Manabu Miyasaka - President & CEO Toshiki Oya - Director & CFO Osamu Aranami - EVP & President, Shopping Company Takao Ozawa - EVP & President, YAHUOKU! Company

Keiichi Yoneshima - Barclays Securities Taro Ishihara - Daiwa Securities Yosuke Tomimatsu - Merrill Lynch Japan Securities Masato Araki - Mitsubishi UFJ Securities Sumito Takeda - UBS Securities

Okay. I'm Miyasaka, I'm the CEO and thank you very much.

So, let me start the guidance and the business performance of Q2 of FY 2014 and the current status of business and first of all, this is the summary of the Q2. And the revenue is ¥103.3 billion, with an operating income of ¥46 billion and 18 quarters ending straight of that revenues and profit growth and we have started the new strategy in e-commerce and now we have something that impacts of this new strategies and then also at the same time and we have recruited additional resources and also we are making investment for the promotion.

That also all included and also the other advertising or that the infrastructure concerning that big data. We have made a big capital investment for this and also in the last -- but we made an investment for the securities for all these investments and it continues and that's why we had more expenses.

And when it comes to forecast in the Q3 is that this is just like here shown on the slide and for the Q4 and we don't make any forecast announcement and inform that on an annual basis and we expect that the positive growth of both revenue and the income and profits. Next let me talk about the summary.

The next summary is about that advertising the businesses for that we have the ¥60.5 billion of revenues. It was a 7.2% growth on the year-on-year basis and the smartphone advertising that pushed up the total revenues half and when I'm looking overall and now we’ve 34% of the sales from the smartphone advertising and now compared to the one year ago and have grown more than 70% year-on-year.

And after this onward, we’re going to explain in details. But that now YDN is leading that in advertising business and we would like to have the brand new products and have to launch it and they will follow the YDN as in the core part of business and we like to push that business.

And when it comes to e-commerce and our new strategy of e-commerce was announced last year in the middle of October. About one year past, we’ve announced a new strategy for the e-commerce and the result of that and just in Q2 in last year, that we’ve total transaction value of the e-commerce was negative although, the market is growing.

So, but now one year have passed. Since then and now we’ve mega turnaround from the negative to positive, the growth of the transaction value now and then also when it comes to smartphone business and that's been growing for the smartphone based business and they have grown by 45.4%, year-on-year basis.

So in result of that and easy ratio of the smartphone is also, we’ve 33% exceeding the 30%. Next let me talk about the summary of the performance of the quarter and please look at the table.

Now with ¥103.3 billion of revenues have grown by 2.5% year-on-year basis and let me repeat it again, that we have the deposit growth on advertising and now we have some kind of negative impact of this new strategy on e-commerce and that's why all in all we have 2.5% of the operating income by 46 billion, it was minus the 7.6%. And they're also based on -- there is a new strategy on e-commerce, where you need to make additional investments of the promotions and the recruitment in the new resources and also like an all in all, we made huge investments for the security as well as the big data concerning the systems.

So taking all these and factored in and included in depreciations, this is the results, which is represented and operating income. And this is the historical trend of the revenues on a quarter-basis.

And this is the gross ratio of the quarters and when I look at this in a quarterly, the gross ratio and due to that implementing the e-commerce new strategy and then also the sponsor research and now the premium advertising have slowed it down. That's why we pushed it down, that's the gross ratio just like this.

Next let me explain about these revenues for each of the segment-wise performance. For the e-commerce, now it have declined by 8.3%.

On the other hand now advertising revenues as well as the settlement, the payment-related business having a growth. So in all in all we have that revenue growth of 2.5%.

And next, let me then talk about advertising business breakdown, and when you look at it annually, revenue of our advertising business has grown by 7.2% and particularly the display ad have led this growth, particularly for the YDN. Yahoo!

Display Ad Network have contributed a lot for this growth. So now we’ve grown by 60% year-on-year.

So in result of that and totally we have that 18% versus the total gross ratio for the display, but other than the YDN, the rich advertising is growing and this advertising business segments have been rather slow. That's why, in total we’ve 7.2% of gross.

Then when it comes to sponsored search, this is the smartphone-based sponsored search. It has been favorable but on the other hand when it comes to the PC based sponsored search, the PC based search have declined.

So, that's why for the sponsored search, the buyer of the PC have not grown. So, that's why in all in all, this and sponsored search has grown only 1.7%.

And this is about both, the display ad and sponsored search ad. This is that about that growth.

Due to the YDN have grown, so that's why the display ad have achieved 18%. But when it comes to sponsored search, now they have lost is the portion of the advertising base and PC based sponsored search.

So the smartphone are growing, but the PC based sponsored search have declined. So that all in all and they offset with each other and we have only 1.7%.

This is one way we’ve expected and then actually and now this is the second stage of the shifting to the smartphone. Now in the first stage, we’ve have the smartphone was added on to PC based businesses, but now it's a PC advertising, PC sponsors have declined and more than that the growth of the smartphone that we're getting in the second stage of this shifting to the smartphone.

So that's why we need to do a lot of the other measures and we're going to explain in details later. Then when it comes to what happened with the sponsored search would be the one-off that point, but you would like to know about it and we must not to be so much optimistic.

So when it comes to that -- now we’ve the large substantial decline in the revenue via this PC is expected so that it's likely that growth would be that the minus growth and that's the single-digit growth. That's why we need to get ready for implementing a lot of other counter measures.

But when it comes to the sponsored search it have been supported and for the Yahoo Japan business in the past 10 years and -- but we must know that there will be the lifecycle for any of the product. So that we’ve to deal with -- there is the declining phase of the lifecycle of the PC based sponsored search, but we need to get ready for this.

And next, this is the device-wise analysis of the business performance, now and what happens up in Japan advertising business is that, now we’ve the smartphone-based advertising have been growing based on the number of smartphone revenue increasing and now we have a ¥17.4 billion of more of the business on the smartphone-based advertising, but on the other hand, the other revenues based on PC was decreased by ¥8.7 billion and this is the red portion. This is smartphone and this is pink color portion, this is for the PC based advertising and then this is the trend.

We will continue, but anyway this is the trade-off and we need to manage that how this minus negative will offset that the foresight on the smartphone. First of all, I would like to focus on this that the smartphone, the revenues that advertising on the smartphone based and that we’ve ¥20.3 billion in the total revenues, it's exceeded ¥20 billion and this is not coming out from the smartphone.

