Manabu Miyasaka - President & CEO Toshiki Oya - Managing Corporate Officer, SEVP, Director and CFO Takao Ozawa - EVP & President, YAHUOKU! Company Osamu Aranami - EVP & President, Marketing Solution Company Kentaro Kawabe - SEVP & COO Gen Miyazawa - EVP, President of Search Services Company

Sumito Takeda - UBS Securities Hiroko Sato - Jefferies Securities Yoshitaka Nagao - Nomura Securities Keiichi Yoneshima - Barclays Securities Haruka Mori - JP Morgan Securities Yosuke Tomimatsu - Merrill Lynch Taro Ishihara - Daiwa Securities

Thank you very much for coming to our session despite your very busy schedule. We would like to start the business results presentation for 2014 third quarter.

We will have the live broadcasting of the presentation and also we will have the on-demand distribution. I would like to introduce the representatives from Yahoo Japan.

We have Mr. Manabu Miyasaka, CEO of Yahoo Japan; and also we have CFO, Mr.

Toshiki Oya. First of all, Mr.

Miyasaka will give the presentation. Then afterward, we will open the floor for Q&A.

We plan to end around 6:30. Please start the presentation Mr.

Manabu Miyasaka.

Good afternoon, everybody. I am Miyasaka of Yahoo Japan.

I would like to give you the performance results of Q3 of 2014. I will be using about 20 minutes or so to give the presentation.

You see the executive summary for FY2014 third quarter. Revenue was 107.5 billion yen.

Operating income 49.9 billion yen and there has been increase of 4.7% and 0.3% year-on-year respectively. And in terms of Q4 outlook revenue, it’s between 112.1 billion yen to 114.1 billion yen.

And operating income was 48.7 billion yen to 50.7 billion yen, up 4.1% to 6.0% and 2.0% to 6.2% respectively. And in terms of cash dividends forecast, we believe that per share will be between 4.58 yen to 4.63 yen.

This is another executive summary. In terms of advertisement-related revenue, it is 61.1 billion yen.

YDN grew dramatically, i.e., about 60% year-on-year. And so this was a good robust growth.

And display advertisement revenue increased by 19.2%. Regarding paid search advertising revenue, as I have mentioned to you before, there has been a shift from PC to smartphone.

Therefore the growth rate was minus 2%. Regarding smartphone advertising revenue, it is growing continuously, and year-on-year it grew by 1.5x and it registers about 34% of the total revenue ratio of advertisement.

Let me give you the highlights of Q3. In 2014 Q3, our revenue was 107.5 billion yen, increase of 4.7% and YDN contributed.

Regarding operating income, going back to revenue, we have DSP, which is a new product, which has contributed to the increase of revenue. And along with the increase of revenue, we have increase of consolidated subsidiaries growth.

Therefore, these two factors actually contributed to the year-on-year increase of 4.7%. And this shows the quarterly revenue trend.

This shows the details of growth trend from 2011. About a year ago, we have announced to you new e-commerce strategy, and we will make it free of charge.

Therefore you see a decrease in revenue, but we have completed that cycle already. Therefore in terms of the revenue, we are seeing improvement.

Regarding the breakdown of the revenue, along with the advertisement revenue, e-commerce strategy completed its cycle. Therefore in terms of the consumer business, it has increases.

Well, in terms of other segments, and I mean as advertisement [ph] services as well as e-commerce, but along with the increase of e-commerce you can see an increase of other businesses. And the FX business actually contributed a lot to other businesses.

Next, I would like to talk about the details of advertising-related revenue. Display advertisement grew about 20% and paid search advertisement went down by about 2%, especially in terms of display, YDN registered a growth of 60% year-on-year and also Yahoo Premium DSP contributed to our growth.

This shows the advertising related revenue year-on-year growth trend. Regarding display, we are maintaining steady growth.

On the other hand, in terms of paid search, we are seeing a shift from PC to smartphone. And so in terms of query of search is increasing and smartphone paid search is increasing but all the query of PC is decreasing.

Therefore in terms of the total trend, we see a negative trend. But since smartphone is increasing and although we are seeing a decrease of PC, we do not expect any dramatic plummeting once again.

Therefore, we want to continue the growth of paid search. This is smartphone.

It is in total 21.2 billion yen and it is about 34.2% in terms of revenue ratio. Let's take a look at e-commerce.

As completed to a year ago, the transaction probably increased by 8.1%, especially in terms of e-commerce shopping and auction had to be increased and we put a full-fledged effort. And in terms of travel, if we include that, you see it increased by 8.6% but in terms of the actual shopping and LOHACO for example, it increased by 11.5%.

In the end of December last year, there has been an increase of consumption tax this past April. Therefore the unit price per customer increased by 10%, but with the advent of the increase of the consumption tax, it has been negatively impacted, but in terms of the order, the number of people placing order, we are seeing increase in terms of orders as well as buyers.

And in auction, we have been seeing the end of one cycle after the new e-commerce strategy, an increase of 8% and also smartphone e-commerce transaction volume increased to 35.4%. This is the quarterly profit trend.

We have completed e-commerce new strategy and we reduced expense and conducted streamlining. We have the cost control campaign in our company, and we are trying to improve the efficiency of the cost and we are seeing the fruit of success of that endeavor.

And this shows the operating income year-on-year growth rate and this is just for your reference. And we were able to have an increase after year because of the completion of one cycle of the new e-commerce strategy.

This is the business outlook review of Q3 of 2014. In terms of the revenue, YDN and FX contributed to the growth, and the decrease of PC advertisement revenue was not as bad as we have predicted.

