Manabu Miyasaka – President and CEO Toshiki Oya – CFO

Taro Ishihara – Daiwa Securities Yoshitaka Nagao – Nomura Securities Yosuke Tomimatsu – Merrill Lynch Shinsuke Iwasa – Mizuho Securities Co., Ltd. Takashi Watanabe – Goldman Sachs Japan Co., Ltd.

Hiroshi Naya – Ichiyoshi Research Institute Inc

Thank you very much for attending this business results presentation despite your very busy schedule. We would like to start FY 2013 Second Quarter Business Results Presentation of Yahoo Japan Corporation.

We have the live streaming and also we have on-demand version as well. I would like to introduce the participants from the Company.

To your right, we have CEO President, Mr. Manabu Miyasaka.

Next to him, we have CFO, Mr. Toshiki Oya.

First of all, Mr. Miyasaka will give the presentation, then afterward we would like to open the floor for Q&A.

We are scheduled to end this session at 6 ‘o clock. Thank you.

Let’s start with the presentation.

[Interpreted] Thank you very much for coming to our office despite your very busy schedule and despite the rain. And I would like give the explanation about 2013 second quarter, we made the strategy change in e-commerce.

So I would like to actually focus on that and spend more time on that portion and therefore we would be taking longer time as compared to the ordinary presentation. And first of all, this is the summary of the second quarter, for the fourth consecutive quarter we were able to grow in double-digits for revenues, operating income, ordinary income as well as quarterly net income.

This shows our quarterly revenues and we were able to register ¥95.7 billion. This shows as a quarterly year-on-year growth trend.

And we have about a 21.5% growth and this shows the quarter revenue breakdown and we were able to grow by ¥16.9 billion. Marketing Solution business contributed 22.9% and Consumer business contributed 9.6% and other businesses including FX business contributed 108.5%.

Next let’s take a look at Advertisement which is driving the growth. In the year, we were able to grow by 17.2% in the absolute figure ¥7.6 billion and this way Advertisement contributed 27.4% and YDN and others contributed 156.7% and Paid Search.

Advertisement contributed 12.2% and we changed a categorization because we handle images in YDN as well and so, as compared to the previous categorization, we have two, one is the Display and another is Paid Search Advertisement. Now what about smartphone?

In terms of smartphone, we were able to increase the revenues by ¥4.5 billion and in terms of its contribution ratio it is 19.2%, but in terms of feature phone it was a negative ¥0.1 million. And so, in terms of its revaluation it was 2.0% in the past but now it is 0.7%.

And so, this will be the last presentation in which we will be disclosing the contribution ratio of feature phone and we will be focusing more on smartphone in the business results presentation. And that shows the quarterly advertisement-related revenue year-on-year growth rate and when you compare the display advertisement and paid search advertisement, you see the rates as indicated over a year.

And in terms of Paid Search Advertisement revenues, you see by industry breakdown as indicated on this slide. In terms of YDN, what are the causes of its increase, you see the breakdown over here and in terms of premium advertisement we see ups and downs and all in all, it was minus 1.7%.

In terms of e-commerce, transaction value, this is before the new strategy and so all in all in terms of e-commerce the transaction value has increased by ¥18.5 billion, plus 4.9%, but in terms of Shopping related and Auction related transaction value, shopping related in terms of transaction value was negative 1.1%. So it was fairly below the previous term.

And in terms of the Auction related, we were able to grow by 5.2%. So year-on-year, we were able to have the 5% level, also all in all, we are doing relatively well in the e-commerce area.

This is the quarterly profits and in terms of operating income and ordinary income, there has been a growth. And in terms of the operating income year-on-year growth trends, you see the number as indicated over here.

And this is a review of the first half and on April 25, we provided you with the forecast and we were able to attain all those numbers and in actuality, we were able to overdo all those forecasted numbers. And this is the forecast for the second half and in terms of advertisement we will be able to increase by 6.7%.

But in terms of operating income we believe that there will be a negative number. Yahoo does not usually provide a negative change number, but in terms of the second half, we would like to put full-fledged effort in e-commerce.

So please take this number in a positive light. However, having said that in full year, we will be able to register growth in terms of revenues as well as net income.

And in FY ’14, for the full year, we believe we will be able to register positive growth number and we will be trying to increase the operating income double by 21x and this is the image that we have for the annual growth rate. Two digits is the growth target that we are aiming at.

And in terms of Advertisement revenues, we were able to have the two digit growth. So now we have to focus more or less on e-commerce and I have been repeating this over and over again.

And, in order to have a robust business, we have to have e-commerce and advertisement revenues in the two digit growth and this is more or less like the front and the rear wheels of a vehicle. So, now we will be focusing in terms of the investment in e-commerce.

In terms of operating income it might be flat temporarily but by making e-business a success, I believe that it can attain the same level of two digit growth as that of the advertisement revenue. So in terms of operating income double, there has been no change whatsoever and that is definitively our goal.

In terms of 2013 year end cash dividend forecast, per stock it will be a 5.0% year-on-year and we plan to have the consolidated net income, the 20% to be provided as the shareholders’ profit or actually the returns. And we will have the stock option and of course, we will continue upholding the doubling of operating income, but at the same time, we are looking at the transaction volume and if it is made double, then we will allow the exercising of the stock options.

So, there are two conditions that must be met in order to exercise the new stock option and that has been provided. And also we will have the share buyback and in total the maximum is about ¥30 billion a year and by acquiring the stock from the market, we will cancel all of them.

So from here onwards I would like to go into the details about each business and firstly let’s take Marketing Solutions business. And in terms of our organization, Marketing Solution Company MSD, a media company comprises of our Marketing Solutions business and media will come up with good services and we would like to surprise people and we will be able to attract many customers and MSD will monetize the advertisement business and that is the cycle that we are looking at.

First of all, let’s take a look at the status quo of the services. We will be focusing on the top 20 services and in terms of page view and traffic, those can be explained only by focusing on our top 20 services.

