Executives
Manabu Miyasaka - President and CEO
Masatsugu Shidachi – Manager, Marketing Solution Company
Kentaro Kawabe - Chief Operating Officer
Shin Murakami - Chief Mobile Officer
Analysts
Keiichi Yoneshima - Barclays Securities
Yosuke Tomimatsu - Merrill Lynch
Yoshio Ando - Deutsche Bank Securities
Yoshitaka Nagao - Nomura Securities
Oliver Matthew - CLSA
Takayoshi Koike - Goldman Sachs
Hiroshi Naya - Ichiyoshi Research Institute Inc.
Sumito Takeda - UBS
Yahoo Japan Corporation (YAHOF.PK) F1Q2012 Results Earnings Call July 25, 2012 12:00 PM ET
Manabu Miyasaka
Yes. I’d like to now present the Business Results of the First Quarter of FY 2012 of Yahoo Japan Corporation. I’d like to first of all spend about 30 minutes to make the overview.
So I’d like to first of all give you the financial highlights. The revenue was 77.5 billion yen that is 8% year-on-year increase and quarterly net income was 25 billion yen, increase of 7.6% year-on-year. Now the trend of the revenue is shown here and we have been growing in quarterly revenue.
Now looking at the growth trend, this is the new information that we added and starting with this year, we renewed the management team and this was the first quarter after the new management, so we try to avoid the drastic worsening of the business performance. We have been very careful. But from the aspect of the growth, I think we made a pretty good growth.
Now let’s look at the breakdown of the 77.5 billion yen. First of all, the Marketing Solutions business that is including advertising and information listing. This business grew by 12.5% year-on-year, consumer business including e-commerce and premium members, and so known advertising business that is the business that we receive fees from the users, the consumer business grew by 1.2% year-on-year.
Now turning to the advertising, let’s look at the breakdown of the advertising on page six, and the overall sales revenue was 43 billion yen and that is an increase of 4.9 billion yen year-on-year, double-digit growth was achieved.
Now looking at the listing and display, listing grew by 12% and display grew by 15% and from this time we started to show the ratio of the smartphone advertising revenue. And the PC business, of course, we tried to maintain other business and we try to grow the PC business, but also we try to grow in the smartphone advertising revenue, and this I believe is a new challenge for us that to provide the information on the smartphone revenue ratio.
Compared with the previous year, the percentage increased from 3% to 10%, especially for the listing advertising and also the display advertising part for smartphone. Despite the fact that that the value is still small but growth percentage is quite high. Now this is the year-on-year growth trend of the listing and the display advertising. At the first quarter both listing and display advertising grew in double-digit.
Next please turn to page eight. This shows the listing advertisement revenue breakdown by industry. In particular, you have the transportation and leisure and recruitment services doing very well, and in terms of the transportation, especially the travel did very well.
Last year we were impacted by the disaster caused by the earthquake and therefore, there was plummeting of the segment. But this year we did very well in terms of the transportation and leisure.
And in terms of the negative which is the Internet information service, we have the so called flat market and last year around this year, we had many flat market, but now if we see a decline in that domain.
Now you see the display advertisement revenue breakdown by industry. As in the previous case, transportation and leisure did very well and on the other hand Internet information services declined.
Now, let’s take a look at the e-commerce transaction value. In terms of Shopping as compared to the previous year, we did 74.6 billion, increased by 4% and in terms of Auction, there was negative as compared to the previous year of 1.9% and you have card and digital content, which is others, which is not a physical products that are being sold and bought, and there was an increase of 2.1%.
And in terms of e-commerce, it went up by 0.7% and in terms of the total it is 2.8 billion, and as compared to the general market that this was relatively weak, so we would like to realize two-digit growth.
And in terms of the good news, smartphone did very well in EC and last year it was 7.6%, but in terms of the Shopping and Auctions transaction, due to the smartphone it increased to 17.6%, which is more than doubled of the previous year.
So that was very quick summary of the revenue and now let’s take a look at quarterly profit trend. This shows the first quarter comparison of the previous years and you see a growing trend.
This shows the quarterly operating income year-on-year growth trend. We were able to increase by 8.6% and this is a reference point that you might want to look at as compared to the previous year.
This is the review of the first quarter. In terms of revenue operating income and ordinary income, we surpass our forecast that range. But in terms of the quarterly net income, we have Firstserver, which is 100% subsidiary company, there was a data loss incident and because of the expenses incurred upon this incident, the quarterly net income fell within the range and so this is all for the first quarter. And the next page you see the business outlook for Q2. This is quite tough explanatory.
So that concludes the brief summary of the first quarter business results. Now in the shareholders meeting and we talked about the new profit growth and I’d like to now share with you the some of the progress that we made in reaccelerating our profit growth.
So the image of the profit growth is that by 201X that is latest 2019 we’d like to double the operating profit. So more specifically what are we going to do? There are three major things that we are trying to do.
I’d like to, well, the top one is similar to what business that already exists and the bottom one is more challenging that is for the future. Now let me talk about the Only 1 Strategy and talk about the progress that we’ve made.
