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Thank you very much for your patience. Thank you very much for joining this session despite your very busy schedule. We would like to start Yahoo! Japan FY 2018 Full Year and Q4 Financial Results. We have a live distribution of the session over the net and we also archive the videotaped presentation as well.
I would like to introduce the members from Yahoo! Japan. President and Representative Director Mr. Kentaro Kawabe.
Good afternoon.
CFO, Corporate Officer Mr. Ryosuke Sakaue.
Good afternoon.
Today, we will have Mr. Sakaue talk about the full year consolidated results and for the fourth quarter results, we have the supplemental information attached at the end of the presentation material regarding by segment growth and strategy, including the policy strategy for 2019. Mr. Kawabe will be giving the presentation. We will open the floor for Q&A later and hold the session until 6:00 o'clock. Then Mr. Sakaue, please.
Thank you very much for joining us. So I will be in-charge of explaining to you about the full year results of FY 2018. This is a summary of PL. So revenue was positive 6.4% year-on-year. As I have been mentioning to you, there was a change in the accounting principle and if we exclude that, then there has been an increase of 8.6% year-on-year.
As shown in the guidance, operating income was JPY 140.5 billion. Net income includes the loss of PayPay, so there has been a negative growth minus 42.1% year-on-year recording JPY 77.8 billion. And this slide shows the factors of change as compared to FY 2017. Depreciation was JPY 12.1 billion, so the expense went up. We tried to pursue data-driven business model, therefore the expense increased.
Regarding other revenue and expenses, ASKUL and Synergy Marketing we had impairment loss, which is JPY 5.9 billion and net-net, operating income was JPY 140.5 billion. In terms of EBITDA, there has not been much negative impact because we have factored in the impairment loss as well as the depreciation.
Regarding sales promotion cost, we tried to challenge different waters as we planned JPY 30 billion for the expense for new challenges. So media video content, we procured and edited new media very efficiently, so there has been an improvement of JPY 5.6 billion. And we had the result of JPY 12 billion regarding the commerce result. And regarding the sales promotion, it was JPY 9.3 billion, YJ in credit card we had to acquire the cardholders, and we were able to acquire new members through those efforts.
Next page is balance sheet. In terms of cash and cash equivalents in the end of March, it was JPY 546.7 billion with minus JPY 321.5 billion. And the impact was from the acquisition of treasury stocks. Analysts and investors want to know about the net cash ex the banking businesses. Therefore at the very last line, you see the simplified net cash excluding banking business at the end of March is JPY 82 billion [indiscernible].
So that's all by me regarding the overall FY 2018 full year results. By segment will be explained by Mr. Kawabe.
I am Kawabe. Thank you very much for joining us today. So I would like to talk about the business segment results of FY 2018, then talk about the growth strategy that we will pursue after FY 2019 going forward. Firstly, business which is related to media; we have services, to monetize those services and this depicts that scenario regarding media business, we tried to include the monthly logged-in user IDs and we want to elongate the time spent by those logged-in user so we have more inventory for ad and we will be able to monetize more on advertisements. And this is the overall structure that we have pursued in FY 2018.
In the service area, monthly logged-in user ID is very important and for 4 consecutive years we were able to enjoy double-digit growth, i.e., more than 10%. And advertisement by those logged-in users grew by more than 20% year-on-year.
We have different advertisement products and I will walk you through the details later. The important point is that the paid search advertising revenue for the full year went up by double-digit for the first time in 5 years. And so this is the details of monetization scheme.
Total advertising revenue went up by 6.7% year-on-year registering JPY 323.8 billion. In terms of the breakup, paid search advertisement grew by double-digit for the full year. Premium advertising grew by almost 2 digit. YDN-wise, we took ad fraud countermeasures and at one point it was minus 0.7%, but if we exclude that, we were able to increase by 1.2%.
In FY 2018 in media business we focus on videos. Content-wise, we procure different contents and at the same time made our own original videos. So we had additional budget to pursue this end. And they were different results. Point to note is original videos, they were popular among the younger generation, so the best result of this effort was the increase of younger audience. By emphasizing the media, smartphone top page video viewing time increased by 2.4 fold year-on-year and smartphone video adds went up by more than twofold recording JPY 5.3 billion.