And in terms of the cost side, around e-commerce and the big data, we are investing in those domains, but cost control campaign is working, and in October, we gave the forecast that we were able to decrease our expense as scheduled. This is the outlook of Q4.

In terms of paid search, that will be the major pillar of our future revenue. And so in the fourth quarter and also in FY2015, there will be shift from PC to smartphone.

So there might be some flattening of the growth. So it will be in the lower half of single-digit growth.

In terms of full-year 2014 outlook. In terms of operating income, we can actually work on the big data and security, and we will make do investment and that has not been changed.

And in terms of income before income tax, about a year ago, i.e., in the fourth quarter, we had the gains from the proceeds from the sales of the securities, but that will not happen in this quarter. And in terms of the cash dividend forecast, we still grew by 20% of net income.

So there will the growth of 3.4% to 4.5%. Now, I would like to talk about the services.

First of all, in terms of Yahoo Japan, we would like to ride on the wave of smartphone, and we are seeing a growth. And in terms of the top 20, we are enjoying the majority of the access or DUB.

So the most important point is whether those 20 top services are growing? As you can see, we are continuing the growth of these services, and especially the dark red is the smartphone.

So you are seeing the growth around the smartphone. And all in all, in terms of all the services, not only the top 20, but we are seeing an increase of the access.

And especially in terms of the smartphone, we are seeing the growth in other non-top 20 services as well. And also in terms of browser, which is major services, we are seeing growth because of the smartphone.

And we would like to focus on smartphone and change our company to grow around smartphone. And as a matter of fact, in June, Yahoo Japan’s access, actually show that the access is more driven by smartphone rather than PC.

And that milestone hasn’t changed backward since then. So smartphone is becoming a driver and we would like to continue that trend.

And also the further challenge the other shift from the PC to smartphone is application. So including both browser and then applications, and now that a lot of users are using that Yahoo Japan’s service on both, the applications as well as browser, but after this and we’d like to - and there are other more other efforts for the shifting and also enhancing applications on, not only for the browser but also the application.

So that will be one of the big challenge for us, even after this. For example in the case of the movie contents and a lot of the movies will be built by this application smartphone.

For example, we knew that brand GYAO, and by renewing that brand and also we use TV commercials and for promoting that’s the usage on GYAO like this. And this is the car navigation applications and this is a free car navigation application.

And now we are heading more download, and now in about - we have two million downloads in the past 100 days. This is the brand new application released recently and this is the Yahoo!

Keyboard on the iOS versions, and also its ranked number one in the free applications. So just like this, we are developing this application one after another for enhancing this area.

And but what’s most important in this application is that our top page application for Yahoo. So that I wanted more users use that this a top page of application of Yahoo Japan so that - and I mentioned that the once that we’re going to making all these, the Yahoo Japan top page in the timelines and we’re just still testing, and after a series of testings, because it will have a big impact on operation, but now while we are still testing, but we have plan to release this timeline version up to top page in spring.

The other area in the application was important is the game. So this is sort of game is the important application for the smartphone.

So also now Yahoo Japan also have to develop own game, so that we established a company named, GameBank for breaking into this market directly. That’s all the usages of the Yahoo Japan services and by the smartphone mainly.

Next, after this onward, let me explain about that how - now we are also enhancing the access of the Yahoo Japan service via the smartphone platform. And at the same time, next let me talk about the status of the monetization of these services.

Now I want to show there is a slide that depict that [ph] on the Yahoo Japan as providing the services and based on the each of the - new comments of each of the base and the services, but when it comes to selling this advertising, that’s in each and every time and age, we had it changing evolving. And what kind of service should be core of advertising?

First of all, we started a display advertising based on this category and second from the early 2000s, we started providing the paid search advertising in 2011, and 2012. And now we are replacing all these paid search systems and up to the 2013 and now YDN, the Premium DSP, the kind of new products and very strong product have been launched.

And then after this onward, and a focus on this area will be that probably that’s now this Premium DSP and YDN is very favorable. So that we need to develop, that’s the next brand new advertising product.

So this is a challenge after this, and we’re getting into already this new phase. And when it comes to this - and what would be the fifth core product of advertisement?

Well, I think that’s the performance basis would be the data. And this is our concept.

So what’s differentiating Yahoo Japan from the other competitors? It’s a way of providing more than 100 services under which each of these services had a very higher market share.

So that’s why we can see that now Yahoo Japan knows the users the best among all the other competitors in the market. For example when it comes to page view, about 600 page views and also we got 50,000 access per second.

So all these access have been made by voluntarily by that customers and the users. So about 50,000 every second or that about - for all these, the 6 billion months of that context is received and have been accessed the users.

And how we can take advantage of this data based on this heavy amount of access is very important, and like to monetize this is data utilization that new concept of the development of new products and services. The one actual example of this is the Premium DSP.

We already have about 180 major advertisers who have utilized this Premium DSP. And also when it comes to revenues, on Q-on-Q basis, it has grown by more than 60%, so that this data-based service and products have a very big potential.

And also video advertising would be very important in the future after this. And when it comes to video advertising and GYAO or - not only for GYAO, but also would like to have the video contents access to all the Yahoo Japan services as a whole.

And it will long time, but I think that when it comes to now we have a very steady growth of revenues from this video advertising and video contents. And I mentioned that how we can improve that our advertising product based on data, but on the other hand this, not only based on the data, but also we needed to enhance the impact of impression of - impactful impression of advertisement.

