About Asia’s Top Social Networks & “Innovation Arbitrage”: Benjamin Joffe of +8*

As we move towards the unConference Singapore 2009, we speak with some of the people who will be speaking at the Unconference. He is one of the top experts on innovation, mobile and web business models in Asia as well as being the founder of Mobile Monday in Beijing. Today, we speak with Benjamin Joffe of +8* (plus 8 star) on Asia, the business models of Asian social network services and what businesses can learn from them. Benjamin Joffe is a sought-after speaker and thought leader across the world on the topic of Asia, social networks, virtual worlds. He has lived for 9 years in East Asian countries (China, Japan, Korea) studying the internet landscapes. Besides running Plus8Star, he is also Partner at China-based gaming startup Cmune.com. His work can be found at his Slideshare profile and this ReadWriteWeb article where he discussed “Facebook vs Asia’s Top Social Networks”. Follow him on Twitter @benjaminjoffe

e27: First of all, could you tell us a little about how you ended up living and working in Asia during the past 9 years?

Benjamin Joffe: I love food ending with “i” – sushi, kimchi and jiaozi. And manga too maybe?
More seriously, I was attracted to learning a new language while doing my engineering degree. I wrote my first Japanese character in 1996 and came to Japan first in 1998. I found that I was more active there than back home and decided to came back for work in 2000. I stayed about 4 years in Japan.

While in Japan, I got interested in both Korea and China. I felt I had missed a window for China in 2001 so by 2003 I decided to move to Korea for an executive training with the EU and helping a mobile SNS startup – back in 2003 it was probably too much bleeding edge.

After a year in Korea I wanted to see something new and I decided to go ahead and moved to Beijing.
On the work part, I came across a lot of innovations that initially I thought – like many observers – too local to work elsewhere. Then I realized many concepts were being “reinvented” after a while and found there was an “arbitration” opportunity. +8* is the company I built a company around this idea.

Now I also have better eyes to see beyond the “cultural layer” and understand market structures to see what could work or not in other markets, and how to adapt ideas. It took me 9 years to acquire this “augmented reality” vision.

e27: How did your interest in Asian social networks start?

Benjamin Joffe:

I was working in Japan in 2001 and visited Korea on a business trip. I saw Cyworld and probably asked the right questions – beyond the avatars’ designs. I met the original founder a bit later and we are now good friends. (editor note: both ben and cyworld founder Yong Joon Hyoung are now working together at Cmune)

He helped me to understand that social networks were not so much about engineering as they were about sociology, psychology and design. He can tell you about “Social Process Re-engineering” and “Personal Resource Planning”, then you realize “social networking” is a very basic first step towards what could be done.

e27: QQ and Mixi aren’t exactly as well known as Facebook outside of the countries of their origination. Yet in your slides as well as in recent news, they’ve done significantly better than their western counterparts such as Facebook, can you tell us why this is so?

Benjamin Joffe:

Those services are not well known because it seems the interest threshold from Westerners for looking at an Asian company is around 1 billion USD. This is the revenue of Tencent last year and the valuation of Mixi, DeNA, GREE or Changyou that was the first company to IPO on Nasdaq after 6 months of no IPO. Changyou is a Chinese online gaming company monetizing with virtual goods. This should send a strong signal.

Of course, the concept used by those companies has not changed much between the moment they made 1 million, 10 million, 100 million and 1 billion. There are also a lot of very good concepts making less than 1 billion.

Facebook has been stuck with “low hanging fruits” trying to monetize with ads. There was not enough ads in Korea or in China to make gaming or social networks viable so they tried new models. One of them worked beyond expectations; it was the virtual goods model. The West is very excited about this model now. Cyworld had it for 10 years.

e27: Do you think that Asian social networks such as QQ and Mixi can become as mainstream as Facebook outside of Asia?

Benjamin Joffe:

There are no “Asian social networks”. There are business models, service concepts and companies.
As companies, I think QQ and Mixi have very little chances to succeed outside their home market due to management, culture, finance and competition. However, I think their concepts can work very well if correctly adapted. After all, Mixi started as a localized version of Friendster, so why not the other way?

We published reports on both Tencent and Cyworld that were purchased by companies in US, Germany, France, Russia, Vietnam and more. We also did custom projects for Western companies that tell us that “the best place to learn about virtual goods is Asia”. We also met some people at Facebook and MySpace and shared some ideas with them. Now, Facebook and MySpace have an equally hard time in markets where there is mature and well-financed competition.

e27: What lessons can Asian companies and start-ups draw from the success of these social networks within Asia?

Benjamin Joffe:

Best lessons are that:
(1) You can get paid by users even in markets with low income and rampant piracy. China proved that 5~15% of users paying is enough to make billions. It looks like many people in the West still think “people don’t want to pay for content” even if iTunes and Apple’s App Store proved them wrong. Asian companies have a hard time convincing investors who don’t understand what they do. They should learn that it’s possible to do great things with little money if you focus on monetizing early.

(2) They should also learn that they might build very successful local players by leveraging their local knowledge and the best practices from other markets. One of our clients wants to be the QQ of Russia, another one the QQ of Vietnam and another the Cyworld of the Arab world. Building local or regional champions is easier than world leaders. Remember neither Facebook, MySpace, Google or MSN dominate in China, Japan and Korea.

e27: Do you think Asian social networks will continue with their current success in say, another 5 years time?

Benjamin Joffe:

Cyworld has been around for 10 years and people are growing out of it, waiting for the next thing. Cyworld came around with early ADSL (just a few Mbps) and is trying to migrate to 3D to leverage the super-broadband speed but it’s hard for them to change that much – especially since all founders have left since the acquisition. They are fortunate it is so hard to build a company in Korea they don’t have a lot of competition.

DeNA and Gree are the emblems of 3G services in Japan. In 5 years 4G will be around and it is likely another round of companies will take the spotlight.

I have more confidence in China’s QQ as they are basically “communication infrasctructure”. This is a very solid position – QQ IM starts before the browser! I think Tencent will be around and probably in even better shape as in 5 years China will have maybe 500 million Internet users instead of 300 now. Also, mobile will be better and will help monetize even more.

For other Chinese SNS especially Facebook adaptations I think they might stick for a while as they raised a lot of capital and can survive with that regardless of revenue, offering 5 years of free lunches for their users. Those companies have not really innovated much and only constant innovation can help them survive in such a competitive market. Competition from gaming companies, QQ and Baidu is likely to be stiff.

Benjamin Joffe will be presenting a case study on Asian Innovation at the unConference Singapore 2009.

This article is part of a feature series on prominent attendees of  unConference 2009 on May 16th. Follow the event on twitter here. (event hashtag: #unconf2009)