The Little Startup from Japan That Took Down NTT – TownWiFi

It’s rare for a Japanese startup to challenge NTT and come out ahead. But that’s exactly what Takehiro Ogita and his team at TownWiFi have accomplished.

TownWiFi is a mobile app that automatically detects and logins into available WiFi hotspots. Since TownWiFi was very modestly funded, Takehiro and his team relied on a better user experience and word of mouth to get the word out.

Today we sit down with Takehiro and dive into that story, but we also look at the company’s existing overseas userbase and his plans for global expansion on a shoestring.

There is so much changing among Japanese startups right now, and Takehiro explains some of the social forces working for and working against new Japanese startups.

It’s a great discussion, and I think you’ll enjoy it.

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Show Notes

• The universal problem with free WiFi
• What allowed TownWiFi to gather a userbase so quickly
• Why Rakuten produces so many startup founders
• Why Takehiro had to hide his startup from his family
• How TownWiFi managed to beat NTT in direct competition
• A common sense plan for global expansion
• How pivoting from a C2C to a B2B model saved this startup

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Transcript

 

Disrupting Japan, episode 92.

Welcome to Disrupting Japan. Straight talk from Japan’s most successful entrepreneurs.

I’m Tim Romero and thanks for joining me.

Takehiro Ogita started TownWiFi as a simple way to allow Wi-Fi hotspots to be accessed and shared to mobile phones or mobile device users in general. There are a number of free Wi-Fi finding apps out there today but there are a few particularly interesting things about TownWiFi.

First, unlike almost all their competitors, TownWiFi has found a way to monetize this app. And while they’re not yet profitable, they are earning revenue. Second, and I love this for so many reasons, the dominant player in this space, when TownWiFi launched their product was NTT and little TownWiFi has absolutely crushed NTT in the marketplace.

Don’t get me wrong. I like NTT. I have friends at NTT. NTT is actually doing a lot of positive things in the area of corporate development and open innovation. The reason TownWiFi’s story is so inspiring is that it would have been absolutely impossible 10 years ago.

Back then, NTT DoCoMo was not only the dominant mobile carrier but strictly controlled which apps would be allowed to be featured on their platform and sold to their subscribers. This may sound vaguely like the way Apple runs the App Store but it’s not. At that time, Japanese carriers would select one or two apps in each category, usually from closely associated companies and then lock everyone else out. Apps did not really compete with each other and there is no way that a serious challenger to the carrier’s own app let alone one made by an independent upstart would have been allowed inside their walled garden.

Things are changing for startups in Japan, and when tiny little startups begin to beat NTT at their own game, it means great things are on the way. But you know, Takehiro tells that story much better than I can.

So let’s hear from our sponsor and get right to the interview.

Tim: So I’m sitting here with Takehiro Ogita of TownWiFi. Thanks for sitting down with us today.

Takehiro: Thanks for having me.

Tim: TownWiFi is an app that helps you find free Wi-Fi hotspots but I know it’s more than that, and you can explain it better than I can. So why don’t you tell us what TownWiFi is?

Takehiro: We are providing app which can auto-connect and authenticate to the public Wi-Fi. Our biggest point is that we are auto-authenticate, and auto-login, and auto-register to very public Wi-Fi of the world.

Tim: So that means that the user can just kind of keep this app running in the background —

Takehiro: Exactly.

Tim: — and the phone will just automatically connect to publicly available Wi-Fi when it can?

Takehiro: Yeah. There’s many public Wi-Fi spot in Japan, in Korea, and all over. The UXO using Wi-Fi is not good at all, the WiFi Mark at the iPhone. You cannot connect after that. You have to open up the Safari, it will redirect you to registration pages of each Wi-Fi.

Tim: Right, right.

Takehiro: It’s super annoying.

Tim: You’ve got to go through at least three or four different pages and forms.

Takehiro: Exactly. Exactly.

Tim: Okay. So the real selling point is all this happens in the background.

