Blissful Japan

Some of you may have heard of Gree, Japan’s #2 social networking site (SNS). (No, I don’t know how they chose the name! Is it a Japanese-English version of “Glee”? Maybe someone knows?) About 4 or 5 years ago I joined after getting invitations from a number of my friends, who were also using the service. However, as time went by, Mixi became the dominant player and nobody I know uses Gree anymore.

Gree’s one good feature I thought was a reminder email when one of your contact’s birthdays was coming up. More than a reminder though, the service also provided a community birthday card web page where you and all your friends could leave your birthday wishes and see what other people had written. It’s this birthday card feature that showed me how everyone I knew gradually stopped using Gree, as gradually the amount of messages on these community birthday cards decreased and decreased, these days down to just 1 or 2 people bothering to write in.

Gree also always had a superior mobile version. Even 2 years ago in the Spring of 2007, Mixi’s mobile site was a disgrace compared to Gree. Simplistic layout, virtually no images, few features, etc… But I know that Mixi mobile has improved a lot in the past two years.

So what makes Gree worth $1.2 billion? Can someone please help explain this to me? I have this feeling that all SNS sites are overvalued (including Facebook and LinkedIn), butnow Gree as well? Amazing….

Text below is from Wireless Watch Japan.

Gree to the World
Japan’s #2 SNS platform - Gree - IPO’d on Mothers stock-exchange last week and saw it’s shares jump 52% on listing day to a valuation of just over $1.2B, closing ahead of Mixi and gliding into 4th place for all digital-focused listed companies in Japan. While claiming approx. 7M users, only half of the Mixi base, Gree is almost entirely a mobile play. Serving as defacto SNS platform for the KDDI/au network, who was an early stage investor, the service offering combines gaming and messaging with a virtual goods model. According to company financials they reported $11M in profit on revenues of $33M in their last fiscal year while noting marked increases in Q1 FYE09. Crisis.. What Crisis?!?

More from around the web:
http://fukumimi.wordpress.com/2008/12/20/grees-ipo-and-service-outage/

Gree, Japan’s #2 (and original) SNS had its IPO on Dec 17th, instantly valuing the company at an eye popping JPY110B ($1.2B), with PER of 170 and PBR of 104. This makes Gree worth more than the #1 SNS, Mixi, which is currently valued at $900M, which is trading at a PER of 43.

Gree has approx 7 million “users”, which puts it far behind Mixi which claimed it passed 15million in the summer. The interesting thing about Gree is that it is, for all intents and purposes, a mobile internet SNS, with more than 98% of page views from mobile devices, although it originally started as a PC service. Mixi has a more even split between PC and mobile, 33:67 according to the most recent published figures.

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/22/AR2008122201143.html

It seems the stock market sees a lot of room for growth in GREE’s business model even though the company doesn’t own valuable IP; the site’s big idea is easy to copy and Japan’s mobile market is saturated and bound to shrink considerably in the future for a variety of reasons (declining birth rate in Japan, government ban on handset subsidies). The combination of ads and fee-based sales is working out in today?s weak online ad market: From all of GREE’s sales, 70% comes from virtual items and 30% from ads. That’s a high ratio of virtual sales for a mobile site. In contrast, Mixi is heavily dependent on advertisements (the site generates less than 10% of its revenues through premium accounts and has no avatar system).