And so it is of important for us to focus on the top 20 services. And what is the daily unique browsers, you see there we were one and you see another that is quite flat, but all in all we can say that DUB wise, we are registering a favorable growth.

Application download is increasing and we are very aggressive in providing a different smartphone related application and we have android and IOS and in terms of cumulative downloads, we were able to reach 100 million level. Let me be more specific about what kind of efforts were been made – the efforts we are making for the having the more usage among users for users for one thing is that this is one this just services called this is one of the example, Famiport Coupon.

So this is that, if you search it and then you can get the coupon, we can use at a convenience store. The other is services called Yahoo Browser and this is now we have exceeded 1 million users of this Yahoo browser already.

The other services for example, we have announced a Big Data reports and this is lot to communicate the possibility of Big Data. So, on a weighted basis, we’ll make announcement for analysis of the Big Data, this is about the predictions of the seats and the results of that House of Council Elections and will have a very good accuracy.

The other product is, this is the real time search. So this is for example that the part of the search is on that’s the Twitter, the comments, so the Twitter comments and whether it’s positive, negative or neutral for this analysis, it’s automatically be done with the technology and presented in the easy way for work.

On the other hand and let me talk about our efforts to improve the profitability, first of all for the display advertisement. For the Brand Panel and we have kept growing that revenues on Brand Panel and then also as mentioned earlier and the rich advertising has been the creative and the more the better expressions is now presented, so that now the percentage of our the sales of which ad have up closer to 30% and when it comes to that, and also we distribute this to the YDM to the prime display, and also we are doing this.

When we look at all these of the framework of the business pieces for that and the YDN, now that we have additional revenue for YDM on top of Brand Display, than usual Brand Display, so that we can have more profitability and leverage as well. And this is revenues of YDN with all this effort was made, now we have the three part of revenues on the sales of the YDN and when it comes to advertising, let me just make additional comments.

Also either way it’s not the Brand Panel, although YDN, we call it that’s a category called others, that is the bunch of this is a small products for example just a bit of small spaces in the pages or they do have that portions and that actually didn’t account for. It’s a substantial portion that, but now it have been declining on a year-on-year basis.

So when we intentionally, the decline in that revenue for this that because now we have right here the too many types of the products that we like to just organize and to consolidate the type of products so that we can focus on some of the major product line up. That’s why and there was we are in the process of organizing for all this too many type and over 1000 products and so that we can have more consolidated and better forecast.

Now also going to the Sponsored Search, so we are doing a lot of efforts included in the product improvements and contributed to this incremental revenues of the Sponsored Search, but also let me make additional comment about this. Also it has been growing by 12%, but in the last year, we have – now we have the switches to the engines and then also into past year we have done a lot of efforts so that’s why we are going to keep making the improvements.

But when it comes to the Sponsored Search, it would be – we have to be little bit conservative and forecast whether we can keep having that double-digit growth at traditional way. So I would think when it comes to Sponsored Search the growth will little bit slow down for this.

Okay, after this onward, a lot to talk about Consumer business. First of all, why, again and let me just explain, why we are going to implement this new strategy and when we look at the Japanese e-commerce market, it’s accounted for only 6% of all the retail market in Japan is very, very marginal.

So at least we need to have that 10% to 20%. So that we’d like to grow this e-commerce market per se.

So this is why I would like to expand that domestic e-commerce market by our own unique approach, for example when compared to that, the height of mountain, we try to count more, we would like to make that height of the mountain higher, as high as possible, just like the mountain Fuji. So that going through this, the e-commerce revolution, whether may I call it, we’d like to make the first mountain the higher and after that we make the mountain higher, and we would like to set climbing and like to achieve the top.

So this mean that, we like to, also – make the contributions to make that the market expanded as possible and we would like to become the number one in the transaction values and this is that, the e-commerce ecosystems and the cycle and this is the scenario. So first of all, both the shopping and auctions is, now this is end of the cycles and we are having more sellers and the more buyers and we’ve gone into this cycle.

So that there is lot sellers and there is a lot of buyers were attracted and now the competitions intensified and we are going to have more business in there. So this is the basic cycle., so that first of all, in order to increase both the sellers and buyers and how we can grow this positive feedback and cycle is the key.

First of all, let me talk about this with the Yahoo Shopping, the Auction and premium membership. First of all, let me talk about the Shopping business and the major change in the strategy in the Yahoo Shopping is that, we are going to switch from that fee business.

So there is a fixed fee business, to that more an advertisement business this is the major change in the business model, from the fee business to the advertising business model. So this is the rough image of our change in the strategy and we look at this in the internet market.

Now this is the area we have the expertise and the most experience is advertising business that, when you look at the internet advertisement business, it galloped at a tremendous of web page and sites and a lot of the people have created their own sites. But actually, only the very top of the pyramid can make the access on it.

So at this time, we would like to do the exact for the same as also in the e-commerce market. So, so far in our traditional e-commerce market, we try to just collect that, the fixed fees for all the participants.

The red portion means that the monetizing portions, by the way we’d like monetize all these mountain as a whole. So that if we concentrate only on the fee business we cannot grow that e-commerce market.

So that’s why first we’d like to go up on all this mountain tie and go, to say for all of this in the whole triangle can grow and we can monetize from the business through the advertising business model. And when we look at this ecosystem of Yahoo Shopping, which should be the switch and the first switch to trigger the whole cycle and someone talking about the chicken and egg.

So that we consider a lot of things and this get a lot about which position will be to trigger and we have concluded that. Increasing number of sellers can be the very first trigger.

So that’s why we needed to increase the number of sellers, that’s why we eliminated all that barriers which prevents that increasing the sellers. So these are all the major points and our focus on the tenant fees and loyalties and all become the free of charge and then also we like to liberalize for all the regulations.

So that many – as many as possible the potential sellers can join the market. And as a result of it what happened here is that, so far, when it comes to Yahoo Shopping in the past ten years, that we have a 20,000 tenants there already, but at least when it comes to number of applications and for 25,000 for companies and the 30,000 individual potential persons is now making applications after we made this change.