Takehiro: Exactly, yeah.

Tim: Excellent. Tell me a bit about your users. Who is using this? How many hotspots do you have registered? How many companies? How many subscribers?

Takehiro: We have 1.5 million Wi-Fi spot all over the world.

Tim: Wow. That’s a lot of spots. So how many of those are in Japan versus global?

Takehiro: In Japan, we have 300K.

Tim: Okay. So most of the spots are overseas?

Takehiro: U.S., the most.

Tim: How did you register all these spots? How did you find the location?

Takehiro: We are not talking with each Wi-Fi provider. That’s super tough negotiation for an app which is not famous at all like us. What we do is that we just support the registration flow of the users. So contract is based on users and Wi-Fi provider, like users and Tokyo Metro or users and Starbucks.

Tim: But how do you support that? If you’re here in Japan and you’ve got Bob’s coffee shop in Central Missouri, how do you know what steps you need to take to register and log in there?

Takehiro: We have two different way to do that. One is to just go there. Just go to Starbucks at San Francisco.

Tim: Something tells me, with 1.5 million hotspots, that’s not really a practical approach.

Takehiro: Well, it is actually. Because if I went to Starbucks at San Francisco then connect to the Starbucks Wi-Fi, we will just build the same interaction into our apps. What user have to do, just set up the first sign and if we handle one Starbucks Wi-Fi, the authentication is same. We’re not sure about where exactly the Wi-Fi spot is but our app will connect when there is Wi-Fi around them. And next, we will analyze the log data of users. Where did they fail, if user tried to access the public Wi-Fi which we don’t know. The log will come, this SSID and this kind of registration pages. By analyzing that, we will make that Wi-Fi into our TownWiFi.

Tim: I get it. So the first time a user visits a location, they manually go through the process then it’s in the system and everyone can use it after that?

Takehiro: Exactly.

Tim: I guess similarly, if a location changes the protocol used to log in, the first person logging in after that has to go through it and then everyone else is updated.

Takehiro: Kind of that, yeah.

Tim: All right.

Takehiro: We are tracking the Wi-Fi success ratio. If the Wi-Fi manager change the registration flow, we can detect it and fix and reuse it.

Tim: On the user side, the subscriber side, how many people are using TownWiFi?

Takehiro: We have more than 2 million users and one million are active.

Tim: That’s also global or mostly Japan?

Takehiro: Well, sad to say it’s mostly Japan. We’re trying to expand global and we are handling Korea and U.S. Wi-Fi. It’s growing but not so fast as we expected.

Tim: Okay. What is TownWiFi’s business model? How do you make money from this?

Takehiro: We have two business models. One is making user pay and another is utilize Wi-Fi data. The first one is very simple. We will handle the paid Wi-Fi. If you pay ¥‎300, you can access this certain Wi-Fi. There exist all over the world and we are talking to that Wi-Fi provider. We will sell at ¥‎300. They will wholesale to us like ‎‎¥‎400.

Tim: So in those cases where there is no free Wi-Fi available, the phone would default onto the paid Wi-Fi?

Takehiro: Yeah. We will let user know, “Hey, there is a paid Wi-Fi but how about using it?” It is more targeting to travelers. Especially in China, the China Telecom Wi-Fi is all over China.

Tim: Right. And on the Wi-Fi provider side, what kind of data are you selling?

Takehiro: We are selling two data. One is Wi-Fi request data. User are saying that, “Hey, I want Wi-Fi at this shop.” And we are selling that data to Wi-Fi sales company and they will call shops that these people are wanting Wi-Fi at their shop. How about making it?

Tim: How do you get that data if the application is running in the background?

Takehiro: User have to do it manually. There is a request pages or request tab at our app.

Tim: Okay. I see. So it would be maybe there is a coffee shop in the middle of an area with no Wi-Fi and this would be a good way to get more people into the shop. Is Wi-Fi still an effective way to draw customers into a shop?