Next is the commerce business and the results for fiscal 2018. Likewise we have the service piece and the monetization piece. The base is transaction value of e-commerce, and we also talk about in-house payment and payment overall. And that is what we are focusing on and promoting when it comes to services. And for monetization, on top of e-commerce, we have the sales of other non-merchandise products such as finance and so forth, and for fiscal '18 for e-commerce which is the base, we worked together with SoftBank and this has continued to be a success and 4 consecutive years in a row Yahoo! Shopping was able to grow above 20% with regards to the payment means.
I will later explain in detail for mobile payment PayPay, it grew substantially. And PayPay growth, leveraging on its strength, the valid credit cardholders for YJ Card grew as well, and it surpassed 6 million in 5 years when it comes to the valid credit cardholders since the start of service. I'll talk about monetization later in detail. One thing that we should take note of is the O2O piece which is Yahoo! Travel and Ikyu in particular. These services are doing very well.
I will elaborate. First of all, e-commerce transaction value overall went up by 11% year-on-year and it was JPY 2.340 trillion out of which our Yahoo! Shopping is what we put the most emphasis on, and this went up by 22% and it went above 20% for 4 consecutive years in a row when it came to growth. And for the other segment, more than Yahoo! Shopping, Yahoo! Travel and Ikyu grew and it was up by 26% and transaction value was now close to JPY 400 billion for the fiscal year. Also PayPay and other positive impacts brought about 1.65 million valid credit cardholder growth to YJ Card and the total number of cardholders is now at 6.3 million. So that was an overview of the achievements of the media business and the commerce business for 2018.
So under new management, I'd like to talk about our growth strategies as we entered year 2. So on April the 1st, it was -- the new Imperial Age was announced, and we're going to shift to Reiwa from May the 1st. So in the age of Reiwa, what kind of services is Yahoo going to offer? And what kind of company are we going to be? We actually put together a video for our employees as well as to our stakeholders. So please take a look at the video first. In the age of Reiwa, this is how Yahoo services are going to change. What kind of future are we going to create in Reiwa era?
[Presentation]
So in the age of Reiwa, Yahoo services are likely to change and evolve in this way. In April, I believe it was the 7th, we showed it to our employees and we shared it together, and it was a way of encouraging our people to change with speed.
So with regards to a concept of the video, I touched upon this in the previous results meeting as well, but the services at Yahoo Japan, what is it going to turn into in the future? We want to make our users' lives convenient to a surprising extent. This is since our foundation, and we would like to make the online world even more convenient. We will push this even more. But we would like to be even more active in the offline world and make people's lives convenient. So we would like to make a new entry into the real world as well.
Of course, we are working off the assumption that we are in the online world already and we try to put more focus on what we're going to be doing in the offline world going forward. So whether it be online or offline, Yahoo Japan, we hope that we'll be indispensable increasingly to users. And that's how we would like to develop our services in the age of Reiwa. So effective and convenient services.
More people will be using Yahoo, and if they spend more time with Yahoo, obviously we'll be able to increase our revenue and that's what we need to do. So I shared this with you in the previous results meeting as well. But going forward, the way we would like to increase our revenue looks like this, meaning that we would like to increase our existing businesses, but by offering the new services, we would like to generate new revenue streams as well and grow them substantially, and ultimately we would like to be even greater company in scale.
Out of the areas we are considering monetizing, in the previous results meeting, I talked about integrated marketing solutions in detail. This time around, I'd like to talk about PayPay. Incidentally, revenue-wise we have FinTech here, e-commerce and integrated marketing solutions here. But PayPay is in linkage with all of these types of services.
So going into talking about PayPay, October the 5th last year, we released the app, and it became a function that can be used through the Yahoo Japan app as well. Then after it went through these milestones and we had a series of initiatives underway. I believe you recall what we started from December the 4th, which is the first JPY 10 billion giveaway campaign. With this campaign in place, we caused a boom and it -- we were able to raise awareness.
And when it comes to cashless and mobile payment, I think a lot of people started to learn about the world for the first time ever. There were a lot of positives with the introduction. However, we did face some security-related issues and callouts as well. And we may have caused some concern to you all with regards to this PayPay, Yahoo and SoftBank respectively. We regret what has happened and we speedily implemented measures so as to solve the security issues back in December as well as in January. As a result, security measures-wise, we implemented these measures and with that in place, we started from February the 12th a second campaign which was -- which is another JPY 10 billion.
