
`Fig. 1f Changes in the rate of CD purchases at TSUTAYA
`
`Page 00021
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`notifies its on-line members of new CD releases through i-mode e-mails and issues electronic
`discount coupons, both of which have shown strong user response. The rate of CD purchases by
`members who have received e-mail notifications is several times that of members who did not
`receive e-mail notifications, and the amount of rentals by members to whom electronic coupons
`were issued increased by 59% compared to the previous month, both of which are clear indications
`of the effect (Fig. 1f).
`
`Airline companies are reporting that their ticketless sales from i-mode is 10 million yen or
`more per month. E-commerce sites such as for game sales say that they are making several tens of
`millions of yen in sales each month.
`
`At DLJ direct SFG Securities, an on-line service that handles stock transactions via
`telephone and the Internet, 20 percent of their total trades are via i-mode.
`
`
`The popularity of lifestyle related information
`
`
`In comparison to Internet use on personal computers, one characteristic is that a greater
`percentage of women use i-mode. As of October 31, 2000, that percentage has reached 41.7%.
`Recently, as websites catering to women increase, there have been more opportunities for i-mode
`to be covered in women’s magazines, and it is hoped that this percentage will continue to go up.
`In addition, when one speaks of i-mode, it connotes an image of young women in their
`twenties. It is true that there is a very high level of penetration with this demographic, with the
`overall percentage of female users reaching 43%.
`
`
`
`
`
`
`
`
`
`41
`
`
`
`Page 00022
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`
`However, in reality, i-mode has also been accepted by relatively higher age groups as well.
`Of i-mode users overall, up to 29% are users 40 years of age or older, and this percentage continues
`to increase. When looking at how they use the service, much of it is for economic news, stock
`trades, sports and news. This is probably also an effect of the wide ranging menu explained earlier
`(Fig. 1g).
`
`
`Men vs. Women
`
`Age Comparison
`
`Unknown: 1%
`
`19 and under: 7%
`
`Women: 41.7%
`
`Men: 58.3%
`
`40 or older: 29%
`
`30 to 39: 20%
`
`20 to 29: 43%
`
`As of October 31, 2000
`
`(Source: DoCoMo)
`
`
`
`Fig. 1g i-mode users by gender and age
`
`DLJ direct SFG Securities conducted an interesting data analysis of usage trends among i-
`
`mode users by age. They found that users of this company, which specializes in on-line brokering,
`are more likely to trade using i-mode the older they are. For all age groups, the average number of
`i-mode users is 20%, but for those aged 60 or older, i-mode usage just under 30% (Fig. 1h).
`
`Looking at users on an individual basis as well, there are now many services that have
`
`
`
`
`
`42
`
`
`
`Page 00023
`
`

`

`[Translation]
`
`20s 30s 40s
`
`50s 60s 70s and older
`
`Percentage of i-mode users
`
`(Source: DLJ direct SFG Securities)
`
`i-mode strategy | Chapter 1 Success
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Fig. 1h DLJ direct SFG Securities
`
`
`
`become essential to their lives.
`
`One of the features of i-mode is that, like the Internet, it offers an array of media geared
`towards small communities that the “mass media” such as television and magazines have not been
`able to provide very easily so far. Many services that make use of this advantage of i-mode are
`coming onto the scene.
`
`For example, there is an information site for surfers called “SurfLegend” (provided by
`Cybird) that provides updates on wave conditions for coastlines across the country. This site which
`already has over 100,000 subscribers seems to have gained overwhelming support from surfers
`nationwide. Surfers look at the information on SurfLegend and decide, “There are good waves on
`
`
`
`
`
`
`43
`
`
`
`Page 00024
`
`

`

`[Translation]
`
`i-mode strategy | Chapter 1 Success
`
`
`
`that beach today, so let me head out in the afternoon.” Real-time information, let alone information
`about multiple coastlines, is hard to get, so people want this information even if they have to pay
`for it.
`By the way, this SurfLegend website is supported by a network of surf shops across the
`
`country. It is apparently important for surf shops to have a good understanding of wave conditions,
`and by 4 a.m. or so, store staff are already checking the condition of waves. SurfLegend then
`gathers all of this information on a network. In other words, surf shops all over the country have
`united to provide information.
`
`
`The average monthly usage fee exceeded 2,000 yen
`
`
`In this way, i-mode has improved user convenience and has become an integral part of the
`
`
`
`44
`
`
`
`Packet communication service revenue: The amounts shown in
`this figure are a total of the income from the base fee for packet
`service contracts such as Dopa, i-mode, etc., and the income
`from data usage amounts
`
`October 31
`
`October 8
`
`September 18
`
`Breaks 10 mil. yen
`
`August 28
`
`August 6
`
`July 15
`
`June 24
`
`Breaks 5 mil. yen
`
`May 26
`FY2000 projection
` 330 billion yen
`
`April 15
`
`FY1998
`200 mil. yen
`
`FY1999
` 38.5 bil. yen
`Breaks 1 mil. yen
`
`March 15
`
`February 14
`
`December 23
`
`Number of i-mode users
`
`October 18
`
`August 8
`
`(Source: DoCoMo)
`
`March
`
`February
`
`January
`
`December
`
`November
`
`October
`
`September
`
`August
`
`FY2000
`
`July
`
`June
`
`May
`
`April
`
`March
`
`February
`
`January
`
`December
`
`November
`
`October
`
`September
`
`August
`
`July
`
`June
`
`May
`
`April
`
`March
`
`February
`
`Unit: 10,000
`
`FY1998
`
`FY1999
`
`Fig. 1i Growth of the number of i-mode users and packet communication revenue
`
`Page 00025
`
`

`

`[Translation]
`
`i-mode strat