Takehiro: Wi-Fi is not needed to all the shops. It basically depends on what kind of users are going there. So we are just creating the list based on user needs. So if there are more than five people requested it, there is a need for your shop for creating Wi-Fi. Especially young generations or people who change to cheaper telecom services, they will reduce the cost but also reduce the amount of data volumes. Another is that we are providing Wi-Fi dashboard to each Wi-Fi providers. They don’t know who are using their Wi-Fis when it’s used or is that repeater or a new user? We are providing that in dashboard. On top of that, Wi-Fi provider can contact users when they connect to Wi-Fi.

Tim: I can see the value in contacting users when they connect, sending the messages and things but don’t the shops already have access to the information on how many people are connecting and how many repeat users there are looking at their own log files?

Takehiro: Well, it depends. Some Wi-Fi provider like telecom services are providing them data but they are provided by like Excel file. It’s hard to analyze. We are making that very smooth.

Tim: Excellent. It makes sense. Before we dive deeper into the technology and the business, I want to back up a bit and talk about you for a minute. Before starting TownWiFi, you worked at Rakuten for a few years?

Takehiro: Exactly.

Tim: You graduated from Keio.

Takehiro: Yeah.

Tim: What I’ve noticed, both Rakuten and Keio University seem to produce a large number of startup founders. Why is that?

Takehiro: Well, talking about Rakuten, one big thing is that it is founded by the person who quit the big company and start their own company and it succeeded like Mikitani.

Tim: So Mikitani is —

Takehiro: Is a role model for us. I won’t say the best role model but great role model, quitting the big company.

Tim: So now that Rakuten is the big company, it’s sort of inspiration for all the employees to follow in his footsteps?

Takehiro: Some of them, yeah. But frankly speaking, I have no intention to quit Rakuten and start my startup at all.

Tim: Really?

Takehiro: Yeah. My motivation is to make things better. I like what I’m doing. Why I quit is that I do these services and I got obsessed that I should do it and I thought that this is the best thing for Japanese Internet services. Especially young generation, they want to use it but they’re quitting to use internet because of this.

Tim: You’re saying you didn’t really want to leave Rakuten and start your own company. So what made you decide to do that? What made you decide to do that instead of running TownWiFi as kind of an open source project or a hobby project?

Takehiro: I didn’t think about hobby because I was obsessed. I’m focused to this. But what I think first is that let’s do TownWiFi inside Rakuten, yeah.

Tim: Okay. So you tried to do it as a Rakuten project?

Takehiro: Yeah. There are Rakuten Mobile so I thought that it will be kind of synergy. I pitched to some member at Rakuten Mobile and it was positive but it was tough at the higher layer and they didn’t get it at all. So my only way is that quit Rakuten or quit this idea.

Tim: You quit Rakuten?

Takehiro: Yeah.

Tim: What did you co-workers and your family think about it? Were they supportive or were they worried about you leaving this big safe company to start your own company?

Takehiro: Yeah. I didn’t tell to my family at all.

Tim: Really? They thought you were still working for Rakuten?

Takehiro: Yeah. Several months after I quit, I went back to my family for the summer. “By the way, I quit Rakuten.” They were super surprised.

Tim: They were not happy with your decision?

Takehiro: They were not happy at all, yeah. My mother and father work at big company, traditional Japanese companies so they cannot understand at all. But I quit so there’s no point of going back.

Tim: I think a lot of young Japanese founders find themselves in exactly the same situation. Actually a lot of older Japanese founders found themselves in that situation too. Getting back to TownWiFi, who is your competition in Japan, for example?

Takehiro: There are one big compare — Japan Connected-free Wi-Fi app. It is provided by NTTBP, NTT subsidiary so it’s super huge.

Tim: Yeah. Well-financed, big budget.

Takehiro: Well-financed, yeah. Promoting at every places. But I think they are running for four years and we are running for one year but download number is same. We reached it four times faster than them. I think that active user is far higher than them.

Tim: Why is that? What did you do that NTT couldn’t do?

