Managing the Ubit equation content out, money in: how does an international mobile venture firm stay two years ahead of the competition?
This is no over-funded, under-utilized Silicon Valley mobile content start-up, but rather the gritty Japanese evolution of a content and tech company that is a global leader in mobile site management. Ubit is unique. In a land of megalithic corporations with armies of engineers, Ubit has with just a handful of talented international developers created a successful European business worth millions of dollars a year.
A Rapid Start in Content
Ubit was founded in the spring of 1999 by Yuji Okada and Dr. Yoshiro Mizuno, a partner in Mizuno Pharmacies. Ubit (originally "104.com") was established to develop, manage, and sell Web content, starting with a Website called KissKissKiss, which used Ubit proprietary in-memory database technology that Mizuno had originally developed to service the needs of his more than 100 community pharmacy customers around Japan.
KissKissKiss was a huge hit, with over 150,000 users across Japan at one point. The site, which coincided with the peak of the dotcom boom, provided users with a personalized portal loaded with functions and features. Users could aggregate content from sources of their choice and use an advanced Personal Information Management (PIM) having functions such as calendaring and scheduling. Female users were impressed by the site's ability to track ovulation patterns. All this cost only JPY210 per month.
The site's popularity ensured that Ubit was on the radar screen of all three major mobile carriers--NTT DoCoMo, KDDI, and Vodafone--and garnered Ubit a reputation for reliability and capability. The company became one of the few international Japanese firms to be licensed to provide content to all three carriers. This experience has given Ubit a defining advantage over potential foreign rivals.
However, with the pop of the dotcom bubble, the popularity of KissKissKiss eased, and the senior management of Ubit faced the question of what to do next.
One lesson from KissKissKiss was that aggregating content and maintaining mobile sites was very time-consuming, because there was no tool on the Japanese market that could automate the full process of site management. Hence Ubit engineers created the new site management system MS2, an offshoot of Ubit's early experience in managing sites for all Japanese carriers. Arjen van Blokland, the Vice President of Sales and now a board member, decided to build on existing relationships in Europe and ride the coming i-mode wave there with MS2.
Although i-mode didn't take off as expected, in 2001 Ubit's experience in content development and management in Japan put the company light years ahead of European competitors. Van Blokland impressed several leading European carriers, in particular Orange, of the Netherlands, with his company's technical systems and knowledge of user behavior. He was able to tell Orange how to build exciting and profitable cell phone content sites without going through several years of experimentation.
In 2002 the Orange Group tasked Ubit with setting up and hosting branded mobile content portals in six countries. Thanks to its site management software and methodology, the company was able to get the site up and running in just a fraction of the estimated time. Orange was duly impressed and went on to offer other more exciting projects
In late 2003 and 2004, Ubit and Orange created highly successful sites and promotions for video clip downloads of the Euro 2004 (soccer), Tour de France (cycling), and UEFA Champions League (soccer). In addition, they executed content sites for Disney, Warner Brothers, Universal Music, and, in 2005, Star Wars.
The success in Europe was such that Ubit is not only working with Orange but also with Optimus in Portugal, and has launched services for T-Mobile, O2, and SFR to reach more than 60 million potential users in more than 10 European countries.
Evolution to Software Solutions
The relationship with Orange has been important for Ubit not only in revenues and endorsement, but also in its focus on Ubit's systems and technology rather than content. This has benefited Ubit's international aspirations; while content tends to be localized and monopolized by large brands, software is indeed ubiquitous.
A core software component that has made Ubit a leader in its field is its site creation, publishing, and management system MS2, which stands for Mobile Site Management System. Orange likes MS2 so much that Ubit has become Orange's sole ASP and technology provider for branded contents in several markets. Ubit has had great endorsements in Japan as well. In 2001 it was chosen by news majors Nikkei and Asahi as their mobile content platform. Ubit now hosts and serves up cell phone, web, and PDA pages created by both companies. Even though MS2 has not been fully adapted for these sites yet, Ubit estimates that its MS2 software saves both companies roughly 10 engineers each in content maintenance and site upgrades.