But still, we are in a stage of accepting applications, it’s not at all these applicants can open the store, that will be the second stage. So that’s why it’s not at all that applicants can have more stores, but at least we can say that.

But I think that – we think that we get off to a very good start, because at least with making all this the fees and then the free up charge and also that on a link free type of operations, and in the past one month we can have 45,000 applicants and showed the intentions or the interest to operating the store than the Yahoo Shopping. So that at least we are confident now and we can get off to a very good start and we like to make our – get them the actual good market opportunity.

So when it comes on with a schedule and before the holiday shopping season in December, we tried to make a major system change and that would be understanding from that two weeks starting from December 1st and the 15th, that will be that holiday season and shopping season. We don’t want to have any system trouble due to that switching in the systems.

That’s why first, we’d like to accept that applicants who have already have expensed in this major e-commerce platforms and so that this is that in our strategy of the holiday shopping season strategy.. We will try to make the mechanism simpler, so that new people will be able to participate more easily and so after the holiday season shopping and we would like to solicit the new comers who do not have any experience whatsoever in e-commerce.

And so during the end of the year, shopping season, we need to have more buyers. So for the existing shops, we would like to com up with more increased buyers.

So we will have different campaigns and different trials, and we conduct this every year. But we are going to put more effort into.

In terms of e-commerce shopping, I have been explaining as follows, which is, why Yahoo Shopping is not growing and the big hurdle was the attraction of customers and assortment of products and also the distribution and settlement. And we have to be number one in each and every domain and I think that is the business model that we have to pursue.

And what was the weakness? The major weakness was the assortment we had at the attraction for the customers and we had the distribution and we had the settlement, but unfortunately we did not have assortment of merchandize but by having more authors and more sellers, we were able to reinforce the product line and that will be the e-commerce evolution and in terms of settlement, we have three points and in terms of distribution, we are collaborated with Askul with right logistics.

And so we will try to improve the position of each and every domain. So at the end of the day we can increase the number of sellers and the number of assortment and merchandizes and that means that consumers will be in more competitive environment and that is benefit for the buyers and the platform will be more attractive to the – years.

Therefore there will higher transaction volume and value at the same time. And in order to have revenues in the advertisements, the seller must have profit, by having the transaction value, of course we will be able to gain more advertisement revenue.

So first thing meaning that, the sellers must have profitable business and this might be a long term horizon, but we would like to be patient and try to pursue this scenario. Now, let’s talk about YAFUOKU which is Yahoo Auction, so business model-wise, we still have the fee-based business model and so there is no major business model change whatsoever.

The 2007 in terms of the transaction value it was the peak and but then afterwards it was flat or a decline slightly that has been the historical flow since 2007. And so that been the case, we have to revitalize the ecosystem even though the fee-based business model doesn’t change.

So in terms of YAFUOKU business cycle, what should we look at? Of course at the end of the day, we have to increase the number of people who provide new merchandiser listings.

How can we do that in the last year? We tried to come up with new mechanism which ID doesn’t have to necessarily be confirmed that before the shipment, but say, in terms of the people who list, they do had the bidding experience and sometimes they are successful, sometimes they are not.

So in order to increase the number of the people who list the items on the auction, we have to increase their bidding participation experience and that has been proven by the data that we gathered. So the first triggering point will be different from that of Shopping,, but we have to increase the bidding portion and that was the door opener for us in revitalizing this cycle.

So, in order to increase the bid, what did we do? If you want to buy anything above 5000 you have to be the premium member and that was the condition that had to be met but we did away with this rule.

And we made such an announcement quite recently, so to-date in terms of the new successful bid, the average unit went up. In the past, you have to be a premium member to bid above 5000 but now there is no such rule and so the average bid rate went up and in terms of the number of average daily new bidders, it increased by 40% year-on-year.

And so we tried to make bidding simpler and easier so that we can increase the number of items listed. And in terms of Yahoo Auction and there are corporations who are the sellers.

And in terms of the corporate sellers as in the case of shopping we have a very dramatic change and so in terms of the monthly tenant fee, it will be a charge and in – first of all you have to have a maximum of 3000, but now there is no limitation in the number of listing they can have. And in terms of individuals, the individual had to pay ¥10 per listing.

And you don’t know whether you will be able to sell it or not. So they tend to be very cautious and if you are very cautious, you will not be able to have many listings.

So we did away with this ¥10 per item listing fee and you can have free of charge for C2C. And in terms of B2C, the applications increase year-on-year increased by four folds, this is through the application level, but not that this has become a reality, but it’s sure the fact that Yahoo Auction again increased.

Today, it have been relatively flat but then a new measure actually proves the fact that there is much interest amongst industry and also in terms of the number of stores increased by 12 points as compared to the time before the announcement. So in the past, you had to have the agreement, but now anybody can join and therefore we are seeing increase the number of listings.

So in terms of the ecosystem that we want to delineate in the future. We want to increase the seller and the buyer and in terms of the shopping and monetization was the advertisement, but in terms of the auction it will be the auction royalty and membership fee.

Now let’s talk about premium memberships and this has been impacted by the new scheme. So let me explain to you about this portion and in terms of the premium member, you were able to participate in the auction item which is more than ¥ 5000.

But then that has been actually removed, so what is the merit of premium membership. We will come up with a different measures to increase the effectiveness of being a member.

And in terms of Yahoo Shopping you can your own store. You can do it as an individual, but if you are the premium member, you can now have it.

In the past, that was not allowed. And in terms of ID check, we need to abide the measures and that will not change and also, in terms of the guarantee or the compensation plan, there will be a major guarantee if you are a premium member.

Of course if there are more merchandisers and items listed, it will positive if anybody can purchase and that’s the bright side, but of course there is a shadow or a dark side to it meaning that, maybe more intentioned people might participate in this option and list something that is questionable. Those distances, we would like to come up with a security measures and but in case any fraudulent case happens, then we would like to come up with a compensation plan for the premium members.

