Internet Diffusion in Japan: Cultural Considerations Carrie La Ferle, Steven M. Edwards Michigan State University and Yutaka Mizuno Kyoto Institute of Technology ABSTRACT The adoption of the Internet in Japan and the United States was examined in order to understand potential underlying factors influencing the diffusion process and to provide insight into the growth of the medium internationally. The United States and Japan are individualized and economically stable countries that are both leading the world with the greatest number of Internet users. Therefore, it would seem somewhat logical to assume that the diffusion of the Internet might be similar between the two countries. However, data on the penetration rates of the Internet in these two countries reveal a different story. Cultural variables are used to explore the differences found, and it is suggested that these factors may affect the degree to which the Internet is adopted across a variety of countries. Implications for advertisers include: (1) gaining insight into the internet adoption behaviour of other countries worldwide, (2) understanding how similar future innovations may be adopted across countries, and (3) making marketing-mix strategies more effective by accommodating for cultural influences during the adoption process. The Internet currently reaches 426 million consumers worldwide (Pastore, 2001) and is projected to more than double in reach to 1 billion by 2005 (Iconocast.com, 2001). The internet as a medium has experienced unprecedented growth in the United States and is now also increasing around the world. In fact, North America currently accounts for only 43 percent of all internet users, followed by Western Europe (25 percent) and Asia (almost 21 percent). Eastern Europe, Latin America, the Middle East, and Africa account for just under 11 percent of total internet use combined. Although North American consumers are the largest group of online consumers, accounting for 79 percent of total advertising expenditures in 2001 and remaining an estimated healthy 70 percent by 2005 (Halprin, 2000), they are projected to account for only 30 percent of total online users by 2005 (Lawrence, 2000). Therefore, understanding internet adoption across different countries is crucial as companies continue to increase their online marketing efforts with the goal of building consumer relationships and securing new shopping channels online. The United States currently reports the greatest number of citizens online with 135 million, followed by Japan with 34 million and the United Kingdom with 14 million (Computer Industry Almanac, 2001). However, with respect to internet penetration by country the Computer Industry Almanac reveals a somewhat different picture of internet use. Sweden and Canada have the greatest numbers of internet users as a percentage of their populations with 49.6 percent and 48.7 percent, respectively. The United States falls to third place with 48.4 percent of its population online, while Japan falls to ninth place with only 26.7 percent of its population online and is behind South Korea, Australia, the Netherlands, Taiwan, and the United Kingdom. Similarly, 7,800 internet service providers were estimated to exist in the United States in 2000, compared with only 73 in Japan for the same time period (The World Factbook, 2001). Therefore, we must be careful of making quick assumptions regarding internet user rates based only on the sheer number of users in a country. Even more important for marketers is the need to understand the factors that might account for these differences in internet adoption across countries. This point is particularly true for countries like the United States and Japan, where the two countries are arguably equally developed and economically strong and yet have very different internet penetration rates. Toward an understanding of differences in adoption rates across countries, two projects were undertaken. The first project sought to gather current information on internet use and users in Japan in an effort to compare data with U.S. numbers. The second project focused on potential cultural factors that may help to explain adoption differences found between the United States and Japan. Toward this goal and to strengthen the generalizability of the results, cultural variables and the number of internet users were examined for the two countries of interest as well as for 48 other countries. Theoretical support is drawn from both the diffusion of innovation literature, as well as from research using Hofstede's dimensions of culture. Implications for marketers extend beyond the two cultures examined, as cultural differences were shown to affect adoption of the internet in markets around the world. INTERNET ADVERTISING AND USER PROFILES IN THE UNITED STATES AND JAPAN - Project 1 The internet is changing the way advertisers present, sell, and communicate with consumers. Currently a variety of practices are being used to reach consumers. Banner ads and interstitials run akin to more traditional forms of advertising, while websites range from being reminiscent of product brochures to full-fledged showrooms. These 'showrooms' provide the ability for two-way communication between marketers and consumers as well as offer a channel for consumers to make online purchases. The internet by its very nature is a global communication channel, with the potential to reach consumers anywhere in the world. For all of these reasons, the internet is a medium that marketers of varied products and services are rushing to embrace with multiple techniques. Yet, in order for the internet to be an effective medium in the United States or abroad, consumers must have both the desire and ability to access computers with internet capabilities. Although the United States is excelling in terms of penetration rates and e-commerce sales, concern still exists regarding people and countries with differing socioeconomic and cultural backgrounds that either cannot access the internet or who choose to avoid the online experience. The differences in internet penetration and user profiles between the United States and Japan, two similar countries economically, provide evidence of the need for more inquiry into this area. Journal of Advertising Research Vol. 42, No. 2, March/ April 2002 www.journalofadvertisingresearch.com