A Look Under the MS2 Hood
The MS2 mobile content management system is the keystone of Ubit. It is a powerful content aggregation/creation, management, and distribution software. Customers such as carriers and service providers put their text, music, video, and software applications into the MS2 tool, and that data is presented to a range of users in a usable format, regardless of their type of cell phone. In effect, MS2 is a ubiquitous rebroadcaster of content.
Perfect ubiquity is a tall order. But given the powerful, modular nature of MS2, the adaption of content to phone characteristics is now a cut-and-paste effort by editors and publishing staff on the media company side. When users connect their browsers to a mobile website, they are actually connecting first to the MS2 service platform, which identifies the phone type. Once it has this information, all resulting data from the website is modified to suit the user's phone. Things like screen sizes, fonts, file types, and applications support are all changed on the fly, quickly and automatically. Ubit now supports over 200 different phone types in Europe and more than 200 others in Japan.
At the very start of development, Ubit head engineer Zev Blut, development manager Stephen Chasey and VP of sales Arjen van Blokland decided that they wanted the software to support every make and model of handset, at all levels of carrier and handset maker technology, ranging from WML v1.1 (the much maligned original WAP standard), through to 2.5G such as i-mode, and now full-blown 3G. The design brief was, in essence, "What the handset does not see, it should not get"--meaning that content is carefully profiled and shaped for an optimum user experience on their particular handset. For example, the system doesn't offer TrueTone ringtones to a handset that can't play them.
Although according to Ubit's own estimates there are approximately 15 other companies with viable content management software, only Ubit is present in both the Japanese and European markets. The significance of this is that because Japan is at the leading edge of cell phone content, Ubit is always able to adduce proven results in its bids to European carrier and service provider clients. Furthermore, Ubit is one of just two or three companies globally that has perfected the dynamic multi-platform presentation of user file downloads both in Japan and overseas.
The defining trait of the Japanese content market is its saturation by providers who develop their own site technologies, or who use a specialty-systems integrator to custom-build a site. While this saturation has driven down costs, Ubit's CEO, Akiho Ohnuma, feels that cost saving efforts are focused on the wrong things. "Everyone is trying to push down the hourly rate charged for local designers, coders, and content editors--but this has a direct impact on quality. And one thing that all content shops know is that customers desert a poor quality site very quickly. Instead, they should be figuring out how to automate the process so that they can use fewer designers and coders and through the savings beef up on the content."
Thus, in Japan, some of the smarter service providers have realized that more of the same will no longer work, and are hot for technological solutions that will slash their publishing and maintenance costs. A good example is For-Side.com, which went public in 2004 on the basis of its JPY5BN (US$45MM) business in ringtones and other cell phone content. This massive player now has millions of paid monthly subscribers, and is one of Ubit's largest Japanese customers. Its patronage, says Ohnuma, is proof that even without the gloss and polish of better-funded companies. Ubit has solutions that work and that the smart players want.
Superior Performance Wins Customers
MS2 is not only flexible. It is also scalable. Blut says it can support between 100 and 1,000 database sessions, or tens of thousands of users, at once, depending on the power of the hardware. He is confident that the solution is sufficiently powerful to host a football federation world cup in the future. In a way, the successful Star Wars promotion has already been a "world cup" in the movie world, and in managing that campaign the software served an estimated 20,000 to 30,000 visitors.
The system is scalable at the input end as well, in that it allows customers to publish in two hours a page of content that once took days of laborious coding and design tweaking. This is not to mention all the variants of that page made for the different screen sizes and display characteristics of the major brand handsets. To illustrate a point, Blut states that a PacMan game produced in Europe needs to support at least two different major handset platform variations for a fully featured user experience.
With MS2 Ubit manages an amazing 250 web sites, just over 240 in Europe and the rest in Japan. While this may sound lopsided, the numbers reveal that not only was Europe the breakthrough market for Ubit, but also that while the company's Japan web site customers are fewer in number, they are also substantially bigger. For example, the second-tier web portal (after Yahoo) in Japan, Itochu-backed Excite, has committed to using MS2 for its high-profile video-karaoke mobile sites to cut engineering and operation costs, and maintain the same site structure for all three carriers. Excite serves about 5.9 million users a day and has more than 8,700 video applications of interest to visitors. Through Excite, Ubit is also getting exposure to some interesting content companies. For example, Excite hosts the Apple Japan home page.