This is Yahoo’s top page in -- on PC and the Yahoo! Services were shown. But in addition to the Yahoo! Services, we wanted to have the link to the best services, so that we can increase the value of the portal.
So we would like to of course have the link to the Yahoo! Services. But we cannot do so all the time. There are 150 different services. We cannot concentrate all of our resources for all of them under the current circumstances of the competitive by Internet environment.
So the top 20 competitive services where we are number one and the dominant power. We would like to focus our resources. So we’d like to make sure that those 20 services are provided in a very convenient way to the users.
So what about the rest of the services? Of course, we will try to be number one on our own. We will continue make efforts. But in some cases, for example, Yahoo! Mobage was our partner.
So we would like to work with other companies to improve our businesses in some other cases. For example, we shifted from Yahoo! Recipe to Cookpad. So we don’t want to stick with our own services but rather try to link with the better quality partner services. So that is something that we started.
So by focusing our resources to those competitive services, we would like to provide better services and our strength is that that our top page on one screen, we’d like to increase the value of the top page. So by linking this to the Only 1 services we’d like to improve the value.
So whether it is good idea to focus on those top 20 services, you might have different views, but as you can see 80% of the Yahoo! News and Yahoo! Services, top 20 services. So we have to make sure that we don’t loose those 20 top services with PC and also we’d like to do so for the -- with the smartphones.
Now top 20 services, what is the growth trend? The -- I cannot show you the vertical axis, in terms of the unit, but I’d like to show you the trend. In the first quarter 2012, we grew in the daily unique browsers or DUB, so we’d like to continue to make sure that we grow in DUB for those 20 services.
The new challenge or new efforts is the discriminate that we created inside the company. And this is the ranking list and as I said, that there are 150 different services now and in terms operating income or the usage by the users from the different perspective, we try to make the ranking of those services.
And as a result, if you are Y4, you want to make effort, so that you can go up to Y3, and if you are Y3, you will try to make Y2. So if you become Y1, the human resources, or promotion resources, or cash resources, you would be better off or you would be prioritized.
So this is the competitive environment, the healthy competitive environment that we’d like to create inside the company. So Y1, Y2 represent the top 20 services. So we’d like to make sure that all the services can be Y2 -- Y1 and Y2, so that you can get more resources.
Now, what is YC? This is a new services we will start and this might become Y1 in the future, but initially we start with small scale, so this C stand for Challenge. And once a month our CMO have a half day so that we can have a competition in coming up with the new ideas about the new services. So through those efforts, we’ll try to formulate the YC and try to foster and nature them too become the Y1 to Z.
So we try to do many things and some of the major measures are introduced here, concerning news, we have Yahoo! News business and we started this. And Yahoo! News, entertainment, sports, business, international politics, Yahoo! News covers the wider range. But this is more for the business news for the future decision makers. So that is intent behind this new service and we’d like to try to foster this.
The GyaO! was traded and this is a very timely for us. And MLB, the video information is something that we also started and Yahoo! Services is the new efforts that we started.
Yahoo! Matchmaking is another service we have and this is growing steadily, and right now over 60,000 members profiles are registered. We have fewer children and how can we solve that issue that is the kind of dream we have.
So as a new service we’d like to make sure that we nature this Yahoo! Matchmaking. I think this is one of the largest matchmaking services via internet in Japan. And smartphone version will be launched so that we would like to increase the number of the members registered.
So those are the activities that we are doing over the internet. And the next one is the Most Powerful Tag Team. Yahoo Japan is the internet company, but we’d like to also work with non-internet companies.
One example is a partnership with SoftBank Group, including myself, I often talk with the management people of the SoftBank, so that we can find out where we can generate the synergies and there are some potential candidates.
And one thing I’d like to share with you is what we announced at the software world and this is what we call ultra customer acquisition. We have plan to offer an effective customer lease platform and we’d like to make sure that we’d like to -- we can utilize the information technology to acquire more customers.
For example, there is 50 billion yen information -- worth of the information shared and we’d like to make sure that we have a special promotion offered on our site, so that the users will come to the physical shops and this is the online-to-offline, O2O marketing strategy.
So O2O whether actually the customers or the users go to the physical store. This is one example that I like to show you, which is called Pre-mono, premium mono, together with the manufacturer.
For example the compares -- the coupons are issued and after checking with the Yahoo, the customers can go to the store to use the coupon. So there were many people who went to the store to use those coupons and actually approximately 60% of the visitors spent more than just the cash, I mean, the coupons.
So it is possible to try to create the synergy like that. So O2O, we will be trying different things and but as a market, I think has a very strong big potential, so we would like do this one after another.
The second collaboration with other industry is the B2B and this with ASKUL and the target until now in Yahoo! Commerce. We did not have the actual distribution of the goods. So by working with ASKUL we would like to have the same day delivery, a 70% of the population and 100% delivery to the -- for the day after the order.
So I’d like to share with you the current status, including myself two CEO’s are having the discussion for the development of this service and actually we dispatch some of our employees to ASKUL, more than 10 people are working ASKUL people. And we plan to launch the new service in the four timeframe. So ASKUL is a 2013 in May timeframe. This is the target for that and we are transaction value, target is 18 billion yen for the first year.
