Manabu Miyasaka - President & CEO Osamu Aranami - Corporate Officer, EVP

Sumito Takeda - UBS Securities Japan Masaru Sugiyama - Goldman Sachs Yosuke Tomimatsu - Merrill Lynch Securities Yoshitaka Nagao - Nomura Securities Shinsuke Iwasa - Mizuho Securities Hiroshi Naya - Ichiyoshi

Good afternoon ladies and gentlemen. Let me start the business results presentation on the FY 2015 second quarter of Yahoo Japan Corporation.

Starting with the summary of the business results, revenue was ¥138.2 billion, an increase of 33.9% year on year. Operating income, ¥102.7 billion, increase of 123.2%.

The net income was ¥91.3 billion, 202.5% increase year on year. ASKUL is consolidated from this year and there was a temporary gain from that and those numbers include them.

As for the major KPIs, advertising-related revenue was ¥65.7 billion and the percentage of smartphone was above 40%. Among the advertising, display was very strong, 30% or higher growth year on year.

E-commerce transaction volume was very solid, ¥333.5 billion, 18.5% growth year on year. Now, this is executive summary.

Advertising-related business, especially YDN and others, contributed the most. The major reason behind this is that from May, we started the in-feed advertising in the timeline view which was very strong and in addition to that starting with the spring last year, we have been improving YDN and as a result we have seen the good results.

64.5% growth year on year was seen in YDN and others. As for e-commerce, auction was single-digit growth year on year.

As for shopping, shopping we accelerated the growth above 30% growth year on year. Credit card business was very strong.

The number of valid cardholders we planned to reach 1.4 million in one year, but actually six month earlier we achieved that target. In addition, it's not just the increase of the cardholders, but the active members or cardholders increase, so active users increased.

Therefore, the transaction value increased by more than 70% quarter on quarter. So as a whole, advertising, e-commerce and credit card, all of those businesses show strong growth.

Now, looking at the shopping business which show the major growth, I'd like to show you a graph. 2013 second quarter that was the -- right before the ECE revolution and at that time it was still in a negative territory.

So the transaction value has declined. Actually the market was growing, but we were one of the losers.

That was second-quarter 2013. And from October, we started the EC revolution.

We shifted the gear and after two years, from the negative growth, we achieved 30% growth year on year. So we finally recovered to this level.

Another business, card business, starting with this year, we started this in a full-fledged manner, YJ Card -- together with the YJ Card and our plan was actually already achieved six month earlier. So this has been going very well.

So the second-quarter summary is as follows. Core businesses, the advertising, YAHUOKU!

and others; core businesses grew solidly and investment stage businesses including shopping and finance and settlement business, we have seen the growth in KPIs. So investment stage business and the core businesses in both of those areas we saw a very strong growth in second quarter.

Now looking at the revenue, ¥138.2 billion, increase of 33.9% which is at a high level. This is something you can see in the graph.

As I touched upon, the ASKUL's consolidation is included in this number and without it it's about a 10% year-on-year growth. So that's the current status.

As for the operating income, so here it is ¥102.7 billion and 2.2 times larger than the year before. So again, because of the consolidation of the ASKUL, there was a temporary gain from the re-measurement.

That was about ¥59.6 billion. That is included into this ¥102.7 billion.

So that's the additional comment that I'd like to make on this page. As a result, net income attributable to the owners of the parent was ¥91.3 billion, three times higher than that of the year before.

Now, let's look at the revenue breakdown from now on by each segment. I'd like to give you the highlight.

As you can see in this bar graph, the marketing solution, at the bottoms consumer business and other financial businesses, all of them grew. And in the consumer business, actually the growth was very rapid.

This is partly due to the consolidation of ASKUL Corporation. And the payment YJ Card was consolidated and M&A was the contributor.

As for the quarterly margin, as I mentioned, the ASKUL was incorporated and because of the gain from re-measurement relating to this business combination, the quarterly margin jumped. Now, I would like to talk about KPIs going into the details.

First, in the past three years and coming three years, what will be the changes? I already mentioned this many times, but let me explain this once again.

The three years in the past, we were strong with the PC, but we wanted to be strong also with the smartphones. That's what we tried to do in the past three years.

In the first quarter, finally, the page view -- in terms of the page view, the smartphone became the major access and the PC is smaller. So now that the smartphone is a dominant device, so now that Yahoo!

JAPAN has become a smartphone company. That is my evaluation.

But having said that, we have to continue to challenge. We're of course strong with smartphone, but we want to be also strong in the apps.

I'd like to make sure that the number of the users using the apps. So that is the second-stage challenge for us in coming three years.

Another thing is that we want to also become strong in shopping. In the past three years, that was not sufficient.

So in coming three years, we would like to be strong in the shopping area, so that Yahoo can be known as a shopping player. So looking at the smartphone use, already daily unique browsers, already 60% of the access comes from smartphone.

So PC has become a minority already in terms of the percentage. So we have been making such change steadily.

But in the future, we would like to increase the access via the apps, so shift from the browser to apps. In addition, we would like to use the increase of the use by ID.