This is very important, not only for the movies, but also would like to come up with a kind of a specific product or advertisement product, which provide a very strong impact on the users. So that’s why we tried to do a lot on this rich advertising on smartphone.

And the last, the topic for advertising is that this is the real-time search on Yahoo. When it comes to query of the PC have been declining, as mentioned earlier, but when you look at the query on the search on the smartphone, it have been growing substantially.

So that’s now the total query, combining both PC and the smartphone have been increasing, but one uniqueness of the search on the smartphone is that real-time search is very, very popular for the smartphone, such services, so that’s why - and we’d like to set up the specific space for advertising in this real-time search area. That’s all about our efforts to monetize advertising.

After this onward, let me talk about the consumer business. And first one is Yahoo!

Shopping. Now one year has passed since that - more than one year has passed since easy commerce revolution.

For one thing I promised that we need to eliminate all the costs and also providing, that’s really free the space for shoppers and the sellers. So these are the two queues [ph] and the result of this the easy commerce, easy e-commerce revolutions.

And now when it comes to our first objective, and we have - and now we try to keep the past objective, try to have that the shopping side we have the most of the traffic and then we have 243,000 accounts now we have, just like this. And then our next objective is that although there are a lot of sellers in the market but we needed to have specific merchandisers there.

So our next objective is that we’d like to become the number one in the number of products to be sold on the sites, and also now the number of products to be sold have been steadily increasing at the end of the December 2014. And then I think that by the end of this fiscal year 2015, we would like to become the number one in terms of the number of products sold.

So the first objective I can that we become the number one site to have that - number one in the number of service, and also would like to become site where we have the number one in terms of number of the products. Now after the most sellers and the most products, then what happens with the number of shoppers and the buyers?

This is the next important. On a long-term basis, I’m sure that now as to the e-commerce side, we have the most number of the largest number of products would be the most competitive, but still that, it should not be so long that we’ll achieve this the objective number three to become number one of the number of shoppers.

And implementing the advertising, but we think that’s about - and this is we have done lot of traffic view of 60 billion views in a month. So that’s why we’d like to try to link this traffic into this actual business and e-commerce.

And result of that, now when it comes to actual and orders and the number of [indiscernible] orders, now it had been grown more than 10%. We have a double-digit growth from the year-on-year basis.

And this is an actual graphic which shows that the trend of increasing the number of orders, and after the implementation of e-commerce revolutions and now it have been growing really steadily like this. And excluding the impacts of consumption tax hikes and also after even more than one year after this new strategy, the transaction value have been growing really steady, like this.

Now we have started the testing of a new advertising product as mentioned earlier, and we cannot disclose the details but eventually - and we’d like to become the number one site having the number one number of shoppers and sellers and the products and on other side the most attractive, and now we would like to get in, that’s best cycle of this cycle of this e-commerce eventually. Next, I would like to talk about YAHUOKU!.

We changed the start page, and also the application changes has been made. And for the first time since the release of the application, the start page has been changed.

And along with that, we have the TV advertisement and other promotional campaigns. So in terms of transaction value, in December, it was a record high.

After conducing new e-commerce strategy, you see the very bold line. You see the increase of the transaction value.

This is it. So the transaction value is steadily growing.

And how about the number of sellers? It is very important parameter.

And for three consecutive quarters, quarter-on-quarter, we are seeing an increase. So there are more bidders and there will be successful bidders, and not only being a bidder, but they will be convinced to become sellers themselves.

So there is a very virtuous cycle there. In terms of our auction cycle started with C2C but B2B and C2C, and also we do not segregate them, but we will try to comprehensively tackle all of them and business account is increasing to the magnitude of say, 20,000.

What is our future plan? There has been one major move.

We have completed a tender offer for shares of Carview Corporation. And so far, we have actually merged it with Yahoo!

Autos as well. And in terms of used car, it is in the magnitude of 2.5 trillion yen in terms of its market size.

And right now in terms of Yahoo auction, we are handling different used car transaction, but I believe that we can grow further more. We should have higher synergy impact with Carview Corporation.

Therefore we conduct the tender offer for shares. And Yahoo auction-wise business scenario-wise, we are trying to increase the number of sellers and buyers, and we will be increasing the revenue growth from system-use fees and membership fees.

Now let's talk about the premium membership. The number of premium membership ID exceeded 10 million.

Internally, we’ve been always saying that we are going to attain 10 million, and we were not able to attain this figure, but finally we were able to attain this figure. We conducted easy strategy change, and at one point in time, we suffered the negative impact of it, but we increased the carrier channel as well as the sales channel.

And not only Yahoo, but we have opened up new routes of channel. And that contributed to the number of membership and there are about 1,700 membership privileges.

And since there are so many privileges, the premium member does not understand what kind of privileges that they can enjoy. Therefore we made it easier for them to access the privileges.

How about settlement and finance and other businesses? This is a new pillar.

And as of January 1 - January 5 rather, we have consolidated ex-KC, current YJ Card Corporation as a consolidated subsidiary company. And e-commerce is growing, and we have the advertisement.

And in terms of auction, it will be the fee as revenue flow. And we believe that finance is another segment that we can expect further growth.

So KC is now YJ Card, and we hope that the transaction value that this triggered by the e-commerce revolution will have a ripple effect on the car business as well. And so the link with T-POINT exceeded 20 million IDs already.

There are two different IDs that are linked together, and it is very difficult to attain such a large number, but fortunately we were able to increase the IDs to more than 20 billion and we hope that we will be able to further leverage on this synergetic relationship. Now, let's talk about the relationship with the government.