Now talking about the third idea that we have, we have mentioned the Point business. We have Yahoo! Point, but that is only for online and not for offline. There is no place where you can use or accumulate the Yahoo! Point. We want to go into the offline arena as well, so that Yahoo subscribers will be able to utilize the points.
Next screen, we are scheduled to start the business with Culture Convenience Club. As I have explained to you some cases in which Yahoo and net -- non net related companies will be collaborating together.
First to me is exploring in the Frontier that we have not have our foothold in, and so we would like to take some time as to try new orders.
The first one is related to the overseas business. In India we started business and we have made an announcement already. We will be tying up with SoftBank Capital and maybe it is might be news for you, but for the first time in Yahoo’s history we are dispatching our staff to abroad offices.
And by Yahoo Inc. we have received overseas information. But along with that we do believe that we have to send our own personnel in order to gather information. Therefore we started in a small scale by sending our staff members to New York and in terms of Yahoo Inc. they have started their business here in Japan via Yahoo Japan. And likewise we will like to have our antenna extended abroad so that we will be able to expand our business abroad as well.
Like in the case of our Indian business we do not believe that we can have the revenue of several percent in initial term and we believe that we have to have a long-term perspective in generating revenue from those overseas businesses.
Now let’s talk about the domestic business. Our corporate mission is to work as the problem resolving engine. Therefore, we will like to tackle one social issue per year. So every year we will define what is the challenging mission that we have to pursue. And this year we will like to try our limit by utilizing IT in reinvigorated northern Japan.
As we have e-commerce online business and we have Ishinomaki reconstruction binto or lunch box. So Ishinomaki is known for different dishes that seafood oriented, so we would like to continue pursuing this lunches and also we will be working with the Fukko Department online Shopping platform and we have our offices in Ishinomaki as well.
And if possible, we would like to break-even and if possible, on top of that we hope to generate revenue from these businesses as well. So we would like to double fold our profit in the years to come and those other projects that we will be pursuing to realize that.
And next, I would like to report to you the progress on our smartphone growth initiatives. This is a daily unique browser trend of smartphone. As we can see, we are growing as expected.
There are different projects that we are handling in regards to smartphone. In terms of the top page of smartphone of Yahoo Japan, in the end of June, in terms of DUB as compared to the previous year, it is 1.4% higher or rather 140% higher, meaning 1.4 fold higher and we have our different services and it is very important for the user to click and go to the next link. And so the so called [shower] impact is very important and we believe that it increased by 190%.
And in terms of the smartphone, some people say that the portal function might diminish and we were very concern about that negative impact. But it’s not a question of whether portal is viable or not, but the important thing is whether the service is gearing to the needs of customers. Therefore, we will be further reinforcing the services.
And this is a Yahoo! Weather disaster information application. It is ranked number one in category for both of iOS and Android and it is also number two for over free-of-charge. Right now, we have more than 100 applications and in terms of the cumulative download, it is approximately 30 million.
This is the statiscope of our application. As smartphone grows is very important and as compared to last year, the market itself is improving but we want to further accelerate that trend and it is important that all our employees will have iPhones and iPads.
Therefore, within this fiscal year, I hope that we will be able to distribute iPhones and iPads to each and every employee, and so they will be able to use them on a daily basis to conduct their business. And so we want our employees to be fully equipped with important information they need to conduct business.
Last, but not the least, I would like to talk about our internal new project. We have smartphone first and engineers and creators are very important in pursing those projects. And we need to hire high caliber personnel and there are different projects going on in order to materialize them and we have a defined Black Belt program.
So we want the high caliber engineers to be in management. But instead of just having those engineers becoming management, we want them to be professionals and experts. And right now we have three Black Belt certified engineers and we would like to increase those Black Belt holders and I want those engineers to be the experts in the area of engineers and development.
And so we have some reference material after this. So please take a look at them at your leisure. Now, we would like to open the floor for Q&A. If you have any question, please raise your hand and we will get you a microphone, and once you get the microphone, please mention your name and affiliation. If you have multiple questions, please ask one question at the time. Thank you. Do have any questions?
Question-and-Answer Session
Keiichi Yoneshima - Barclays Securities
Keiichi Yoneshima from Barclays Securities. Thank you very much for the presentation. I think it’s easy to see presentation. Thank you very much. Those numbers are very easy to understand. I would like to express my gratitude for that. The first question I’d like to ask is that, at the advertising revenue you mentioned that the percentage of the smartphone is about 10% on page seven.
If you look at the mobile as a whole, including the feature phones in terms of the advertising revenue, so combining the smartphone and the feature phone I think it used to be 8% last year. So what was the percentage in the first quarter? That’s my first question? I have four questions. One at a time I’d like to ask.
Manabu Miyasaka
Yeah. If you make the apple-to-apple comparison, previously it was 8% and it’s now up to 12%.
Keiichi Yoneshima - Barclays Securities
I see. Thank you. So if you look at the feature phone, it increased to or it’s -- from 5% to 4% and the smartphone increased up to 10%. Is that right?
Manabu Miyasaka
Yeah.