So we're seeing the multi-device and multi big companies are emerging. So we would like to make sure that we understand our customers using various devices.

So that means that we would like to increase the number of the users who would use the ID so that we can understand the overall customers rather than the part of the customers. So we'd like to increase the number of the logins.

So we're increasing the active users IDs. We have already achieved 30 million in the first quarter and now we have achieved 30.94 million in terms of the monthly active user IDs.

So this is the number of the people who actually access per month. With regards to the usage of Yahoo!

JAPAN startup page, actually at the end of May in the first quarter, this is when we launched it, the familiar Yahoo! JAPAN top page -- startup page was converted to timeline view.

Before we did this, we ran user tests over and over again, we conducted interviews and we did what we could and we were pretty confident prior to the launch. But it was the first time we did such a big renewal because it's a big service provided to millions of users.

So this was a challenge for us. So in the month of June, we did see a dip in access for a while.

Some people started to say it's harder to use. However, then after, as planned and as we expected, we saw a recovery and pick-up.

Now the number of accesses is higher than before we converted to timeline view. So the success of shifting to timeline view was a concern in the first quarter, but I think the renewal ended in a success.

So now it's a matter of how we can grow access going forward. Another thing I would like to mention is increasing app usage of Yahoo!.

This is nothing that just started today. We're making a variety of services around applications, but let me mention some that are growing these days.

It's weather and news that are recording high growth. If we were to benchmark against April 2014, both weather and news is growing by three times compared to the index of 100 and the curve I believe is accelerating these days.

News and weather is to be representative services people access to -- through the browser, but nowadays more and more people are accessing to this service through apps. So with regards to shopping, we would like to increase the number of users as well.

Total e-commerce transaction value grew by 18.5%. Especially we saw growth around shopping-related which was 27.3% growth.

At the top, you can see ¥16.3 billion. This is ASKUL's B2B business.

It's the one month worth of revenue from ASKUL because there is a lot of people who refer to the catalogue, but place orders online. So that part was captured.

So this B2B business may grow in the future. So that's why I followed up on that point.

Overall, since the EC revolution, we've been doing very well. The red line is the growth rate year on year for shopping-related and the dotted line is auction-related.

YAHUOKU! in the second quarter went down year on year and in the previous years, we did see some periods when it was down year over year.

For shopping, until the first half of 2013, it was down year over year and in the first half of 2013, although the market was growing, we were losing on a standalone basis. However, due to our new strategy, both of the businesses has been on the growth path.

YAHUOKU! is growing steadily by single-digit.

And for shopping-related, the growth rates have been accelerating. And this is another point that I would like to reiterate.

At Yahoo! JAPAN, our businesses are divided into two in a broad sense.

One is the revenue-producing, operating profit-producing core businesses; the other category is -- are businesses that may not necessarily contribute to OP, but over the long term, we believe that they will be drivers of the business and that is why we're making up for investments. So let me explain about the two in detail a little bit more.

So first is advertising under core businesses. For advertising-related revenue, it grew about 8.6% year over year.

This was due to growth in display advertising; it grew at high rates, especially for in-feed using timelines grew. So that stood out.

As for paid search, it was minus 5.4% year over year. So we saw a slowdown here.

Let's look at trend so that you could understand this a little bit better. For display advertising, YDN and others, the rate of growth had slowed down, but since the end of last year, we've done R&D around YDN and we made a steady range of efforts.

And since the first quarter, we shifted to timeline view at the startup page and that was a success. And due to in-feed, we have started to see reacceleration of growth again.

And as for paid search, we've been seeing a device shift. We're seeing growth in smartphones.

However, per query, the monetization power is less for smartphones. So due to the shift, we have been seeing a deceleration.

Going forward as a trend, this is a structural factor, so we believe it's going to continue to see single-digit decline. We're not expecting double-digit decline.

So we're expecting single-digit decline for paid search and go back and forth within a range. So what's more important going forward would be in-feed display advertisements.

So advertisements -- the products that are growing well is something we would like to be aggressive with and also for paid search, we would like to consider how we can control the decline. So we'll be working on both fronts.

So overall, smartphone advertisement ratio has been growing. Currently it is around 40%.

And this shows the history of Yahoo! JAPAN's advertising business.

So this is the oldest business we have and it's a business we have pride in. And the main product changes in several years' time and we will continue to add on new products and we have also been doing R&D and offering new products.

And currently, we believe in-feed advertising will be a driver and also Yahoo! Premium DSP which I haven't really touched upon up until this point, but we believe these two products will be the drivers of our business.

So that was the advertising piece of core businesses. Next, let me talk about another part of core businesses which is auction-related.

For the auction service itself, it's individual transaction marketplace. We have a variety of data, but overall I think we have about 80% market share.

So we have dominance in the market. With that as a backdrop, we're trying to grow our share even more, but we would like to also define a new market so that we can reestablish, redefine the domain of YAHUOKU!

or else we can't grow any further. Therefore, single-digit growth is what we would like to maintain as we look into new business domains.

That will be our new challenge. One is automobiles.