It's miraculous how the mobile world has become global despite the proliferation of standards and hardware. Ubit is one of the trail-blazers in making the mobile experience seamless--both at the user end and the back end. In effect, the company has become a global animal itself.
For example, at its Tokyo office Ubit maintains a number of web and development teams for Europe and largely hosts the MS2 administration of Orange's European services. Asked whether this doesn't introduce noticeable user delays into the system, Patrik Karrberg, European Sales Manager, replied, "Latency from Tokyo into Europe is eaten up by a much larger latency induced within European carrier networks. Although, yes, there is a lag of about 100 milliseconds introduced by distance, this has no impact on the user experience. MS2's speed and automatic content adaptation creates a comfortable environment for European users to surf the mobile Internet and discover new 3G applications."
Indeed, MS2's speed is surprising. Chasey gives a short demonstration of its site building, content management and reporting capabilities, quickly navigating though content lists, site editing interfaces and various site usage statistics.
Blut tells us that the system can do enquiries on hundreds of thousands of users almost simultaneously and can handle more than 100 simultaneous user requests providing the system is being hosted on appropriate hardware.
Surviving the Competition
While Ubit continues to build business on the basis of MS2, the 800-pound gorillas are jockeying for position in the content-management-platform market. Ohnuma notes that Ubit has gone undetected by the M & A specialists. Not so some of their international competitors. IBM bought out Venetica in August 2004 and Ascential in March 2005. Sybase bought out Extended Systems in July 2005.
We asked Ohnuma how Ubit has survived. "These big players are new to serving data to mobile devices," he explained. "They are used to thinking about enterprise backends for masses of data, but not about the real-world issues of ease of use for service providers or ubiquity on lots of different hardware. But it is true that the big boys have suddenly woken up to the fact that there will soon be this massive global marketplace of more than 700MM 3G mobile users. And with 3G comes the emphasis on content. So we continue to push ahead with product development--creating innovative yet complete solutions which will ensure ongoing satisfaction from such major customers as Orange, Nikkei, and Excite."
Ohnuma further explains that the differentiating factor is the company's sheer technical horsepower. "While there are about 15 competitors offering ASP-based platforms for customer content, only Ubit has the technical ability to host downloadable content--games, film clips and the like--from an automated platform. Everyone else has to serve up their downloads massaged for different phone types as separately created files. Here in Japan, we're safe for a while."
Consequently, few Japanese companies bother to compete with Ubit, preferring to manually create download objects. Ubit has a fair share in Japan of the market for automated downloadable mobile content files. Ohnuma estimates this market will be worth JPY10BN within three years.
Kunihisa Aoki, General Manager, Domestic Business Division, feels that just as enterprise software developers have settled on a couple of operating systems, mobile content developers will go through a similar evolution and wind up focusing on their applications instead.
So with that kind of conviction in his product, what is his prediction for market share in a service provider platform business segment? "Ten percent," he replied confidently. He has reason to be confident. KDDI alone hosts about 4,800 sites. So there is plenty of opportunity in the market. Aoki thinks Ubit can grow from the current 10 Japanese customers to 50 this year, 100 next year, and double that figure in the following two years. Add to this Ubit's overseas revenue and sites, and the market share could well approach 10 percent--enough to propel Ubit to a successful IPO on Mothers or JASDAQ.
Where Ohnuma is taking Ubit is as exciting as its rise to its present position. MS2 ensures that every phone type gets data the way the phone can handle it. So, Ohnuma reasons, users should be able to configure their implementation of MS2 to customize their own phone interfaces and portals. That would be a profound development--the handset as a productivity rather than entertainment and communications device. Today there is no similar free personalized web content platform in Japan or probably even internationally.
Ubit also intends to tap into the advent in Japan of Felica technology, a contactless communications system, on cell phone handsets. Combined with Sony's EDY payment system, Felica enables users to make payments wherever stored value-payment cards are used. Examples include JR ticket machines and most convenience stores in Japan. Ubit is negotiating with the EDY and Felica industry associations the integration of MS2 into both systems so users can instantly pay for Felica-EDY enabled services and track billing.