But on business for the first time and it was out of debt now -- ratio is now exceeded 33%, exceeded 30% and that's what I guess. And next, let me talk about e-commerce, and starting from this quarter and that, so when we’ve been declining that we would like to have that number one transaction.

But it's where the changes that's the graphics like this and when you come to shopping and auction for both of these and the compared to one year ago and have been growing to the double-digit growth from the negative growth. Now this is the quarterly profit trend with a new e-commerce strategy, we’ve big data and video advertising and other advanced investment.

So, depreciations are have impacted negatively but for the full year, we would like to achieve the increased revenue as well as operating income. This is quarterly operating income year-on-year growth trend.

We do not have the information, but even though we’ve negative impact in e-commerce, some of the expenses has been capitalized and therefore operating income in the first quarter -- the first half has been pushed up. So, excluding that in the first half, it was down 5%.

So it is down to 7.6% from negative 5% to negative 7.6%. Now this is a review of the first half revenue, as well as operating income.

The forecast is achieved. Now this is the third quarter outlook, the growth of the sponsored search has slowed down in terms of growth, but YDN growth even farther and therefore it is expected to grow.

For the operating income as I repeated many times, the investment in big data has to be continued and therefore we will continue that and cost control will be tightly done by the compared to the previous quarter in the previous year, it is going to be a reduction. Now this is the outlook of cumulative basis of the first quarter through third quarter in nine months.

Now we’re trying to find the new business revenue, trying to have the cost reduction opportunity and cost control. So in the full year, we’re trying to achieve the increased revenue as well as increased operating income.

Now I would like to talk about other aspects as P&L and bottom-line and give you the KPI and the business situation. First of all, this is the usage of Yahoo Japan service.

In the internet business, basically you get the users and monetize the users, so that's the order for monetization's. For the Yahoo Japan, the biggest issue is that in the PC era, Yahoo Japan almost extensively used, 84% of the user have used Yahoo Japan.

So we’re the owners of that go-to-market. But in the smartphone area, our era is Yahoo Japan continue to be used.

We’ve been struggling and working very hard in several years, but let me give you the current situation. Now access to Yahoo Japan ultimately is occupied by the top 20 services and occupies approximately 80% of the Yahoo Japan business.

So, if you have very strong services continued to be used by smartphone or not that's a critical point, and then it will have the 21st ranking the new service, entirely new services can be added to that. So Top 20, so we’re going to have an extensive use by smartphones, more than 50% are coming from the smartphones in terms of access.

Now if you look at the old services the Yahoo Japan services coming more from smartphone than the PCs and also looking at the monthly unique browsers more than 50% are coming from the smartphone in accessing the applications. Now let me go to the page views, some of the 40% are coming from the smartphones at this moment and looking at the number of searches, especially in the smartphone era.

As Yahoo Japan can occupy the good market share as in the PC era, that was the questions that you had. In the search area 40% or more are coming from smartphones at this moment, especially for PC, we continue to be growing also in iOS.

The search share is very favorable for us and it's about 50% per set for each. Now let me go to the number of visits.

In terms of number of visits and frequencies, Yahoo Japan frequencies are more than 50%, they're coming from the smartphones already and in total hours, on time spent, more than 50% are coming from smartphones. So, I'm trying to show you different data but as a whole, at least in a minimum level of smartphone shifting has successfully been done, that's our analysis.

Now currently the 73% or more of the users use at least once a month of Yahoo Japan in the smartphones. So in the smartphone Yahoo Japan is going to be continued to be used?

The answer is, yes. It will be used.

So we were able to change the entrance for the company as our smartphone is user's basis. Now in the browsers, there are those people who are using the applications.

So we’ve to pay more attention, but Yahoo Japan is now used by the smartphones, but do they download the applications? No.

In that area of applications, we’re making efforts and approximately 230 million downloads are done by the users. Now in the Japanese users, Internet users are approximately 90 million and we can only do business in Japan and out of that 90 million users we have more than 230 million applications are downloaded.

So our applications are definitely used quite expensively by the users as well. More recently, there are good success cases Yahoo Car Navigation System was launched, it is free of charge and you can have full functions of car navigations.

In three weeks, 100 million applications were downloaded. Well, this is the new service and also Yahoo News is also a very strong in presence.

It is a combination of Yahoo and News and Applications, smartphones users and browsers in combined. So through the smartphones, there is a tremendous number of people who are also looking at Yahoo News through smartphones.

So, we would like to have more users to use smartphones for Yahoo Japan. So let me introduce to what we are doing.

For several percentage of users, it is provided on a trial basis already and maybe some of you have already enjoyed the test-run and if you go to the top line, it is timeline style transformation is offered on that test-run basis. Smartphone and tablet users, what is the most familiar page, it's a timeline and there are lot of nice services in smartphones, but it's the timeline type of the sites and that is very familiar.

But also looking at the advertisement in smartphones the chance of success is higher in a timeline UI, big data based advertisement provided as a part of it, and I think that combinations have a higher chance of success. So Yahoo Japan top page is going to be changed to a timeline based and we’re are going to provide the advertisement in a most suitable to the timeline.

We’re doing that permanently and it's doing quite well. The top page change and transformation is a big event.

So we’re trying to tune it gradually so that we can expand the number of users on a test-run basis and if it's going successfully. We would like to cover 100% of users who can see the timelines.

So, I have given you the user's situations and the service changes to be more suitable to the smartphones. Now let me now talk about the more users are using smartphones for Yahoo services and with a timeline that number is going to be expanded, and then how we are going to monetize with advertising products and let me go into that area now.

First of all look kind of site, this is the history of our advertising product. It was not dependent on one product, it was always the timely advertising product that we develop and launch in the market, so new product development was the history of Yahoo.

Firstly, we had the display advertisement and also there was a sponsored search and YDN was offered and YDN was tuned and YDN is leading the market, there was a lifecycle, but there is no product that will be alive forever. YDN is leading our market and business and sponsored search is slowing in terms of growth at this moment.

However, what is important is that to grow continuously the YDN and at the same time, we’re going to solve the client's issues with the new advertisement product. And now and so these are the list of five products which can be the growth driver, so it is now we’re focusing on the developing, coded testing for all this and we have some of them.

