Yahoo Japan Coverage Launch: $14 Trefis Price Estimate

| About: Yahoo Japan (YAHOY)

Yahoo! JAPAN Corporation (OTCPK:YAHOY) is Japan’s premier Internet company with diversified product suite, which includes eCommerce sites for auctions and shopping, a search engine and other general content such as news, finance etc. The company was started in 1996 as a joint venture between Japanese firm Softbank and US based Yahoo!, and has had a successful 20 year run in the Japanese Internet industry.

Yahoo! JAPAN primarily competes with Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY) and local online shopping giant Rakuten (OTCPK:RKUNF).

See our complete analysis of Yahoo! JAPAN here

We recently launched coverage of Yahoo! JAPAN with a $14 price estimate for the company’s stock.

We’ve broken down our analysis of Yahoo! JAPAN into five main business segments:

1. Online Shopping & Auctions

2. Mobile Advertising

3. Search & Listing Advertising

4. Display Advertising

5. Membership & Other

State of Japanese Internet Industry

Online ad spending in the Japanese market is expected to increase by over 50%, reaching $13 billion in 2016, up from $8.5 billion in 2011. We expect this to be one of the driving factors of Yahoo! JAPAN’s future growth since we think that the company will be able to use its leading market position to capture a big share of this overall spending growth. (Online advertising spending in Japan from 2010 to 2016 (in billion U.S. dollars), Statistia)

Not only will online ad spending grow in the Japanese market, consumers in Japan will spend more money online to make purchases. Research firm Forrester forecasts that eCommerce spending in Japan will increase by more than 50%, to approximately $100 billion by 2016. In our opinion, with online ad spending, Yahoo! JAPAN’s brand and its strength in the Japanese eCommerce industry will help it capture a substantial part of the spending growth. [1]

Mobile Ads to Drive Growth

According to our estimates, mobile advertising contributes approximately 17% to Yahoo! JAPAN’s total value, even though it made up for only 5% of total revenues in FY 2011. Our positive valuation is on the estimation that Yahoo! JAPAN’s mobile ad revenues will increase rapidly, making up around 15% of total revenues by 2015 and 22% by 2019.

The primary driver of growth in mobile ad revenues will be the increase in mobile ad spending in the Japanese market. According to research firm eMarketer, mobile ad spending is expected to double and reach $2.6 billion by 2016. [2] Since Yahoo! JAPAN will heavily focus on expanding its mobile offerings over the next couple of years, we think that the company will be able to capture a sizable chunk of this spending growth, making the division a big driver of growth going forward.

Diversification Provides Stability

Yahoo! JAPAN’s calendar year revenues have been relatively stable over the past three years, growing slightly from JPY 273 million in 2009 to JPY 299 million in 2011. The primary reason for this stability is the high diversification in Yahoo! JAPAN’s revenue lines. In 2011 three of Yahoo! JAPAN’s division contributed more than 20% to the total revenues. We expect this to continue, and possibly stabilize even further as mobile ad revenues as a percentage of total revenues will become a bigger contributor to total revenues in the coming years.


  1. India to be the fastest growing E-Commerce Market in Asia-Pacific; Market Set To Grow to $8.8 Billion by 2016, iamwire
  2. US to Top Japan as World’s Biggest Mobile Ad Market, eMarketer

Disclosure: No positions