Why Yahoo Japan and NOT Google? — Thoughts on Media Business

Last week I wrote a post about Yahoo Japan. Whenever I say,

Yahoo Japan is the №1 visited PC site in Japan.

Most people regard it as one of the unique country where Google isn’t dominating. Just as Russia has Yandex and Koera has NAVER, Japan has Yahoo Japan. I understand that the situation is very different in many other countries and that many of the successes of Yahoo Japan can’t be simply replicated.

However by understanding WHY Yahoo Japan is still stronger than Google (at least in the PC field), I believe this reason may be useful for companies running a media business in a very early market. Therefore, I’d like to share my thoughts on the reasons why Yahoo Japan succeeded in Japan with some background information. In addition, I’d like to put together my belief of the overall media business.

Trajectory of Yahoo Japan and Google

Here is a table that shows some notable events of the early internet age.

Information from IR

When Google came into Japan market, Yahoo Japan already had over 150 Mn daily page views. Although Google had some disadvantages, as you can see from the bar graph below, Google was able to show some high growth rate right after it launched in Japan.

Data from Impress R&D

Considering its growth rate, Google did have certain potential of becoming the dominant in the following years. But it didn’t happen at least up to date on a PC basis as of 2016.

Data from Nielsen as of 2016

Why? I believe there are 2 reasons.

Reason

1.First Mover Advantage. Obviously, Yahoo Japan was faster than Google. Just like Daum and NAVER in Korea and Yandex in Russia that launched 1 year earlier than Google, Yahoo Japan still keeps this advantage until today.

So what are the benefits of moving faster than others?

When you’re there first, you have the privilege to attract all the target users so the user base can increase quickly. From the trajectory table, you can see that Yahoo Japan reached 5 Mn daily page views in just 15 months. I guess this point is often said in many places so I won’t go any further.

Another point I’d like to emphasize more is that the first player in the market can create a new habit that will take root for quite a while as long as the service is kept at a certain level of satisfaction.

In this case, Yahoo Japan first focused on building a portal that has all the information neatly gathered into one place and allowed users to access to each service or information by directory search.

Yahoo Top page as of 2001. Image from web archive

Therefore, when Google launched in Japan I can imagine that people thought it looked so simple.

Yahoo Top page as of 2002. Image from web archive

Though Google gradually increased its share by being used by Yahoo Japan and other domestic search engines, this ‘altogether in one place’ mind is still apparent on PC devices. Check out current Yahoo Japan top page! I feel that since the directory search was optimized to the local needs, it was easy for many people to jump right into it and even stay there. If Google came in first, I bet the way people surf internet would have been very different. Since it didn’t, this one page, not so high tech portal, is still an important hub for many Japanese today and generating millions of dollars. Be better than the global giants at providing contents that fit the local demand.

Reason

2.Fast Monetization. Not just comparing with Google but also comparing with other existing domestic search services, Yahoo Japan was able to grow because the monetization began at a very early stage. Having revenue means that the company can utilize that resource to improve the service level, resulting in an increase of user base by improving user satisfaction. The much earlier search services ended up following way behind Yahoo Japan because of this difference. Here is the revenue and profit transition for the first 5 years of Yahoo Japan. The first few years were mainly from display advertisement on its portal site and it increased its revenue stream from other wholly owned services.

Information from IR. $1=¥115

Thoughts on overall media business

I see many media businesses that can’t generate much revenue despite their large number of users. If the media postpones its monetization strategy until it captures large volume, say around 10Mn+ users, I feel that is too long. There isn’t any standard bench mark in the market but from what I understand from other existing media businesses in Japan, 3–4 Mn user base is enough to start some sort of monetization. Some recent startups are even starting from much earlier stages. I believe this is because the revenue that can be collected through a media that is just connected to an ad network can generate only up to $8–10 Mn/y in Japan so there isn’t much up side to this. (Please note this is not always the case and there are some exceptions) If the user base is growing fast, think more about how you can make money out of it rather than how you can capture more users.

So Yahoo Japan is healthy enough to survive the next 10 years?

Absolutely no. The device is shifting from PC and Smartphone and I can’t deny that Yahoo Japan is struggling with this transformation.

Data from Nielsen as of 2016

You may think that the business mainstream is always occupied by large internet companies or conglomerate and that there is always no space for new comers but I happen to think those are not true. Understanding that there are difficulties, the competition never ends and there is no ‘peace’ in a market that rapidly changes — just like the internet market.