We have Yahoo! Tax and Public Utility Payment and also Home Town Tax Plans.

And the transaction value is increasing, and year-on-year basis it is increasing by 12x. And in terms of the transaction volume, as a whole, it is only a small portion, but we provide engine that will provide solution to different entities.

And so I hope that we can have a good partnership with the government through Yahoo! Tax and Public Utility Payment.

We would like to have the operating income of 330 billion yen and become number one in transaction value in the e-commerce market. This would be the end of my presentation.

Thank you.

Okay, from now on, I would like to open the floor to question. [Operator Instructions] The ones who are sitting in the right hand side of the back side row of the center.

Okay. Thank you very much.

I am Takeda of UBS Securities. And my question is that this time and now you have that the negative growth of this, that’s the operating income year-end forecast.

What based on that? For example in the past meeting, you had questions, field any questions that you can have that is that the year-end incremental income and then again have positive growth and the profits, but mentioned like to insist on that kind of making that’s profits in the consecutives years.

And what is the - are there any problem in your business performance and why you have switched the strategy, or what is in the background of now you have forecast of negative growth in the operating income? And also what would be the next fiscal year for Yahoo?

And this is linked to my first question, but would you please explain your idea on this, please?

Okay. First of all, let me talk about this year-end forecast and full-year forecast.

And when it comes to full-year forecast - when it comes to the current organic trend, and now I think that’s for the forecast. And this forecast reflects that in a current situation the status of our business operations.

But when it comes to Q3, that’s true that the both revenues and operating incomes - when it comes to revenues, as I said, YDN have been favorable and that pushed up, and also we have been successful in controlling the costs. That’s in Q3, we have had more gross up the income, the revenues and they were expected, but when it comes to that Q4, basic situation will continue.

There is no any negative factors in Q4. This is the kind organic trend and situation in a business.

But on the other hand, when you look at that, some kind of factored one-time or one-off factor, for example mainly why we acquired YJ Card or the former KC Card. And when we acquired the YJ Card, we’re going to have a negative goodwill.

It was that assumption. That’s why - and this is one way to announce and that’s they are meeting after Q2.

If we have a negative goodwill, that means we have acquired that will pushed up our operating income. So that’s why we expect about 1.6 billion yen - more than 1.6 billion yen or more in operating income, and also there was reflected in the full-year forecast, but actually we are actually certain operating with credit card business, we needed to have that assumptions and also conservative ideas or the projections [indiscernible] how much of money we have to repay and reimburse on this excess interest repayments.

And we needed to have more provisions for this reserve for the preparing for these payments and that will lead to the negative impact on this and we needed to have more provisions on balance sheets. So end of Q4, we’re going to have an organically we’re going to achieve that’s incremental revenues and the operating income, but taking all this, the impact of this, the provisions of the excess interest coverage reserves into considerations, we needed to push down the forecast on the operating income.

Yes, we have a lot discussion internally, so that in Q3, the advertising business has more revenues than operating income, down where they’re expected, but in Q4, they will continue. So this is now that we have [indiscernible] surprise negative impacts end of Q4 is not that, but we think that as we have to be conservative.

We’re trying to be conservative in building up and reserving the provisions for the payment, this repayments of excess interest payments in the future. And when it comes to next year, then every year we have some big topic or some issues, but on your second question that’s about, what will it be the next year for us?

Think that we have getting into the second phase of strategy for under the smartphone strategy. And this year, the end of three-year mid-term business, if it’s the case.

Now another thing that’s getting really completely finished is the first phase successfully, now our services and the getting to be used on the smartphone, but we are getting into second phase and how we’re going to be successful more on the monetizing is basis of a business in the smartphone. So this kind of a new monetization, the method should be development.

For the other thing, and to second phase of shifting into the smartphone is that while enhancing that the browser based business, but also we need to enhance and emphasize more on the applications. So that we’d like to have been successful in the second shifting stage for both, this monetization and also as well as that application business.

That’s all. Thank you.

Any other question? Yes.

Person sitting at the center, two rows from the front, left-hand side person.

I am Hiroko Sato of Jefferies Securities. I joined you late, so maybe you already talked about it, but today you announced about the game company.

Can you comment on that? And I was surprised to read that announcement.

And are you going deep into the game domain? In terms of other companies, whose core business is not game, they have to actually record deficit up until they have the killer application.

And of course once you have hit game, will positively impact your numbers. But what will be the limit of your endurance and patience in being able to register positive number in the game business?

And I’m sure that at the very beginning, it will not be in the black, but rather it will be in the red. So can you tell me what is the magnitude or deficit you would be able to bear until you can record surplus?

So Kawabe, who would be the executive of GameBank. Would you please comment on that?

My name is Kawabe. Let me give you the holistic picture first.

As mentioned by Mr. Miyasaka in terms of our tonnage [ph] of FY2015, including browser, we actually completed the shift from PC to smartphone as being announced by Neilson & Research.

But regarding application, we still have some leeway for growth. And amongst the applications, game is one of the most used services.

And I’m sure that the game will increase further more in the future. Therefore, it doesn’t make any sense for us not to go into that domain.

And what is the timing for us to go into the game business? So far we have been giving priority to other domains, but I think time is right for us to go into the game business.

Now, how are we going to handle the game business? The good news is that the segment, the market will grow and the trend that, that game will change.

It will change from casual to deeply grossing game and those will be network-based game. And so you see annual changes in the trend of the games that are in favor.

And I believe that we are in a turning point of the trend. So we would like to focus on the future mainstream of game along with the partnership that we have.

