Manabu Miyasaka - CEO Toshiki Oya - CFO Kentaro Kawabe - COO Yuji Umemura - President of YAHUOKU! Company Takao Ozawa - President of Shopping Company

Yoshitaka Nagao - Nomura Securities Masaru Sugiyama - Goldman Sachs Shinsuke Iwasa - Mizuho Securities Taro Ishihara - Daiwa Securities Yosuke Tomimatsu - Merrill Lynch Saburo Araki - Mitsubishi UFJ Hiroshi Naya - Ichiyoshi Securities

I would like to start FY2015 third-quarter business results. The flow of today's presentation is quite different from usual.

Firstly, I will take the microphone. Then, we will move on to shopping and auction; i.e., regarding e-commerce, we will have the presidents of each entity to talk directly to you.

And if the new flow is valid for you, we would like to continue this pattern in the future so that President of each company will give direct presentation and we will solicit questions then afterwards. Let me go through the financial results.

This is the general figures. And revenue-wise, year-on-year we increase by 82.6% because we were able to fully leverage on the consolidation of ASKUL and also the core business grew steadily.

Operating income was ¥43.1 billion, minus 13.7% year-on-year. Even though we increase in revenue, our operating income went down.

As explained in the previous presentation, we have media application and credit card company business. We have conducted advance investment in these segments, and therefore, those budgeted promotion activities have been conducted accordingly.

And in terms of advertisement-related revenue, it grew by 6.3% and display advertisement increased 31.4% and domestic e-commerce increased by 32.2%. And regarding advertising-related business, smartphone increased year-on-year 30.4% and YDN revenue increased as well, and year-on-year it increased by 52.2%.

Last year we leveraged on big data to make improvement to the product and also we started new advertisement and that contributed to the increase of YDN. And paid search advertisement went down via the PC.

And regarding e-commerce, shopping grew dramatically. It increased about 50% year-on-year.

We vitalized the shopping platform. And in terms of the transaction value, it is linked to the seller and the shops and sellers were able to earn accordingly.

And in terms of the advertisement-related revenue, it went up as well and also auction-related business is growing very steadily. Regarding credit card business, in the end of third quarter we have 1.8 million cardholders.

So once you have the credit card, you can immediately shop at Yahoo. And the activation rate is going up as well.

In the third and fourth quarter, i.e., the second half, we will be focusing on the promotion activities. And let me go through the details.

Why at this point are we going to emphasize promotion activities? The product itself is growing steadily and regarding media, we have different applications and the rating and ranking of those applications are going up and the customers deem that our applications are becoming more user friendly.

And for two years consecutively we became the most downloaded publisher in Japan. And so we are strengthening our application capability.

Also, in e-commerce the shopping platform is improving and also we have more items to be sold. Also, we believe that we can conduct the promotion and also we invested in credit card business.

And starting from April, we are actually securing the credit cardholders once we conduct the promotion activities. We have great products.

So once we have the promotion, we will be able to further enhance the understanding amongst the public regarding the witness of our products. In the third quarter last year, we had the promotion expense of ¥4.3 billion and now we have about plus ¥10 billion, getting to ¥14.9 billion.

And shopping business we secured about half and others are in applications, auction and also card businesses. We spent most in shopping.

And what was the impact of this promotional cost? Along with the promotion, as I repeat myself, the shopping platform itself was further enhanced.

So the synergetic impact of those factors added in the increase of the growth rate of shopping business traction value to be 48.3%. And in terms of the credit card business, we made some improvements so that we can secure new cardholders.

And now, we have 1.8 million cardholders. Another endeavor in the third quarter is to have a tender offer for shares of Ikyu Corporation.

Regarding the growth, we have YAHUOKU! Shopping and we try to further vitalize e-commerce.

And in terms of the reservation of restaurants and travel, comparatively speaking we were not conducting many activities. But with the tender offer of Ikyu Corporation, we can actually enhance our service-related e-commerce domain.

Looking at the revenues, you see the trend as depicted over here. The consolidation of ASKUL was a positive impact and also three other core businesses grew, and therefore, year-on-year we increased by 82.6%.

Operating income was ¥43.1 billion, minus 13.7% year-on-year. As mentioned before, we conducted the sales promotion activities and about ¥9 billion has been spent for that.

And this is planned in terms of the reduction of the operating income. Net income was -- you see a similar figure over here.

Let's take a look at the revenue breakdown. It was ¥196.4 billion, marketing solutions, consumer and others -- others meaning payment and financials, both of these grew.

So far Yahoo Japan ever since its establishment, we have been centering around advertisement as our major revenue source and that was the positioning that we had and that was the view taken by the public at large. And regarding revenue, for the first time, consumer business became number one in terms of its contribution to our overall revenue.

And what is growing the most? Other businesses that grew by 34.1% year-on-year and this is related to payment as well as financial services.

In the past 20 years, we were known as the advertisement centric company. But from here onwards, in the next two decades we would like to add another pillar to the advertisement.

So in terms of financing as well as credit card as well as consumer business, we would like to have three main pillars instead of only one. And in terms of the business model in which we were focusing only on one pillar, we will be more diversified.

Therefore, in terms of margin, it will be quite different from the advertisement centric business model; therefore, the margin will go down temporarily. And let me go through the key performance indicators.

Up until 2012, Yahoo Japan was known for PC centric company. But then afterward, in the past three years and nine months, we are strong in PC, but at the same time we wanted to become strong in smartphone as well.