So, let me introduce some of these and the new ideas and products and the first one is that data solution advertising. Let's go to Yahoo!

Premium DSP, the one thing about what is that the strength of Yahoo Japan and first of all and we’ve overwhelming search page. We’ve lot of the high shares and as such but search engine, but now I think there's the one of the very strong point of Yahoo Japan is that we can compare it to with data, compare it does now.

We understand we have the best understanding of the Japanese users and consumers. Now we’ve about ¥60 billion views in a month, so that every time and we know that's an information center.

We know that the consumers are based on this ¥60 billion after the views and not only for auction and shopping and, but the payment, we have that -- a lot of that variety of services and so we get about a 100 variety of data's and based on if 100 variety of services can be captured and also the freshness and the newness of the data is very important. So, I think the data as one it was older, it doesn't make any sense.

So that we need to have a bit of a fresh data is more important. So now we’ve about at the maximum basis -- we have about 50,000 access per second.

This means that we can update and we could update the consumers 50 time -- 50 time is second. And then we’ve e the variety of the wider data's and also we have an updating about 50,000 per second of the updating data.

So far this is the big data. So these are the three B's for the big data.

Now so these are the three Bs is now concentrated in the Yahoo Japan and Yahoo Japan is the only company, which can now own all of these and the basic elements of the big data. So that's why we like to provide that the advertising based on this data.

For example, the contents information is provided on a timeline or that advertising products and based on the data or the data driven or recommendations and the offering of the services and the products. So this is that's a really competitive advantage of Yahoo Japan.

Now this is the background and so that this is the uniqueness of Yahoo Japan is that data and the data driven, data based products. So this is Yahoo!

Premium DSP is really based on the data. We already have and then nine months ago, we released the products already Yahoo!

Premium DSP and now in the past nine months. Now we already have about close to 130 clients now have adopted this Yahoo!

Premium DSP, so that immediately after the new products launched, we’ve the clear that the most delicate the phase of the new product launch already since we have already spent nine months and this Yahoo! DMP is that this is the data management platform for the managing of the data owned by the client companies.

And then also as we get off to a very good start so that, they will like to -- the combined is the Premium DSP and the Yahoo! DMP.

So that we can provide a more data based product and services. And the last point for the database products and the services is that -- now we think that the data, with the most important factor to be the winner in the advertising business online, but so far we have that aspect of media and then also we had the aspect of e-commerce so that we can own the data.

But once it was an important that the kind of thing is about how to get an increase of loyal customer, once that also that are the ones shopper can become the loyal customer to the clients. This is most important so it is now.

Now we’ve and the synergy marketing company is now our consolidated subsidiaries. So that isn't weakened and provided the end-to-end visibility of the data from that capturing data to that returning data customer into loyal customer to the clients.

So that now we can provide the marketing solutions, end-to-end marketing solution from upstream to downstream. So next let me talk about video advertising, and when it comes video advertising Now the galore is that's the core parts of the operations and both in-stream and in-scroll both have been very favorable when it comes to that the audience, the frequency and rates have been increased about 80% year-on-year.

So, I think it's the very good and favorable situations. And then let me talk about commerce advertising.

When it comes to commerce advertising and still and some of the product we're getting ready to launch. But we’ve already started up in this part of this commerce advertising, since now we have the e-commerce sites we're providing that's the most, the highest number of accounts.

So that's why we have to provide that's kind of sponsored search or that this type of advertising easily. And last of all, let me talk about application advertising and timeline advertising and timeline is that -- now first of all we start at the top page, well we're now turning into the timeline, so then after we completed the process and then we would like to expand this in the timeline, scope of timeline again in older and broader.

So that also this is the timeline advertising based on that big data will also be displayed and this also the promising products for us. That's all about advertising business, and let me talk about the consumer business and this is about the e-commerce business and in October 7th, the last year.

We announced the new e-commerce strategy and since then let me explain what have happened, what have changed since then, one year after that. And first of all let me talk about Yahoo!

Shopping, and how the Yahoo! Shopping had changed or that changed or not.

But then it had changed it dramatically and the major change we experienced in the past one year is that the number of the sellers have become as 190,000 accounts. It happened about 10 times as many as that one year, and also boosting of shopping and auction and now we’ve the 50th anniversary of Boltz Auction and Yahoo!

Shopping. But when it comes to Yahoo!

Shopping, we're looking at about 15 years, we’ve been or at most -- but still we have been struggling and we could not become a number one in many of that measurements. But now, in the past one year, after we implemented e-commerce and new strategy in our e-commerce, at this now we've become the number one in terms of number of sellers.

And now that we’ve the highest number of the sellers, we’ve that now about more of the products to be sold and we have exceeded 120 million items sold on the site. And maybe next year, probably we also will become the number one in terms of number of the items to be sold, because we have to become the number one in a number of the sellers and next year we may be the number one shopping sites in Japan.

We’ve that largest number of items, and then also now we have more increasing number of orders. So this decline indicated that the growth after we announced that new strategy on e-commerce and the spike.

This means that including the raise of the consumption tax, so that also excluding there's the spike due to that consumption tax. Also still we are in the trend of the increasing of the number of orders and also the transaction value has been increasing and growing trend and you can look at the graphics, you can easily understand.

But very long time now Yahoo! Shopping have been struggling, floundering at the bottom although the e-commerce market have been growing.

But now after we announced a new e-commerce strategy and it turns out to be an old mega turnaround and we're getting into the growth. So also excluding there are some of the extraordinary reason like the consumption tax hike and still we are getting into that increasing trend also in terms of the transaction value and this is the basic scenario.

We have explained that repeatedly in the past again and again and then again, we have to increase the number of the stores and sellers and the number of items and we’re number one, but still we’re not to the overwhelming number one. So that we’re still aim to be that overwhelming number one positions and we'd like to grow that transaction value and I would like to make that transaction value into that -- our growth of the advertising business.

That's about outline of the Yahoo! Shopping.

Next let me talk about the auction. YAHUOKU!

and what happened with YAHUOKU! business?

First of all this auction, the YAHUOKU! service has now -- also our target is to become the number one auctions which on selling that the highest number of items.