For the first campaign, we gave 20% cash back as well as established a high ceiling. But from the second campaign, what we want -- we decided to focus on our aim, meaning we would like to have more users use PayPay on a daily basis. So we gave back 20% for people who use PayPay on a daily basis and we also offer a full refund once in -- we also offer benefits once in 5x and so forth.
So the ceiling now -- this time around, we are not facing issues due to the thresholds we have set and the campaign is trending safely and we will be introducing some numbers now. But through this campaign, we were able to generate good results.
These are the numbers that we are showing you for the first time today. So in PayPay's business, these are the KPIs that we emphasize; number of registered users and merchants; and also the number of times in which payments are being made. So this shows how we trended in the past half-year to 7 months.
Regarding the registered users, after 6 months we reached 6 million. Last time when I gave the presentation, the number was 4 million. So ever since then, we were able to enhance the number by 2 million. Now the number of merchants, this is the first time that we show you this number, in 7 months we have 500,000 registered merchants.
Speed is the key, so in disclosing this number we try to compare ourselves with other cashless platforms to reach the number of 500,000 merchants within 7 months and we looked at different press releases and we are making much investment in PayPay and we are unsurpassable in terms of speed in reaching 500,000 merchants in 7 months, so we want to increase to 1 million merchants and also make the merchant network to be most user-friendly and do that as soon as possible.
And the number of payments being made which is the product of the cumulative registered users and the number of merchants by the end of FY 2018, it was about 25 million. We will be growing furthermore and this bar chart is most important. We had campaign #1, which is so popular and many people leveraged on the first campaign, but maybe you might feel that second campaign-wise it was not that popular.
In campaign 1, a high ticket was the use case, but in campaign 2, it is more on a daily payment, and so compared to campaign #1, the current payment is made for small tickets and PayPay is used on a day-to-day basis, so in 6 month time we launch other services, and we have a track record and when we compare our track record with PayPay and others, we believe that we were able to make a very successful [indiscernible] start in the past 6 months.
The number of registered users will reach the level of 10 million and in Japan if the user exceeds 10 million, we will go beyond the early adopters and move on to the [ late ] majority phase. And maybe later majority might go for the usage of mobile payment and what scale will they chose? The key will be the awareness, what is the recognition level and we are working on awareness enhancement and we want to be #1 continuously to be the entity that will be remembered without any hint. And we are conducting different campaigns and in campaign #1, we are awareness #1 as well and that hasn't changed ever since then.
And late majority, it might start using the mode of payment and I believe that PayPay will be the selected scheme. So in FY 2018 we were very serious in ramping up this new business which will be on par with Yahoo itself and we are trending very favorably.
Third-party research is being conducted and we are seeing very positive results. And the investors know that we are growing, but they are quite concerned about whether we can have a profitable viable business. And so I want to talk about monetization and please look at the slide. PayPay is the mobile payment and in terms of the KPIs that we emphasize, they are 3, the registered users and the merchants and the number of payments and we are growing in these KPIs.
And what will be generated through the enhancement of these 3 KPIs, it is written on the top half, we will have accumulation of data through PayPay and also the balance of PayPay will increase, different monetary value would increase over PayPay. And we want to leverage on data and balance to monetize and that is our overarching scheme.
What kind of monetization can we do if we have the accumulation of data? We have O2O and this is traffic [indiscernible] and from the merchants' point of view there will be more shoppers, and that kind of marketing will be quite feasible and I talked about this when I explained to you about integrated marketing solution in the previous presentation. Now what are shoppers buying? Online advertisements, we can enhance the targeting accuracy and also different KPIs can be enhanced. So there will be a major impact on the increase of revenue of advertisement business.
Now about the increase of payments, PayPay there will be different monetary value and different financial services can be provided to PayPay registered users. And you saw this in video as well, maybe might be before your payday and you don't have much balance, but looking at the cash flow and the daily usage of PayPay, we can be assured that this person can pay back JPY 30,000 later, so we can loan JPY 30,000 and we will charge interest and that interest portion will be a monetization source.
And also another scene in the video, you might have much balance and you might not use and then you can buy mutual fund and we have [ OYJ Bank ] and that can provide different offerings of the mutual fund or since we are -- use on a day-to-day basis, so different insurance products can be provided and the balance on PayPay can be used to purchase insurance policy, so that's another way to monetize.