Keiichi Yoneshima - Barclays Securities
The second question is that smartphones as a whole including Advertising, Shopping very strong. So the reason behind that, for example, in the area of the advertising, I think there is a natural trend, for example, if you use the smartphone, you do more searching that has been said, and that’s one thing. But in addition to that on page 41 or 42, your efforts were also quite successful I believe?
So the natural increase or the trend, do you think is the dominant portion and the shifting the users to the smartphone has been positive for you or you have been focused upon the smartphone as a strategy, and do you think that your strategy has been effective? How do you analyze those two major factors?
Manabu Miyasaka
Well, first of all, the product, it’s not just the smartphone, but including the PC services, the listing advertising. We have improved our products. It’s not just this year what has turn but we continuously made improvements and that has turned out to be effective.
If you have good products you have to also have a very good sales team and concerning this term, the sales team did very well including the sales via the smartphone. I think the sales people have been very aggressive.
So we didn’t have incentive -- incentives for the sales people. But we started offering the incentives, so that we have more healthy competition among the sales people. So the product side and sales side, I think both of them have been effective. Anything that you’d like to add, seems, no. So until now you didn’t have any incentives for the sales people.
Masatsugu Shidachi
Masatsugu Shidachi from Marketing Solutions. For the sales people or incentives, for the individuals and the teams we did not have them in the past. But this time, the sales profit if you expand them, there will be a performance points or performance award, performance portion which will be link to your bonus.
So if I may add to that, starting with this year, the advertising companies and agencies, also we made some changes and started off our incentives, so that advertising agencies find it easier to sell. So we are currently making some improvements for the advertising agencies as well.
If I may add, I think that natural growth and the other factor. In the first quarter, I think, that the natural increase was more than the other factor. So the improvement of the sales and the product is something that we can expect even more in the future.
Keiichi Yoneshima - Barclays Securities
The third question is about the forecast. I tried to make a simple calculation, both revenue and the profit vis-à-vis the previous year’s 6% to 11% increase in revenue and profit expected.
So the first, in a similar way as a first quarter, basically advertising -- display advertising and listing advertising, you think that you expect a double-digit growth to come up with this forecast or consumer business. For example, do you think that it will improve? So could you explain the background or assumptions behind this forecast?
Manabu Miyasaka
Yeah. I think you are right. Basically, relatively speaking the growth of the advertising, we believe is going to be strong. So double-digit advertising is expected and the percentage of that against the total is big or high. So that is the reason.
Keiichi Yoneshima - Barclays Securities
The last question is a qualitative question. Yahoo internet sales CEO was decided and it’s being a few days and I don’t know what kind of relationship we will have with the new CEO. But do you think that would change the relationship with Yahoo Inc. or about the things that you would work together or not work together? Do you have anything that you can share with us?
Manabu Miyasaka
Well, it is being a few days I just exchanged some e-mails, but nothing specific. I think that new CEO is very busy. So we don’t have anything specific I can share with you, but she is very knowledgeable about the products. She came from the Google. So what kind of management she is going to do in the product advise, I’m sure that that I can learn a lot from her. So, I’m looking forward to it. Thank you. Any other question? Yes, please.
Unidentified Analyst
Thank you very much. I’m (inaudible) Asia. Please turn to page nine of your presentation. For others, you have a very high number. So, I want to know what is the content within others, can you explain?
Manabu Miyasaka
Well, if you turn to page 57 and 58 of the attachment, you will see the breakdown. But the others cover a wide scope. Okay. So we will look into the matter and respond to you later.
Unidentified Analyst
Thank you. I have another question. In terms of SG&A, it went down. Page 51 of your presentation, I see the breakdown and in terms of the commission and the promotion expense, and year-on-year, there was not much of an increase. But I would like you to explain to me in detail, how do you control SG&A?
Manabu Miyasaka
Well, in terms of SG&A, in terms of the personnel expenses, we had new recruits and because of that there has been an increase. But in terms of business commissions, as well as sales commissions, we think about ROI and try to analyze whether those expenses are necessary or not.
And we try to analyze the necessity and try to reduce these two expense amounts as much as possible. And in terms of business commission, as well as sales and promotion costs, these are very high relatively speaking. So we try to reduce these two items as much as possible.
Unidentified Analyst
Thank you very much.
Manabu Miyasaka
Any other questions?
Yosuke Tomimatsu - Merrill Lynch
I’m Tomimatsu, Merrill Lynch. I have four questions altogether. So this is a follow-up question. In terms of sales promotion costs, as compared to the previous year, it increased slightly. But in terms of Q3 and Q4, it plummeted comparatively speaking. So strategically speaking, I understand that EC will be the area that you will be investing. That was the commitment by the previous year?
And in terms of EC, you must be investing much in sales promotions but then did you change the strategy and so do you believe that in terms of current situation, the time is not right for you to have sales promotion costs?
Manabu Miyasaka
In the latter half of last year, in terms of e-commerce sales promotion, we invested a lot in that area. But when you think about efficiency, we want to actually harness as much impact as possible by spending the least amount. That is why, in terms of, between the fourth and the first quarter, we reduced sales promotion costs.
Yosuke Tomimatsu - Merrill Lynch
Is that direction that you will be taking in terms of 2011 March fiscal year?