We will go for publishing business, and also we will develop our own game and that will be handled by GameBank. So how much we are committed now in terms of GameBank?

We have a partner companies relying to incubate fund, and we are conducting discussion as to what will be the level of commitment that we can share. We do not have any plan to be completely in the red, including publishing business and also partnering overseas entities, we would like to of course secure surplus/profit.

So you will start as of January 2015, and when do you think you can contribute to the revenue. What will be the timing in which you would be able to contribute to the revenue?

Well, right after the launch of the game, I’m sure that we would be able to register revenue. And I guess you are more interesting in profit.

It all depends on how it moves. Thank you.

I would like to move onto the second question. Mr.

Miyasaka mentioned about smartphone real search will be monetized. And in the last quarter presentation, you mentioned about five new products in the advertisement, including timeline and that should contribute to the revenue of upcoming fiscal year.

And during that time, I think you mentioned about fiber-related new products, and you mentioned that next - second half will be the period in which positive impact will be felt from those five new advertisement products. Am I right?

In terms of DSP which is one of the five, as you can see on the graph, we are seeing growth, but in terms of other four products, it is growing steadily, but from the overall point of view, we need some time to make them big hits.

Then going back to real-time search monetization. That will start from the next fiscal year.

Am I right?

I am Miyazawa of Search Company. We happen to really decide on the timing, but most probably sometime in spring earlier, the better of course, we would like to launch the new product.

Well, I want to know what is the base of the growth of the revenue next year in the area of advertisement?

Well, frankly speaking, we don’t know until we actually launch the new product, and we have high expectations toward this new product, but I guess you should be more patient.

And so in terms of new product launch revenue contribution, will it hit your P&L sometime after next fiscal year.

Well, it depends on the product, because maybe we can be very profitable earlier on one product, and not for the others.

Including timeline and including DSP, you mentioned about the video as well. And out of those five new advertisement products, which one do you expect the most?

Can you tell me, Mr. Miyasaka?

Well, it all depends on what timeline you are thinking about. Next fiscal year, well Premium DSP will be the one that we can expect a lot, because we are seeing tangible results of DSP.

How about the next product?

Well, long-term view-wise it might be timeline as well video advertisement. We have smartphone premium advertisement segment, and I’m sure that we have more leeway for growth, and we have inventory at hand.

And so just having premium advertisement is not suffice. So using timeline advertisement that we would like to monetize and we would like to find more potentials in this segment.

We have to just try and see because we cannot be very committed in making any tangible promise to you.

Thank you.

Any other question? One sitting in the front of the center of the room, please.

Thank you very much. I am Nagao from Nomura Securities.

My first question is that in Page 22, you mentioned about the top 20 services has been growing steadily, right? But now we were getting into the second phase of shifting to the smartphone platform, but my concern is that the news has been a very big traffic driver, but now the other competitive news applications has been [indiscernible] recently.

So what happens with your old news services, either any impact on that from the other competitive services?

It’s not only for [Technical Difficulty] many of the lot of the players are launching lot of services on the smartphone platform one after another, not only for the news but also - but at this moment of time now the news is based on PC and browser-based services, which are the big market share. But relatively as I mentioned earlier, you’re right that a lot of the news service have been launching in the market.

So we also should be to get ready and to brush up services to compete with them. And so what’s reluctant to make that users and smartphone also look at Yahoo news.

We’d like to do our at most.

Okay. Thank you very much.

My next question is that, now paid search. I know we have a decline in revenues in terms of the paid search services, and also and that’s the lower single-digit growth in the quarter but - and maybe likely that’s the margin of the decline will expand in the next year and the next quarter.

Yes. And currently, I think that will be the same.

And when it comes to the margin of decline, and now the PC query have started declining since the last spring. And so that started declining, that’s the queries on the PC the last spring, but we did not have any ideas how much margin will decline, but it seems like they are getting steady.

So that is steadily shifting from the PC to the smartphone. So in a sense that we think that we expected same pace of shifting from the PC to smartphone, but when it comes to that, this was pros and the cons, but now the smartphone services getting matured under the market.

So that’s why I think that in the second phase, third phase, we don’t expect that any dramatic drop of the PC and the paid search in the future.

And my next question about the easy size. Now you have still growing in the number of shops and the transactions, and what would it be specific action you’re going to take for the Yahoo!

Shopping next year? What is the priority in the business in the Yahoo!

Shopping next year?

Okay. Mr.

Ozawa, please.

Okay. I am Ozawa of Yahoo!

Shopping. Next year in FY2015, as the President Mr.

Miyasaka had mentioned that now about our line, that we would like to have more shops and more services, and then the two main things for this. One thing like, we’ll have to become the number one site, number of shopping mall, which have the largest number of shoppers.

So at the same time, we have to have more shoppers, we have to have more products, so that a lot of unique product which is only available in every shopping will also increase. Now we have 240,000 is the total number.

I think so that now - but this 240,000 enough or not enough? That will be an argument.

But when things like for example, Taobao has about five million to eight million shops are there in Taobao. So this is about 20x of the many stores there as ours.

And then also more than 100x of the Rakuten and the number of products sold there is 160 million. So this would be the number one.

That would be the difference between the China and Japan. But I think that we needed to have, is another 10x or 20x of this size, otherwise it cannot be conspicuous.

Looking from that the users and well that Yahoo! Shopping site is weighted overwhelming number one.

So that’s why, we’ll have to keep making efforts to expanding the number of this in the shoppers and buyers. But the other two things is, how we can increase the number of buyers and then also how we can make the profits in the transaction?

