TechCrunch covers Japan’s YouTube | More on NicoNico Douga’s innovations

TechCrunch finally added some coverage of the world’s second largest economy and #2 richest Internet market, Japan. This move might bring more awareness about the country’s Internet scene (and maybe mobile?).

As we attended recently the little known “Infinity Ventures Summit” in Sapporo where Japanese Internet & mobile entrepreneurs gather to share stories and learn about the up-and-coming of the local scene, we had the chance to learn more details about NicoNico Douga (“Smile Video”), also called “Japan’s YouTube”.

Taking the opportunity of TechCrunch’s coverage, we will add some info and perspective on this service.

1. Culture

It is always difficult to define what is “culture“, and tempting to use convenient stereotypes. What is sure is that when millions of people use a service, there must be something to it.

With 7 million registered users (out of Japan’s 90 million Internet users) since its start in December 2006 (barely 18 months ago), the service seems well on its way to mainstream adoption.

Other key figures:

• 5 billion video views by May 2008
• 1 billion comments
• Paid members: 195,000 (started July 2007)
• Mobile members 1.7 million (service started in August 2007)
• Demographics | 71% male | 29% female
• 10s: 27% | 20s: 47% | 30s: 18% | Other: 8%

More, the site has an average usage of 3hours14 vs. YouTube’s 1 hour/user.

TechCrunch’s article refers to the site as “deeply rooted in this country’s geek culture, which is reflected in the Manga-inspired design and wild layout.”, and the site does have some geeky roots such as its connection with Hiroyuki, creator of the country’s largest BBS “2channel”, but the number of users has probably gone over the “geek” niche, though content still reflects mojoritarily male users’ interests. As for the alleged high level of tech literacy of its users, it is at least dubious, Japanese services being generally good at “making things simple” (as said recently by i-mode’s maverick inventor Takeshi Natsuno, ex-VP @ NTT DoCoMo). Think Wii.

2. Service innovations

Though “This feature sounds totally absurd”, the comments-over video function is close to a combination of video + BBS (online forums). Dwango partnered with 2Channel (“Ni channel”) Japan’s largest and influential BBS to create this absurd (?) combination, hence the “Ni + Wango”, the logo deriving from “niwa” or “bird” in Japanese.

What Seiji Sugimoto, CEO of Niwango, said during his presentation offered some insights into the human drivers of the service’s success: “The text on the videos is based on a timeline, which allows a new form of asynchronous communication. In fact, we see ourselves as a communication service using videos”.

Undoubtedly, “video-game sequences, bizarre comedy clips, anime and user-made footage.” reflect Japanese culture, actually mixing Internet and TV culture (where subtitles and jokes are routinely displayed during TV shows to make them more entertaining) but wouldn’t that adapt nicely to other types of content that are popular overseas? The result is a very creative “my two cents” kind of participation (is there a better way to translate “tsukkomi gokoro”?), a very conversational style rather than the comment-style that often falls short (who reads the second page of comments on a YouTube video?).

Another interesting aspect is the example given of a professional comic artists posting his know-how of drawing a character. Comments on screen are a strong encouragement to share knowledge and this aspect could be an interesting development on its own.

Now, it is hardly a surprise it leaves many unconvinced as the comments on the TechCrunch article show (“I fail to see how commenting directly on the video is better.”, “it probably wouldn’t work”, “it probably wouldn’t work as well with the English language because it takes more space”, The point being that Americans, unlike asian people do not like automated services which do that sort of thing. So we have a cultural gap with Asia that simply can not be bridged. The technology is only the presentation layer of that gap.”, “Yet another disaster this business model is sure to fail and will die “), but some of them give an interesting perspective rather than a simple caricature:

• Mike Sheetal @ UltraSuperNew, an Interactive Creative Agency in Japan says: “This actually works a lot better and is a lot more adictive than you can imagine without using it and being able to read it”
• Another interesting one is “What some of the commenters here are missing is that Nico Nico Douga is like watching a video with a bunch of friends, with people commenting on what’s happening as it happens.” (Larry Larrikin)
• “The core concept of Nico Nico is this “mass pseudo-simultaneous participation via time shifting of comments”.” (Ken)

Eventually, the comment that seemed to us the best approach regarding innovation in general “I suppose what should be noted is: if there’s a feature available to the users, and the users choose to use it (comments overlayed on video), then perhaps what we claim to dislike might be a bit removed from what’s actually happening.” (Eric Rice)

3. Business models innovation

First, we think any service that manages users to pay on the Internet deserves respect (especially outside of the girls/gambling realm). There seem to be some bias here, as what would TechCrunch say about a US-based Internet service getting 200,000 paying users?

Other business models are – unsprisingly – Ads, but also affiliates, which has been bringing pretty decent revenues (close to 3 million USD since its start in July 2007). Of course, those models are still ramping up and who would expect immediate profitability from an online video service?

4. Mobile

Any other video service out there with 1.7 million registered users on mobile? (maybe Youtube thanks to the iPhone’s default install? But who actually uses it over the air – i.e. not via WLAN?). Japan can do it with flat-rate data over HSDPA and CDMA EV-DO. 40 USD a month for a complete flat fee on mobile, or a dozen for a large package. Remember Japan has over 80% penetration of 3G (including W-CDMA and CDMA 2000 1x).

A question asked by Loic Le Meur who had come to present Seesmic & Twhirl and meet local entrepreneurs and investors was whether they had a mobile version using Flash. The answer was: the mobile version cannot use Flash as Flash Lite does not support videos yet, so they had to develop an application. As a quick reminder: Japan’s Macromedia launched Flash Lite first in the world, and Japan already has a large majority (means, over 50 million) Flash-compatible mobiles (see David Collier’s post on Flash in Nov 2007), the latest ones running Flash Lite 3.0 since November 2007

Mobile users are able to get pretty much the same content, comment on it just the same. And… “it is also possible to buy things” (products featured along with videos). Yes, this is m-commerce.

Last, since the mobile version started, the number of teens has been increasing. Unsuprising as teens generally have more access and use of mobile than PC (isn’t this quite common in the West too when teens are not at home?).

5. What next?

The service is moving into allowing live broadcast and already incorporated e-commerce features (what?! yes, e-commerce).

This would allow people to comment live. Sugimoto gave the example of a discussion between two guys (niconico exec + 2channel’s Hiroyuki) where they could see the users’ comments while being broadcasted. It lead to an incredible level of excitement and emotion on the user side, and some fun interaction with the two “stars”.

As an example, Hiroyuki was repeatedly drinking from a bottle, which lead users to feature a pack of Volvic in the “e-commerce” section of the video. While the service does not take commission from this, users can add things from Amazon or Yahoo Shopping. 188 people bought the 6-pack of Volvic while and after watching the video. In a way, this service is bringing the TV advertising model (and possibly product endorsement) in a way that fits the Internet culture, paving the way to the upcoming era of “social commerce“.

6. Conclusion

Among the 30+ companies that presented at the event in Sapporo, NicoNico Douga was for us possibly the strongest “Wow!“, and the e-commerce functions were the additional “Aha!“. YouTube might have the mainstream stuff, but this service is definitely onto something and managed to capture more of the youthful spirit of the Internet than YouTube’s video-on-demand model and is exploring very interesting service concepts and business models.

As usual, it is likely the company has little intention or capability to expand agressively overseas (aside from Taiwan where they have a strong following). The Chinese copycat (in a classic “C2C” move) might have a chance in China if they try hard on the e-commerce model (notably with Taobao or the Alimama service from Alibaba.com), as monetizing with subscription or ads will probably be close to impossible. Will be see a “C2US” (copy-to-US) come out or has YouTube already crushed competitors?