As a result, in smartphone, there are many people using Yahoo, and I think we were very successful in that domain. And in the next coming three years, we want to become a company strong in applications in smartphone.

And we are strong in media, but then we want to be strong in e-commerce as well. And that is the challenge that we will be facing to change ourselves.

And also we would like to increase the usage in smartphone as well, and we are seeing an increase in the users; and about 60% of the users use our service via smartphone. And this is the monthly active user ID and it is growing steadily, and we have about 31.91 million who are using our Yahoo service in terms of their service log-in.

And e-commerce, we are centering around shopping and we were able to grow dramatically and the growth is very steady. And now we would like to go into each business.

Firstly, Yahoo Japan has many businesses and right now we have core businesses that are generating profit and revenue. And another segment is the upfront investment stage businesses.

So they are maybe breaking even or they are in the deficit, but we know that in the future we will be able to generate more revenue and profit -- and those are from shopping and credit card companies. First of all, for the core business, and let me talk about the advertising business.

And now -- and have it grown by 6.3% year-on-year on a quarter basis and the display advertising have been growing very good and more than -- and we can achieve that more than 30%. On the other hand, when it comes to the paid search, it was minus 10%, so that growth was negative by double-digits, 10%.

This is -- the trend is indicated here for both the display and the paid search. When it comes to the display advertising, now the YDN has been very favorable and also the indeed [indiscernible] advertising have started, so that it has contributed a lot.

On the other hand, when it comes to that, the advertising, the shopping sites have also made a contribution. On the other hand, when I look at the paid search advertising, the trend is -- very clearly indicates that it had been gradually declining and slowdown.

And next year probably -- the next fiscal year, it would be to that minus of the double-digits or there's an high of the single-digit decline we have expected. But still when it comes to the paid search -- and we are not so pessimistic about this, the paid search advertising, because when I look at the -- about the number of queries on the Yahoo Japan total, it had been increasing.

And also -- now, it's not as in our queries under the search the share have been taken by the other competitors. It's not that.

We have the still and the very steady growing in number of searches and the queries. So that's -- and if we can have a good challenge of that and monetizing of these queries and search basis and we can expand the business.

And then also we have a growing proportion of smartphone business, so now it will be grown by 30.4%. Next; the second core business is the membership business.

Then, first of all, for this -- now this -- the number of this --- the member -- the paid members is now about 16.34 million, just like this. And the major topic here is that now we have -- membership fee have revised from ¥380 monthly to the ¥462.

There is not -- that's the way we are going to increase revenue by increasing the membership fees. And now we are trying to encourage the premium members who use -- use for shopping more, so that's where we are going to provide that kind of premiums or the service guarantees will be provided based on this increase of the fees.

So also if -- so we like to make the investment so that we can encourage and promote more of that membership basis. So by increasing the members we can grow the business.

That's about the membership services on the core business. The next -- let me talk about the auction-relevant businesses and Mr.

Umemura, the Corporate Officer and President of Yahoo Company is going to explain about auction business.

Okay, thank you very much. Myself Umemura.

I'm responsible for the Yahoo auction business, so let me explain about the YAHUOKU! Business.

First of all, this is the outline of the current business performance. And when it comes to YAHUOKU!

and it's -- had been flat after it’s -- like this in the past four or five years. But after the e-commerce revolution in 2013, we have boosted again and also in this Q3, as we have explained already and we have grown by 5.4% and also on a full-year basis.

And we will continue the growth and we are going to have -- that's the record high growth in auction business. Now, this year particularly we enhanced the service base and applications of the Yahoo auctions.

Now, Yahoo auction has the tremendous numbers of -- the overwhelming number of products to be offered and then also now we have some kind of complicated transaction rules and the process was one of the disadvantage. But now we can clear that and also solve the issues by providing the application.

And in result of that, now on a year-on-year basis now we have that, the transaction values have grown by 46% when it comes to the usage of the application like this. Next, let me talk about the sales promotion activity in the Q3.

On the November 11th, it's a good shopping day and that we are working together with the Yahoo Shopping. This is the joint company with the Yahoo Shopping's and there's a campaign.

Now, we have -- sales have grown by 84% year-on-year. Now -- then auctions and that concentrated -- transactions concentrated on the weekends, but on weekdays and this is the record high transaction value we could post and also for the year-end shopping sprees.

Now, we could grow by 7%. That's in the same day and then week basis.

And now we have also the all-time-high transactions. So this is the perfect fold -- future after this, as shown here on this graphics and when it comes to the reuse markets and the used product markets, and now it's set to be the ¥1.5 trillion.

This is the current visible market, unrealized market, and this market have been growing year-by-year. And on our own survey of the market survey in the futures and a lot of products still buried and a lot of treasures in their home and household, so that it will be about another additional ¥3 trillion of potential additional market for this reuse market.

And now the YAHUOKU!, we now have become the reuse platform, so when it comes to the older reuse market and we have another type of market, including the real estate and used car market. So these are also the other potential market we can explore and based on these potential markets, so these are the three points we would like to focus on.

And number one is that's the -- with the [indiscernible] shops, that's the market platform in the world, I mean which that they are more easy buying and selling so that we can have more increase of the users and then also in how we can explore this, the potential ¥3 trillion markets and how we can explore that. And number three is that used cars and used -- and also real estates.

These are the new type of the markets we can explore. Number one -- and I like to brush up that's an oldies in the market, which have the easier to buy and sell.