So PayPay will expand the mobile payment domain. Regarding monetization, Yahoo will be in-charge and in FY 2019 we will make sure that we can reinforce it and that will be the division of labor between the 2 parties. So some investors ask us even though PayPay might grow, Yahoo might not get profit from that. Well, so Yahoo will actually come up with different services and we will have the sharing of the profit to PayPay since PayPay will be the fundamental of the mobile payment.
In FY 2018 I said that we will invest in offline and the first endeavor is PayPay and PayPay we are very determined to build something akin to Yahoo. And so we have the profit of about JPY 130 billion to JPY 200 billion, so we want to maximize the users so that we can provide monetization solutions. And so I believe that PayPay will be able to generate a profit of JPY 100 billion. Of course it will be a time-consuming endeavor, but I want that in the end of the day you will understand that we are trying to create something akin to Yahoo in scale.
So we would like to expand PayPay as a means of mobile payment, but I'd like to talk about how we're going to do so. First of all, merchant expansion is an area of focus. We are using agents and our sales people and we have been continuing to increase the number of merchants. And when you look at usage data, the chain stores that have a nationwide presence, when those type of merchants increase the amount of usage of PayPay increases substantially in phases. So FamilyMart's image may have been strong, however now we have been working with MINISTOP as well with Lawson and for supermarkets, since we have entered fiscal 2019 from April, AEON, the supermarket, has started to offer PayPay settlements at part of their source and because we are aiming for daily use, chain restaurants are an area we're focusing on as well like [indiscernible], Matsuya; recently we founded Marugame which is a Udon chain and PayPay is being utilized at these outlets too.
It's like search and shopping, a long tail user experience we believe is important as well. So for other individual stores such as the [ Sumitaward Shopping Street Federation ], the entire shopping street is now PayPay -- adapted to PayPay. So in this way, we would like to increase the number of merchants. So we were able to reach 0.5 million in 7 months. So theoretically in -- we could reach 1 million in 14 months. And that is how we would like to grow our merchant-base.
Also with regards to users and the number of payments, because even if we increase users, they have to use PayPay. So in order for them to become cashless, it's a way of designing a campaign. PayPay actually made this release today. But the users, they're asking what's going to happen after the second JPY 10 billion giveaway campaign, we're getting these questions from the users. Therefore this announcement was made today.
For normal times, what is going to happen? For normal times, the PayPay bonus rate is 0.5%. However, this is going to be increased by 6x to 3%. And also a once-in-several chances, they -- the users like the cash-back scheme. So in this case, we're -- in normal times, we are going to continue on with the JPY 1,000 equivalent cash-back campaign once every 20x.
With regards to other ways of maximization, so people are asking is there going to be a JPY 10 billion third series of giveaway campaigns again. There has been a lot of questions in this area. However, with regards to the way we do this, for JPY 10 billion giveaways, we were doing 20% cash-back in all the stores where PayPay can be utilized. But we would like to do this differently.
After the second campaign is over, we will start the next campaign. So I can't give you the details yet. I think it may start from June, we'll probably design on a specific theme. In a certain category, the PayPay-capable stores will be able to implement the campaign so that we could communicate to the users and have them experience that PayPay can be used in various types of outlets. So it's probably going to start at drugstores in June.
And for those users who are able to fulfill certain conditions, they'll be able to get a 20% cash-back or win cash-backs every once in 20x or so forth. So we're going to do it in a variety of ways. But in any way, we would like to create dominance in the number of users and make Japan cashless.
So I was just talking about offline measures now. But in fiscal 2019 one more change for PayPay is we're going to respond to online use. So it was supposed to start in April in fact. However the other day, due to the security issues and the priority we put on it, it was delayed by 2 months. So now we are planning to start this initiative from June where PayPay can be used online.
As a result Yahoo! Shopping, YAHUOKU!, PayPay payments will be another extra option. And for the fixed term T Points, this is being issued quite a lot through Yahoo! Shopping, but this can be switched over to PayPay bonuses and also through YAHUOKU! If I was a person that posts piece of merchandise we would like -- we could do the PayPay topping-up function instead of what we were doing if I was the seller.
So the balance scale for fiscal year 2018, it was JPY 700 billion equivalent payments possible. Therefore, this JPY 700 billion worth of charges can be charged to PayPay. That's the potential we see for 2019. With that, with regards to the frequency of payments, we expect this to rise. And also because it's a PayPay charge, people will be -- there may be users who will newly become PayPay users.