There is a massive reuse market. So the automobile reuse market is what we would like to capture with YAHUOKU!

and we have already started engaging in it. And going forward, with Sony properties, we would like to address their reuse second-hand market online.

From the month of July, we have made announcement that we're going to make investments into the entity Sony Real Estate Corporation and I think the details of what we're going to do can be announced a little bit further out. For the third part of the core businesses, membership services, so here we show the number of monthly paid memberships IDs.

Number of IDs is close to 16 million right now. In some sort of way every month, they make payments to Yahoo!

JAPAN. For this quarter, there were no big strategic updates, but with regards to the monthly paid numbers, this is a very important revenue base.

So this is something we would like to grow and we would like to look into how we can do that business-wise. So, so far, I've been talking about our core businesses.

So now I would like to talk about the investment-stage businesses. First of all is shopping -- or let me talk about KPIs.

The number of stores grew by 80% year over year, number of items listed grew by 50% and the number of buyers grew by double-digit. So all of the KPIs did well for this quarter.

And for the stores, it's not only the number of stores that grew, but tenants that are able to attract customers have been participating. For example, Culture Convenience Club, Futakotamagawa Tsutaya Electrics, Sony Corporation, Daimaru Matsuzakaya Department Stores were stores that joined us that have power to attract customers.

So thanks to those efforts, the shopping business transaction value is increasing steadily. On the left-hand side you see the bar graph.

The grey is 2013, pink is 2014 and the red is 2015. As you can see the pink and grey and red, if you compare those, the red is higher in terms of the growth.

So this means that we're seeing the accelerated growth in the Q3. Q4 we're hoping that we can continue this trend.

In terms of growth, on the right-hand side, the consumption tax hike occurred, so there are fluctuations, but as a whole we're growing. When we did the e-commerce revolution, we had this strategy and we have been using this since that time.

What we need to do first is to increase the number of products and in order to do that, we need to increase the number of sellers. We have been doing that and we have been successful.

And increasing the number of products, I think we have also come close to being number one. So more products means that our strength, that is the users, users bringing to Yahoo!

Shopping, they make sure that they do the shopping. So until now, even if we bring the users, they come in, but they don't find the products they want to buy.

So they left. That has been the case for some time, but since we have more products now, people buy and put those products into the basket.

And as a result, our transaction value increases by increased number of buyers. So in terms of the transaction value, there is a number of unique users and annual spending per customer, we multiply those two numbers.

Why is it increasing, the number of the unique buyers and especially new buyers on the rise? Those new buyers who have never used the Yahoo!

Shopping are -- have become the users. So we're seeing the higher number of unique buyers.

And also people are buying from our sites more frequently. So annual spending per customer is increasing.

So by multiplying those two numbers, transaction value is on the rise. So this describes what is happening right now.

Because of more products, we're increasing the conversion rate. As conversion rate improves, our strength, that is to say that the traffic becomes more effective.

So we can maintain the conversion rate and we can increase the purchases. And when the customers make a purchase, we would recommend that if you are making a purchase it's better to join the YJ Card or become the premium members.

So we make those offers to those shoppers. So those have been very effective and with the new users, they become -- or they apply for the YJ Card or they become the members so that they can get more attractive offers and they come back and make another purchase.

So this various ecosystem started to function well. For your reference, what kind of offers are we making?

This is just one example. This shows that -- say that you put the ¥3,240 worth of products into your cart and you see the red part on this slide, this is an offer.

And it's okay to buy this ¥3,240 right now. But if you apply for the YJ Card, then application would take only two minutes and you will get the 3,000 points and if you get as much as 3,000 or 5,000 points to make a purchase of ¥3,240, it's a good deal.

So people will make an application and become the member of the YJ Card. Another offer is Premium member.

So again it's ¥3,240 purchase and as you can see at the bottom, if you become a Premium member, then you get five times higher points. So that's another offer.

And when you do the shopping, everything will be guaranteed, even if you buy something defective. So you can get the additional guarantee as a Premium member.

So people will come back after becoming the Premium member to make another purchase. So that's one example.

As for the credit card business, this is the last part, as we based upon our plan, we already achieved 1.4 million valid cardholders six month earlier because of the strong shopping business. Because of the synergy effect, we achieved this target earlier than our plan.

The card itself, of course it takes the cost to issue the cards. So if they are not actively utilized, it doesn't mean anything.

But we're targeting those customers who are likely to make purchases using the cards. So the rate of active use or the transaction value is on the rise.

Up to fourth quarter, it has been flat before the start of the YJ Card and together with the Yahoo! or in addition to the number of the issuance of the YJ Card, the transaction value started to increase.

So now I would like to talk about pursuit of further growth. First of all, as I've explained, the advertising media business and also the consumer business as well as the financial and payment business, we believe all the wheels are turning and we're doing well.

So this trend is something that we would like to accelerate. Before we spent about ¥10 billion in the second half for sales promotion purposes, but we would like to increase that by ¥20 billion and a total of approximately ¥30 billion is what we would like to invest which would probably be the highest level since Yahoo!