And first of all -- and starting from January the 15th now we have and make that all this -- the fees for that bidding and also the buyers are now free of charge. Then so far -- and also the oldest now that the payment is made by the bank transfer, but now we are making the fees free of charge, now and all this free payment have been realized.

And also when it comes to C2C and what has been important is that delivery. And also they started just last year we have announced that the delivery service with Yamato, so that's now for all this and the delivery, the documents cover the issues on the YAHUOKU!

platform and also now there's -- also we can provide the discount in the delivery service by the YAHUOKU!, when it comes to delivery. Then also number three is that we have improved the system for that and actual and bidder and those who will offer the products on the YAHUOKU!

Just like that we are making all the YAHUOKU platform easier to use for both sellers and the buyers. And we wish -- and we like to increase the number of the participants on these YAHUOKU!

platforms further. Number two is that, I mentioned about still we have another ¥3 trillion of the potential market that reuse products, so thereby taking advantage of the YAHUOKU!

And we would like to provide the data market for them to sell their oldies and buried and those products buried in their home. But it's not that and it's very difficult because some of them are too busy to just get involved in the YAHUOKU!

process. So that's why now we think about -- we call it indirect offer.

So for all the used products will be taken to that BOOKOFF store front and the physical store, and the BOOKOFF will handle their products and that it can be -- that's put on to the YAHUOKU! platform.

So this is that process that we have now proceeded with the BOOKOFF, we have and started our corporation two years ago just like shown here on this graphics. So this is the total.

And the number of products handled jointly by BOOKOF and YAHUOKU! have been rapidly increasing like this.

But still -- and its still, but -- very few and still that's and lower compared to a year ago. So we would like to continue making efforts furthermore so that we can -- and making that the number of customers and -- that go up for both the direct and indirect participants of the YAHUOKU!

So this is our idea. And also regarding auto and real estate markets, we would like to challenge these domains.

In auto area, in February last year, we had an alliance with Japan Automobile E-Commerce Inc. and HAA Kobe.

So in B2B in terms of the vehicles that are put in the market by YAHUOKU!, the buyers will be directly participate in the B2B and purchase the vehicles that are in the B2B market. So this is the direct purchase from the wholesalers, and so price wise it will be attractive to the buyers.

So that is a value-add. The real and virtual are connected together so that we can develop the automobile domain.

Another area is the real estate market, and in November of last year, we had the partnership with Sony Real Estate Corporation and we had OG Direct, which is an individual, will be able to list his or her own condominium on the platform, and we just started opening this platform to the users. We just launched this service.

So firstly we would like the users to use this platform to understand what is the appropriate price of his or her condominium and we are advancing in the area of condos that are listed. But today we do not have any transaction that has been actually realized.

And so regarding auto and real estate markets, YAHUOKU! will be aggressive in opening these markets.

So far YAHUOKU! has developed a different commerce, especially the reuse domain and we would like to further tap into this reuse market to further advance our business.

Thank you.

Next, I would like to talk about Yahoo! Shopping.

I'm Ozawa and I'm in-charge of Shopping Company. As mentioned before, our shopping business in the third quarter, we were able to increase by 48%.

So comparatively speaking, from the previous period we were able to grow dramatically. But having said that, absolute value wise as compared to other competitors, it is still small.

So we cannot herald too much about our achievement. But two years ago Yahoo!

Shopping itself year-on-year wise we were not increasing, but rather according to the trend we were registering a negative figure. But now we are growing almost 50%.

So through e-commerce revolution in the past two years we were able to have a milestone recorded in the transaction value. And in terms of the transaction value, we understood what are the ins and outs that we have to conduct to increase our transaction value and based on our learning, our service is growing and we can further increase our business furthermore, say about plus 50%.

Mr. Miyasaka actually showed you this slide before.

We will be conducting e-commerce revolution according to this cycle. On the left hand side, we will have free listing and that means that there will be more products and what will happen if there are more products?

Similar products will be handled by different sellers and so the price will go down and there will be service competition and in the end of the day that price will go down and at the same time the quality will go up and the attractiveness of the shopping platform will improve. It is not indicated over here, but we added more engineers and so the platform itself has been improved including the system enhancement.

And so therefore the platform itself became more and more attractive, as written on the right hand side. And the platform became more enticing and that solicited more buyers to participate and we have sales activities and campaigns and we have more buyers.

So a good platform will solicit good buyers, and therefore, there will be increase of transaction value. And we have an increase in our shop IDs and also the transaction value increased.

And by going through this cycle, more shops would like to sell more. So that will lead to advertisement-related revenue, as indicated at the center of this cycle and in the past two years, we have pursued this cycle.

Of course if the advertisement-related revenue goes up from day one that would have been ideal. But of course we had to go step by step and so that -- the people who had to invest in this scheme would enjoy a win-win situation.

I will talk about three points. People question us, are you handling more products?

How are you increasing buyers? And I will answer those questions.

Firstly, regarding store IDs, we have about 370,000 altogether. Two years ago we had about 20,000.

And so you can do the math to understand the increase. And we have more than 200 million items.

And the transaction value is going up and in FY2015 we will have the number in the magnitude of ¥200 million to ¥300 million. Let's take a look at sales promotion.

We had advance investment and we want to solicit buyers to this site and we had conducted different schemes to promote that. And we need for them to be repeaters.

We would like them to buy twice and three times. But in order to facilitate that, we have to have a door opener and therefore we decided to have November 11th as Good Shopping Day.

We have other campaigns, but this was most effective. And we also continue point-related sales promotions.

Our shopping platform has diversity of products and it is very affordable. And in terms of point redemption, what is the right percentage to solicit customers?