Manabu Miyasaka
I believe that things have changed and if you are to reduce the business commission and sales promotion that will be a completely direction. Well, all in all, we will like to pursue ROI impact as much as possible.
Yosuke Tomimatsu - Merrill Lynch
Now, in terms of number of human resources, I do understand that you want to expand our business that means that you will require more human resources and you will be focusing on 20 top services and are you going to reallocate your current personnel, or are you going to hire more people including the new graduates?
And unless you do something about the human resources, you will not be able to further reinforce your 20 top services, especially when you think about the sales DUB may. Do you need to have more people?
Manabu Miyasaka
Well, in terms of personnel, this is related to SG&A. We have to think about the sales and we want to increase the users and there are different management objectives that we want to attain. But in terms of new management, we want to reaccelerate the growth of profit and that is ultimate goal that we will be pursuing.
And so in terms of net sales and transaction volume, of course we are not going to neglect them but at the end of the day, we will focus on the profit or the bottom line.
Having said that, in terms of the personnel expenses and also we have our utility cost, as well as rent, we have to look at the numbers very carefully and see, whether by adding new people we will be able to increase our profit.
Let’s say, if we do not hire more people, we already have 5,000 people. So we can retrain them and we can have incentive program, so that we will be able to revitalize the activities amongst our current employee, so that they can perform well.
And so, instead of just looking at hiring more people, we should try to leverage more on the current human resources, so that they can utilize their capability more than ever before. And so we do not have any plan to just increase the number of heads.
Yosuke Tomimatsu - Merrill Lynch
Now the third question out of four. When you became the CEO, you said that you are going to drive safely at the very beginning. But after you drive carefully, maybe you might have the next phase in which you will have long-term perspective and short-term perspective as well. And I do understand that you plan to increase the revenue and profit in the years to come. But you will not be hung up on those two aspects only, but you will try to pursue long-term growth?
Manabu Miyasaka
Well, we want to double the profit and that is our ultimate goal, and if we were to double the profit on a quarterly basis, we would like to build up our profit. So it’s not that we're going to just enjoy the great leap forward, but rather we would like to take a steady increase in our revenue and profit.
And, maybe at one point there might be a phase in which there might be a decrease in profit and revenue. But at this point, we believe that every quarter we can increase revenue and profit.
Yosuke Tomimatsu - Merrill Lynch
Now, in terms of Yahoo, we could not be -- I understand that you plan to stop the service. But then even this quarter, you are seeing a growth in the service. And so are you going to all of a sudden stop the service, or are you going to redesign and provide a similar service, or are you going to ex-recruit and come up with a new service? I know that recruit is a giant end personnel business and but just we could not be -- is very important segment, I want to know what is your view?
Manabu Miyasaka
We will end Yahoo, could not be in December. We will not collaborate but we will independently conduct the business. And in terms of the relationship with recruit, we will like to continue having a good relationship, so that they will have the advertisement on the net via us.
And so in terms of financial impact, momentarily, there might be a decline in the revenue. But I do not think that there will be a plummeting of revenue in the segment. We will continue having the momentum of growth.
With recruit, we have diversity in terms of collaboration and of course, there are some relationships in which we might feel some tension. But at the same time, there are other avenues in which we can have a very amiable collaboration.
Kentaro Kawabe
I’m COO, Kawabe. We will continue having relationship with recruit. But then there will be no exclusive relationship per se, but we will cooperate with each other to advance ourselves and recruit is challenging its own model. So they are trying to find out, what is the new site and what is the new Internet business model and we will challenge a new portal as well.
There is a company called [Endeavor] and they are focusing on recruit business. As we will ask [Endeavor] to look into the new business model and we will continue recruit related businesses in the future as well.
And as mentioned by Mr. Ohya, there might be a small decrease in the revenue but there will not be any dramatic decrease in the revenue because we plan to double the profit. Thank you.
Manabu Miyasaka
Any other questions?
Yoshio Ando - Deutsche Bank Securities
Yoshio from Deutsche Bank Securities. I have three questions. First is on page 23. Top 20 or core 20 services, you mentioned top five today. So specifically, which services are the 20 services? I have never seen the list, is this something that you cannot disclose? If it is possible, I’d like to know, what are the 20 top services and which are the top five services?
Second question is on page 43 about application. You mentioned more than 100 applications and the 30 million downloads and you have been the number one. Concerning applications, 30 million or I mean, the number one, what is the meaning of that for Yahoo? It’s difficult for me to understand, so you -- could you explain that?
The third question is a little vague question I have. The smartphone version, Yahoo, it's probably very convenient, too convenient. So PC, in comparison to the PC version, advertising is not so visible in my view?
So could you comment on that and what’s the business model in the future? For example, for the smartphone version, you’d be charging more? Will that be a possibility in the future? And the real-time share prices will be also offer, so is that something that you expect?
Manabu Miyasaka
We have high expectations from of our top five to top 20, Y1, Y2, Yahoo! Talk, Yahoo! News, Auctions included. Others ones we have not yet disclosed. And also there are some replacement and they are suffering in changes, so we would internally announce them but I can -- we cannot disclose them at all about the top 20.