So for 2019, whether it be increasing the number of users or increasing the number of payments, we believe this will be a measure that will contribute to the increase. For the online application that will -- this campaign will not apply to the online version. So please feel assured we're not going to be doing the 20% cash-back for the online PayPay.
So that concludes my part on PayPay and where we are and our plans for monetization and for fiscal 2019 we need to continue to grow the scale of PayPay and I just talked about the way we're going to do so.
Now let me talk about Yahoo overall for fiscal 2019, and a revenue outlook as well as our policies. So first is policies; in 2018, we communicated to you our plans and the policies remained unchanged. I would like to organically connect our services and maximize number of user actions that will lead to conversion. And whether it be media or for commerce, we will strive for further growth.
And for services in offline -- in online, we would like to make it even more convenient. And for the offline area, we would like to make it convenient too, which is in a world we haven't really touched in the past. With regards to how we're going to grow, a multi big data will be utilized, and we would like to grow in a data-driven way.
So these are our 3 major policies that we will focus on. So thinking about the policies and based on our policies, we need to create an environment -- we created an environment back in 2018 so that we could pursue growth. So in earnest in fiscal 2019, the future vision of Yahoo is something we would like to achieve and realized.
So as we focus on the future, we are thinking about a new organizational plan. We released this at 3:00 p.m., but briefly explaining. We used to be just Yahoo Japan Corporation, but we would like to split our company and have a holdings corporation on top. And the services companies, whether it be Yahoo Japan Corporation will be underneath the holdings corporation.
The listed company will be the holdings corporation. The name is going to be Z Holdings Corporation. For the non-listed companies, they will be Yahoo Japan Corporation. The aim of this, there are two. One is we would like to swiftly, strongly and flexibly make the future. In order to do so, we need to be more agile.
Therefore, for each of the companies and for the group, our major policies will be decided by the holdings company. But for the individual initiatives, we want each of the companies to move swiftly and therefore, we have come up with this organization. So the agility and flexibility needs to be obtained as we move into the future.
Another thing is the finance intermediate holding company. As I mentioned earlier, through PayPay to the Yahoo group, there will be more users who deposit money or have a balance with Yahoo. And we would like to offer convenient financial products and monetize it. So we would like to reinforce our financial business.
And we do have the bank as well as credit card company and we are going to facilitate further growth. Since we are talking about finance business, the transparency of governance is very important. And the decision-making and the body criteria will be quite different from the Internet company. Therefore, we need to have the right governance by coming up with a finance intermediate holding company to drive further growth of our financial businesses.
And so under the holdings corporation, we will establish new finance intermediate holding company. And this is the announcement that we are making today and we have to have the resolution put on the table at the shareholders' meeting, which will most probably be held in October.
So by going through those exercises, what will be the business landscape of Yahoo in 2019? Let's look by business segment. Firstly, media business; for paid search advertisement and display advertisement, we would like to have high single-digit growth. And total advertising in the first time for 6 years, we would like to have double-digit growth on the top line.
So in order to materialize on this vision, what should we do? I cannot disclose you everything. So this is the roadmap that I can share with you today. As a matter of fact, yesterday we announced and launched the top page application coupon tab. The competitors are growing in the area of coupon. And we can link our business with PayPay and this will be linked to integrated marketing solution.
Therefore, yesterday we launched top page application coupon tab. Please use this during Golden Week so that you can benefit from this. We want to be a data-driven company, so we are going to make timeline more efficient and also based on data-driven concept, top page should be more personalized and that will happen sometime in the second quarter.
We have the -- a plain vanilla advertisement business, but we are moving to integrated marketing solution. Online and offline commerce ads will be very important to realize this. So in the second half of FY 2019 we are going to have online commerce ads, so this is a e-commerce marketing tool and also regarding offline commerce ads, we're going to use PayPay to launch offline advertisement for the commerce and we want to start this within FY 2019. And so these are the components that will drive us to the 2-digit growth in FY 2019.
Now about our commerce business, Yahoo! Shopping should grow furthermore. For 4 consecutive years we were able to grow more than 20%, so I'm sure that we can do it once again in FY 2019 too. In FY 2018, we went back to the basics and tried to polish ourselves furthermore and in 2019 we should try to leverage on that lessons learned so that we will be able to revamp our growth.