So we have a two-tier security mechanism. Now let’s take a look at the growth of the premium member ID.

This before the announcement, so this is the end of September number. We are seeing steady growth and we have about 9.52 million premier member IDs.

And so what is the future policy of e-commerce, I’ll talk about shopping auction and premium memberships and I have explained to you in details for each segment and in the end of the day I would like to increase the number of sellers and be number one in the number of sellers and this is true for shopping auction. There might be some people who might want to move from one platform to the other.

Of course we will not stop that but in terms of you see in a particular mall or particularly site, I do not have any intention to solicit them to come over to our domain, because if we do that, we will not be able to expand the market as a whole. We want the current place in EC to have to multiple shops over multiple platforms so that, by going through that mechanism, we can increase the pie, i.e.

the market and be able to further vitalize the domain. The other thing that we like to add with the some production making of the subsequent field the charge and somewhat get reluctance to open the stores, because they have to pay the fee.

But now that we offer the free of charge, for this registry and the store that we expected a lot of the potential and many people can join that and also they can join to the e-commerce and they kind of eventually will not grow that, not only for business, but also for that e-commerce in Japan per se can be grown. And the next is that although we have a lot of sellers, but that’s still that we need to offer that the product.

The other way have to that meaning that the shoppers – many of the stores there, we need to offer that as many products as possible to the customers. And then last of all, we would like to become the number one in the domestic market in terms of the transaction values.

So this mean that we expect that incremental revenues and profits. So that we are taking this fees approach in three steps.

And I want to comment that the decline of the revenues and so that is summarized here, in the case of Yahoo Shopping and that maximum we expected about a ¥3 billion and ¥600 million for the Yahoo Auctions and then also the settlement fees the ¥300 million and further this with the other expected decline of revenues due to the switching to the new strategy. But this is only temporary, it’s not that we are going to have this – the decline in revenues year-on-year, this is only the temporary in cost and it’s temporary the investments in order to make that whole of this mountain grow and we are can expect that the whole e-commerce market in Japan and our business and other than that on top of that, our emphasis would be that, the promotion.

So that whether investment spend the money for this promotion activity a lot after this. So we have a lot of the traffic and for example, book grow their knowledge base, their search service so that, we can have that kind of a linkage between he shopping e-commerce and above the services, but other than that we needed to invest more further investment.

So that we are going to invest about between ¥2 billion to ¥3 billion for the promotional cost. And then also this is for the second half that not only we need to make that effort, not only for the second half but also we would like to spend any of the about the between ¥4 billion to ¥6 billion of cost.

And also we’d like to provide that kind of compensation system for the premium membership, so that we also make an investment. We don’t exactly – with the forecasting the 2015 and afterward, but at least we can make this investment this year and the next year.

And that’s why although and we are going to have this temporary decline of the revenues and operating income and but within that just all this taken everything into consideration and now in the revenues we are going to have the decline of ¥2.5 billion to ¥3.5 billion of decline in revenues and when it come the after the income including promotion costs, we are going to have a decline of ¥3 billion to ¥5 billion of the declines on a year-over-year basis. And we would like to expand the e-commerce market and we would like to become the number one in domestic and transaction values by 21x.

This is a new goal and target for our management. And the other area is about the settlements and financial business.

And this is the settlement services, also for the e-commerce that when it comes to Yahoo Wallet, we already have more than 25 million accounts. And when it comes to financial business and we are working on this in the cyber agent Fx business and now we have in the more billing on this in the business and this is due to the favorable market.

But now we have a very favorable business here. That’s all my presentation, but I explain about an outline of e-commerce revolutions as well as that for this settlement services.

That’s all. Thank you very much.

Okay, now we like to move on to the Q&A period. If you have any question, would you please raise your hand and that we are going to bring the microphone to you and would you please mention your name and the name of your company please.

Anyway the multiple questions, would you please make questions one-by-one please. Then one question, okay please.

I am Ishihara of Daiwa Securities. Thank you very much for the presentation.

I have three questions I would like to make it one by one. All questions – all about the e-commerce and my first question is that – due to this new strategy, you expect that your advertisement revenues will grow, that’s your forecast, but this increase of that advertising revenues can cut off.

So when you can offset for all the declining revenues that had a negative impact of this strategy. For example, sometime in Q4 in the next year or that they do have any ideas or it would take a longer time then that’s for example that the first half of the two years ahead or what is the timeline do you think that the growth of the advertising revenue can more than offset about this or the incremental cost and the decline of those revenues when can achieve that?

Okay, internally, now we have some kind of a scenarios and a decent number of sellers and the change in distribution and we have some simulations internally, but we cannot disclose about our ideas about for example, when we can have that breakeven, it’s too early for us to make public announcement of a scenario. So that I don’t declare about details, but when it comes to our implementation of a new strategy for the time-being the number of the – increased number of sellers or the number of increase of the products available, then that would be the key measurements I want you to pay attention to.

Okay, my second question is that, in implementing the new strategy and you are going to have a dramatic increase or the person who offer their products in the market, but other than that, and you can have some, we don’t have any sign of that favorable indication. So if that have more transaction values or for example when the price is just lower than the other e-commerce in the Yahoo Shopping site.

So is there any signs that you can have some favorable sign of this new strategy.

Then when it comes to the shopping, but we are not sure that how much that the new strategy have already have some impact on to that transaction values about the implements on the point campaign, that and all the mixture of that kind of a promotion activity. So that it’s too early for us to make some comment on that.

But, when it comes to – we have the more products on which some the point will be put. So this mean that, it’s something like that other sellers and the shop owners are providing some favorable offerings to the customers on.

For example, shipment fees would be free of charge or that kind of things that they are putting on more points. But just like this, we don’t think it will have some kind of more activities and changing that the way that the product is sold in our market, but it’s too early that how much contribution it has made.

Okay, thank you very much. My third question, my last question is that, we have been more person for open new stores and we are going to have more merchandising products at there.