As far the download of the application, 30 million in total and more than 100 application. The significance of that, well, we have to make sure that those are used. So number of downloads and usage is the key. That is really the starting point for our revenues. So the number of the download of the application for each service is something that we have to understand.
And smartphone, Yahoo top page, I think you are talking about the display and of course, what kind of advertising is the best for the smartphone? Frankly speaking, there is no clear solution or answer to that. So we are trying different things.
But what we can do now is to make sure that the many people would use it and that's controllable for us. So we are making efforts so that many people will use it and marketing solution company and CMO working together, so that we can improve the display. So that’s something that we are going through the trials and errors.
And as for the real-time share price, our expectation from that? Yes, finally, the day is going to come for the retail investors in Japan. I think we expect the number to increase. Yahoo numbers is the service that we have. 20 minutes delay was what we had for the share prices. So the real-time share price is now going to be possible. So we hope that many investors will use their smartphone or PC to check their share prices. Any other questions?
Yoshitaka Nagao - Nomura Securities
Thank you very much for your presentation. I’m Nagao of Nomura Securities. There are three questions altogether. Firstly, I have a question about auctioneer consumer? In Q1, the number decreased, please tell me the background and what is your forecast for the second quarter and onward, and what kind of measures you plan to take to stop this from happening?
Manabu Miyasaka
In terms of the Auction, there are external and internal factors. And in terms of internal factors, we need to have more items listed and we want to have more people participating in the enjoyment of Auction. And one major factor is we are not seeing more people participating in the listing of the items to be auctioned.
Now regarding the external factor, last year, we had the earthquake and after that in terms of small vehicle, it sold very well and one unit vehicle is very high and that really contributed in the Auction sales of last year’s quarter. So comparatively speaking it went down.
Yoshitaka Nagao - Nomura Securities
Now in terms of Q2, you have the guidance and I want to ask you a question and in terms of April to June guidance, it seems that the guidance of the Q2 is higher in terms of the number; you believe that the advertisement revenue will increase by a two digits?
But in terms of the advertisement, in terms of April to June, they will increase in terms of advertisement revenue, but in terms of July to September why do you think, there will be further increase? And can you tell me by industry, which domain do you think will contribute to the growth of the advertisement revenue?
Manabu Miyasaka
Well, there are of course, seasonalities. And I guess the scenario that evolved in the last fiscal year is the same as this year. Also in terms of the growth rate it will be one digit or two digits. We will enhance our product and we will revitalize our sales activities, therefore we hope that we will be able to obtain two-digit growth.
And so, in terms of the seasonal factor, the same factors last year are applicable to this year. And so in terms of Q1, natural factors contributed to the growth.
Yoshitaka Nagao - Nomura Securities
But in terms of Q2, you will have -- you already increasing your sales activities and enhancing the product and that will contribute to the growth.
Manabu Miyasaka
Well, in terms of the natural growth, I was talking about the smartphone and when I talked about PC altogether from Q1 we made improvements in the product, as well as sales team. And that momentum we will continue in Q2 as well.
Yoshitaka Nagao - Nomura Securities
Thank you. Now, my last question. So, we have a new president and we are collaborating with other companies. And so instead of just focusing on the domestic companies, do you think you will extend your arms abroad and you have been focusing on the domestic market, but do you have any strategic collaboration with the external parties that exist aboard?
Manabu Miyasaka
Well, in terms of the potential, I think there is a possibility of collaboration overseas. We announced our Indian project and also we sent our staff to New York. Having said that, in terms of e-commerce and O2O and advertisement, we have to initially focus domestically, because these three domains are growing and we want to enjoy this momentum. But at the same time, we will look abroad as well, so there is a good balance between the two. Thank you. Any other questions.
In terms of the listing advertisement there has been an increase I believe and Fashion, Accessories, Financials and Insurance and Health and Social activity and Welfare, those actually contributed and each segment wise, it is about 200 million yen, but all in all, in addition we obtain 1.4 billion yen increase. Thank you.
Oliver Matthew - CLSA
Good afternoon. Oliver Matthew from CLSA. First question is that from Yahoo Inc., I think there are several occasions where the buyback was mentioned, but what about the recent trend?
Manabu Miyasaka
Well, the situation that I -- we explain previously has not changed. We have not made any progress.
Oliver Matthew - CLSA
Thank you very much. But in Q2 net income growth rate comparison to the operating profit is going to be high plus 11% or plus 17% or so. I might be wrong? Q2 guidance, I’m talking about the guidance, so why the net income is in that range?
Manabu Miyasaka
You are talking about net income.
Oliver Matthew - CLSA
Yes.
Manabu Miyasaka
Well, so concerning the first quarter -- in comparison to the first quarter. The first quarter there was a incident of the Firstserver Inc. there were extraordinary loss of 1.2 billion, so that push down the net income.
And so in Q2 of second quarter, we would be completed with that, so there is no expectation of that to happen in the second quarter. So in comparison to the first quarter the net income or margin seems higher or profit there was higher.
