Japan's Mixi Tops Facebook and MySpace

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When the site launched as eMercury in 2004, many early users got hooked on Mixi's easy-to-use online diary and "footprint" feature, which tracks visitors. Kasahara also made the site cell-phone-friendly early on so users could send updates from anywhere.

Another reason for Mixi's popularity: its squeaky-clean image as an online hangout. To ensure that Mixi wouldn't be lumped in with the chat rooms and dating sites linked to killings in Japan, Kasahara pledged to keep out troublemakers and young kids who might be easy prey for online scams. Even now, new members must get invited by a Mixi insider, and nobody under the age of 18 can join.

And to assuage worries about personal data being leaked to the Net, Mixi let users hide behind a pseudonym or nickname. That appealed to Net-savvy Japanese, who were used to commenting anonymously on bulletin boards that act as rumor mill, news source, and insider-info clearinghouse. Soon many were flocking to Mixi for their daily online fix. By the time MySpace arrived in late 2006, Mixi already had 6 million users.

The Stock Plummets

Mixi is still adding about 1 million new users every three months. And it has plenty of cash left over from a $1.9 billion IPO on the Tokyo Stock Exchange's Mothers section for fast-growth startups in September 2006. But since January, Mixi's stock price has dropped 43%, wiping out nearly $1 billion of the company's worth. One concern is that a slowdown could hit Mixi's ad revenues. Another: Mixi-fatigue. Only 55% of users visit the site at least once every three days, compared with 70% in 2006. Analysts say Mixi users might be defecting to other sites. "Mixi's rivals aren't existing social networks but sites offering unique services, such as those using avatars," says NRI's Yamazaki.

That's why Kasahara is pouring money into upgrading the site. On Aug. 20, Mixi announced it would let developers of other Web sites use OpenID tools, so Mixi users only have to log in once to access their accounts with other Web sites and services. Mixi also plans to allow outside programmers to add software applications to the site, like Facebook does. Earlier this month, Kasahara & Co. began testing Mixi Echo, a micro-blogging service like Twitter that's similar to text-messaging except it's limited to 50 characters. Those services are free, but Mixi now charges if users customize their pages with Disney (DIS) and Hello Kitty characters, music-sharing services, or extra data-storage capacity. In the coming months the company will launch a Chinese-language service. "I want to speed things up and make this company better at creating innovative services," Kasahara says. "We still have a lot of gaps to fill."

With Hiroko Tashiro in Tokyo.
Hall is a reporter in BusinessWeek's Tokyo bureau.