So if it’s the case that and you need to be improving the level of the accuracy and recommending features or that you need the more human resources to handling of all these operations. So, I think that you need to have more staff and more resources to support that e-commerce business that when it comes to headcount or the size of the human resources and what you plan to grow?

Yes, already starting from this summer, we have started about to recruit, we have recruited about that and – as the number of engineers have become five timers and many of engineers before the summer, but still it’s not enough. So that the engineers and for the merchant supporters and we would like to have more staff.

But and then we have about a 6000 employees who are working for Yafu so that. That’s just a recruiting another additional 1000, but that we can and just so we deploy part of our staff for this new strategy.

Okay, thank you very much.

And then person sitting at the center.

I am from Barclays Securities. I have a couple of questions first please.

I want to confirm the forecast number and I guess, 370 in terms of the second half and you said that there has been a decrease of 6% that is your forecast and your e-commerce explanation you mentioned about the short-term impact about ¥3 billion to ¥4 billion and about ¥10 billion is the impact for the year. So, it will be above ¥150 billion to ¥160 billion in terms of revenues.

And in terms of e-commerce that there will be an increase of about 5%, but in terms of the advertisement revenue increase, is it correct to understand that the growth was only one or single-digit. Or you have the conservative view?

What is your opinion regarding the numbers?

In terms of the hypothesis, or assumption for advertiser we are as we have mentioned pretty conservative in coming up with a forecast. So in terms of the ¥3 billion to ¥5 billion which is the number to be impacted because of the new strategy I think this is quite reliable and in terms of the advertisement.

As mentioned in the presentation, in the second half, we have Sponsored Search which is very large in proportion and year-on-year-wise, the denominator is very large and in terms of our previous year’s third and fourth quarters it was very good. So in terms of the growth rate, I believe that there will be a slowdown and I think this is quite definitive.

However having said that I believe that these numbers are quite conservative. Thank you.

Next, I have a e-commerce and shopping related question. In your explanation, you mentioned about steps one, two and three.

And that you want to increase the number of stores, increase the number of listings and one and two are linked together and in terms of the transactional value in number one position, you have too many customers. And I know that you will be having many campaigns and I know that you have did that in the past, but do you have anything quite new which is different in terms of the way you promote and conduct campaigns and if you have anything very tangible, we will be more than happy to hear that, but maybe this cannot be disclosed.

Is there any brand new promotions?

I am a in charge of shopping and e-company. I mentioned about two cases on October 7.

one is within the search in terms of shopping and list we will show the ranking of the best sellers, say if you want to get a double bed, or a two tier bed, and in terms of the ranking within Yahoo Shopping you will be able to see that. And we use SEO and many e-commerce companies are trying this, but with the leveraging of SEO we can come up with the ranking of that particular product and we have a thing called Chie-bukuro and in terms of PC and SmartView we have about a 2 billion page views and we were linked with it and Chie-bukuro on a daily basis there were questions related to different products.

So how do we use this digital camera, I don’t know, I don’t know whether I should buy the digital camera A or B and there are different questions pertaining to shopping and in terms of Yahoo, our shopping listed that matches with that Chie-bukuro questions, we would try to list it out and also maybe that questions might be quite relevant on the surface. But then content-wise they tend to have a linkage, we try to link Shopping and Chie-bukuro and this has not existed in the past and so this is a new traffic flow inducement that will be conducted and already mentioned that on October 7, and this is under a consideration and one that has been already been fixed and one is still under consideration and out of 100 services that we have, how can we link those 100 services with the Shopping.

And likewise in terms of Yafuoku, we have commerce service and we have other services by Yahoo and we are trying to link them together and we are revisiting with the brand new eyes and two have been announced to you on the 7th of October.

And in terms of the linkage, this is linked to the advertisement revenue or are you going to do it free of charge?

At the very beginning it would be free of charge, and we don’t know whether we are going to make it a fee-based or not we will think about that, but in terms of ranking, I do not think that we should charge a fee for that. But in terms of Chie-bukuro listing, and maybe we might sell that space as the advertisement pop-up.

But as mentioned by Miyasaka, we have to increase the market size and increase the transaction value as a whole, so that will be our major focal point in day one.

Thank you. There is a related question, in terms of advertisement space, you will have more transaction value and you will have more sellers and if you want to get more advertisement revenue, it will be very important for you to come up with more advertisement space.

How do you plan and do come up with advertisement space for e-commerce in particular?

See there are different advertisement products that is the right fit for e-commerce. Based on each other, and we are proceeding with this matter, but we haven’t announced it yet.

So I cannot give you the details, but actually, we are conducting brainstorming within our company, so that we can come up with the advertisement that is a best fit for e-commerce.

Now, my last question. Listening to your presentation, you talked about ecosystem and you plan to have more listings and then the sellers will be profitable and then they will have advertisement and it seems that maybe the top of the cream of sellers or the shops will be profitable, but the shops in the bottom of the list might be inactive.

So, there might be a ghost town shops, so to speak, how do you plan to manage that kind of dichotomy is that were to happen?

Well, in terms of website or blog site that we see the longer tail phenomenon that I admit, but on the long tail on the other side, in terms of merchandise that can be bought anywhere it will be a power game and we have Lohako and that will be the winner gets the old kind a better field. We have different services in different products.

So I do not think that every domain will be winner gets all scheme, but rather if you have a unique product, then and that will be more interesting for the shoppers in terms of the search word they are about 7 billion unique words. I forgot the exact number, but that means that every day, people enter different words when they conduct search.

In terms of items that sell only in limited units per year we make it sure that they are on the shelf so to speak. And so the ones that do not sell off, like pan cakes might be the ones that we should handle.

Thank you very much for the presentation. I am Nagao from Nomura Securities.

I have two questions. My first question is about your advertising business and this July to September the total advertising revenues on a year-on-year basis then have been growing by ¥7.5 and ¥4.5 billion for this month, so that’s why more than half of the growth of advertising was based on the total business and the major smartphone vendors have launched the new products.