In FY2015 we are going through different experiments and there were effective ones and there were not effective ones. And during 2015, we will go through the learning curve so that in 2016 we will be able to leverage on that learning point to have more impact in terms of sales promotions.

And we have every day 5% of purchase price being provided as T-Points. Now, about next year, we will be celebrating our 20th anniversary and we plan to have the anniversary sale.

Yahoo! Shopping-wise, we need to promote the sales.

And in the past 15 years people knew the existence of Yahoo! Shopping, but they did not have any triggering point, so to speak, to push them to use the service.

So we can have November 11 and also the 20th anniversary sale to push the users to use our shopping platform. Let's move on to the third point, which is about the linkage with membership base.

Regarding Yahoo! Shopping users, many of them are Yahoo!

Premium users. In the previous slide, I showed you that 5% will be provided as the redemption point.

And we wanted to know what is the impact, this is a trial stage. But we have another mechanism, which is we try to look at the membership base and try to target at the particular customer and tell them that Yahoo!

Shopping is very convenient and easy to use and by starting from that segment, we will be able to have a positive ripple effect on all the users. And if we try to target everybody at the same time, we should have limitless budget and it will be time consuming endeavor.

And so in FY 2015, we focus on premium members so that they will understand the merit of using Yahoo! Shopping and conduct the different marketing activities to focus on the premium members.

And also we have SoftBank subscribers and T-Point members and we will be seeing an increase in the cardholders as well, and we will try to promote Yahoo! Shopping to those segments as well.

And regarding Yahoo! members, we were able to capture their mind.

Regarding Yahoo! Shopping value that they are spending, it is growing by double fold.

And in terms of Yahoo! Shopping, 50% or more is comprised of Yahoo!

Premium Members. So if you are a Yahoo!

Premium member, it becomes only natural for them to use Yahoo! Shopping and we want to reach that range.

So we would like to create the environment. If you buy something on Yahoo!

Shopping and you must be that premium member. So this is that environment we would like to create.

So for all those that just -- the customers who are paying money and making payments they like to have some positive value get back and refund it. So this is that, the good cycle we would like to have.

I'm sorry. And other than that now overall conditions that the business had been very favorable.

This is that average number of the purchase frequency have grown by 21%, just like this. And then also this is that repeat purchase ratio in the following months.

So this is the loyal customer ratios and this is now it improved by 16%. This is not a 16% growth annually, but it's the 60% of more of the transactions in this repeat purchase.

That's what I mean. So that's all about that.

Now it had been growing by 150% year-on-year in terms of the Yahoo! Shopping.

And now I explained about that basic strategies and actions. So we are going to provide that in all the products and the ease to trade and also fund the refund by the points for all the payments they made.

So these are the systems and they have been workable. But at the same time, we are also going to have the basic pillar of the business other than that -- otherwise we cannot make that basic strategy in the future.

But now when it comes to the advertising revenues, it's coming out to be visible. So now we have the growth in advertising.

The revenues have been realized. It is 2.3 times year-on-year.

But still that value itself is still small compared to that investment we made. But still now we have these achievements.

So then it seems like that this stores and the tenants and they feel like making more money for their advertising and for their shopping sites. So also and now the shopping -- and shoppers have also having -- starting to have the mentality, they like to do a -- made the shopping in the Yahoo!

Shopping site. So this -- in this sense that now seems like that's -- and now the environment getting all the more favorable for our business.

And then finally it results in this, a revenue increase of the advertising. And again therefore, the shopping business would like to offer everything that you want and then also with a very reasonable price.

This is our basic strategy that's still that actual business performance is limited, but now we have just started, but now we hope you pay attention to our business. That's all.

Thank you very much.

Okay, thank you very much. So that's all for that presentations and briefing on the business of the auction and the shopping.

And again, I'm going to talk about the second upfront investment business, the credit card business. And auction and shopping have been growing in terms of the total transaction value and now we can diversify the business and models into the ASKUL revenue sources, into the advertising or in other areas.

But one of the most important source of revenue is this, the payment system and settlement. So for all the shoppers on the Yahoo!

and the environments and for those -- first of all, how we can increase the number of people who use the Yahoo! credit card for making shopping on Yahoo!

sites? So that -- this is the current membership of the credit card.

It had been steadily growing and now we have exceeded 1.8 million. And by the end of the Q4, we like to make it 2.2 million in our plan.

And then also after we have this increased number of credit card holders and if they don't use their credit cards, inactive will turn out to be the cards. So that's why what's important here is that how many of the active users, active credit holders we have?

Now, we have about a 62.1% of more credit card holders actually using the credit card and in the shopping. So now they have their own holder YJ cards and actually they use the card on the shopping.

So this is a very good cycle. So now we have invested for the sales promotions aggressively in the Q4.

Then why that happens in the Q4? Then also in the Q4 we continue to focus on product quality, the media, the e-commerce and credit card and now we are starting to feel then actual and the good is being delivered.

So that's why we would like to keep making some upfront investment. But also we need to just analyze and sort out that result of the investment we make in the Q3 -- we like to focus on the more effective investments, and by the ¥30 billion of the investments and sales promotions for the total of the second half of this year.

And when it comes to the promotions in the second half for a -- now, as long as we have to spend for making investment, we have to setup the clear goal. And first of all, first focus area is e-commerce.

And so as a result of this investment, we would like to maintain that at least that's the sustained growth ratio as we experienced in the Q3 for e-commerce. And particularly for the e-commerce we think that's for all the promotions and we think that's a nice sales promotion that were really effective in enticing the customers into the shop and our shopping sites.

