We should all probably be paying a bit more attention to the Japanese.

They are, after all, the world’s second largest economy, the third-highest ranking online country in the world, and the fourth-largest language group on the internet.

By 2012, it’s predicted that there will be 100 million internet users on the island nation.

Business to consumer e-commerce hit £38.7 billion in Japan in 2008, second only to the US.

In terms of social networking, Japan is second only to China in number of users, with 12.4 million.

Meet the Japanese Netizen

The Japanese netizen is most likely to be between 13-39. That said, surprisingly high numbers of elders are logging on: internet penetration among those 70+ doubled in 2007.

They spend an average of 19 hours online per week. This is not a hugely high number, but still puts them above quite a number of countries in terms of time spent online.

He or she is most likely to spend this time checking their webmail or shopping online. Many also partake in online gaming, for which there is a voracious appetite in Japan.

Most Japanese netizens will frequent the Yahoo! sites, which are among the most popular. Following Yahoo! is Google, and then native Japanese Rakuten, which is one of the biggest online shopping malls in Japan.

Nine in 10 of these netizens who are over 18 will engage with blogs, whereas only just over half the younger generation (8-17 years old) does so. This trend is also paralleled on social networking sites, where many Japanese over the age of 18 are frequent users, but the younger generation’s social networking engagement is among the lowest in the world.

More often than not, the Japanese netizen will use Japanese-owned mixi for his or her social networking. However, there is speculation that many Japanese are losing interest in this sort of social pastime.

Of the netizens with businesses, eight in 10 have a website, yet less than one in 10 make use of social media to engage with their customers.

The Yen’s Online Zen

The current online buyer penetration in Japan is higher than China’s, at 83 percent.

Japanese are trading their Yen for online goods and services at a rate relatively unmatched, worldwide.

Last year saw Japan just miss the top spot internationally for most business-to-consumer sales. These sales are expected to increase by 60 percent to reach over £60 billion by 2011. Around this same time, there are predicted to be over 75 million Japanese online buyers.

Travel: Big in Japan

Japan is the online travel retail leader in Asia.

And like many things Japanese, online travel in Japan is very culturally-influenced.

Rakuten Travel and Jalan net, both Japanese-owned sites, are the two most popular sites used for booking travel accommodations by Japanese travellers.

At last year’s Web in Travel conference, where members of the travel industry agreed that Asia-Pacific’s online travel market was about to take off, it was agreed that travel websites in Japanese should be in the local language.

In addition to language, Japanese online travel consumers have certain needs and preferences when researching their holiday plans. Price and transportation access are among the two most important factors Japanese people look for when consulting a travel information site. Hotel websites are most popular for those Japanese researching their general travel, followed closely by travel information sites.

ICANN Changes the Game

New rules are about to change the face of the web, and also make life a lot easier for Japanese and the marketers who want to target them.

Top level domains (TLDs), the endings of websites (ex. .com, .co.uk), will undergo a massive change in 2009. The internet regulating body, ICANN, will soon be allowing non-roman characters in TLDs.

Currently in Japan, numbers are often used in URLs, representing a strong Japanese aversion to Latin characters (which are at present the only script allowed in TLDs). Allowing Japanese characters in website addresses will make the internet much more accessible to the millions of Japanese who don’t speak or write English or any other Latin-based language.

The introduction of these Japanese character TLDs will also be a huge advantage to businesses targeting Japanese customers. Having relevant key-phrases in domains has long been considered one of the most relevant criteria for search engine algorithms.

That Elusive Little Island Nation

Japan, with its homogeneous and thick-as-blood culture, has long been slipping through the fingers of internet marketers worldwide. The aforementioned aversion to English-only content is quite apparent on the web - Japanese search engines, for example, usually require at least one page of a website to be in Japanese to qualify for submission. In addition, Japanese is a complex language, with three different scripts in use. But with such a massive online network and market, it’s clear that it would be well worth the extra effort.

The earnings can be paid in cash or can be converted to Yahoo Points. While cash payment (wire transfer) would cost the transaction fee to the site owner, Yahoo points can be very attractive to Japanese owners as it can be used at Yahoo Shopping, Yahoo Auctions, and other popular e-commerce sites.

According to Overture Japan’s survey against 1000 people in 20s, 30s and 40s, 65% of them went “online” to research and to book the trip, followed by “travel magazines (17.4%) and “travel agencies (17%).  Even the ones who did book the trip at the agencies, many of them first researched the information online.

Of course, Internet doesn’t mean just the search engines. Many travel portal sites and the booking sites such as Yahoo Travel, Rakuten Travel and Arukikata play a big part in people’s research process. If you are a travel related site owner, you should check your site’s visibility in the search results at these portal sites as well as Yahoo Japan and Google Japan.

More and more shops and restaurants are participating in mobile coupon services such as above. Often times, it allows the user to use coupons without printing it out, which is very convenient.

On the other hand, Web Marketing Guide’s research with Net Asia Research shows 58% has used mobile video sharing sites. Again, MyTube mobile and NicoNicoDouga mobile are the two popular sites, and 70% of them watch music videos.

In Japan’s web version of video sharing market, currently YouTube is the most popular site followed by NicoNico Douga and Google Video. The service is most popular among teenagers in Japan.

They predicts that the mobile advertising will grow to 100 billion yen market in 2008 with further improvements on the mobile devices and with the services such as video sharing, which help increase the mobile e-commerce users.

According to Softbank and Humancapital’s research, more than 73% of survey participants purchase products/services online (PC) more than once a month, and spend about $120/month.  The most popular items were “Books and Magazines” followed by “CDs and DVDs”. Unlike Western markets, music and video sharing sites don’t have negative effects on the music/movie sales in Japan even though Japanese are one of the heavy users of these sharing sites.

This mobile search site use their original mobile search engine “RF Search”, which analyze the meaning of the search term (keyword), and find the pages that are most relevant to the keyword from their data base of more than 200 million page index.

It is exciting to see that Japanese companies coming up with their own search engines while many people just focus on Yahoo and Google. Japanese language is very different from Western languages, and mobile market in Japan is different from any other markets in the world. It just make sense to have Japan’s original engines. Having another engine with different algorithm (different search results) would benefit the users.

The report shows that a total of 7019 bil yen was spent for advertising in 2007 in Japan, compared to 6940 bil yen in 2006. The ads spending for TV (1998 bil yen), magazine, newspapers (946 bil yen) and radio (167 bil yen) have been declined for the past 3 years. On the other hand, the ads spending for Internet has been growing rapidly for the past 4 years in Japan.

I think that the continue growth of Internet advertising market in Japan shows that the advertisers see more values in Internet advertising than other medias. Still, the total amount spent for Internet ads is less than 30% of what was spent for TV ads. I think that advertisers will shift more budget for Internet where they can measure the effectiveness of the ads. Also, I saw more TV ads that were made to point people to their website in 2007. In order to achieve the best results, it’s time to think about both off-line and on-line ads as one campaign, instead of treating them individually.

He also said, “Mobile phone is now an Internet device. I believe that Google will become one of our major competitors within 5 to 10 years.” Google has won the tie-up contract with “au” and NTT’s “DoCoMo”, and has became one of the major players in Japan’s mobile industry in last year.

He added that Yahoo would work with China’s Baidu and S. Korea’s Naver to keep Google from becoming a market leader in Asia.