But first of all, we needed to increase the bidders and then also the successful bidders turns out to be that the offer, first of all to offer the products. So, first of all, we would like to increase the number of bidders.

So these new bidders have increasing steadily after we announced that the e-commerce revolution and particularly when it comes to new, the bidders have been increasing like this and this is going up. And also the younger, all those into 20s have been increasing particularly and among there are new bidders.

And there are a lot people that think about this and some of that stay older and better and the bidders is -- and they are using it. But now we’ve the more and a younger bidders now, just like this.

And also now transaction values have been and is still going up like this and even in YAHUOKU!, we have been suffering from some kind of a negative growth, but now it seems like that we’re now getting into some kind of a regularly growing trenches like this. On annual basis in 2007 was a peak in terms of transaction value.

In 1999, we started and it grew until in 2007 and since then it has been trending down. But after a while, this year even though it's not final, we’re striving that we’re likely to go beyond 2007 level.

So ever since we have founded we’re going to have a record high level of the transaction value, that's the extent of recovery we have now. Now the KPI that supports it, it's also favorable.

Number of sellers have increased on a year-on-year basis for two consecutive quarters, not only the new sellers, the corporate stores have increased in number and very close to 20,000 stores. Now going forward, there are those who have never used it even once and it's more than 50%.

So there are no new potential users, with the smartphones and new devices and products as tools available I believe that reuse market is going to go up even higher. Now having said that on the Internet area, the marketplace and reuse is the market and YAHUOKU!

has already 80% to 90% market share. So it's important to have that remaining 10%.

However we’ve to redefine the market, expand the pie of the reuse market and therefore another growth strategy and access is that it is the reuse in Internet is 50%, in the real stores it's 50%. If we have a 90% in the Internet areas, maybe in offline we would like to aim for 90% of the reuse market as well.

So as experimented in the center street of Shibuya, we had YAHUOKU! with the Bookoff collaborations.

So why you want to put these products in YAHUOKU!, it is so cumbersome to ship it and also to receive it. It's still cumbersome that's why they do not participate in YAHUOKU!.

But if you bring it YAHUOKU! we will charge 30% of commissions, but there is no cumbersome procedures that you have to go through, that's the sales point and YAHUOKU!

store you polish the products and repair it and you can use the reuse product very easily. Now from Bookoff point of view, if the customers are coming as a visit they can explore the business opportunities.

So if they are premium members, if it's ¥100, you can get three books free of charge. So it's a very easy giveaway that Bookoff has provided.

So Yahoo! Premium members can get the books -- used books free of charge or they might put that in auctions of the books where you may get another one that would invite the visit to the YAHUOKU!

stores. Now YAHUOKU!

business model continue to be active, so we are now going to change the business model of the YAHUOKU!. So, so much for YAHUOKU!.

Now I would like to talk about premium membership business. In implementing e-commerce strategy, premium members might be mostly damaged and there was a concern, especially with the YAHUOKU!

premium benefits are going to be decreased, and therefore there was a concern that premium members will go down with SoftBank Mobile channel development and Ymobile channel development and with the product improvement. We were able to have a limited decrease rather 10 million members on accumulated basis will be a range of our target.

Now Ymobile is another business that we are not going to have a ownership of management, but in the smartphone users. We would like to increase the users so that, we would like to provide services for smartphone users and that's our mission and as we intended in the case of Ymobile, 36% comes to Emobile and Willcom and it was a change.

And by now more than 50% comes from feature phone to mobile and to switch it to smartphone. And also users are also more seniors more than 50 years old or I know old as were used to be 23% when the Emobile and Willcom has been in the business, now it's 41% and therefore those users, who had never smartphones are now started to use the smartphone.

So our mission is achieved. Now let me go to over that settlement and finance other businesses, we’ve the businesses with T-POINT.

Yahoo Japan and IE, we’ve the idea of more than 200 million and T-POINT has approximately 60 million members. So for Yahoo Japan and T-POINT collaboration, we can have a collaboration of 20 million.

So in (indiscernible) rural areas up to 20 million, so I think we can reach the 20 million members. Now with that back drop, we’ve various ideas, now they can look into the Yahoo and go to the customers and to trials are done and promotions are done because of the client information.

So I cannot give you the details but there are hundreds of thousands of levels of applications at this moment are coming. Now in the settlement area, what we're doing is for municipalities, the municipalities will use more ICTs in the future local governments.

Now we’ve the comprehensive agreement with the Hokkaido Government for the local tax payment and others and also e-commerce and advertising businesses should be provided to support the small businesses in local areas. And therefore we would like to work with the local governments to improve the Internet use as a whole and the partnership with local governments are especially important.

The Yahoo payment of the utilities are now very popular 350 or 20% can use Yahoo systems to pay their utilities and bills, and for the tax payment as well for the local bills, out of the 1800 municipalities more than 30% no 350 again pay the tax. So with the Internet system provided to the municipalities, I think this is a very good starting point.

So, I’ve covered the major businesses and its situation. Now we will continue to achieve the ¥330 billion in operating income by March 2010 something and also number one in transaction value in e-commerce market as well.

Thank you very much.

I'm Yoneshima from Barclays Securities. I have a couple questions.

I would like to make one by one and the first one, my first question is this is about the Internet advertising. You mentioned in the PC advertising, on a year-on-year basis and it declined on a Q-on-Q basis.

Now if I subtract the smartphone advertising and there have been a flat order slightly increased, so that 39.67 billion in Q1 and a little about 40 billion in Q2. So they would be slightly more than on a Q-on-Q basis and I understand that you have just -- I'm surprised in a way there are some big drop and decline and they go to September.

But is there any reason and you had slightly increased in the Q-on-Q basis just as simply the seasonality or made some kind of information or some kind of a counter measures. So we expect that's also after the Q3, do we expect that the decline in PC based advertising just like this?

Well when it comes to Q-on-Q we don't analyze much details in Q-on-Q but one thing, from this April to June and I mentioned in that guidance in Q1 and we’ve some kind of vulnerability of the IE. So, particularly for the sponsored search and the PC based sponsored search advertising have some dramatically drop and also in exchange for that and we implemented some counter measures so that we can have the recovery, we've done our efforts.