So then also for that more details of us for these, we just go up and we announced the go up that's the fees and were charged to the tenants and the merchandisers on the shopping sites so that we can have the more fund for using for that -- to further developing our business. So we would like to make that services get back to the customers of the shopping sites, although we increased that amount of the fees for the merchandisers so by providing the more points.

So we again enter that cycle by taking advantage of these and increase the fund. Number two is this, about the payment and the settlements for the finance businesses.

Also, we keep making investments and we would like to increase the number of credit card holders up to 2.2 million. Last of all, media.

Now, including the application for the starting page of Yahoo! Japan and we would like to also become the number one also for the applications in this media.

So this is the very last of my presentations about this, the payments and the settlements. But all those, the members of the Yahoo!

Japan and the media services that are most frequent users about the Yahoo! Weather, the Yahoo!

News and the search and the queries, but also the e-commerce will be also be used concurrently by the premium members and they use sometimes they occasionally use their YJ Card and also the other services concerning to this, the payments. But those who use Yahoo!

Japan only for the media service and also for those who are using all this, the monitoring for different services, when you compare it to the ARPU, and it's a huge difference between these two segments of the customers. And now also the market getting older and more matured, so that's why we cannot expect that the total number of that internet users getting double or tripled in the future.

It's not. So that's why in order to grow our ARPU, we have to just grow this kind of high type [ph] spending customers.

So that's now within the limited of the population of internet users. And although it's not declining, but we cannot expect so much dramatic growth of that, the internet user per se.

That's why we like to make them use more and more different types of the Yahoo! services.

That's why that e-commerce and the payment services and premium member services, so all these cross service usage should it be promoted to our current membership and then also the user bases. So I just would like to provide hospitality and when someone used the first class flights on the airlines.

So this is the good analogy of our direction of service after this own. That's all these services after financial services.

And the last of all let me talk about the announcements we would make about the noon time today. This is about an ex-employee of the YJFX and have taken out.

That's all the trade secret and also the customer information when they retire, we announced today and we are still looking for the details and we have today disclosed so far that there is some limited information and also now we are trying to promote that this data business and the Big Datas and for us and it's really, really disappointing, now that we have this incident not only for the growing of business, but also we also providing this kind of basic assurance to the customers. And we are very sorry and the we are causing them a lot of troubles and for all the particularly for the customers of whose information have been taken on.

That's all. Thank you very much.

I'm [indiscernible] of Jefferies Securities and I think my question is related to the results. There are two questions and one point is for confirmation.

Page 57, in terms of cost of promotion in the first half, you mentioned that you will have ¥2 billion in addition. So in the total you will have ¥3 billion altogether.

And that hasn't changed I guess and during that presentation, you mentioned that in the third quarter you will be spending more in the third quarter. But if you turn to page 8, in total -- I don't know whether I am reading this correctly or not, but it seems that you've spent about ¥9 billion altogether.

So in terms of additional ¥20 billion as a promotional activity fee, I thought that you were spending that in the third quarter, but in the fourth quarter you will try to look at the result of Q3 and spend accordingly, but in terms of ¥9 billion, shopping is ¥5 billion and the transaction value increased by 48%. And I believe that if you spend X amount, then you can grow X amount as well.

And in order to continue this growth, you have to spend the promotional fee par with that of Q3 in Q4. So can you try to elaborate on this and are you going to use about ¥5 billion and you increase 48%?

So from your point of view, you actually wanted to increase your shopping business more than 48% because you spent ¥5 billion for the promotion?

In terms of the promotional costs, I don't remember whether I said that we are going to focus more or less on the third quarter. But in terms of this progress, it is as planned.

We will look at the cost performance and if we cannot enjoy the tangible impact as scheduled, we reshuffle the allocation of the budget. So we look at ROI and execute it on the plan accordingly.

And in terms of the result, we were able to gain the results as planned or maybe we outdid it. And in terms of shopping transaction value wise, I guess forecast wise we were pretty conservative.

But in terms of the internal target, we are almost on par with that internal target. Can't we grow on par with Q3 unless we spend the same amount as Q3?

I think the answer is no; because if the answer is yes, it will not be sustainable. We want the customer to use our shopping platform and once they feel and experience the high quality of our service, then we can enjoy the repeated user.

And so the equation is not such that we have to always invest the same promotional cost in order to attain the same result. And in terms of the burden of the cost between us and the store, we have reshuffled the percentage as well, and in the next quarter Shopping's financial burden will be less because there will be reshuffling of the burden allocation.

Maybe I should wait until credit card -- but it seems that the T-Point you get about 11 fold and in terms of Nikotama users, I know that they tried to actually leverage on the points that they can get. And once you said you are going to get 11-fold or 20-fold points -- the flipside of the coin is that once you stop that, then maybe the users might go to the competitors.

So from the next quarter do you think you have to increase the provision of points, because if you don't maybe they might just move on to another site that might provide more points? What is your take on this?

Well, I guess we can have -- being part for the shopping Q&A time. The merchant will have to bear a burden of the point, but maybe you might reduce 11-fold to 5-fold and maybe down to 3-fold in terms of the point of provision.

Because once you have this great offer, it might be very difficult for you to make a different decision.

Well, at the time of 11-fold there will be people who will just go just for getting the points. But then there are users who come not just for the points and we are seeing an increase of those non-point targeted customers as well.