JAPAN started. So specifically what are we going to do?

Broadly we will be focusing on three areas of investment and from next fiscal year onwards, we will be striving for growth based on these investments. The first area of investment is media.

The aim is to increase the number of smartphone users, in particular increase the number of smartphone application users. For media investments, because we have been seeing success in in-feed, the more they use the more revenue we can generate.

So we believe monetization could happen at a fairly quicker stage. The next area of investment is e-commerce.

For this part, like I mentioned earlier, conversion will not come down even if you attract more people. You will be able to increase transaction value instead.

Of course you'll need to advertise, but we will first focus on increasing transaction value and we will also have a year-end shopping season so that we would like to increase transaction value and we will be doing a major sales promotion in order to do that. And second-half transaction value, we hope can grow by 30% year over year this fiscal year and that's how we would like to make the investments accordingly.

Finally, the area of investment will be financial and payment. For this part, we have been able to achieve our target six months ahead.

So we would like to increase our target and strive to reach 2 million to 2.2 million valid cardholders at the end of fiscal 2015. But at this scale, of course we're going to break it down by measures and we would like to also look at the budget by KPI.

We have that available already. But we would like to go through trial and error.

If some measures go well, we would like to add more to it and if things are not working well, we would like to stop that measure. So we need to do things with agility.

We would like to monitor everything. We're not going to use up the budget just because it's there.

We will be doing more on measures that we're doing well. And we will rectify what we're doing in areas we're not doing well.

When we announced our Q3 results, three months' worth of investments and its results can be reported. So we would like to talk about what we've been doing and what kind of return we've been able to see or what areas have been successful, what have not been successful.

Another thing I would like to mention is this slide. We haven't been able to work as much on this yet, but in order for Yahoo!

JAPAN to grow even further, this is an area that we would like to focus on. So this will be my final piece.

So Yahoo! JAPAN's user is the light blue circle.

This is just an image. Of course, some of the green parts spill out, but most of our users use search or they use -- look at our top startup page.

So most of the people use Yahoo! JAPAN's media-related services and some of our users use our e-commerce-related services and some of the e-commerce users utilize our financial and payment-related services and Premium members go across all three.

Yahoo! JAPAN in the future; so far we haven't been looking out into the overseas market, so it's more about growing inside Japan.

So that's why we believe this diagram is important. If it's a user that just uses media services or e-commerce services, we would like to try to turn them into premium members or have them also use our financial payment-related services.

I can't give you the details yet, but if it's media-only users, the ARPU of customers who use all four is far higher. So that's where we believe there is high potential.

Internet in Japan; Internet users grew exponentially over the years. So it was just about increasing new users before.

Of course in the future that's an area we will focus on, but on top of customer acquisition, we will like to also focus on user or customer development. So that would be our challenge for the next 20 years, so that all of our users can use not just one but use two or three of our business segments.

So we would like to basically develop, nurture our users and we hope this strategy can be a success. So the aggressive part of management is what I've talked about today, but in the second quarter, Yahoo!

Mail caused a major accident. So we put -- we inconvenienced our users and there has been a lot of incidents happening at other companies these days as well.

So we believe that we need to strengthen our defense side as well and focus on security measures. We would like to monitor what we have so that we could have a good balance in management between aggressive management and strengthening of defense.

That concludes my explanation. Thank you very much.

Takeda from UBS Securities. I have three questions so one at a time.

So you mentioned that the details will be mentioned in Q3, but this time you announced the plan for the investment. This number is a big one.

So right now what is your plan in terms of balance? For example, on page 46, you have mentioned three things.

So how are those three are going to be balanced? In the second quarter, you already started investment.

What was the balance so far?

Yes, let me talk about the break down. More than 50% is shopping -- investment for shopping.

¥5 billion or so is for the promotion of the media applications. Card and YAHUOKU!

revitalization is ¥2 point some billion. So that will be the total of ¥20 billion or the increase part or increment.

As for the second quarter, as you said, the sales promotion will be enhanced, probably ¥5 billion or so. And as on the image, as I said, that will be the balance for the percentage or if I may repeat in terms of balance same in Q2.

And for each KPI growth, as we showed them, Shopping has shown the major growth and number of active card-users and advertising has also shown the good growth. Second question?

Now the active investment is going to be made. So usually ASKUL's -- the inflation with the ASKUL, without it, it's possible that your revenue might go down.

So next year, do you think that it would -- you will continue to invest or you would stop that? Is there anything or any level that the market should be aware of?

Yes. Well, first of all the large-sized investments, an effect of it after 2016 or 2016 and onwards, the top line growth is something that we expect.

So FY 2015 revenue sales or even higher sales growth is something that we want to target, whether the investment will continue or not including sales promotion. Shopping and Card, this is still an investment phase.

So not as much as the numbers that we share with you, but we will continue to invest. Anyways the sales promotion in the second half, we will monitor the effect of that, so that the next year's investment level can be determined.

If I may add, this April when we made a full-year business results announcement and we said that this year and onwards we're very much focused on Shopping and others. So we'll continue to make investments so that we can realize growth.