And when it comes to April to June, when advertising between April to June, what shall I say and all in all we can say that -- we would like to push up that advertising revenue a little bit more. And in Q1 there will be about 95% and while year-on-year basis and the operating income was 95% on a year-on-year basis and we tried to achieve the same also in the second quarter.

But now a sponsored search and over the premium advertising and based on the PC is that it seems like -- and it failed to achieve that target. So when it comes to the revenues, the PC based advertising revenue frankly it will be the worse than we had expected.

So when it comes to forecast after this, let me think that this is a sort of a structural problems that as Mr. Miyasaka mentioned.

So we should not be so much optimistic and particularly -- and this sponsored search where the larger portion of that sponsored search is for the PC based, so that we expect some kind of a slower growth even after that.

My second question is that in the cost in Q3, particularly for the SG&A, do you’ve any change in SG&A from the previous Q. I don't know exactly that SoftBank HAWKS has a championship of professional, the baseballs and in case that baseball team got the championship and you're going to have some kind of a discounted sales on the Yahoo!

Shopping. So that will be already factored in or you're going to have a more depreciations with this upfront investments and capital investment.

So, would be any kind of expected change in SG&A in the next quarter?

First of all and when it comes to the all in all picture, of our picture basically, I think that when we try to be more conservative concerning the PC based advertising business. This would be the basis.

So we think that the cost should be within that the growth of the revenues that would be the basic idea. So they know to do that, and we also needed to try to cut the cost more than now.

So now we’re reviewing for each of the specific items from the perspective of further cost reduction. But what's important here is that we -- for the operation cost for the existing businesses and in the investment for the future business growth, we need to draw the line between the two and we think about that separately, so that we need to streamline of the existing and the business but also that the big data or the movie or the video advertising, then kind of new products should have that more allocated in the budgets and the investment.

So that's why, when it comes to our efforts of controlling the cost that we needed to look at and from the longer term perspective. So in our company and promotion cost are that controllable expense ratio account for about 20% or 30% and all the fixed cost.

Other cost will be the labor cost and the CapEx. These are the major items of investments.

So that but a decent labor cost and the CapEx will be considered based on a long term basis, and so that we can have some kind of balanced approach of the cost reduction and the increase of the investments. So that we need to have a long term perspective.

My last question is that, you mentioned earlier that as for this fiscal year and for the March 2015, you like to have that's deposit growth and the income, but if that Q3 will achieve that the guidance forecast and Q3 that your hurdle and for the business performance will be higher in Q4. So that's why you're going to have either something you have a positive surprise in Q4 or you think about that, what would you think about Q4 in order to achieve your target annually.

And then also you already set up the target of ¥330 billion and, but I don't think that there will be -- have just a slow down to the pace to achieve that target and anything, any factor, you can make a turnaround for getting into that, again that's all the incremental revenues and profits after the next year and onward in order to achieve that long term target?

Okay. First of all as far as Q4 is concerned, we now and disclosed that of each of these in quarterly, the business performance forecast is that because we need to have a lot of midterm basis for the advertising business growth.

And also in Q4, the KC Card we’ve acquired that previously and still is uncertainty about the result of this the consolidated, the business performance of KC Card, that's why we’ve disclosed just like this. But when it comes to a specific topic and this the Q4 is that, as for the KC Card when we acquired that KC Card and we have a negative goodwill.

And it would be a couple of the billions of Japanese yen of that's the negative goodwill is expected and eventually we need to check out with that's the auditors. But there still the value is uncertain, but we are going to have some kind of negative goodwill for KC Card.

And also when I look at the last Q4, the last year for example the cancellations or the impaired assets, impairments or that kind of a cost, we’ve advanced rate 10 billion and 1 billion and a couple of hundred million of yen then also we at that time we actually we tried to acquire that Emobile. So that at the time, we had to pay the consultation fee.

So that were all the onetime costs, and last year we had that's a bunch of a onetime cost and a total of all this onetime cost was summed up and up to substantial sums. So if we're removing all these and when I look make that apple-to-apple comparisons and we think I would like to try to increase that the ratio of the revenue increase, try to constrain that the gross of the cost.

So finally is not that we’ve any surprise in the organic basis, but these two are the major factors, that's all. And when it comes to the forecast in FY 2015 and much 2015 and when it comes to forecast now we are getting ready for that the advertising on the smartphone, advertising services on the smartphone.

And the first we offer that service in the smartphone, try to monetize the services and this is why getting ready so that we can have more income and profit growth ratio. Then also we can more tightly control that expenses, but the expense is controllable.

So in the next one year we expect that we can deliver the goods about the cost control, but when it comes to revenue and profit growth and what we can say today is that we would like to do our at most. But anyway and by the end of this 2015 and we’ve to get back on that, again the organic growth path.

Ishihara of Daiwa Securities. Thank you very much for your presentation.

I have three questions. I would like to go one-by-one.

My first question is about Premium DSP. At this moment, what kind of clients are the advertisers is that branding or is it for the customer acquisition.

Also, what is the purpose of advertisers and also at this moment Premium DSP, what's the target of the size that you would like to achieve compared to YDN? Are you going to bring it to the same level of YDN or it's going to be the half level of YDN.

Do you have any idea?

Yes. In terms of the business size, let me explain the size first.

As for the client attributes, I would like to have the person in charge to respond later, now as much as possible, we would like to achieve in terms of the business size, but at this moment in this quarter in the middle of the single-digit or the late single-digit it's like double the growth. So business-wise, it's going quite favorably for the moment on a quarterly basis.

There is some 100 million so to achieve the 10 billion level in some years. So, I would like to have Aranami to respond.

For the premium DSP users, let me give you the attributes of those users. National clients, the major advertisers, main advertisers branding and also direct response, 50-on-50 and direct response might be a little bit more but in the future, it is more for that branding to have a higher awareness and recognition to be achieved and that's our forecast.

Let me go to my second question. You talked about the smartphone advertising; you are going to make it a timeline advertising and to have more advertisers to push up your advertising revenue.

Now to your revenue and income, when is that going to starting to contribute is it going to have an impact on FY 2015 or is it going to take more? Can I have any time frame?

Yes. As an assumption I said, I explained that in the new chart, the smartphone advertising as a whole is growing and also PC advertising is slowing in terms of growth and therefore the growth is lower.