And we are seeing an increase. And in terms of the premium members, there are many people who haven't shopped at our platform either.

And so as a first step, we try to have a promotion to solicit premium members initially. But once, whether it be premium or non-premium members, they will enjoy the platform.

The products are good and it is a synergetic impact of high quality platform and the point. And looking at the daily statistical figures, there are users who are doing shopping even though the points are not 11-fold.

Thank you. That's all from me.

And also additionally, when I look at this second half and when it comes to point provision policy, we tried different types. It's not that we experimented the different variety of different types of providing points with some of the campaign and we offered without points.

So that -- it's not that -- it isn't necessarily true that we can have -- we must keep providing points in order to grow. It's not that we think.

Okay. So those sitting end of that and the one second row from the middle and the second please.

Okay.

Thank you very much. I'm Nagao from Nomura Securities.

I have two questions -- I have three questions. My first question is, in your business performance guidance meeting in the Q2, you mentioned that about end of Q3 you will be 70% of the Q3 year-on-year.

You mentioned that in the previous meeting. And what happens with this gap between your forecast and then this actual business performance in Q3?

Yes. So this is about that the level of the promotion investments.

So this is the key for the difference. And in the last meeting, I mentioned in a more conservative way, so in case we have to use that upfront investments and the front-loaded investments in some occasions so that a -- but we are making the very effective investments and now we have this actual results.

Okay, thank you very much. My second question is that, when I look at that decline of the revenues from the paid search is a major concern.

Also, the CEO mentioned that when I look into the next year, that will also further decline into that double digits even or that higher of the single digit decline is expected for the paid search. When I look at all the advertising for the advertising business as a whole, you expect about 6% growth.

What will be your forecast in the next year for the growth of advertising as a whole? And -- so my question about your kind forecast of the advertising business next year.

Okay. It's still -- now, we are still working on the specific -- the budgeting, so that it's too early to give you some kind of specific numbers.

But when it comes to our ideas and trend as for the sponsored search and paid search business, so smartphone partner sites and the link to the smartphone and also -- and the overall market trend, so that is a combination of all these several different factors we expect a budget decline about double digits or the higher of single digit percentage of decline. So how we can stop this or how we can just mitigate this declining trend will be the key.

So when it comes to that -- on the other hand, the display ad we expect a further growth also next year. And also we started in-feed advertising and also we have some kind of an organic growth we expect.

And so with the data solution, we can push up the unit price of advertising and we are making all the more the advertising format richer. So there are a lot of the potentials to grow our advertising business further.

And my last question is that my question to CEO, Mr. Miyasaka.

Now, some of the business you are still making upfront investment and some of the business you are now starting to reap the profits better. And when you think about an overall strategy you still and you have the next year also will be that still the years for that upfront investment.

You are starting to make the actual profits starting from the next year.

Then when it comes to auction, and if we can have the more transaction values and we can have more revenues and then also for the shopping. Now, we are business and the revenue from the advertising and the shopping are starting to come out.

So that now still that our primary focus is that increasing the more transaction values. So this is not so much on the advertising revenues, so that also in the next year again and it's not so much of that's the pushed up the operating income.

That will be that's our target for the two years ahead. So that still next year we would like to and focus on the more important KPI that is the transaction value.

But also let me answer to your first and second question. And when it comes to the investment and cost and we are going to strictly control the cost.

But then on several occasions we have to spend the money in a different way; for example, the CapEx. Now, we need to make the capital expenditure for dealing with the big data business in the future.

And the other thing is that and we are making an investment for the sales promotion, what we did this second half of this fiscal year. And compared to the last year and both of the investments on the CapEx, on the big data and also this promotion, has been more than what we did last year.

So that now it have a have some impacts on income. But also for the other costs like the labor costs or the other SG&A, all that's the cost have been strictly controlled.

So I don't have any concern about it. So when it comes to the advertising business, after this next year and onward and the same period of last year, we think that now we are starting to shift into the Smartphone platforms and a lot of data service is now being used by the Smartphone.

But how we can sell that advertisement to them. Then once that and that's the issue for us, the challenge from the last year.

So that's why we are switching to that the layout of the starting page and also now we are confident that we can grow the business of YDN also on the smartphone platform. So this is what we have experienced last year, in the past year.

But on the other hand, we didn't expect that all this paid search will be declined to this much. But now the number of queries, number of the search queries have been increasing.

It's not declining. So this has been important.

So therefore all the users who use the queries and the searches have been increasing. So that's why how we can monetize this increasing the customer and user bases of the queries.

And this is that our new challenge. And also this is a link to that growth of the advertising business in the future.

So still and we have a lot of increasing number of the lot of and very big customer and user bases, so that also including of the paid search. And I would like to do something new also to enhance the business next year.

Thank you.

Now, a person sitting at the center, in the front.

Thank you very much. I'm Sugiyama of Goldman Sachs.

I have two questions related to advertisement business; firstly, about premium advertisement. Year-on-year, there has been a positive growth and in November you started brand panel over smartphone and maybe that had a positive impact, and maybe there will be more distribution and you might be able to increase your revenue.

So can you tell me your take on this? Secondly, may I

I would like you to pose one question at a time, okay? Now, regarding the first question, there are two factors.

Regarding premium advertisement, we have commerce advertisement. We have 3 billion and that is included in the premium advertisement and that is one of the major factors.

And second point, as you've mentioned, brand panel via smartphone had a positive impact as well. And this has been launched in the middle of the quarter, so the impact is not that large.