So regarding sale of goods, we will most probably be able to enjoy the double-digit growth. So total Yahoo consolidated guidance-wise, in FY 2018 we had to secure capital for future growth, therefore different line items were in the negative and in 2019 we want to turn them positive. And we emphasize the most revenue. For the first time in our company history, we want to do over JPY 1 trillion.
Operating income-wise we will increase this as well. So the range is above JPY 140 billion and if possible we want to reach the level of JPY 100 billion and that is the range of operating income that we aim at. We will be investing in PayPay, but regarding net income we want to fall within the range over here so that it will not fall in the negative domain.
So how are we going to obtain mid to long-term operating income? This has been shared in the previous financial performance result, so we will evolve our business and increase our revenue and operating income. We need to take several years to reach the goal. And I mention that it will take about 5 year and year 1 ended. And in the next 3 to 4 years I want to create a big business and a bright vision and future. So we believe that we are still in the investment phase.
Having said that, we need to increase our top line. That means that in line with that we will be able to enjoy the increase of operating income and as compared to FY 2018, we want to continue increasing. Up until 2022, we will still be in the investment stage and in FY '23 we want to have the record high number of the operating income and after that we want to increase our services and businesses several fold more as compared to the current status. And we will put our full-fledged effort to materialize on this vision.
We will be heading to a Reiwa era and the user experience is the most significant factor and that will be pivotal for us to create a future that we can only create. And when you think about SoftBank group, we will maximize the strength of SoftBank group companies so that we can create the future in FY 2019 that only Yahoo Japan can build.
And I will welcome any questions that you have. So this is all from me today. Thank you.
We would like to now take any questions that you may have. If you have a question a person will bring a mic over to you. [Operator Instructions] Who has a question? Please raise your hand. The person in the front, in the middle row.
I am Nagao from Nomura Securities. I have 2 questions. Here's my first question. With regards to this fiscal year's results, for operating income you were saying that you were going to strive for increased operating income. Even after the losses related to PayPay, you were still striving for net income growth. However, for non-operating losses, the way you think about it, for March 20 I think the center of it will be PayPay, you were saying you are going to manage to, Kawabe-san, but with regards to PayPay losses or the investment size, what are your plans for this fiscal year?
Thank you for your question. The CFO, Mr. Sakaue, will answer your question.
We'd like to withhold the exact numbers, but we would like to manage to achieve this range. From 2018 we've started PayPay, but for fiscal 2018 on a net basis PayPay was operating for 7 to 8 months. However, it's going to be a full year operation for fiscal 2019 for PayPay. For the losses at the bottom-line, the 2018 losses on annualized basis will be about the number we're expecting for fiscal 2019. As for affiliate companies and other companies, we would like to mange to reach the JPY 85 billion number. We like managing to reach the number, so we will make adjustments so that we could reach our numbers.
Here's my second question. This is also PayPay-related or actually monetization-related. So you were talking about O2O, and you were talking about advertisements, but that's an area of your strength from the past. So for financial services and its monetization, as you strive to make progress, I think there's a lot of still missing pieces. So for other financial services what are your future plans? How are you going to reinforce your financial services business? That's all.
Well, it's true that there are missing pieces, we don't have a broker or a securities business, but when you look at what's happening with PayPay, because of PayPay, YJ Card or Japan Net Bank, the number of accounts, the cardholders of YJ Card and Japan Net Bank number of accounts are growing respectively. So with that as a backdrop, loans or investment trusts or insurance products are areas that we can focus on and promote. So instead of filling what's missing it's more about leveraging our existing assets and maximizing them and generating better fuel-efficiency so to say, so those would be the priorities and that's why we're going to have a financial intermediate holding company as I mentioned earlier in my presentation. Does that answer your question?
Any other question? Then person sitting behind the gentleman.
I am Yoneshima of Credit Suisse Securities. I have 2 questions as well. First one is on PayPay. The second campaign is ongoing and bank account and credit cards, Yahoo Japan cards, I'm sure that many people were solicited to open accounts. And looking at the registered users, in Q4 there has been a increase and I believe that there was a PayPay impact and also YJ Card increase, so other services such as Shopping, Yahoo Japan Card usage increase. And maybe not only PayPay, but Yahoo Card and others have been using other services that you have. So can you tell me what kind of positive repercussion you're enjoying?
Yes, you're right. There is a positive repercussion that we are enjoying. So Mr. Sakaue or others, if you can give some color to it?