So when it comes to number of the shoppers and buyers, and there would be some time-lag and this is that our expectations before implementing this e-commerce revolution, but we cannot be optimistic when it comes to the increase in number of shoppers and buyers. And we’d like to have a more buyers but at the end of the last year, last December and Christmas shopping season, we have about 10% of growth.

We’re getting in a trade-off about the increase in number of shoppers, but we needed to have about the increase in the target of growing 30% or 40% year-on-year basis. So that’s why how we can have more repeat users in just a very short period of time.

And we can improve the repeat rates of the same users, or if it’s 100 persons visited the shop, how many of them actually have shopping. This is conversion ratio.

So that kind of specific KPI is used for managing and measuring the performance. What’s most important is the repeat ratio.

And for when it comes to that top page in the search is a very strong tool for inviting brand new users. So that we have the advantage in this, so that we can invite these new visitors to Yahoo!

Shopping. So first we improved the conversion ratio of this that the first-time buyers and visitors and then we’re going to have repeat buyers.

And in total how many times that shoppers will shop actually, or then how much of that value. So there for example by the T-POINTS is one of the tools enhancing this area and we actually surveyed Yahoo!

Shopping customers to know many of them who did not remember, and they didn’t feel that they have some shopping in Yahoo! Shopping.

So the lower awareness of the Yahoo! Shopping site is very, very critical for us.

So that’s why - and we would like to appeal that Yahoo - this is the Yahoo! Shopping site.

You are doing that shopping, you are the shopping site. For example, enhancing the usage of that Yahoo!

Shopping or Yahoo applications. So this is very important.

And last of all when it comes to monetization and when the profit coming out from, including advertising. And this is also the supplementally and what Mr.

Miyasaka explained that we are getting into experimental phase. Now for the third - advertiser for understand more and also the advertising - when we become the number one in terms of the transaction values.

These are the two approach directions for the monetization strategy. For the time being, and what’s important is now we are ranked number three - the number three ranked more, so that first of all, we think about the advertising product developments, as a third ranked shopping most.

And also when will lead to that hedging the risk. That’s all my comments.

Thank you very much.

Thank you.

Any other question? At the center, second row from the front please.

I am Yoneshima, Barclays Securities. Thank you very much for your presentation.

I have two questions. I have question on outlook of Q4.

And advertisement revenue-wise in terms of Q4, what is your year-on-year view? And also in terms of paid search, you said there will minus single-digit and you have YDN, you have display advertisement, and I believe that its increase might decline.

So since Q4 and then onward, what will be your outlook for the advertisement revenue?

Firstly in terms of Q4, I do not think that the trend will change that much, as compared to Q3. So in terms of paid search advertisement, it will be a decrease of single-low-digit.

And DSP and YDN-wise, there will be an increase of revenue by 40% year-on-year. Now regarding premium advertisement including video, the trend will not change.

So it will be about minus 10%. So, in terms of advertisement revenue, there will be a growth of a low-single-digit.

And regarding FY2015, the absolute value will go up. So YDN-wise, the revenue growth might slow down slightly, but DSP will grow steadily.

And regarding paid search advertisement, we will be very conservative in terms of the outlook, so we believe it will be negative low to mid-single-digit. And in terms of advertisement revenue, the growth of 2015 will be single-digit, low-to-middle range.

Thank you. Second question.

So you mentioned about YJ Card, ex-KC Card. What is the impact of consolidating it into your number?

You mentioned about negative goodwill and you had provision, and they offset each other, or since they will large loss provision, there would be negative impact? And in terms of the outlook, when you look at quarterly increase, there will be an increase in the revenue, but operating income-wise it will be flat more or less.

And even though the revenue is increasing, you are very conservative in coming up with the forecast for operating income. So can you elaborate on the changes, especially in terms of YJ Card.

Is the impact zero, or is it negative?

In terms of YJ Card impact, we had a negative goodwill factored in, but then that will be deemed as zero and it will not be more than zero in terms of the impact on P&L. That will be the major factor impacting our performance results, but in terms of revenue and operating income, we are being very conservative, and that is why you see the numbers as depicted for outlook for Q4.

In terms of the provision, for the loss, you have a negative impact?

Well, it all depends on the level of goodwill, whether it’s a positive or negative goodwill. And in terms of goodwill, we have the net asset and also the actual investment.

And the difference between the two will be deemed as goodwill. So as it is larger than the investment will be negative goodwill.

And if the relationship between the two are reversed, then it will be standard goodwill.

So that means that it will be deemed as zero in terms of depreciation of goodwill?

That’s right.

So is it true to understand that the revenue growth is not strong in terms of other segments? So as compared to Q3, Q4 is flat?

Not flat, but trend is the same between Q3 and Q4.

Thank you very much.

Okay. So next question?

And the right hand side, then to the second row from the front side. Okay please.

I’m Mori from JP Morgan Securities. Thank you very much for presentation.

I have two questions. My first question is that, now you are making that the timeline, time of the top page, now you’re testing.

Now you would like to test the monetization before actually implement in that. And I understand that now you are implementing that the timeline based top page so that - would you be more specific about how you can monetize and when?

And when you make all the top page timeline, and what would be the risk? This is my second question.

For again less searching or, no, I think that you have some testing or simulations. What would be the risk when you switch to the timeline type of top page?

So this is my first question.

Yes, let me repeat that when it comes to specific timing of monetization how much of profit is still uncertain, and we cannot express my ideas on that. Anyway the soon as possible then more profit as much as possible.

