With the recent news of the joint venture between NTT DoCoMo and Rakuten to build a new mobile auction business, I’ve been thinking a bunch about the mobile auction space.

Then, out of the blue, an analyst from a European mobile/telecoms newsletter contacted me regarding my musings. I spent a few more minutes elaborating on my ideas and they may make their way into a newsletter.

However, I reserve the right to publish my own thoughts on my own blog, so I’ll jot them down here as well. We’ll see how much of my ideas get into the article.

— Q & A between a European mobile/telecoms analyst and me, Gen Kanai —

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> How and why the mobile auction market in Japan is a success

At the moment, mobile auctions are not a mainstream success yet.

KDDI began to offer a mobile auction service on 13 January 2005 under the brand “AU Auction” in joint-venture with DeNA’s Bidders.jp.

> What is the potential for this market?



In January 2005, Nomura Resarch put the Japanese Internet Auction market at Y1.3 trillion in 2005 and Y2.1 trillion by 2009.

Mobile auction services would expand this market to non-PC users as well as expand the “time” that people are doing auctions (i.e. you could start an auction while on the train to work or monitor your auction even when away from the PC.

The potential for the mobile auction market is very large because of many factors coming together at once:

1) widespread 3G network coverage which allows for the speed necessary for uploading images/data and monitoring your auction items,

2) two and three megapixel cameras on just about every 3G phone allows customers to take high-quality images of their items for auction,

3) high quality TFTs on 3G phones which allow users to see physical details of auction items that previously would have been fairly poor,

4) fixed price, unlimited packet plans so customers do not have to worry about how much they are using the service,

5) the always-on, always nearby nature of mobile phones make them a perfect tool for auctions- both for those who are selling and those who are buying,

6) the mobile nature of the Japanese market: the mobile Internet market in Japan is much larger than the PC-based market due to cost of PCs, lack of space in Japanese houses, and the nature of Japanese life (greater time spent on public transportation vs. the car culture of other nations.)

> Whether it was the right move for DoCoMo to do a deal with Rakuten — could there have been any other companies in contention?

> Could DoCoMo partner with another company also?

While I do not know the details of the deal, I would be very surprised if this was not an exclusive. Rakuten has enough ecommerce traffic to demand an exclusive with DoCoMo. WRT the partnership itself, there are very few entities large enough to do a deal such as this. Yahoo! Japan Auctions doesn’t have a mobile deal per se, but they don’t need to (being the current industry leader.)

> How will DoCoMo make money from mobile auction, what impact will the service have on ARPU?

> Do you have any idea of the possible pricing model — price per bid, per auction, per minute, data usage?

In order to offset the network usage and create a revenue stream, I would imagine that this new JV company would take a slice of each successful auction (say over a certain price) and perhaps a monthly fee to list items (Yahoo! Japan Auctions currently collects Y300 per registered user whether you use the service or not.)

> Do KDDI and Vodafone offer similar services?

KDDI offers a mobile auction service in JV with DeNA called AU Auction. It’s not mainstream yet and most people I know compare the offerings on Au Auction with the PC-based Yahoo! Japan Auctions (the “80,000 kg. Godzilla of online auctions in Japan” : ) and are disappointed with the lack of a marketplace on AU Auction. All serious auction customers, both buyers and sellers, are on Yahoo! Japan’s Auction service.

Vodafone does not have a mobile auction offering. If you have followed Vodafone’s Japan status, they are struggling with uninspiring handsets and a bad 3G network. Vodafone Japan customers are leaving by the droves. I would imagine that the bulk of their efforts at the moment are in new handsets and expanding their 3G network coverage, but by being the last of the major 3 mobile carriers to enter the mobile auction market (which they haven’t announced) they are automatically at an extreme disadvantage because mobile auction users may switch networks in order to be on the one with the largest marketplace (i.e. the early entrants.)

Many analysts believe that eBay Japan failed because they were late to market (launched months after Yahoo! Japan Auctions launched their service) and because eBay had fees that Yahoo! Japan Auctions didn’t. Also, Yahoo! had the momentum of being the dominant portal in Japan, whereas no Japanese Internet users know the eBay brand (either then, nor now.)

The largest mobile auction marketplace will be determined by how much effort DoCoMo and Rakuten put into this new JV. They are 10 months late but if they are very savvy, they have a chance to take a lead in the marketplace as AU Auctions have not captured any significant market share or mind share.

Finally, the dark, dark horse in mobile commerce in Japan is eBay, who have returned to Japan under their kijiji.co.jp classifieds brand (i.e. taking the Craig’s List model worldwide.) They currently do not have a mobile service. If they were to launch a mobile classifieds service, a mobile Kijiji in Japan would have the potential to both expand the Japanese mobile commerce market in total as well as eat into the existing mobile auction market. This is purely my own speculation at this time.