Oliver Matthew - CLSA
Right. I have a question about the product. Specifically, the smarthphone products, what are the products which are selling the most in terms of the display. Another question is the O2O, from my perspective this is kind of brand new product, so its almost like a BTL, until now the listing, I don’t know whether it’s a BTL or not, but basically it’s a ATL product. But in the future, do you think that it will be a BTL by focusing on the O2O, so that you can, growth rate can be increased?
Manabu Miyasaka
What is BTL, I’m sorry? I see. So I talked about the ultra customer acquisition and using the bottom of the screen that something that we are trying to do. So the space that we have not yet utilized probably can be utilized for O2O.
So what kind of market can we acquire or obtain in O2O. Yahoo! Local or other teams, we are trying to have a lot of discussion. Yahoo! Settlement and at least in the other sales promotion or flyer market exist, and they do not utilize the information technology.
So there are those opportunities for us to leverage. So we’d like to find those opportunities as soon as possible. So BTL probably is one of the things that we can use. As per the smartphone display anything, which are selling the most were the most popular ones?
Masatsugu Shidachi
Shidachi is my name. The smartphone display right now we are focused upon is the brand panel that is the top page and PC and smartphone version as premium advertising, is that going to be recognized as important. In the past year or so, we have been making a lot of efforts to sale that and finally it is starting up. The market is starting up.
So smartphone version, brand panel, I think it’s now being recognized by the market. So, I think in the premium market advertising. We’d like to make sure that we can start it up for the smartphone. So that’s the current situation.
Oliver Matthew - CLSA
I have one more question concerning that. So like a Galaxy, the screens are becoming larger. So how large do you think it would be, so that you can use the marketing or you can think that the marketing people would utilize it. Because iPhone 5, some people says that its larger than the current one, but say that its larger by 1 centimeter, but do you think that, that would impact your sales?
Manabu Miyasaka
Frankly speaking, answer to that, if we know the answer. We will be able to create the market with confidence. But frankly speaking, we do not -- we have not yet found the answer. We have a lot of hypothesis and we are trying many things based on the hypothesis.
The size of the screen, the limited space is one of the reasons, but that’s not the only reason. As a human being, the distance with the device and also the area, the space on the screen, I think that the percentage is very important or the balance, and also the content needs to be richer. So we have to increase the number of the information, so that we can deep in the engagement with the users, so for different devices there should be a different point of the balance.
So expression, format, the content, richness, those are the things that we have to work with our partners, so that we can make improvements. Thank you. Any other question? Person sitting in the front.
Takayoshi Koike - Goldman Sachs
Thank you very much for your presentation. I’m Koike of Goldman Sachs. Please turn to page 59 and 60. I have questions related to that data. And on page 59, you have smartphone monthly distribute and what is the number for mobile please?
And also I have related question on page 60, you have the auction shopping of smartphone and I want to know the mobile breakdown? So that’s my question number one.
Manabu Miyasaka
Including mobile, the overall page view will be 12.49 billion to 12.9 billion and in terms of transaction volume by smartphone meaning a total of mobile, including a smartphone it is 65.5 billion. Now related to that data point, I don’t have the comparison with the previous year?
Takayoshi Koike - Goldman Sachs
But what is the trend you have PC feature phone and smartphone, what kind of trend do you see as compared to the previous year?
Manabu Miyasaka
In terms of PV, in terms of PC/PV as compared to the same period of the previous year, it went down slightly. In terms of feature phone, needless to say, it declined dramatically. In terms of smartphones of PV it increased dramatically. And so in terms of the total PV, you can see the numbers as indicated here and it increased slightly.
Regarding e-commerce? At the transaction volume wise it was flat. And in terms of transaction value via a smartphone it increased dramatically and in terms of PC and feature phone, the transaction value went down.
Takayoshi Koike - Goldman Sachs
Thank you. My last question, it is on page view. You have native applications on smartphones and I remember that someone said that you will count and on the other hand some people mentioned that you don’t count, which is the case and if you discount, what is the ratio?
Manabu Miyasaka
So the native application count use via the smartphone? Do you know the number?
Shin Murakami
I am Murakami, CMO. In terms of the native application accounting methodology, some portion is not counted, but most of them can be counted. Regarding the details, within the application we have the SDK library per county and when you move from one screen to another, or you move from PC to another, we take the count behind to screen, therefore the majority of our native applications can be counted.
We have WebView and you, as we start the Safari and you can conduct the internal browsing and via WebView you can count it. In terms of the older version of applications, SDK is not upgraded. Therefore, some of the native applications can not be counted. But then the majority of native applications are precisely counted for. Thank you. Any other questions.
Hiroshi Naya - Ichiyoshi Research Institute Inc.
[Naya] is my name. I have three questions. First question is that this time the sales via smartphone was very strong, advertising, commerce, transaction, you showed us some information. Now the browser and application via browser and via application, if you break them down, what was the numbers and what were the changes that you saw, could you talk about that?
Manabu Miyasaka
Are you talking about commerce?
Hiroshi Naya - Ichiyoshi Research Institute Inc.
For each, I’d like to know both, advertising and commerce?
Manabu Miyasaka
We don’t have that. Well, actually for commerce we do, for commerce auction or there are more via application in the case of Auction.
Hiroshi Naya - Ichiyoshi Research Institute Inc.
So you don’t have the information on advertising.