So then also we expect about the pricing of the smartphone will even higher after this onwards so in this environment and it might be highly likely that your revenue share of the revenues on the smartphone would grow further. So if it’s the case that you like to for example, how you can take advantage of that smartphone and also you need to make more investment for linking this smartphone to the e-commerce and that’s why how do you think taking the balance between e-commerce business and this smartphone based advertisement business.

What’s your strategy on this?

Okay, your question about the smartphone, it’s growing, but still we think that we are going to have anything further and the growth in the smartphone that we need to pay attention on to the smartphone-based business. But when it comes to the balance between the growth between the smartphone advertising and the e-commerce shopping sites, that depends on how can get up to that a good start and how we can grow that e-commerce, we have no idea, but we cannot make any – disclose any ideas about the expectations about for this e-commerce business growth.

For example, that’s an additional – I do think that the part of that profits you have for the advertising in smartphone can be transferred to investment for that e-commerce business, yes, and when it comes to advertisement business and we think we need also any additional investment for advertisement for the smartphone, still. So that’s why, we need to make an investment, we will need it, either it can be an smartphone advertising or the e-commerce, it’s not that we just simply determine this as a cash count and so that’s what transferred the purpose.

We don’t have that idea.

Okay, and on page 52, your presentation you mentioned about the schedule for increasing the number of sellers and you think that’s the – you disclose about the forecast until the December this year, but on the other hand and you are going to – bodies their logistics and the settlement services. So, set aside to this, your forecast in the business, but what would have been the schedule for your operation enhancements for example logistics and the settlement services and what is the schedule for enhancing for this service operations to support this e-commerce?

Okay, thank you very much. And just mentioned in page 54 and we’d like to take advantage of current Yahoo services for guiding this to the customer to that e-commerce site and also we need to enhance that our both distributions and the settlements.

So we like to take a real balance and above these different operations but today I can’t tell about the details how we are going to do for each of these areas.

Okay, understood thank you very much.

Any other questions? The person sitting at the edge.

I am Tomimatsu of Merrill Lynch. I have two questions, first is SS.

You mentioned that we cannot expect high growth in SS and that was the new ones or implication that I have heard from you. And in terms of the divide the breakdown you have smartphone and tablet and I believe that the queries will increase and that will be the driving force.

But on the other hand, there will be either decreasing of the momentum, say in terms of PC, do you think that is contributors in causing the decrease, say, PC might go down or maybe the budget of the sponsors, i.e. the advertisers are moving up to other domains.

Can you tell me the reason?

Let me explain to you by device. In the second quarter, PC-wise it has increased in income.

But looking at the status quo in terms of the number of searches we are seeing some decline in RPS offset that and therefore we were able to register increase in income. There was some fine tuning mechanism, so we can have upside.

For example we can increase the coverage, that is quite possible. But in terms of PCs RPS, I think there is a limitation in increasing it dramatically.

Therefore for our future forecast, PC will slowdown. Now talking about smartphone on the other hand, the number of search will increase automatically in the future as well.

And but in terms of denominator PC has a larger portion than smartphone for now so in terms of the growth rate, in the second quarter, it was about 12% to 13% and so next quarter wise, it will be either first digit latter number. In the Shopping mall we have conditional tenants and they might be “diluted” because of the advent of more participants.

That means the cost might go down, but then if they cannot increase their sales, there will not be a positive story for them.

And do you think those shops that will suffer from the decline in sales will exist or do you think that that you should go for the number instead of paying attention to the compassion of players. And I think you have to strike a balance between protecting the current conventional shoppers and trying to go for the volume of new sellers or comers.

What is your take on this?

I know that this is a difficult task to conduct. We have the conventional stores and we do not believe in sacrificing them for the newcomers, we want the current existing companies to enjoy increase in the sales as well and at the same time, we want the new players to come into the field and we want them to enjoy sales and revenue as well.

So want to increase the market or pie as a whole. And so, it’s not that pie is limited, we want the meat portion to be denser and larger, and so that the enlarged meat can be shared by all the players.

My last question, in terms of the distributorship, maybe, you might have already explained, but in terms of link, you can have more extension. You have Yahoo and then you solicit them to go to the directly managed shop and conduct supplement or you can use the Yahoo Wallet or you may be able to induce the users through your Yahoo advertisement.

And what is your analysis or measures for this distributorship and increase of the transaction volume?

In terms of the transaction value, of course, there are different definitions, one is auction and another is shopping. And in terms of the transaction value, I mean to encompass both the shops being in auction and I cannot delve into the details anymore.

Well, let me add, say, we try to use the advertisement for the soliciting, but that will not be included. So we have Yahoo Shopping Auction and we have the card and that card will become – and that will be the only that will be counted.

We have e-shoku and other Yahoo-oriented transactions and that will be added into the total number of transaction volume.

Okay, let me confirm, you said that link is possible, so there will be the potential to increase the link transaction, but when you say double the transaction value. You are talking about the current Yahoo World.

I am talking about the e-commerce market size, that’s our priority number one and Yahoo would like to be number one and in terms of transaction value that we talk about, Yahoo will be counting the Yahoo enclosed transactions. Thank you.

And if I may talk about the link, of course the tenants are there on view and of course we should not prohibit the tenants to link the users into their site via our site and we do not prohibit them, but at the same time, we do not solicit or persuade them to do that. We have the ecosystem and that is in a way close, and if they go outside our world and they will not contribute to the transaction value.

And why do we allow link? We want to provide benefits to the users, say, if you are looking at the site you may want to look into another competitor site or you may want to link to the manufacturer site and the great invention of the internet is hyperlink and so we have to fully leverage on the hyperlink and if we don’t, what’s the point of being in the internet.

So my idea is as follows, link must be free, but that is for the consumers, they want to have information and I really hope that link that will bear with the consumers will be most beneficial. But there we haven’t started a scheme yet, and so we don’t know what will be the end of the story.