So smartphone advertising is growing as a whole and also sponsored search and as well as YDN in smartphones are also growing as well. But coming forward, the Yahoo would like to have more smartphone users to extensively use Yahoo and we’ve no idea that we have to make it a timeline and that's what we're doing at this moment.

So make a bit of timeline and you put that advertising and I know we had the intention that a feeling that we can grow the advertising as much as possible. But for the users, it's going to be a change, big change to change the time line basis.

So the users has to be accustomed and familiar, become a timeline based Yahoo's main product. I think will they continue to use Yahoo and that is very important and some percentage of users are using that and we’re trying to get the inputs and feedback and we have to make it to 100% on a timeline basis and then we have to launch the advertising.

So as for the timing, we’ve some internal targets but this is not something that we can commit in terms of that time frame.

Let me go to the third question. As for FY 2015 and going forward, what is your philosophy?

As you have explained you are going to new services which is going to contribute you to the revenue and that will push up the revenue as well as the operating income. But if you cannot expect an immediate impact into FY 2015 or how much cost that can you control?

Is there a room for cost reductions and therefore the operating income is expected to grow or not through the cost control if the new businesses is not going to contribute positively?

Well honestly speaking PC is a slower growth, it's a risk factor in my opinion. Now under the current assumptions, the cost control can bring it to an offsetting level by offsetting a negative impact and if we have a new monetizing sources we can bring the numbers to a positive increase.

Now even though we call it cost control, there are things that we can do and there are things that we cannot do. And also there are some ranges of what we can do.

So whether we can cut the cost to make it increase the revenue and increase the operating income in whatever the situation, it's not the case, we’ve to secure the investment for the future and adjust the cost of reduction for the sake of cost of reduction is not right. But we’re very committed to have the revenue improvement and operating income increases.

So with that mindset we would like to work very hard. There is no need to take it seriously and panic however.

What we’ve to face is the PC use is coming down and we knew that it's going to take place. But it is now materializing and very vivid results.

So that was for the smartphones, the PC was a slight reduction almost flat and smart use was incremental, it was add-on. So it was a very favorable situation, but coming forward, it's not going to be the case.

Smartphone will have a negative impact. So we should have a scenario.

So the transformation to the smartphones is fast paced, but I think we have to be ready for the reduction of PC as well. So of course PC revenue, PC views are quite large and therefore we’ve the investment for PCs as well.

But unfortunately, whether we do it or not through our effort, ever since the PC Internet has come into the birth the PC use is coming down very vividly explicitly as we can see the changes expressively. So it's a historical turnaround time, and we shouldn't be optimistic at such a large see change.

We shouldn't be too optimistic and this should be prepared more than enough as you stated and the cost control is something that we have to do in advance. We should be more than enough in prepared.

Of course, we can relax in the slowdown of preparedness, but I think before we go into that see change, we should be prepared. But the key is that the use of smartphone is increasing and also no search cases, uses and query shows the smartphones also increasing very favorably, so we’re very favorable.

So the slow growth in the PC and CapEx and headcounts have to be transferred from PC to smartphones and that's the challenge that we have to face going forward.

And as you mentioned about sponsored search, my first question is about the sponsored search. And now you mentioned that in mobile the business have been growing rapidly.

So this mean that we will be there with specified timing for -- if you’re now growing the smartphone based and to grow, but still you cannot absorb the decline in trend of the PC and there will be any factors any of the quality wording is different or the CPC is different or what do you think is the factor there?

Okay. First of all, just speaking shortly, that the country PC and smartphone and this about revenue part search compared to this and about in the case of PC is 1 to 0.6 for the smartphone, this mean that the smartphone the revenues is for the 60% per search for the PC.

And the reason here is that when you get pricing and the pricing -- when you get pricing and it seems like that they generally in the market and the smartphone advertising is being accepted more by the advertisers. So that is like the pricing -- when it comes to pricing it is almost on the par with PC, but when it comes to CTR for the other measurement like CTR and the space or display size then actually -- physically the advertising can be displayed is the PC has a wider area.

And also when you come to coverage, when it comes to that the trend on the key word on the search is different between PC and smartphone. So and PC is higher than the smartphone.

So, once the future trend after this somewhat and the revenue per search for the smartphone, now I think when you look at in the past three quarters it's been gradually picking up and particularly -- what we’re particularly paying attention to that we would like to provide that accurately matching quality advertisers should offer so that we can have more a ROI advertising and products to the advertisers as much as possible. And in order to do that, what shall I say it's like to encourage more of the clicking of this, this means an improvement of CTR is the one of our key measurements and we actually implemented lot of measures.

So when it comes to trend -- now it has been gradually and growing and going to the very good direction.

Okay, and you mentioned in the presentation and there would be about -- it may be likely that will be and minus of that lower of the single percentage points. But do you expect how much of that the positive effects of that's the new measures and have you factored in your forecast?

Frankly we try to be as conservative as possible so that we do not include any of the any specific effects so much in the forecast.

Second question about the growth of shopping and the auction have been growing, I think that has delivered good surely, but when it comes to the end October to December and what do you think about this the forecast of this in the recent future by shopping and auction?

Okay. Now we’re getting into that year-end shopping split so we expect about double-digit growth in the shopping, but actually we’ve internally higher targets for that.

Then when it comes to auction -- now our all measures and the new measures have run its course so that we cannot expect as high growth as 10%, we experienced in the first half. So after this hour, we try to expand the market so that we can grow the revenue.

So that we just gross ratio will slightly slow down, but we expect that in the Q3, we expect about the middle of the single-digit growth on the transaction values is expected.

My last question is about -- and you already have more than 10,000 of that Yahoo reservations, just like for example, not only for the product, but also you try to scope your business for the Yahoo YAHUOKU! and Yahoo Reservations.

What would be that the timing of actually monetizing service and what would be that your expectation the size of this business in the future and what would be your ideas and the future and the strategy of this new services?

Okay. When it comes to YAHUOKU!

the reservation and first of all, first we need to acquire that all this member restaurants and so we're going to have more reservations and then we would like to have more transaction by this and so we're still in the early stage and so that's why we cannot clearly say when we can start to monetize that. But next year at least it's too early for us to monetize, but we think that YAHUOKU!

the reservation service has a very high potential of the business growth and also we’re sure that our service will be competitive enough and to be winner in the market so that we have high expectation.