Takehiro: We did two things. One is UIX is far better. Talking about NTTBP’s app, they have to connect to Wi-Fi first and after that, they require users to open their app and push the connect button. It’s super lame.

Tim: NTT is kind of famous for bad UI design.

Takehiro: Yeah. User don’t want that. They want to use Wi-Fi like seeder network. No need for connecting or no need to authenticate, just connected.

Tim: Don’t even think about it.

Takehiro: Exactly.

Tim: All right.

Takehiro: So some of our users don’t know about Wi-Fi at all. They heard that if they use Wi-Fi, they don’t have to worry about cellular data. So they install our app. There is some inquiry that “I installed your app but I’m not connected to Wi-Fi.” “Where are you?” “I’m at my house.” “Is there Wi-Fi?” “No, there’s no Wi-Fi. But you said that this is Wi-Fi app.” So I have to start from that.

Tim: To manage the expectations, yes.

Takehiro: But that’s the way user thinking. Because young generations, they don’t use PC at all so they think Wi-Fi as their network. They can connect everywhere. They wanted that so we are trying to do as much as we can.

Tim: How did you get the word out? NTT is your main competitor here. They have shops and billboards and pre-installed apps and they have incredible power and reach. It’s one thing to build a better app but how did you get the word out? How did you let people know what TownWiFi existed?

Takehiro: Well, I cannot say that at all because we did nothing.

Tim: Just word of mouth?

Takehiro: Just word of mouth and after we release our app one year ago, two weeks after we released, user started coming. I think that one month after release, we get 300,000 users.

Tim: So uptake was pretty fast from the very beginning.

Takehiro: Yeah. I didn’t expect that at all. We were so panicked that our server was not that much.

Tim: I mean it sounds like you’ve tapped into something that is really needed.

Takehiro: Exactly, yeah.

Tim: And that NTT was just not doing a good job of providing. Earlier, you mentioned that Wi-Fi started mainly for PCs and laptops. Do you think this business model will continue to be important in the future? What I mean by that is, more and more people are using mobile. Mobile obviously has its own data plan and even the mobile phone’s data plans are getting more and more generous. For example, I tend to use my smartphone as my own personal hotspot. So do you think that trend is going to work against you in the future and that there will be less need for public Wi-Fi in general or do you think that this is something that will continue and remain strong?

Takehiro: I think that’s very important question. But the point is that what will be the price of that? Generally, there are company provide — you got Monster plan like 20 gigabyte per month, only for a thousand yen. I thought that that will impact our business but it didn’t impact at all. I heard from some of my inside sources that many people are changing the plan from Giga Monster to cheaper plan.

Tim: Okay. Even as these plans become cheaper and cheaper, people still prefer free over even a small cost?

Takehiro: Exactly, yeah. We are thinking ourself as telecom services, not Wi-Fi auto-connect services because 10% of our users are not having contract with telecom services. They totally depend on Wi-Fi only.

Tim: 10%?

Takehiro: Yeah. It’s quite huge. I think that that trend is more likely happening at Southeast Asia like Vietnam, Indonesia, and Malaysia. They want to spend low cost, preferably zero. They are using prepaid, looking for Wi-Fi at every place.

Tim: Well, I guess it’s true. No matter how cheap you get, free is always better.

Takehiro: Yeah.

Tim: I also suppose that no matter how much bandwidth the data plans give away, we’re just going to be using more and more bandwidth anyway.

Takehiro: Exactly, yeah. So like us, we’re a businessman. We need high speed and high quality, maybe high price channel data but not for all of it. 30% of the population can be handled by low cost or maybe zero cost with internet.

Tim: It would seem that the two groups of users who would be most anxious to use TownWiFi would be those who do not have or can’t afford a data plan or connectivity at all and will rely on Wi-Fi and travellers who are — data roaming is very expensive no matter where you’re going, and who don’t have a data plan where they are.