So if you look at this quarter, it is in the magnitude of several hundred million yen.

Regarding next quarter and onward, I believe that you want to monetize in a different way using pay search and you have product listing being conducted by other competitors. But are you trying to follow suit or is there any technical hurdle for you to follow suit what others are doing?

We do not have any particular roadmap per se, but we do have the information that you have mentioned right now. You have the result of the search and that is not equal to pay search and that is the notion being shared by all the search engines.

So in our case, search equals paid search and so we have to diversify our business and become more creative and coming up with new solution. Usability is very important, so we have to conduct different pilot run to see whether it is user friendly or not.

Thank you.

Okay, those who are sitting in the third row from the front in the middle section please?

Okay. Iwasa from Mizuho Securities.

And my first question is that, my question about, this is about the information leakage and at the FUFX subsidiary. So and currently is there any cost you expect to, concerning with this incidence or are there, I would like to know about what you can disclose any quantitative information about it concerning this incident?

At this moment of time we don’t expect any big financial impact, but we have to consider about this sincerely and, because that’s, and this is an, that incidence have a big impact on our credibility and reliability. So that’s why we would like to do our utmost to and deal with this incidence.

Okay, thank you very much. My second question is about your basic ideas about the business performance in Q4.

And now you spent about 30 billion of the promotion expenditures in the second half. So that’s now about the ¥21 billion, would it be recognized in the second half, is that what you mean?

Or, in the last guidance meeting about the Q3 will be 70% of that operating income year-on-year. But what will be that your kind prospect of the level of income in Q4?

Yes, in the still Q4 and we are still making some fine-tuning that the final investment for the promotions cost. But then we are going to have the big jump on the revenues, although on the way we will have some decline in the operating income.

And on a full year basis, just for information, excluding the ASKUL business and about the high of the single-digits and of the revenues growth and also [indiscernible] income, that depends on the amount of promotion cost. But it would be about a, it will be a little over exceeding the last year’s level so that as we explained in the initial of the year.

But that is about it.

Okay, thank you very much. And the last of all, let me ask you about the ideas on the premium memberships.

Now, when it comes to like to emphasize the shopping platform that GYAO or that image businesses and something like that, you just a little bit make it a leverage that you efforts on it so that when it come GYAO. Now, when it comes to keeping providing that contents and it seems like that you had narrowed down the scope of the prime services.

But what do you think about the impact the change of the policies on to the number of memberships or the business? Would it have been narrowed down or, because I mean that part of that the services of the GYAO in case for the, part of that the contents of the GYAO and would offer the free of charge to premium members, that’s in the contents, will it be reduced or it seems like that you will reduce the digital contents, menus or the services.

On the other hand, you mentioned you enhance more on the shopping. So now don’t you expect some kind of members of your premium members because you reduced the services on the part of GYAO or is that right?

I’m Kawabe, COO of the company. And now, yes, that’s for the, we are going to eliminate that kind of part of that is the, and the premium services for that.

But now, and we reconsider about that what service will be provided for this, that the video content so that we reconsider about it, what kind of marketing is needed. And as far this quarter is concerned that as Ms.

Miyasaka explained about this, it seems like that’s now and the customers it seems like they will focus more on the shopping. So then we reconsider what should we do with that video.

But in the case of GYAO and they have some, we just had, the cost to procuring the contents for the GYAO and the video contents was costly. That’s why you changed the policy.

So it seems like that you can, for example, lower the cost, the burden for that the contents procurement for the GYAO and that will have some impact on it, if only slightly, yes.

Then the person seating next to the person who questioned a while ago.

[Indiscernible] securities. I have two questions and I will ask you one at a time.

The first one is about the usage of your cash. You have abundant cash at hand and you will have a tender offer of Ikyu and this is a very aggressive investment and regarding investment in Ikyu what is its positioning?

Are you planning to conduct a similar scale M&A in the future as well as the usage pattern of your abundant cash at hand, if so what is the settlement that you will conduct such an M&A activity?

We believe that M&A is one of the needs for further growth, regarding the segment as mentioned before media and advertisement, e-commerce and finance and payment and membership businesses, these are the segments we have to garner the growth and we have the potential in each and every segment and we can challenge each and every domain and so it's not that we're just focused on when of those six domains but rather we want to strike a balance so that we can have across the board positive impact on our company as a whole. Talking about Ikyu we want to strengthen the easy up service in Japan it is still in its incipiency of course travel is taking a lead but in terms of the reservation of restaurants we have only negligible such services and the condition right now is on par with what was in 2003 regarding travel domain.

And so we would like to be a full runner in this area, in terms of our price, there are present [indiscernible] but when you look at different case studies, in order to acquire a particular strong in a particular vertical I think that is the amount that is quite appropriate and once we have [DOB] and if there's any kind of proposal we would like to consider that as well.

I understand that there are different M&A opportunities in the future and Yahoo! Inc.

has your shares and I want to know that maybe you might need cash more in the future and how are you going to handle the shares being held by Yahoo! Inc., are you conducting discussion with them so that you can buyback your shares that they have?

What are different options that you have on your mind right now?

We have conducted such discussion with Yahoo! Inc., but we are of course keeping in touch and are conducting due information exchange.

Okay, thank you very much. Okay, please?

Those at -- from the second from the left, the most -- the rows and the one that's seating at the back.

I'm Tomimatsu from Merrill Lynch. I have four questions.

My first one is that -- and you now -- now, you mentioned that about the advertising, the revenues have been increasing as a proportion of all the other -- the segments. Then also you focused on that also for the profits and the value still you have a very high -- still a rather higher profit margins with advertising.