That's what I talked about. So in the second quarter, third quarter, we have made the higher-than-usual investments.

And gradually the KPI, we have been achieving the KPIs. So because of that we believe that now we can invest more.

Something that I did not mention is the investment for the Big Data. This is not included this time, but this is going to be the core.

So we'll continue to make a major investment and as we're doing already, we will continue to make investment in the Big Data.

Last point. Page 47, you mentioned your ideas that you'll be working on in the future, so for example, the Shopping, the number of the Premium members or you are making a good offer to the Premium members so that you can increase the cross-sell.

So what I would like to know is that that you make -- talked about the four user categories. To what kind of people -- what kind of cross-sell do you want to realize for the time being?

What are the priorities? And also the media users, I'm sure that you want to encourage them to use other services.

So is there any investment that you can do, for example to let people use the payment service or e-commerce service for the media users, anything that you're doing to realize that?

Well, first e-commerce and Premium members and payment and finance, I think there is a close affinity. We're starting to understand that.

So what we're doing as a sales promotion, we're already doing that and as a result, cross-sell is increasing. Yahoo!

Premium member, there is more than 10 million and even those members, some people don't use Yahoo! only for auction.

So they are not using it for the shopping. So if we go or target those, it is relatively easy.

So e-commerce, Premium and other finance and financial and the payment, I think cross-selling is possible. The biggest challenge will be the media users, how do we realize the cross-sell with the media users.

This is my personal view, but in the world media companies, we have not seen the successes of the media companies making in the e-commerce. So the media business and the transaction business is not closely related.

So there is a kind of missing link. So we have to come up with some kind of big idea.

So unless we do some major promotion, we won't be able to convert those media users to the shopping users. So that's one of the things that we have to work on.

The Premium members, the Shopping users, how much of that will be using the shopping services among the Premium members? I'd like to know what is the potential.

We do have our data, but we don't disclose it. Sorry.

Is it very small?

Yes, it's a very small percentage.

I'm Sugiyama from Goldman Sachs. I have two questions.

So first of all with regards to the additional ¥20 billion investment adding up to ¥30 billion, with regards to verifying its impact in the second quarter, you've increased the sales promotion investment by ¥5 billion. The card acquisition pace comparing to first quarter and second quarter, it's been 400,000, it's about the same and 21% increased to 27%.

So you doubled sales promotion cost, but how do you see its impact? And how did you reach the ¥30 billion number?

Is that an appropriate level? Doesn't it exceed the amount of impact you can expect?

I think it's a little too much, so that's why we would like to -- I would like to know your thinking behind it.

With regards to the actual measures for Shopping, for Q2 for Premium members, we focused on sales promotions around them. Even more for the second half, we would like to expand our efforts and finally the conversion rate has started to pick up.

So we would like to attract new customers by implementing measures as well. So mass promotion is included in the ¥20 billion number.

With regards to growth and transaction value, at least for the second quarter we saw 30% and that's the level we would like to foresee going forward as well as we implement the measures. And we're going to add new measures too, but we would like to verify its impact as we move along.

My other question is the following; for in-feed advertisements and its impact for the September quarter, how much of a positive contribution did you see and how much cannibalization if any did you see? And on the startup page for video or grand panel introduction, can you give me your outlook on those?

For in-feed advertisement and the boost impact it had at the time of the Q1 result, we told you net-net it was 10%. So the period is double, so it's 20% this time around.

So basically the number is the same. And for smartphones startup page, video advertisements, quality improvement or quality needs to be high quality.

So at this moment in time, the introduction schedule cannot be shared. We're not at that point yet.

Going back to my first question, I have a follow-up question. The numbers we see superficially were on the surface are the numbers we were just discussing.

But how about quality improvement of the ¥5 billion, if you have been seeing any qualitative improvements, can you share that with us?

You are talking about sales promotion cost?

Yes, Shopping and credit card, if any.

Overall, all the KPIs are growing overall, so whatever -- the more we do, transaction value is now growing and we have been able to start that mechanism happen.

And the advertising take rate?

Take rates usually don't follow at the same rate when transaction value increases, but it's not bad when we look at the numbers. Sales promotion, we spend it, transaction value increases.

The take rate is not plunging. Of course we want to do a little bit more on take rate side, but by spending sales promotion, we have now been able to create a mechanism where we can grow transaction value and I think that is an improvement, qualitative improvement we're seeing around Shopping.

Any other questions? The person sitting in the second row from the back.

Tomimatsu from Merrill Lynch Securities. Three questions.

First is I think you intend to accelerate growth. From the beginning of this year, you mentioned that you will make sure that you make a lot of investments.

But at the end of second quarter, I think there has been some change from the beginning of the year. So what was the background behind making this change?

For example, the ASKUL consolidation or related to the previous speaker -- is it related to some of the numbers or external competition environment? So why do you intend to accelerate further after the second quarter and then accelerate even further in the third quarter and onwards?

That was my first question.

So the assumptions behind the promotions, that's your question. For example, not on the Shopping, but in all the business areas, Shopping of course has started first.