Takehiro: Exactly. So I said there is two ways, for paid Wi-Fi and utilize the Wi-Fi data. Paid Wi-Fi is for travelers. We can provide that alternative to mobile users. For Wi-Fi dashboard, it is for local users to provide more benefit to Wi-Fi providers.

Tim: Does focusing on foreign visitors put you at odds with the shops that want to use the dashboard? What I mean is, most of the coffee shops and restaurants, are they focused on getting repeat steady customers with the offer for Wi-Fi or are they just as happy to get someone in there one time who’s just passing through town?

Takehiro: Well, they want repeaters. Getting new users or making repeat and more repeated is far better at cost. They want to shift to that. And our dashboard will be the strong tool for it.

Tim: Okay. Let’s talk a bit about your global expansion plans. So you mentioned that the first target is the Korean market and then the U.S. Why Korea and the U.S.? How are things going?

Takehiro: First, we think that travelers will need Wi-Fi. On top of that, Japanese users are using it. So we first focus to the country that Japanese users are traveling and traveling to Japan too. Because if Korean people come to Japan, if they have our apps, it’s connected everywhere. They were surprised that there’s no need for WiFi routers.

Tim: That makes a lot of sense. What does the competitive landscape look like globally for this kind of an app?

Takehiro: I found one competitor at China. They are doing similar things but it is located only in China. They are not expanding global at all. So perspective of expanding to global and analyzing every Wi-Fi of each every country, I think only us are doing it.

Tim: Apps like Wi-Fi finder and Wi-Fi mapper, are those only maps? They don’t do the auto-authentication part?

Takehiro: Exactly, yeah. They locate the Wi-Fi place and the Wi-Fi password sharing. They share the password which have to connect to Wi-Fi. So not auto-connecting.

Tim: So just providing information?

Takehiro: Yeah.

Tim: What is your marketing strategy going global? In Japan, word of mouth very quickly pushed you up to the top of the app charts. What’s your strategy for the U.S and Korean markets?

Takehiro: First, we are expanding the country first. This month, we will expand to Taiwan, and Hong Kong, and Macau. After that, we will improve our coverages and quality of Wi-Fi. After we expand to certain coverages, we hope that same word of mouth will happen but if not, we’re thinking that focusing to Taiwan and do some paid marketing.

Tim: If it takes off with word of mouth alone, that’s ideal.

Takehiro: Yeah.

Tim: Try that first.

Takehiro: We have one hypothesis. The point we expand by word of mouth was that after we covered more than 100,000 Wi-Fi spot.

Tim: Okay. So that seems to be the tipping point and it will be a little less in Taiwan since it’s smaller?

Takehiro: Yeah. But in Taiwan, we find more than 200,000 Wi-Fi spot. So not only the number but also by the density will be the tipping point. Korean and U.S., the density is not high right now but in Taiwan, density is quite the same or more than Japan. So we’re hoping that —

Tim: So Taiwan is your real test case for this?

Takehiro: Yeah. Exactly, yeah.

Tim: It sounds like TownWiFi has very much frown on its own and things have gone pretty well. But looking back on it, what do you know now or what do you understand now that you wish you knew when you were first starting out?

Takehiro: That’s super good question. I have many things I want to tell. First, I quit Rakuten in 2015 May and our growth start from 2016 May. So there was one year, dark one year.

Tim: So you wish you would have kept your day job a little longer?

Takehiro: Yeah. I just can’t resist quitting because I was so obsessed of this idea. I quit by myself, no co-founder at all. I just quit and I start coding. When I was in Rakuten, I was trying to do this TownWiFi as side project but Rakuten is super hard, it’s tough work environment. I cannot do it. I just quit. But that was too early for me. At that time after I release app, it didn’t work at all. We start from app with Wi-Fi share. Same concept but Wi-Fi providers was not the shop but the individuals, like C2C. The problem is that which is first, provider or users?

Tim: Right. Any two-sided marketplace, you’ve got the chicken and egg problem.