Partnerships and Collaboration
Asked about international partnerships and collaboration, Ohnuma says the company is in no hurry to tie-up with a bigger brand, and prefers to usher in Ubit as a global standard instead. It's a smart but risky strategy. With every new large contract Ubit wins, it singles itself out as the company to beat, or to buy out. We asked if a buy-out is in the cards. Ohnuma smiled. "We're a consensus-driven firm," he said. "Whatever the management team feels is the right thing to do is what we will do. Right now, we're all about growth and increasing our dominance in the download market."
When we pointed out to Ohnuma that many J@pan Inc. readers at foreign firms might want to use Ubit services to penetrate the Japanese content market, he remarked, "We are happy to provide an end-to-end solution, but often we find customers have already done some of the work, so probably the best fit is for us to provide the platform, the customer to provide the content, and then discuss such things as site management, download and usage statistics--and their interpretation. For one of the major news sites mentioned before, we do provide an end-to-end service, ranging from platform to servers, billing to customer support--so the experience is there if it's needed."
Karrberg adds, "Of course, one other service that foreign content firms need is to apply to each carrier to become an authorized site and service provider, followed by regular checks on content appropriateness and compliance. We can help with this in Japan in the same way as we provide this service for the European market. We can also help with sourcing Japanese media content, including trans-coding of original video and film contents to fit the mobile phone." With more than six years running official web sites such as KissKissKiss, Ubit eats its own dog food--MS2--and finds it to be tasty.
Ubiquitous Business Technology, Inc. (Ubit)
3-42-5 Hongo Bunkyo-ku, Tokyo
Photos by Andy Rain
RELATED ARTICLE: Excite Thrilled by Ubit Solutions
AFTER a slow start, the Japanese Internet market matured quickly from 1999 through 2003, and much of the Internet "real estate" was staked out then. Excite, a second-tier Japanese search engine on a user-visit basis, is flourishing. Itochu owns nearly a 70 percent share in the web portal. Excite's IPO on JASDAQ in 2004 made this possible financially and has triggered renewed activity in creating quality content--particularly for mobile phones. That is where Ubit comes in. Yoshihiro Tomita, director of Excite's Mobile Business Department, spoke with J@pan Inc about their choice of Ubit.
In 2002, Excite, like many portals, tried to build their own infrastructure, explained Tomita. However, the advent of serious profits from the cell phone contents business meant that if Excite wanted a piece of that profit stream, they had to quickly find a solution to compete with other portals. So Excite turned to Ubit.
Ubit's solutions were able to reduce not only development cost but also development time--a crucial factor when exploiting the fickle market for cell phone content. Excite used to estimate two or three months to develop a new site, and if you factored in all three carriers--AU, DoCoMo, and Vodafone--then that development time would balloon to four months or more. Excite learned that with Ubit they could halve development time, and enjoy stable code that is very scaleable.
Excite was also concerned about site upgrades. Mobile content sites need a lot of technology updating. Ubit's MS2 obviates the need for site-by-site upgrades--but also supports all major technologies being introduced. The result is a transparent platform for content providers to work from.
For Excite, Ubit's biggest selling point was the economics. Tomita explained that it typically costs JPY10-15 million to develop a new site and at least 10,000 subscribers are needed to break even. But nowadays, with tens of thousands of sites, it is difficult to earn a return on the same investment. Ubit's solution brings down both the development and maintenance costs so dramatically that service providers can enjoy an ROI on numbers of less than 10,000. Indeed, the Ubit cost-performance value proposition enables the service provider to experiment with more diverse and niche content.
That is just what Excite is doing, said Tomita. The portal already has Excite Music, a J-Pop site, and plans to launch other sites in cooperation with Ubit. The company is confident that each of these will garner 10,000 subscribers, enough to turn a profit.
Excite also plans to make their site Felica compatible, so as to create an integrated content and e-commerce site. With Ubit's Felica-compatible download system, points will be able to be deducted from Felica, making the music and other content accessible by young Japanese expecting a seamless, trouble-free online shopping experience.--J.D.
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|Date:||Sep 22, 2005|
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