And from the beginning of the year I think you changed the direction. So why did you change the direction?

Well, the promotion, I think we have to consider the timing of the promotion. Timing is extremely important.

So an appropriate timing of the promotion, there are two things that we have to be careful about. First is the products, the products, whether it is dependent on the promotion and that is the case and the monetization and collection, whether we're ready to do so.

I think those two are important. And this time, media and Shopping and commerce, in those areas we're going to make investments in terms of products.

Now we have our improved products and we're ready to monetize in the area of the media, for example, in-feed advertising and in Shopping, commerce advertising; and cards, credit card business now that there are active users. So we have those three elements of actors.

So we'd like to make sure that we do appropriate promotion or enhance the promotion. I think we have reached that level.

That is our judgment.

So maybe this possibility is something that you considered from the beginning of this year?

Well, this year we wanted to invest. We even further beforehand last year this time, we started the deceleration of the page search and EC or e-commerce.

We did not see the big growth. So we were still seeing to -- we're waiting and seeing.

So cost control was the challenge that we talked about. And after that we started to narrow things down.

And another thing is that the e-commerce is not something that we're giving up. I think we can make further growth.

We just started as a market. So we wanted to make an investment at good timing and also Big Data.

Unless we work on it, we have to use the datacenter of somebody else. We're using somebody else's cloud, so that would lead to weakness.

So we would like to have a computing power. Sufficient investment is necessary in that area.

And so we want to be on the offensive and as Oya said, products as a whole have improved. When products are not good enough, promotion is just a waste.

So it will be wasted. Some people say that we have to try, but when products are not good enough, the investments will be wasted.

So in the first quarter-second quarter, as a result of the promotion, the media application we saw growth and also e-commerce we saw growth and card we also saw growth. So in terms of products, I think we're seeing good improvement.

It's not 100%, but I think we're now ready to make promotions. If we make promotions, we're pretty sure that we can improve KPIs, so we decided to make those investments.

Second question, now business results. In your case, the previous executives were conscious of the marketing, for example, double-digit revenue increase or profit increase.

I think that they were very conscious of the bottom line and they control the bottom line. That was my impression.

So from now on for the next year, is that something that you are free of, you are going to do what you want to do? And are we going to show the results as a result of those efforts in the medium to long term?

So which indicators or is it top line or number of active users which indicators are going to grow the most? And how should we evaluate Yahoo!

based on what types of the indicators or the numbers?

Well, the timing of major investments, I think it would happen many times in the future. Bottom line is of course important, we have to be always aware of that.

We should not be only focused on the bottom line, we have to have a balanced view, but we have a very big social responsibility and we deal with 1 million partners and we have 10,000 people involved. So we're socially responsible.

So we cannot try everything we want to try. But the Company is also big.

So I think we have a certain scale to make certain investments in the smart way. So to a certain extent, we have to be aware of the bottom line in managing the Company.

But as size increases, 10% investment, I think we're more and more likely to make the kind of bet using our scale.

Last question. The top line of course that you are also conscious of that; for example in the area of the Shopping, you mentioned take rate advertising and the system or mechanism to increase the take rate.

Is that something that you already have? And you have that kind of plan this year and next year?

And also in media, you will be investing in that I think that it's in-feed advertising. So the placement of the in-feed that will be Yahoo!

apps and Yahoo! News, probably there are no other places that you can place this in-feed ads.

So do you have a good focus that you have more and higher potential and inventory in that area and you are likely to win in that area? And also in the area of the card, shopping commission is not so high.

So in terms of collection, cashing or revolving payment, the use of them, unless they use, maybe it's not going to be a good business. So collection or the investment that your view on the take rate of the Shopping and is there a good formula to win in the area of the Shopping?

And in the credit card business, do you have a good focus about making good collection of your investment?

For store advertisements, in linkage with transaction value, the advertisements have been brushed up. The size is still small, but even if transaction value were to increase -- currently the take rate is 2%, but if transaction value goes up, the take rate has been maintained for the second quarter.

We aren't focusing on the take rate. Fundamentally in a macro sense over the medium term, transaction value, if it were to go up in stores, started to generate good earnings, marketing cost will be spent.

The take rate goes up, marketing cost will be spent. That is the flow that will be established.

We're currently a stage before that where we're as trying to ignite that cycle to happen, where we're trying to increase transaction value first. So next is credit card.

So for credit card, to your point, the settlement commission itself would be hard for us to collect on our investment. So revolving payment and cash advances are used by a certain level of customers and that is accounted for in our expectations as well.

When we look at our plan and what's actually happening, cash advances and revolving payment customers are higher than expected. So we believe that we can see payback on our investments sufficiently.

For in-feed advertisements and how we could apply it to other areas and its potential, currently it's on the startup page and also for Yahoo! News and sometimes in Sports.

Out of total page view, these only accounts for a small portion. Going forward, we would like to be cautious, we would like to first ensure that usability is guaranteed before we go ahead and introduce it in other areas, but we would like to roll it out to other areas within Yahoo!