Takehiro: Exactly. That happened. There is some provider and some users but it didn’t match at all and we were struggling. After we focused to the B side and we decided that we will collect the Wi-Fi by ourself and providing 150,000 Wi-Fi spot, it breaks.

Tim: Okay. So you built up the business side by yourself and then the consumers found it useful?

Takehiro: What I want to say to myself is that even you think that it is great but don’t quit your company, don’t stop the revenue.

Tim: I think that’s good advice. Listen, before we wrap up, I want to ask you what I call my magic wand question. If I gave you a magic wand and I said you could change one thing about Japan, anything at all, the education system, the way people think about risk, the legal system, anything at all to make things better for startups in Japan, what would you change?

Takehiro: I’ll definitely change Japanese people’s mentality to the startup.

Tim: Why?

Takehiro: Because there was many complaints or negative word, harsh word to me when I start this services.

Tim: From parents or friends?

Takehiro: No, from the people who I don’t know.

Tim: Really?

Takehiro: Yeah. Like on Twitter or Facebook or the blog.

Tim: What were they saying?

Takehiro: They’re saying that I’m stupid.

Tim: Was that they just thought your idea was bad?

Takehiro: My idea was bad and like this model won’t work. I personally understand that we are letting users connect Wi-Fi easily. We are skipping some registration flow. Is that against the law or is that against policy? What does Wi-Fi providers think?

Tim: So just very negative things in general?

Takehiro: Yeah. They never use our services but just complain.

Tim: So you would use the magic wand to make people more supportive or to maybe criticize you in more positive ways?

Takehiro: I will say that if you’re not using, do not say we’re hell. New service is not perfect at all, far from perfect. There is some risk and there’s some bugs, problems but who knows, if user exist and they love us, it’s good things.

Tim: Yeah.

Takehiro: If I have complain from users who are using our apps and are saying that it’s not working or there is a bug or this Wi-Fi cannot connect, I will do everything to make it better. I want them to use our app and if they want to complain, they use our app and not use to just complain. If you have no intention for our app, don’t use it and don’t complain.

Tim: But if you’re using it and have a good idea, feel free to complain.

Takehiro: Exactly, yeah.

Tim: Excellent. Listen, thank you so much for sitting down with me today. I really appreciate it.

And we’re back. I love the fact that TownWiFi has been able to beat out NTT as a tiny team with no marketing budget. These kinds of stories show us that the playing field is really starting to level and that Japanese users will choose a good user experience over a famous brand. And both of these trends are great news for startups in Japan. Now, TownWiFi still has some challenges with monetization. After the interview, Takehiro and I discussed some of the other strategies that they’ll be rolling out later this year but they’ve been able to achieve an impressive global user growth on a very small budget.

However, the one part, the only part really of this story that makes me want to step back a bit and put away my Japan cheerleading pompoms is how hard it was for Takehiro to get that initial support from his friends and family when starting TownWiFi. He was even shot down by the internal innovation team at Rakuten. Rakuten is one of the leaders in internal innovation programs here in Japan.

Of course, there is something to be said for the idea that none of these should really be too easy. Perhaps without someone with Takehiro’s commitment, TownWiFi would not have survived its early setback and then pivoted its way to being poised for a successful global expansion. We’ll definitely be keeping tabs on Takehiro and TownWiFi to see what’s coming next. And of course, you’ll be the first to know when that happens.

If you’ve ever been frustrated with Wi-Fi connectivity, Takehiro and I would love to hear from you. So come by disruptingjapan.com/show092 and tell us about it. And when you come by the site, you’ll see all the links and notes that Takehiro and I talked about and much much more in the resources section of the post.

Hey, I know you’ve been meaning to do this for a while now. But now would be a great time to remember to give us an honest review on iTunes. It’s really a great way to help us out and help support the show.

But most of all, thanks for listening and thank you for letting people interested in Japanese innovation know about the show.

I’m Tim Romero, and thanks for listening to Disrupting Japan.