That would my answer, but while testing this timeline time above top page, the user would stay. Now this hours on the page are there are going to have more access to the news page, in the case of Yahoo and layouts that list of services shown in at the left hand side of the band, so what we should change a layout of that.

And have search windows are there, so because that’s there, we’re going to have to coming up with recommendations for each of the user one after another, so that if the users would draw too much on that recommended portions, they are losing more interest on actual searching windows. And the searching - so that won't be negative impact.

So these all are very complicated factors are there, so that we are trying to find out that, okay.

Okay. And my second question is that when it comes - my question about the video advertising and the year-end last year, you have lot of TV advertising, and for the GYAO based movie advertising.

Can you provide more movie content services after this? How you are going to differentiate the movie content basic services from the other competitors?

What would be your competitive edge? And I think that the GYAO will play very important role for as a strategy and providing there movie content services.

And so what would be the position in the GYAO in the strategy, and how are you going to make it a competitive advantage of your movie contents?

Okay. Our movie content services or Yahoo Japan is - I think that we have a very long history of providing movie contents.

And what’s have been important for our services is that not the movies, but also the image is that - what I mean that, for example, we must not ignore the copyrights and we have to respect the copyrights. So this is the number one.

And then also - and the other thing is that we would not destroy the business model of the copyright owners. We would not disrupt and destroy that.

And we’ll like to work together with the creator of the movies and images. So we do not do anything that will hamper the kind of creators and right holders.

That’s why we have been highly appreciated that’s our attitude and we have a really close relationship with the other competitors. So that’s our unique positions, and so we happen to blocked [ph] all that kind of services which hamper the right owners.

So that’s why we have the trust from them, but also when it comes to that advertisers side, now we’re having a more of a national brand advertisers. They can't be released to place their advertising on our services, because there is not any infringements of that’s the right holders, so this is very important assets.

And I’d like to also insist on this and keep this assets after this onward in the contents business.

Any other question? Third row from the left and second person from the back.

I am Tomimatsu, Merrill Lynch. I have several questions.

Firstly on page 72, you have the trend by advertisement product. And in the third quarter, I want to understand what had happened.

Can you elaborate on what had happened reading this slide? In terms of smartphone advertisement, it grew by 500 million yen quarter-on-quarter, and that means that the PC advertisement grew quarter-on-quarter.

Am I right? So I want to confirm that point.

And by product, you have YDN and it is growing. And you have Premium DSP as well.

And which was driving more of revenue? And in this quarter, what was the backdrop upon which they grew, especially in terms of Premium DSP, in your presentation last time, other analysts mentioned that it might be difficult to grow Premium DSP because you have to explain what that product is all about.

That is same question that I got from your prior presentation, but is it true to understand that Premium DSP actually grew because your explanation was successful, or what is the stage you are in, regarding Premium DSP? In short, please tell me what is the situation you are in regarding the advertisement business?

Which page are you referring to?

I am referring to page 72. You have the growth trend by advertisement product.

So you are looking at the graph that shows the revenue by advertisement product. I was not able to open this page, so can you question once again?

Yes, I have it. Quarter-on-quarter in terms of YDN, I see that it is growing, but in YDN, you have premium DSP under YDN as a category.

And so quarter-on-quarter, you have increase of 160 million yen. And you can give me a ballpark figure, how much did it contribute to the growth.

So please tell me the backdrop.

So regarding the numbers, in terms of YDN, Premium DSP is included. In the last quarter, it grew in the magnitude of 100 million yen and it grew by 1 billion yen in the past quarter.

So account number is increasing steadily and the repeat rate, as mentioned before, is very high to begin with. And to-date, about 80% are repeaters.

So this is more or less a stock type of business. And so with the increase of advertisers, we are seeing an increase.

And you want to know how much we depend on the operation?

And also in terms of YDN, I see that it grew. And in Q3, why did it grow so dramatically?

Did you have any special measures, or it was just an extension of the endeavors that you have conducted in the past?

YDN grew dramatically. And in terms of the distribution system, we targeting, we fine-tuned it and made some improvements.

And as a result, we saw an increase in the advertisement revenue. And so we are seeing a very steady growth.

And maybe I should hear from the person in charge of this businesses, but quarter-on-quarter wise, in terms of a premium advertisement, you increase it by 900 million yen. So it grew from 901 million yen to 1.01 billion yen.

So I guess this is not in line with the past trend. In terms of premium advertisement it is very seasonal.

So I thought that will work to the negative during the last quarter?

No. From Q1 to Q4, there would be a steady growth, and that is the seasonal cycle that we usually register.

So do you think this is all seasonal? And also, video advertisement is included in the magnitude of 100-some million yen.

So paid search is decreasing, but if mobile paid search is increasing, I believe that PC is contributing as well. So all in all, PC is suffering, but in terms of quarter-to-quarter comparison, in Q3, PC did pretty well.

So YDN premium display, as well as video, they contributed growth of PC as well. Am I correct, or are there any other factors?

Regarding the advertisement revenue, there has been a discrepancy between the initial forecast and the current state. We were very conservative in terms of PC, but it did not decline as much as we have thought.

And also in terms of smartphone advertisement, it grew more than our expectation. So putting two together, you see the result of Q3.

And in terms of Premium DSP, how is it ramping up? Can I hear from the person in charge of Premium DSP?

I am Aranami of Marketing Solution Company. Regarding Premium DSP, as mentioned by Mr.

Oya, the repeat rate is very high. And so it is business model that depends on cumulation and contribute to the overall revenue.