JAPAN and also our partner sites, partners of YJ as well. And Big Data investment, data infrastructure investments will continue so that we can improve performance because there is a lot of space for improvement.

So I think there is a lot of upside for in-feed advertisements going forward. To add a little more, for in-feed advertisements, out of total page view of Yahoo!

JAPAN, it's only a small portion. So we're trying to gradually roll it out to other areas.

If we're able to see good response, of course we will engage in efforts to roll it out to other areas. And it's not just limited to us.

I think people in the media business are struggling, so we would like to share our expertise with them. And it's not just about in-feed advertisements, it's more about timeline view because we received 200,000 complaints after we launched the timeline view.

But this is valuable expertise, so we would like to work with other people in the media so that they could also monetize as well. And as a result, we hope that Yahoo!

News and other pieces of our services and Sports can improve in quality. So we're not going to just try to keep it within, but also share with our partners.

Finally for Shopping and the credit card business, to your point, the percentage is low, but data is important as well because credit card is a settlement business and the data we collect is highly accurate. I talked at the World Marketing Summit the other day about let's say for example customers who use Yahoo!

Search, we could try to guess if they have children and the accuracy is 70% when we analyze the query of the search. But it's really hard to increase the accuracy from there even if it's just by 1%.

But if it's credit card information and data, if we add on credit card information, of course people who use search do not necessarily use YJ card. It's only several percent of users.

But if we have credit card information and search information, we were able to raise the accuracy to 77 points. So of course we would like to increase revenue from the credit card business through cash advances and loans, but what's more important is the important information we can gain from credit card users so that we can make recommendations and suggest contents that are better matching for the users.

So if it's just the settlement company, you won't be able to do that because we have settlement in search and settlement and e-commerce or media, we're able to have this kind of business model.

Yes, I totally agree. Tpoint [ph] data, settlement data that will be your strength.

However, when you look at the Shopping take rate, it's only 2% right now and you are at the igniting point which means looking at it till the next fiscal year, when do you think you can raise the take rate and how high do you think you can raise it to? If you can give us that kind of guidance, we will be able to get a better idea.

And for credit cards, you have been giving us transaction value expectations, but revolving payment revenue and so forth are important revenue stream for other companies. So can you give us a better picture for the future and targets for these respective business segments?

That will be better guidance for us as much as you can.

At this point in time, for revolving payment revenue, we don't really have a clear target and we haven't really discussed it to that extent internally either. It's more about increasing the number of YJ card members.

So whatever they use, Yahoo! Shopping or if they use revolving payments, it doesn't really matter at this point.

So we're not at that stage yet. Of course, going forward, we would like to raise the YJ card ratio and increase the number of people who use revolving payments, but credit card settlements at Yahoo!

Shopping, first of all, the rate of people who use YJ card at Yahoo! Shopping needs to increase before we go there.

So currently we need to focus on just simply increasing the number of YJ card users.

How about for Shopping?

Yes, over the medium term, like we've been saying, 3% to 5% take rate I believe is an achievable number. I can't explain by timeline here, but if transaction value growth accelerates, the take rate is likely to grow and that's with no doubt.

Does anyone else have any questions? The person in the middle, on the right-hand side, second row.

Second row from the back.

I have two questions. First one is for the third quarter, the December quarter, by advertising product, can you give us your guidance and outlook and organically, how much of OP decline are you expecting.

By product for advertising, the basic trend is basically going to be the same trend as the second quarter. Let me break it down a little more.

For page search, second quarter it was minus 5%, but we believe the decline is going to be steeper, meaning the high single-digit percent. Factors behind that would be smartphone partner sites, some of the contracts are going to be coming to an end.

For the second quarter, it was July, August and September. From the third quarter, it's going to fully contribute.

So we're going to see earnings come down. So that's why we believe it's going to come down by high single-digit.

For YDN and in-feed advertisements, we're expecting 50% year-over-year growth. For premium advertisements, as a trend, it will basically be the same and we're expecting growth -- a decline of 10% to 20%.

For the bottom line, we're making upfront investments. So to give you some image year over year, we're expecting 70%.

But if we were to implement the measures full-on, this is what we're expecting, but we will be selective. There may be a possibility we may be selective with the measures which will change the numbers.

My second question is the following. Sugiyama San asked this question as well.

In the second half, you were making major investments, but as you showed us on pages 45 and 46, transaction value has already been at 30% and for credit card users, you've been able to add on 400,000 more users. My sense is that you could go higher than what you're sharing with us, but what are your thoughts?

What do you mean by that?

Meaning, can't your targets be higher than what you've been giving us as guidance?

Well, it depends on the measures because some of the measures are new. So there is some factors that are uncertain and that's why we have these targets.

Internally of course we have higher numbers that we raise as targets. Yes, internally the targets are more of a stretch, but the promotions that we're going to implement are major and it's the first time ever we're doing this.

So that's why we're being cautious in officially guiding the market. And like I said, just because we have ¥20 billion more, it's not as if we're going to use it all up.

But it's a matter of a ¥100 million measures and we're going to be doing 200 of them. So we would like to be selective and look at the success and failure of respective measures we implement.