Yosuke Tomimatsu, Merrill Lynch Securities. I have four questions, Premium DSP is my first question.

What is going to actually like to grow this to big business? And you’ve have the driver once the -- the product attractiveness has grown.

So what's lacking is that product attractiveness or capability or its awareness by users or by the distributors or what is going to be filled to grow this business to a big business? That's my first question.

Mr. Aranami, he is just trying to strengthen this business.

So, he is going to respond.

And there are two key aspects. One being that Premium DSP is the data analysis, a capability based proposition that we make and that's the type of product, and therefore human resources development is going to take more time than before.

Now, another aspect and the key and which is very important is as follows. Currently, DMP, Data Management Platform development is going on very aggressively.

It's DMP and Premium DSP system linkage is going to be achieved and that's going to be a major trigger to grow this business. On the DMP according to mass media, it was a complete and it was launched in September and in a few months it was going to be tested.

But if that's the case, the linkage is already complete and it's going to be January that will be tested and it will be noteful business. In the New Year, we’re going to have system linkage going to be established and sales and marketing is going to expand from that point onwards.

My second question -- two questions will be big data related. In the nutshell, I think what's important is who is using big data and that you have the premium members over 10 million.

And I don't whether that usually always logged in. So who is important?

And can you track who is using that? And please explain in that aspect?

And also the President has explained the cost is increasing for the big data, and what is that type of cost that is increasing? I think it can be only our internal cost.

If you can do it by yourselves or are you outsourcing and you have to go get it from outside and therefore it is pushing up the depreciation. So if the big data is expanding, is that going to push-up the cost structurally?

So that's the two questions from me in relation to big data.

Yes, who is using it? And in order to understand, we use cookies in the case of PC, but if it is a different devices with applications so we’ve to use IDs to understand who is using that.

In the PC, we’ve that system, but in applications we can do it fully and therefore it's not released yet, right? It's not released yet, but we’ve have the login -- quick login can be done in other devices and whether it's PC or application we can track who are the users and capture the user data.

Now as for the facilities, I think that data that has to be stored is massive, it's not PC view log alone, but if you're trying to store data it can be limitless, but basically we are trying to store the information of that data as much as possible. So there is a cost associated with keeping the data.

Is that hardware cost?

Yes.

So it's a depreciation of hardware cost?

Yes.

Okay. My last question is related to EC, you said that you’re going to have a benefit and results, but important to KPIs, the satisfaction of the tenant, but looking at that by having a new store opened in Yahoo's or that they are satisfied or not?

And it's very important. Unless they are satisfied even though it's free of charge, it is cumbersome procedures and it might not be good for the store owner.

And what's the satisfaction level after one year and you have policies and measures to raise their satisfaction level. The search result and EC it can be linked together or for the tenant satisfaction level are considered, is there a risk that stores were leaving the Yahoo or not?

Is there any risk or concern arising? Or have you launched any policies to raise the satisfaction level?

And in the fourth quarter, have you planned anything? And where are you putting importance?

And search and easy linkage, have you done something and what do you expect out of that?

Let me talk about evaluation by tenants and what we’re doing to improve the satisfaction, the percentage ratio is going to do it. I'm Ozawu in charge of the shopping.

As for the satisfaction level, the tenants stores there are quite a few and if all of them are satisfied 100%, that would be great. But since its shopping mall a super long tail, there is super selling stores and not -- so it's saves the shopping as well as the YAHUOKU.

They are our products, that are not selling very well and those tenants and stores are also included, and therefore we cannot sell all the product, even though they have the stores in Yahoo. So 100% of satisfaction is not possible.

Now where we should have a higher satisfaction level? Now especially head top sellers where that's 0.2% or 2% is a question.

But we call it to 5% to 10% of top stores, we would like to have a good score. It depends on the sales structure, but we would like to have a good support.

And while we support the tenants, we would like to grow their revenues compared to the previous year and what we are trying to achieve through the support of structure as well as with the exposure, we’re going to have the preference. We do not charge and therefore we don't have to have an eco-services.

If they're selling, we provide a better treatment and if they are not selling, we cannot continue support. So we do not have any question here on evaluation.

This is just a transaction value, based on the transaction value what is the changes within the previous year is traced. Fortunately as we trace the major stores and tenants depending on the category, there are some changes but the satisfaction level is going up.

And for the details, we do not disclose the numbers, but as far as we track and support the top large scale stores and tenants we support and we keep it in mind through the majors that they stay on Yahoo.

And since it's a very good opportunity maybe we talked about auction as well.

Umemura, who is in charge of YAHUOKU auctions has also stated, not all the stores will be happy, but especially in the YAHUOKU, the top sellers are supported. A store satisfaction is achieved through better sales, and sales are improving and so it's a qualitative score.

But we believe that the top tenants are satisfied, and also in the YAHUOKU stores other than easy malls, it's cumbersome, it takes more time and effort. So in the summary as we’ve told and therefore the tool for the stores will be upgraded and tools for the stores are doing in the past one or two years, and therefore such auction using the tools have contributed to a better satisfaction.

So, in the second half of this year, with YAHUOKU that will (indiscernible) the transaction applications will be improved so that we can even improve the satisfaction of tenants stores.

Let me supplement one thing. In selling the DSP our user talk about CRM is a solution provider type of the non-staff, is it required maybe, you have to go deeper with the customers relationship.

And do you have a sufficient talent and capability or are going to have alliances or M&A to get such a talent to have a better proposition capability to the customer. So what is the human resources capabilities and skills that you have currently, Mr.

Miyasaka?

Yes. You talk about the solution.

Solution is the key and we changed as marketing solution company for the advertising. So products are getting more like solutions, human resource is a qualitative change is also required as well.

So internally we’re trying to develop the skills at the same time the business grow there will be a bottleneck of the human resources that we might face and we might need M&A or alliances. In data science, Qubital is the company that we have and we’re trying to have the human resources development.

Aranami, do you have any comments?

Yes. Qubital Data Science is the joint venture with (indiscernible) Qubital Data Science is a good support in growing this DSP business but that's not going to be sufficient.

And therefore as Mr. Miyasaka mentioned, we’re going to have business alliances or M&A to expand the business.

So we think such alliance or M&A might be necessary in the future.