Last time, I mentioned that it depends on the operation. And so it is human resource intensive.

So within our company, we gathered a team that is robust and we believe that we can grow in this business.

And second question is related to the timeline of application. I think this is main twittering point for Yahoo’s future.

So once you have the timeline, you have Yahoo Tobi [ph] attractive points because, just by looking at it, you understand what is happening in Japan right now right off the bat. But by coming up with a timeline, maybe it might work to your disadvantage, and I guess even having said that you decided to launch timeline as soon as possible.

So can you tell me what is lesson learned from your pilot? You have different applications, and there are ones that have grown in.

And since you have multitude of applications, I believe that you can enjoy the synergetic impact because of the magnitude of applications that you’re handling. So do you think that you can enjoy the synergetic impact amongst those multitude of applications that you have?

In terms of the timeline, I believe that is one of the strategies that we would be pursuing. We use the human resources to segmentize and categorize different data, but we need to have a search engine because the amount of information was too hard.

And we are seeing an increase of paid search as I should take the proactive action of recommending that site that he or she prefers. So whether it be Yahoo or not, since we are bombarded with so much information, we have to be more catering.

And personalization and timeline are in a pair. So by going with a timeline, we would like to go with personalization as well.

So if we just show the same information into the magnitude of people, that’s possible, but in terms of Yahoo Tobi [ph], maybe three or 10 might be the same amongst all the mass, but then the rest will be personalized. And so the level of personalization would be different.

And so there will be a balance between catering to the mass and catering to the person of preference. Now about the synergetic impact of the applications.

Of course it is possible to link application to application and we would like to challenge that. So you have the start page Yahoo.

And on that page, you can have the application platform that can link different applications, but realistically speaking, you gather different information from applications. And as a company, we will be able to provide the personal advertisement that will be in need of the person using those applications.

And I think that is the very best application synergy. If we have only one application, you cannot reuse that information in another application, but since we have multi applications, multi big data company like us, we’ll be able to use that information for different advertisement.

And so Yahoo ID can be used sufficiently in order to cater to the needs of different applications. So when it comes to premium advertisement, when I look at that trend in past five years, and all, and Q3 each year have surpassed Q2, so that - so it’s not an any specific reason this quarter, right.

Yes, we’d like to do our at most every time.

Okay, thank you.

Do we have any other question? Okay.

Right hand side, three rows from the front please.

I’m Ishihara from Daiwa Securities. Thank you very much for presentation.

I have one question. My question is that the Yahoo!

Inc. in the U.S.

and now Yahoo! Inc.

owned the Yahoo! Japan’s stocks, right?

Is there any discussions you are having concerning Yahoo! Japan stock owned by the Yahoo!

Inc. in the U.S., or is there any specific business alliance and you have discussed with Yahoo!

Inc. in the U.S.?

This is my question please.

When it comes to that, we did not have any discussion over our stock owned by Yahoo! Inc.

And when it comes to that the strategic meaning that we are the strategically important strategic partners, so that we’d like to keep current relationship with Yahoo! Inc.

in the U.S., but the technical alliance and then also we have some specific points we have discussion with them about different point of business and this is the current status. And we have daily communications and we’re having daily conversation with them and also they own have ideas, but we did not have any kind of discussions focused on our stock owned by the Yahoo!

Inc. in the U.S., no.

Okay. Thank you very much.

Do we have any other question? Okay, the ones that’s sitting in the second row from the back.

I have three questions about the numbers, if you can disclose. This is all based on the business performance Q3.

The first one is about the FX related numbers. And number two is that about the direct to sales ratio of advertising, what happens in Q3?

The number three is that possible, this is about total and about the transaction values of this Yahoo government payments and government utility payments.

And when it comes to your first question, there is no any major change. Bu when it comes to FX, we’re going to check out the details of the numbers and then get back to you later.

And about the government and utility payments, tax and public utility payments, I would also like to get back to you later after checking out that specific numbers. Thank you.

Do we have any other question? Okay, second row from the front and center section please.

I’m [indiscernible]. Thank you very much.

And my first question about the - my first question about the gaming. And starting from this - generally how many titles on your pipeline and country and what would be your prospect of the number of titles and pipeline in the future for example in the next year?

Do you have any idea about that?

Now we’re planning. So we are in the middle of planning, so we cannot mention the details, but I think about including publishing, we’d like to launch one title a month.

That would be the pace that we suppose.

Okay. Thank you very much.

And you mentioned about the light game or the full-fledged game. So what about the type of games you’re interested again?

I didn’t mention this in the comments last time, but even on this smartphone devices, now we have reached 40 million, so I think that we have very strong power of promotion, so we’re taking advantage of this promotional parts, and I’d like to break into the market with that brand new area or the category of games by based on our own promotional ability. So I’d like to explore the brand new or the brand new area of the game.

But I think that’s the Yahoo top page game is that’s most popular. But I think I’d like to this is the Yahoo top page is really familiar environment for the users.

So I’d like to launch something casual on the top page of the Yahoo, this is the idea.

Okay. Thank you very much.

And the other question is about, last part of your information packets, and you disclosed about the industry and market-wise information, but shifting more on that this smartphone. Is there any major change of the trend, which kind of industry is now have more popular than the other industry?

I have never viewed that - analyzed a data likewise that any - about the advertisers profile and based on the PC or that smartphones?

Well, I think that application developers’ advertising is growing now in smartphones.

Okay, thank you very much. Thank you.

It is about time, but if you have any question please raise your hand. If not, we would like to end the presentation.

Thank you very much for your participation.