Anyone else? The person sitting in the second row.

I have three questions. First is about investments.

You talked about investments. Most of them are provided through points.

Yes, in the case of Shopping -- you're talking about Shopping?

Yes, especially about Shopping and also financial and payment, about both of those businesses.

Yes, in the area of the Shopping, yes, the content is mostly points and also to attract customers, advertising and also mass advertising will be included. So points portion is actually relatively higher.

As for card business, mostly this is point-related measures. Well, from the different perspective, if I may, about Shopping, there are mainly four things that you can do with points.

First is the Premium member sales promotion measure and apps. The expansion on apps is important, so we will be taking measures for that.

And brand new customers, to acquire them, the advertising would be necessary. So it's including the mass media advertising that would be also included.

So from now on, the collection of the investments, when you consider the transaction volume, you mentioned the take rate, 3% to 5%. So say that points -- if you add additional points of certain percentage, the spread or the margin will be much smaller.

That is my impression. So in order to increase the profit in the future, you have to have a huge increase of the transaction value or increase the take rate or reduce the other points.

In any case, the consumers might take an action or purchase because of the higher points. But in order for you to get the collection of the investments, you might have to do the opposite or if the spread or the margin is small, even if you do the sales promotion, it might take a long time for you to convert that into the profit.

So what are your views on those areas?

Well, transaction or 30% or higher growth of the transaction value is one thing. And also take rate, first of all, to maintain it and to gradually increase it.

So the size of the revenue is -- will be decided based on the multiplier effect of those factors. So concerning the points promotion this year, especially apps promotion, in order to make sure that the people would use more applications, we will be making the investments in a more focused way.

So this year's investment will no longer be necessary in next year-end onwards. So I would like to make sure that we make a good takeoff so that we can have a more efficient sales promotion.

And the revenues will be multiplied by the transaction value with the take rate. So we expect that to increase in the future.

So sales promotion cost or sales promotion would become more efficient eventually. That is our plan.

So in order to increase the take rate, that would be mainly by advertising or something that you have not yet disclosed, for example, additional charge to the shops or sellers or charges to the buyers? Could you give us the indication how you plan to increase the take rate?

Maybe there are many things, but basically the store advertising will be the main thing. So, for example, having a banner in the Shopping side, the space is limited, so cannot catch up with the transaction, so advertising, the ranking of the Shopping and there are other media that we can use.

For example, search, we can give a better deal. So stores or the sellers can find those more attractive.

So we're starting to see that. So for the time being, using those products we would like to try to increase the take rate.

Finally, the marketing solutions, the business results, the revenue has grown by about 10%, but the operating income is 4% increase. It's high, but the operating income has come down.

So what was the reason behind this decline? In the second half of this year, how do you intend to increase the profitability?

What are your views?

Well, I would like to check on the details later on, but as for the marketing solutions segment, Q2, there was investments for the applications also in the media business. So that had certain impact.

Anyone else? Person in the middle, second row, second person from the right.

I have three questions. First is in-feed advertisements, I think it's going to be key in order to grow it even more.

You talked about your challenges already. Are there any bottlenecks you're foreseeing or things you need to watch out for?

Can you share your thoughts with us? I'm sure -- can we expect high-speed growth to continue, high growth rates to continue?

That's my first question.

In-feed ads themselves, it's a matter of increasing inventory volume as well as sales, raising unit prices. So Aranami San and Miyazawa San will talk about the two.

Currently, the startup page of Yahoo! and Yahoo!

News, Yahoo! Sports are the areas where we have in-feed.

For the application, we still have potential for growth. On the other end, UI, some of the parts of our services are not timeline view yet.

So it's a matter of whether we can shift and convert those pages to timeline view. We're currently working on that.

We would like to share successes of Yahoo! Inc.

as they have already shifted and also partner companies of YJ. We have been hearing that they're going towards a direction where they would like to have a stream or timeline view.

So that would be another source of our growth going forward. I don't think the upside is going to stop in the near future.

With regards to unit prices, what we think will have a big impact is video. By having a video format, we believe there is upside to raising unit prices.

So we're currently working hard on its R&D.

So for video, when are efforts going to be full-fledged and launched?

We can't give you a specific date right now, but basically we would like to be able to share it with you as soon as possible.

My second question is related to e-commerce. Out of total transaction value, how much is accounted for by smartphones?

Total EC?

Yes.

It's in the beginning. It's 39% right now.

Sorry about that. And my third question is in the middle of September on the iOS site, ad-blocking apps appeared and there was some concern at that point in the stock market.

One month has passed and it doesn't seem that it has had a big impact, but is that the right way to think about it?

Currently, it's only a limited number of users who use it. So we haven't been impacted that much.

And going forward, are you concerned?

You never know what's going to happen. That's what the Internet is all about.

So we don't want to rest assured. But I don't think it's going to happen overnight.

We're getting close to the end time. So this is going to be the last question that we can entertain.

Any questions? No?

That concludes the business briefing. Thank you very much for your participation.