Manabu Miyasaka
No. No. We don’t.
Hiroshi Naya - Ichiyoshi Research Institute Inc.
I see. The second question. From this time the stake in ASKUL is reflected in [PL]. So how in terms of the profit and loss, how is it reflected, it’s difficult for me to see, could you explain that?
Manabu Miyasaka
Well, at this time, the 30th of June is the deemed acquisitions, so that would be starting from the second quarter.
Hiroshi Naya - Ichiyoshi Research Institute Inc.
The last question, you are working with Cookpad and as your own services, some of them are not strong, but that is where you need to work with others or is there are any particular job that you need to work with outside partners, or do you have many of them or specifically which are the once that you need to strengthen by working together with the partners.
Manabu Miyasaka
I can not really give you the specific answers. But those users or the customers coming to the Yahoo, we’d like to make it most convenient. We’d like to have a links. I think it’s a very important job for portal. So there are so many possibilities as many as the number of the users.
But Cookpad, working with the Cookpad, this is something that we did for the first time, whether it was a good idea, not good idea. I think we would find out the issues and challenges, and we’d like to review that and we’d like to, try to think whether we will have a similar. I can not really give you the specific names, sorry. Thank you. Any other question? Person sitting in the back.
Sumito Takeda - UBS
Thank you. I’m Takeda, UBS Securities. I have two questions. Question number one, it is about Firstserver. I do understand that you have taken some measures and I want to know, what kind of counter measures you took, what is the statiscope?
Second question is in the first quarter, you had the extraordinary loss of 1.2 billion yen. So can you tell me the breakdown? And so what kind of extraordinary loss it is? And also do you expect further extraordinary loss to be incurred in the coming quarter?
Manabu Miyasaka
So in terms of what we did as a counter measure. It is a subsidiary company and so they have to take the initiative. But of course, we will support them. And so we supported them after the data loss event and also we are providing advice.
And there are companies that suffered data loss and so we are trying to deal with this situation and as a third party’s point of view, we come up with report to understand what cost it, and what should be the preventive measures.
And we want to disclose that report so that it can contribute to the prevention of similar incident from happening in the future. And so we have the third-party examination or investigation team that will find out what was the cause of the incident.
In terms of breakdown of extraordinary loss, we have damages to be compensated and there is a rule by Firstserver and all in all, it is about 700 million yen in terms of the maximum damage compensation.
And we actually reevaluated the asset and the remaining of 1.2 billion is the reevaluation of the asset. And so in terms of what is the maximum loss? We were very conservative in coming up with the loss, and so in terms of the extraordinary loss, I do not believe that we will incur another loss in Q2.
Sumito Takeda - UBS
This is a follow-up question, you have Only 1 Strategy for portal and I want to know who you will be partnering in the future, let say, you have the collaboration with Cookpad and you have collaboration with other company, and of course, you have to enhance the value of your portal? And your partner will enjoy value increase as well?
And how do you plan to pursue further sales or revenue with your counter party and I know that you have some scheme with Cookpad and what is your scheme? And also in terms of the collaboration with other companies, you do not intent to generate dramatic revenue from those partnerships?
Manabu Miyasaka
Well, media company is the entity tieing up with Cookpad. So, I would like to give you the general aspect. A few years ago, we came up with the strategy of open strategy and so it does not have to be Yahoo Japan, so but we tried to collaborate with external parties and so that we can and have revenue generated from those partners.
And we don’t have API vis-à-vis a Cookpad. But this is a new business model in which we can generate a more advertising revenue, as well as billable business. Any other comment?
Sumito Takeda - UBS
At the outside of your question, you mentioned about portal site? As a portal site if you access it and you will be able to be guided to the best service that is available at that point in time?
Masatsugu Shidachi
That most important item that we have to pursue, but of course, it must be a profitable business for us as well, so that we can link it to the other site, and in terms of Cookpad, as mentioned by Mr. Miyasaka, Yahoo! Wallet and advertisement are the parameters that we pursue to generate revenue.
And in terms of Cookpad they have the advertisement that they can have as inventory and we will leverage on that and we will sell that. And we have female, as well as housewives that we can not gather too. So, we can get that advertisement inventory from Cookpad and at the value as Yahoo.
In terms of Yahoo! Wallet, we provide the billing scheme to Cookpad and so that can booster Cookpad’s revenue and also we can provide them settlement services as well. There will be a household whose member is only one individual.
So there will be a 30-year old man constituting a family and I don’t cook and the many housewives use Cookpad. And I actually use a Cookpad on Saturday and cook dinner for myself.
As a 30-year old male, they are -- the mainstream users of Yahoo as well, so by introducing a Cookpad they can become a premium member and actually get settlement service by Yahoo! Wallet.
And so they will be coming up with the system that is compatible with Yahoo! Wallet. So we want to leverage on that to increase our revenue. And I’m sure that, we are going to expand our scope of partnership and we want to increase the user satisfaction level portal and at the same time, try to pursue more revenue generating scheme. Thank you.
Manabu Miyasaka
Any other questions? No other questions. Okay. Thank you very much. That concludes the presentation and meeting of Yahoo Japan Corporation. Thank you very much for joining us today.
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