But we do not have any intention to expand to other non-Yahoo world. And so, realistically speaking or technically speaking, it is possible to link to the other world, but it’s possible, Yahoo would like to include within the world of Yahoo.

So for the attendants that usually make it attractive enough, so that they want to enclose their business within Yahoo. In the past, the issue was that – in terms of the settlement, we tried to leave it to other parties.

There was no consistency, is that in terms of product search you have to go to the external link and they use another external party, but that’s and from the consumers’ point of view, that was too cumbersome. And so if you can use our wallet and conduct purchasing from the beginning to the end that will be more convenient for the consumers and by Yahoo Shopping and maybe that might be the first site for the user to experience the efforts by, but then maybe, they may want to go to another site or another mall and want the Yahoo Shopping to be the triggering point in which the inexperienced consumer can come and enjoy shopping for the first time.

Thank you.

Okay, Iwasa from Mizuho Securities. My first question is that, in August, you have announced to have acquired the Coneco.net on August and there were having more shops and they were having more products and they were having more information and the directives to implement that appetite of business and this price comparisons of it would be, or will you benefit better.

What will be the direction of your business plan and how to increase the number of advertiser by taking advantage of this Coneco.net. Do you have any comments on that?

I am responsible for the Media Service. When it comes to Coneco and what it temporarily, and that was a product that answered Japan.

That’s our services to all the questions and all the enquiry can be responded quickly as soon as possible. This is the part of the old Japan services and we can have that linked with the Coneco operations and for all the reliable products and the price submissions of the products and that information can be searched through this Coneco operations and after that, and that will be also further linked with the e-commerce revolution and then also a research with this, the e-commerce products.

We’d like to have that very good combinations and integration with all the other services as Mr. Ozawa mentioned.

And for example, once that result of the search of the Coneco will also be leaded to some desirable products and which offer that e-commerce. So that account things.

Thank you.

Okay, thank you very much. And the last of all, my question about the settlement service.

Now in this the e-commerce revolutions and we like to – you mentioned the offer that’s the lowest level of settlement fees in the industry in Japan, but in order to expand that revenues and profits and also on the other hand we have to reduce the cost. So in order to improve the profitability, and it can be done by self in-house or we have to depend on the other – third-parties and by acquiring other companies for expanding the profitability or when it comes to expansion of the profits, as well as revenues, do you have any external resources needed for you for the future in this area of business?

Yes, the settlement fees would be the industry lowest level, this is in our idea. So that’s why we tried to do our at the most to reduce our own cost in operation.

So, as a possibility, whether we can do everything in-house or also we consider about the acquisitions and M&A and the M&A also can be the option, as a simple option.

Okay, thank you very much.

I am Watanabe of Goldman Sachs. I have two questions altogether.

Firstly, it’s about e-commerce. In the previous announcement, you mentioned about technology and you stated that technology will be very important in the future and you will come up with the advertisement format that is in line with e-commerce.

And in terms of the development schedule, I know that you are on the way right now. When do you think you can complete that?

Do you have any timeline? If you have any definitive timeline, can you share that with us?

That’s question number one.

ASAP. Internally we do have a certain timeline, but as you know a development schedule tends to change.

And so I cannot tell you now, but after we are done we’ll let you know.

Okay, then the second question is related to advertisement you have of prime display and you said with YDN and you were able to increase the revenues and I want to know of what is the status quo? That is to say, looking at the prime display space, I see YDN advertisement quite often and so in terms of the space efficiency, maybe you are almost on the top of the mountain, meaning completion in prime display.

Nonetheless, do you think there is any space that by the end has not leveraged yet? And if so, may be YDN revenues might be flat in the future and if my understanding is correct what kind of measures that you plan to take to stop YDN to go flat, maybe you want to increase the unit price or you might want to increase the advertisers, what will be your measures to prevent YDN from being flat in the future?

In terms of the prime display by the end, I think we have more leeway to distribute right in, in the backfield, but I cannot tell you any definitive figure and in terms of the future potential of growth of YDN by improving the function we can the CTR or increase the accuracy of targeting. And the development to realize that, it’s already underway.

And I think you don’t have to be concerned about that.

Okay, thank you very much.

Naya of Ichiyoshi Securities and my question about the future or three questions about the future of your new incumbent strategy. Number one, your shopping sites, now we have started a business and just like that eloquent, But now and when it comes to transaction values as there is a huge gap between the Rakuten and you, the Yahoo.

So, why, how did you analyze that’s a reason of the huge gap in terms of the transaction value between Rakuten and Yahoo sites?

Okay, I have been working for that Yahoo and also Mr. Ozawa have been working for a long time in Rakuten, okay, now we got two experts on this to answer this question.

Okay, first of all, let me talk about this and initially we don’t have any logistics and distributions. and when we try to focus on how we can have a more sellers or that have the buyers And how to offer the settlements, then when it comes to Yahoo Shopping and Auction, the auction was exactly the same even in initial stage and one can – anyone, anything that so have the ID.

But now, the Yahoo Shopping site was limited when it comes to qualifications for opening new stores. Although we have said this a little later than – that was started then in Rakuten, but yes, now we have the less products and there are less number of stores opened when the Rakuten down to one reason and then also some of the other subedited operations and some accuracy of the operations are.

Also that they have did more and that’s created a feeling about how to grow the business than us, how about you? I have some difficulty to talk about the Rakuten and because it’s broadcast on the web, but anyway, in my personal comment, here is that’s for one thing, that’s the difference between the media company and the retail based company and that’s the major difference.

That's the difference in the mission and then also the leases allocation between two companies. So, I mentioned that I am going to make it to the five times much as the resources, because that the Yahoo Japan has a really, really small number of engineers to catch up with the Rakuten but at the same time, also when it comes to guiding from their search and the Chie-bukuro, the knowledge base, it should have been done, even the ten years ago, but then have never been done so far.

So it’s not that the issue of the priority. So Yahoo so far have focused more on the media business, advertisers, that was the first priority of Yahoo, so in the segment and e-commerce have a lesser priority inside of the efforts and for all these debt and for the resources and what was on the guiding front of obviously the e-commerce and also that the development of particular general services.