Araki from Mitsubishi UFJ Securities, I would like to have two questions. Yahoo!

Premium DSP and from this the quality it was used by the different channels and also now you expect that's the high awareness after this and what is that the change of the channel for selling this products and also--

I'm sorry, would you please cut your question one by one, please?

Okay.

Okay. Your first question is that from the July to September in the Premium DSP is distributed through that this brand panel, this is the question?

We do not distribute it -- we deliver to that, so that whether or not we should deliver to that brand panel or not, we still consider is not now.

My second question is that the (indiscernible) is not removed from that equity method, a couple of equity method, are there any change or?

There is no any specific reason.

I'm Takeda from UBS Securities. My question is about -- a question about the management as a whole.

Now in your presentation, you mentioned about your forecast of the sponsored search and forecast and anything and you still it might be likely that a negative growth and so that it was a very disappointing news but now your management environment will change and also Mr. Miyasaka mentioned earlier.

And now you're getting in second stage of the shifting from that PC to smartphone-ended market? So if it is the major trend, so if it is the case and if you think about that rather than the recovery of that, the smartphone and advertising, you’re going to have to improvise the other optional plan for enhancing your management.

So that in the next three months do you have any -- in the past three months, are there any change for example, you have determined and change the attitude of more on M&A's and then also you're starting to deal with the gaming businesses, so that if there are any that kind of a change in tractions and strategy?

Okay. And one of our strengths is that the amount of big data.

And this means that -- this is the recent history of our several different services and the businesses and having led to that kind of big data. So the auction and shopping so this means there is e-commerce and advertising.

We need to start a brand new business following that e-commerce and advertising. So that's needed, that's for sure.

But anyway one mobile acquisition, then finally to that determined not to own the business, but anyway that is one of the new areas. So we can expect so much in the process, but organically, the e-commerce and advertising, we expect to follow growth and agendas.

I guess so, we would like to do at most to grow them, but at the same time the finance and the payment businesses. The other area and the other, number four, number five and there is kind of a brand new business domain should be explored, and if there is any opportunity, we don't deny the possibility that we break into that area with M&A.

My next question is that, I'm very sorry, the next question is also a difficult question for you to answer, but in the past couple of months when we’ve conversation with about this market and your target was getting that income and profit double and it seems like that a lot of people in the market cannot have some kind of doubts about it. So it's not just like that for some of the big jump, but also they like to have some kind of cruising speed up to growth in order to achieve the target.

So that if you please that, we kind of get some details, but as in management and how long do you need to get as you start back on this kind of cruising speed and the cruising pace of the growth. Do you have an idea about that?

Okay. I cannot mention when, but I would like to say as soon as possible and the point is that we need to have it double-digit growth.

So, that's why we mentioned about e-commerce strategy and because we try to achieve that double-digit growth. That's why we took that strategy, but anyway including e-commerce have to get back on the track of the double-digit growth.

This is the most important strategy, but I cannot mention when.

I'm (indiscernible) from Deutsche Securities and I'm very sorry that the question (indiscernible) but my question about e-commerce and you have 10% growth in the shopping and 7% of growth of YAHUOKU! my calculation wise and in the past one year, you’ve made turnarounds to get the business that profitable.

So that is not so much specific question but for example, I like to ask to Mr. Ozawa, what is the major challenge you're facing up against and what kind of challenge for Mr.

Ozawa and how are you going to solve that problem and challenges? And try to exceed in the Rakuten and Amazon?

And what's your comments about, what is the problems and challenge for you and how to solve that? Would you please answer?

When it comes to challenge, there are tons of challenges and we’re strong giants there. So in the past years and they have focuses there, and also there are all those, the companies have focused on making the profit as much as possible.

So that's why when it comes to Yahoo! Shopping brand, who has been really foundling at the bottom.

So that's why and we try to make turnarounds since at the bottom of the situations. So that on middle and long term basis, I think we need to make Yahoo!

Shopping that and indispensable and essential site. How are we going to do that?

In order to do that, we think that first of all we should appeal that the Yahoo! Shopping offer anything and it has a lot of any item that sold there.

So that first of all we need to make the portfolio of products as broad as possible. That's item, that's product, it's not in Amazon and Rakuten, but it's available only in the Yahoo!

Shopping site that is one of the traction. And at the same time not only for the long term products, we also just like we do in YAHUOKU!, we also offer that commodity products.

It's not either on the long term and very special product, but just like the convenience store and that kind of how we should sell that kind of commodity products. And I think the most clear approach is that to make that commodity product cheapest.

So that's why and all in all, we like to appeal that the Yahoo! Shopping sites is selling everything and is the cheapest price, and this is one of attractions, so the one when it comes in the price and we offer the free of charge of the store opening fees.

So that's why lot of the shop owners they can take advantage, that's the free of charge other than the fees to what would have pricings. Whenever we ask, we try to ask that shoppers to try to say that the price as cheap as possible, and so just like this and we just wonder, what will be best approach and I think that's and this is the free of charge of the commissions and fee is that one of the best attractions.

Perhaps, now we’re making phone calls every day, so that we need to think about what will be the appropriate size of our supporting staff size. But other thing is that we need to provide that the uniqueness which is unique only to the Yahoo and the only thing that's for example what are the strengths of a convenience store that they're very strong because they're located closer to that consumers or they are located closer to their needs.

Now that if someone gets thirsty and they can easily find the convenience store that is that allocation constitute to their needs and the consumer is and that's the strength of convenience store in terms of like, that I think that Yahoo and search is that's in a bunch of that product they need. So, that's why we like to get in closer to the consumers.

So for example needful and the declining that the revenues of such and we cannot just do and take it in any directions that -- we like to make everything on the shopping, if that's a result of the search. Everything of the shopping search should be displayed that we cannot do that and we should not do, we must not do that, but in a mid and long term basis of anyway we like to create a size and they can offer that everything where the cheap is the price.

But for example if that's stockholder and the management allow us to do that, we would like to make additional investments for getting the shopping closer to the consumers, the closer to their needs, so that depends on that the transaction values and rate. So you’re going to try to life up the 30%, we can do that.

But anyway we need to make a balanced approach to do that for how much of the investment we should make. So this is the challenge for the Yahoo Company as a whole and other challenge as an head of this department must be coordinated well.

That's all. Thank you very much.