Regarding YJ Card acquisition, 1.6 million has been newly acquired and PayPay has played some role. And we only know how many may actually had become a member of YJ Card through PayPay. We only know the total, which is 1.6 million, but we don't know what is the percentage that we newly acquired through PayPay. If you have YJ Card, Yahoo! Shopping and other services can be reused and we have certain equation that we use. And we should try to have more channels to become Yahoo cardholder, and we do that through SoftBank and other channels. So the cost is going down and so there is a positive repercussion. But at the same time, the cost of acquisition is going down because of the maximization of different channels.
I have another question. So people will open bank accounts and there will be people who will hold YJ Card. Which will be greater impact through PayPay?
So are you comparing between YJ Card and Japan Net Bank?
Say bank is 20%, and in terms of YJ Card it's 19% and others are only 10%. So I guess people focus on either Japan Net Bank or YJ Card. Which is the major driver?
So the majority is the bank. So we have other banks. So as compared to other banks, we have more accounts being opened through Japan Net Bank. In terms of operating income and revenue balance, there has been increase of JPY 50 billion to JPY 70 billion and operating profit has increased by JPY 10 billion.
In this fiscal year, you have investment plan. Last year you invested in media, but how about this year? Do you have any area that you focus regarding investments, for example, any media?
In FY 2019, we do not have any particular emphasis on a particular investment area. And in 2018 we will -- we did invest in media and video and we will continue that. And regarding e-commerce, so when the transaction value goes up, we need to increase our investment, but then we want to make that efficient. And regarding depreciation and amortization cost, we will continue pursuing data-driven business model. So regarding depreciation, it will most probably increase by some amount.
Any other question please? Second row from the left, person in the second row.
Mori from JPMorgan, I also have 2 questions. Here's my first question. With regards to the guidance [indiscernible], the range, where does that come from for ad outlook, revenue outlook, you have a range. So I'm thinking about the change in marginal profitability, or is it because of differences in cost? Is that in your assumptions? So for advertising, in the second half you were going to launch commerce ads. So how is that accounted for in this outlook? Please let me know as much as possible to the extent that you can.
So Sakaue-san will take your question.
So for the overall company as well as for the media outlook, double-digit growth for media is an aggressive target. It's more of a goal that we set in place. For the overall consolidated guidance, relative to that, the probability of achieving that range is higher. So that's a little bit difference in nature. So for media, double-digit growth, if we were able to achieve that, the overall results are likely to be higher, but we are accounting for risks as well. So the overall OP is JPY 150 billion right now in our outlook. That's the maximum level we're anticipating.
And the commerce ads, how much that is being accounted for? So can you sort out the scenario?
For paid advertising, paid search, in the previous year, CPC, we implemented measures so that CPC will increase. And from April onwards, options for paid search advertising have been introduced once again. So for paid search advertising, on a ongoing basis, we're expecting that growth will be double-digit or high-single digit. Of course, last year's impact will run its course, but we still believe there's opportunity for further growth for display advertising. For premium advertising, last year we were close to double-digit growth as explained. So this year as well, it might be a little bit stronger with regards to the nature of growth. Premium advertising may grow at 10% or more, which means YDN, display ads and so forth, what's going to happen to that, currently we believe it's going to be low single-digit. Kawabe-san didn't explain this, but by utilizing data, we are starting to see a better impact. So that's something we would like to continue to focus on. So if I were to follow up one more thing, with regard to our marketing power, with regards to how we face our clients and proposing more from a marketing point of view, that's something we are focusing on, especially from this fiscal year, so that we could get more orders. So that's something we're doing aside from our products. We are trying to reinforce our sales capabilities. So for commerce advertisings, we will develop them and market them. But we haven't really accounted for them in our outlook as much.
Here's my second question. Regarding PayPay and the way users are increasing, what is the image of growth? So you -- 6 million -- out of the 6 million users, I think so far, should we think that most of them are active users? And with the campaigns in place, are you expecting to gradually increase your user-base? For Shopping, are you able to bring SoftBank users over to your platform and you were able to accelerate your growth? So PayPay is obviously a joint venture, so we expect that happening again, but in your roadmap for this fiscal year, are you going to implement measures that users will grow substantially, especially in the area of collaboration with SoftBank, which is my area of interest?
So Ozawa-san will take your question first, and I might follow up.