And so everything was inferior to the Rakuten in terms of their e-commerce operations. But now we have a lot of the user bases in Yahoo Japan and I am afraid of Yahoo Japan so far and I think that’s under estimate that a difficulty of implementing the e-commerce business.

Because now the Yahoo Japan have dedicated a lot of the customer base. That’s why where that started – again the way we that we thought about that we have just allocated sufficient resources and the starting the proper business operations, that’s why and that’s where we are going to start again in this new strategy.

Thank you very much for responding to the question, to the very difficult question for you. Okay, the next question I am afraid is also they are not the difficult question.

In the Auction, they are going to charge that a loyalty, but when you about the other competitors who offered a free over charge of loyalty business model for the auction, do you think about that competitor will come out on the market? And when it comes to auction, we don’t touch upon the loyalty, because we need to spend a patrol cost for auctions and then also and we needed to secure the portion of the cost.

So that’s why we don’t think that the business model auction will switch to the fully advertiser business models, I don’t think about. I don’t know anything about the competitor.

So do you think there is a possibility that the competitor offered a free of charge in terms of loyalty?

Yes, it will be, and anyone can think of anything. So I don’t have any idea.

Okay, my next question is about, we have more sellers, more buyers and more products and my question about these buyers. So far in Rakuten and the Amazon, there is someone who don’t use the Rakuten or Amazon but this person is going to use that Yahoo or that’s some users will have experience in buying at the shopping in the Amazon and Rakuten also they would like to shop in Yahoo.

So, for the users, for the giant, for the shop and the easy site for the first time in Yahoo and do we have any ideas then how – again then they attract that to the other first time users? How kind of a new buddies are going to offer to those in really first time users for the e-commerce for example and do you have any idea?

Well, it’s not so specific, but I think that – anyway, although we can have a lot of product offers that –and still there is some – for the word missing, in any e-commerce site, first that's why they would like to have that. Anyway they like to have a lot of product in assortments and I’d like to refer everything eventually and any product can be offered from there.

So that is the idea, so in order to do that we’ll have to do a lot of things. But anyway, first of all, we like to have as many products as possible to be offered in our sites, that’s our priority, okay.

Let me just be more specific about this in the product that’s worth. We have the two access and they are two dimensional, first one is the type of the product, we need to have a lot of the types – product types, for example a lot of – when do the buyer try to choose at the sites and if they like an offer that’s in the market and we like to make an user to think about that, if we go there, anything and everything are there, but any time often.

For example it’s not the – it’s not available on from that day and all the retail that isn’t available. So that’s why with the things to about to one year contract or the billing system and this is absolutely some of the barriers.

That’s why – and for example that the farmers, so even the farmers can have only one year contracts and they cannot sell and only with the one year contract into the e-commerce sites. So this is about the farmer so that’s why we charge them for the one year contract, but if the same farmers like to focus on only the two months on a specific part of the year, that is kind of a – that’s for example pastries and for example the farmers.

They cannot join in the traditional ages, then we can attract them. And then also there is some – and this is for example some the tenant would like to sell only the three days in this New Year.

So then it was not about – but also in the traditional e-commerce site better we can attract them. So that for example, I just purchased a digital camera, better I’d like to resell it again in the market, but only for the three days, that’s can be the shopper.

So that we can offer the more number of types. But on the other hand the vertical axis would be that variations on one of the specific products, for example, only one single, exactly the same product, but 3000 that the 3000 attendants can sell the same product.

One is the used one and another is a brand new one, another one is that exactly simpler that can be delivered on exactly the same day. So that – this is the expansion of the two different directions, than they having the more types of the products and also that they have to and the variety of that is, how to sell, that is actually the same products or the alpha.

And some of the farmers can in Alpha there is a product and exactly the same day, the – product from that field. So only for the specific day and that's kind of a variety of the different approach that would be available in the e-commerce revolution.

Okay, I understand. Thank you very much.

Any other questions? Person sitting at the center there.

I am (Inaudible). I have two questions related to e-commerce revolution.

The first question is, quite a simple. Are you – are existing fee-based advertisement model?

For example, there might be stores that as well and become very profitable, but maybe those subs do not use your advertisement at all. I think that there is such a potential and is that okay with you?

Of do you have any measures if that happens? Going to the second question, you announced a new revolution, but before the announcement you had T-Point and Askul partnership and especially in terms of the partnership with Askul, what kind of benefit are you enjoying?

And also collaboration with T-Point is it going well? Personally speaking, I use Yahoo Shopping very often, but it is a disappointment that you are linking it with T-Point.

Regarding advertisement, whether you buy or not, it all depends on the decision of each store. So there will be store tenants who do not use the advertisement and I think in terms of advertisement whether it be any ordinary internet, SEO is working.

So we don’t need any advertisement maybe that might be the decision, but then we want to advise them and make them feel that they want to purchase our advertisement and so, we will put our effort to develop very attractive advertisement and this is the same as other way of advertisement businesses. Now regarding our Yahoo Shopping T-Point, Yahoo Shopping and T-Point can be connected depending on the decision of the user and we don’t disclose the number, but it is going.

So we can see the increase at the linkage between T-Point and Shopping. Now, regarding Askul, it is one of a portfolio partnerships.

We have Yahoo Shopping and we have Yahoo Auction. There are three EC and that will be in one group and Lohaco is conducted by Askul and it handles a long tale of products which are day-to-day items and that would be – it continued to be handled by Lohaco.

And Askul reinforces we have this and but of course this is impossible to put all the merchandises in their warehouse. And so we will have the inventory such as water in the warehouse, so that Lohaco who can handle those products.

So depending on the pattern of sales, we will have Lohaco and Yahoo Auction and Shopping and in the long tale of site, we will have auction products.

Thank you.

Do you have any other questions? Right, okay, thank you very much.

That’s all for today’s guidance meeting. Thank you very much for joining us.

Thank you.