Interesting posting by Joi Ito about why companies need a local partner in Japan.

His examples:

eBay went it alone and had to leave and now don’t exist in Japan having lost net auctions to Yahoo Japan and Rakuten. Friendster and now Facebook who have launched “localized versions” are not getting traction. Mixi, the Orkut knockoff with arguably a much clunkier interface, has 10M users and is public.

Infoseek, Technorati, Twitter, Six Apart/TypePad/Vox/Movable Type and other brands that we’ve helped launch are all doing pretty good in Japan IMHO.

I think the only two non-joint ventured web companies that are doing well in Japan right now are Google and Amazon and both took years and lots of investment to get there.

Why don’t foreign companies work in Japan?

Foreign brands have very little value in Japan without local promotion.

It is very hard to hire people into fully-owned subsidiaries. Many foreign companies pull out of the market. Japanese companies tend to go public more quickly than US companies. Even when US companies do, often they don’t give subsidiary team member any or as much upside incentive. Local partners tend to incentivize local teams and push for local IPOs. Everyone knows this. Even Google had a tough time and are finally getting traction.

Joi, by his own admission, is promoting his own services, since he has launched many foreign web companies in Japan.

For China, the need for a local partner is clear, but the reasons different. Asian markets have large local sensibilities.

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