1. Overview of iMode Marketing Tactics

2. Executive Summary “WAP-lash” is the media term used to describe market sentiment about WAP after a year of limited market uptake. However, in Japan, mobile internet services have been an unqualified success with over 27 million total mobile data users. Conventional wisdom attributes this success to unique market conditions, categorizing iMode with other predominantly Japanese phenomenon such as fugu and karaoke. This wisdom is flawed because it confuses correlation with causation and fails to describe adoption in Japan or predict adoption in other markets. However, much worse than being statistically flawed, these “fugu” factors discourage a closer look at iMode’s business model. This has led to a superficial examination of iMode marketing tactics as if they hid the secret formula that would transform WAP into a success. NTT’s success is not built on a cultural aberration or a marketing sleight of hand, but on a basic business principle: If you can make them (content) rich, they will come. NTT’s first insight was to build a mass market for the mobile internet through a large selection of telephones and intelligent pricing of data airtime. NTT’s real genius was solving the problem facing the wired internet, how to generate revenue from subscribers. iMode subscription billing service creates clear financial incentives for content providers while keeping NTT firmly in control of the customer relationship.

3. “WAP-lash” is the media term used to describe market sentiment about WAP after a year of limited uptake The conclusions of the study were certainly not good news for any company hoping to make money from m-commerce over WAP - 70% of the participants said that, based on their experiences, they would not consider using WAP services within the next year.” Norman Nielsen Group The German cellular operator …,reported last month that its average WAP customer uses the service less than a minute a day Source: Merrill Lynch 1.5 2 AT&T Millions of Subscribers BT WAP Subscribers Sprint Millions of WAP Capable Phones 20 40 60 Used for WAP WAP Not Used WAP Phone Usage Source: WAP Forum

4. However, in Japan, mobile internet services have been an unqualified success with over 27 million total mobile data users NTT DoCoMo Over 22 Million data subscribers >40,000 subscribers added per day On track to surpass AOL as world’s largest ISP J-Phone KDDI 3 Million data subscribers Over 3.5 Million Data subscribers Provides service to 44% of world’s WAP subscribers Early adopters of CDMAone NTT iMode Subscriber Growth Japanese WAP Users as % of Total WAP Subscribers Japan ROW

5. Conventional wisdom attributes this success to unique market conditions, categorizing iMode with other predominantly Japanese phenomenon such as fugu and karaoke Typically Stated Japanese Mobile Internet Success “Factors” Long train commutes (~54 Minutes) Low internet penetration/high mobile penetration (compared to US) Market dominance of NTT Lack of two way SMS prior to iMode Packet Data Network Fugu (Pufferfish)

6. This wisdom is flawed because it confuses correlation with causation and fails to describe adoption in Japan or predict adoption in other markets. Long train commutes (~54 Minutes) If this Mobile Internet adoption is driven by…. …. Why Were Japanese teenagers the early adopters of iMode Have the German, French, Italian and Spanish markets (with lower internet and comparable or higher mobile penetration than Japan) experienced little success Have AT&T and Nextel (with packet data networks) not succeeded Has the US market failed to take-off Has Vodafone (with 3x the proportional subscribers) been unable to force WAP on its subscribers Low internet penetration/high mobile penetration (compared to US) Market dominance of NTT Lack of two way SMS prior to iMode Packet Data Network

7. However, much worse than being statistically flawed, these “fugu” factors discourage a closer look at the iMode’s business model. Another Example of a Correlated but Unrelated Japanese Mobile Internet Factor In Japan, cars have the steering wheel on the right. Operating the radio and heater controls with the left hand improves bi- lateral dexterity leading to increased mobile internet use.

8. This has led to a superficial examination of iMode marketing tactics as if they hid the secret formula that would transform WAP into a success 1. Drop "WAP." 2. Don't call it Web or Internet. 3. Find a new language. 4. Don't get technical with me! 5. Promise, don't hype. Takeaway???: If we had only had a catchier name, it would have been successful!! Five Rules for Marketing WAP Services (Source: Business 2.0)

9. NTT’s success is not built on a cultural aberration or a marketing sleight of hand, but on a basic business principle: If you can make them (content) rich, they will come NTT’s Design Principles (Abridged Version) It is much easier (in terms of probability of market success) to charge $10 per month to 10 Million subscribers than $1000 per month to 100,000 subscribers Principle Strategic Implication Target the mass market - not the “Mobile Professional/Enterprise” segment Leverage the carrier’s established billing engine and customer billing relation to create the potential for content providers make money Creating content is easy - billing is difficult

10. NTT’s first insight was to build a mass market for the mobile internet through a large selection of telephones and intelligent pricing of data airtime Data Capable Phones Cost per eMail** ($) 2 15 27 0 0.03 0.10 Analysis All phones are data capable building a large installed base of potential WAP users Voice parity pricing does not encourage data usage **eMail cost is for “airtime” only and does not include data subscription fees. Sprint PCS assumes 1500 minute plan with wireless web and 1 minute to send an email. Sources: ATT Wireless, Sprint PCS, NTT DoCoMo web sites. Phone selection limits consumer choice Data pricing does not generate incremental revenue Large and growing phone selection at all price and style points Data pricing generates incremental revenue but also encourages data substitution for voice

11. NTT’s real genius was solving the problem facing the wired internet, how to generate revenue from subscribers “Yahoo! itself first resided on Yang's student workstation, "akebono" while the search engine was lodged on Filo's computer, "konishiki." (These machines were named after legendary Hawaiian sumo wrestlers.)” “As the first online navigational guide to the Web, www.yahoo.com is the leading guide in terms of traffic, advertising, household and business user reach, and is one of the most recognized brands associated with the Internet.” www.yahoo.com “Yahoo gets most of its revenue by selling advertising space on its pages. A slowdown in advertising sales has caused Yahoo shares to fall 87 percent over the last year.” (1) Two guys... (3)…but cannot bill individual users. Source: Bloomberg News Source: Yahoo! Website (2) …can build the world’s largest Internet content company...

12. iMode subscription billing service creates clear financial incentives for content providers while keeping NTT firmly in control of the customer relationship NTT DoCoMo Authorize d Content Providers User i-mode content iMode Fee + Usage Fee + Content Sub Fee Content Fee - Commission (9%) Commission (9%) Each content / information Provide content Provide MENU iMode Subscription Model Takeaways NTT has the billing relationship with the consumer Content revenue is directly correlated with the number of subscribers - driving providers to focus on growing subscriptions Users, not NTT, determines the value of content Content providers bear all the financial risk of creating new content All incremental traffic (voice and data) revenue is retained by DoCoMo

13. Intelligent application of these insights not only help our clients as they work through 2.5-3G issues, but can also lead to work defining and building these new business models Target the service at the mass market and let content providers attack niches through targeted offerings Make service trial easy and inexpensive Build in ways for content providers to make money at launch of data services. Although a subscription service has worked in Japan, it is not the only method of revenue sharing. Analysis by carrier of alternative business models (e.g., sharing of air time revenue, pay per use) should be performed to determine the best model to properly incentivize content providers Bandwidth is not as important as content, the vast majority of Japanese mobile internet users connect at <10kpbs. Conversely, bandwidth and device improvements alone will not fix the problems in WAP without a fundamental shift in business model Insights