And also your shopping business also will eventually go to that advertise business. And also you are going to improving the quality of the targeting advertising.

So that's still on the mid and long-term basis. Also, you had tried to improve that in the big data quality and they will finally and converge into your advertising business, right?

Isn't that a correct understanding? So -- or, that you still don't expect that the finance and payment business will exceed the advertising business in the future?

Yes. And we think that's the -- by taking advantage of EC and payments and the data will also be utilized for the advertising so that in order to grow the advertising business.

That's true that when it comes to that they pool the revenues and the EC has been growing. But also for that when it comes to profits, it's -- they would like to make a very balanced approach, not that's any -- for the focus only that one of the segments.

So, each of the segments should grow all together. And now -- but now we have had the more business and -- whether in the EC and the EC business grows all the more and will lead to that more advertising business.

That's true. But -- and -- but then, for example, if you can take advantage of the big data and we can use the data for the targeting for all the services of Yahoo!

Japan, for example, why don't you use the credit card, why don't you buy this product or that we can recommend that? So it's not that for the advertising.

It's for that we can provide that they also -- and actually it might be likely that's also the other services can grow that biggest segments in the business, okay. And next question is about that's the breakdown of the advertising types.

Now, a ¥21.5 billion for the paid search and then also for "the basis" you have the ¥900 million of more revenues on this YDN my question about YDN. And when I look at this ¥900 million more increment revenues of the YDN, is that this is why is that?

So, for example, this in feed advertising and traditional YDN or premium DSP, these are all the type of products and also the advertising concerning the e commerce. And I'm sure I don't know exactly the details, but YDN was not a part of that advertising for the e-commerce.

So several of these would you please explain about the what will be that more details of specific about what will finally result to this ¥900 million of incremental revenues?

I'm sure we don't analyze show details of the Q-on-Q basis. So that but just roughly speaking, more than half is based on the organic growth.

And when we are talking about the YDN, about the half of the growth of YDN and based on organic growth and the less than half is from the in-feed advertising. This is that rough breakdown.

And organic we mean that improving that accuracy of targeting by taking advantage of data. And when it comes to DSP, its universe is very limited, but it's steadily growing and we think.

And also as we mentioned earlier, when it comes to the direction of the e-commerce, it's not the YDN but it was a part of the premium advertising for the e-commerce advertising.

Okay, my third question is that in order to grow the advertising business and you mentioned about the application basis strategy. But what should become the progress of that this native application of strategy?

And when an interview that agencies that are compared to the Facebook they say that they still and they don't Yahoo! don't use so much of that, they don't have the wider usage of the native applications.

And so that's why that the some agents and the other agents now mention about negative level of Yahoo! Japan of this limited native applications.

So I think that's when you think about the application business strategy, how you can make it more fully native based applications? And do you think that's the you need to go to that or and what is current status of that's your business based more on that native application based business and would you be explaining about the datas?

Okay. Whether it's in the browser based for the native applications, it's anyway, we like to choose the best one.

And if you say there's two alternatives, but what will help strongly pushed so far is that anyway in the Yahoo! applications and also for that's the login based Yahoo!

application users must be must increase so that so when it comes to that applications and whether it is native applications or there are a lot of different applications will be possible. But anyway, what we have to do is that for all those smartphone browser users should be switched, migrated into that Yahoo!

application users and also this is our primary focus. So you mean whether it's on a native or not, you don't think it's so much important.

That depends on the service depend on the service, okay.

And my last question is that and this is about the overall strategy and also part of this question is about the shopping strategy so that they Mr. Ozawa, would you please answer to the question later.

But Mr. Ozawa presented that in the -- he would like to take advantage of the strong point for increasing that loyal customers and that is of importance for the other companies and focus on the credit card and the contents or but now you are taking a different approach.

So but when I look at your what you are doing by the end of January and a now, you that's the and the conversion of the shopping and have been just reduced at the end of January and it seems like that and you have to change it to that the and the conversions or reimbursements and then also if you increased that the fees for the premium membership fees, so that it's going against that. It's going against the policy for the expanding the, the broadening that the premium customer base if you raise that premium fees.

So then also and the reimbursements of the points of that one point something or if you change that's the percentage of the returning the points and that will have some negative impacts. So at least that it's not so much over and a tailwind for that your strategy to push more of this e-commerce so that whether all these actions and whether the tactics is linked to your strategy of enhancing your e-commerce?

And when it comes to shopping and Mr. Ozawa will answer in details and later in his session.

But when it comes to positioning of your premium members that now, we have a lot of users and using the Yahoo! services.

So yes, all that are very important customers, but they also which customer to be taken care of and most carefully and we have to focus on that. So in this sense that a most important customer will be the premium members.

That’s why we are providing that the policies to focus on the premium members first of all. So country, the services concerning that the shopping or the credit card is provided, but also, and then we just explained about the overlapping for different services and the multiple service users.

So then first of all we like to increase the number of premium memberships, members and then also in, for them to encourage the usage to have the different services like in finance or the other e-commerce services. When you look at all these and part of this single action, it seems like that we and raised the fees or that they, or something like that, but it seems like negative.

But no. And then we are also able to provide that stay add additional services and exchange further to raising the fees and then also anyway, the premium members is in still positions to be the very, very and a vital for our business.

So that's why we like doing as a whole. We are providing comprehensive and strategies and tactics so that would you please just take your time to look at what we are doing after this.

Thank you.