For the gradually increasing users, we will have our regular campaigns in place. But for the fixed term T Points that we give over Yahoo! Shopping is we're going to switch over to PayPay. We have 10 million-plus buyers on Yahoo! Shopping platform, and they're -- in order to receive PayPay bonuses, they have to register with PayPay, and that will be JPY 10 million. So that's going to happen and we believe it's a prerequisite. So for SoftBank measures, we input -- we used fixed term T Points for other initiatives too. So I think that will lead to more user acquisitions. So 20 million may go up to 30 million. We don't have to invest more cost. If all the users switch over to PayPay and register, we might expect this much growth. That's what we're anticipating. And I think this is pretty visible as well. And it's the moment people get the charges. So for Yahoo! Shopping users, the JPY 700 billion or JPY 100 billion is going to now come in, and we will have active users that go around. So that's what we're expecting.
Yes. So going back to your question, because of the PayPay online implementation, we do have quite a lot of Yahoo Commerce customers. We believe that they're going to start to become PayPay users too on annual basis. So for the 6 million current PayPay users, it's pretty irrelevant to what I'm talking about because those are offline users that we acquired. So for the users that don't have a overlap, they are likely to become new PayPay users. And the size might be smaller. We also have SoftBank-related fixed term T Points that are being incurred at this moment, which will switch over eventually to PayPay and that is also a potential user-base as well.
Any other question? Person wearing a green shirt sitting in the front.
I am Sawada of Ace Research Center. I have 2 questions. First one is on PayPay campaign concept. On Page 24, you have the trend of campaign 1 and 2. Oh, by the way, I have a question about PayPay growth. You want to reach 10 million and you want to further enhance your awareness level amongst the consumers. So with that as a backdrop, when you compare campaign 1 and campaign 2, regarding registered users and awareness level, it seems that campaign 1 was more impactful as compared to campaign 2. So going forward, when you launch another campaign, are you going to come up with more amazing, surprising campaign that might be quite different from others?
It all depends on the purpose of launching a campaign. Campaign #1 was to enhance and trigger people to use PayPay for the first time, that is why it was quite dramatic. But in terms of the second campaign, we want people to use PayPay on a day-to-day basis and we have early adopters as well as late adopters and so we want to encompass both types of users so that people who were not able to ride on the wave of campaign 1, they will be able to ride on the wave of campaign 2. So we are not going for high ticket, but we're going for the small ticket for the day-to-day purchase. So we want to design in the campaign that will be astounding to the consumers that will generate excitement, and we want to do that within the domain of day-to-day usage.
Second question. You want to link your endeavor with integrated marketing solution, and I want to know how you are using data that you capture through PayPay to integrating marketing solution. I want to know what is the progress right now and what is the project that you are tackling right now?
Integrated marketing solution using PayPay data is offline commerce advertisement. So in order to realize that we prepare ourselves. So we are conducting interviews of the merchants and other preparations will be conducted so that in the second half we will be able to come up with a tangible product including online advertisement using PayPay, we will be enjoying more positive repercussion.
[ Miazao ]-san, are you okay?
If I may, so we have data through PayPay and we will leverage on that. That's point number one. And in terms of data that we can capture from PayPay, there are businesses that we can launch immediately. Say you get coupon through Yahoo and that coupon is linked to PayPay, so if you use PayPay as the payment scheme, you can use that coupon. So we can understand who got the coupon and who used it. So far the business model was just to display the coupon and that was the business model, but we can't come with a meritocracy basis. And without PayPay, we cannot track whether that coupon has been used or not. So O2O business-wise we can have a big leap forward by leveraging on the payment scheme using PayPay, and that business model will start sometime in 2019.
The person in the pink shirt sitting in the front row please.
I am Araki from Mitsubishi UFJ Morgan Stanley. This is related to the prior question. Campaigns with the user, you know what they bought and in Q3, on Page 13 in the presentation, you talked about store-by-store reports where the store information is going to be bought. That was what was written. And strategically speaking, for a convenience store, let's say the commission fee is point-something percent, very low and you could receive the data. Are you going -- is that what you have in mind because that wasn't written in this time's presentation. So what happened to that? Going back to Ozawa-san's point, it's going to take time because the users that participate in the campaign need to buy something. But if you -- by the store reports that will buy you time, so I just want you to elaborate on what you meant by that? My second -- oh, sorry.
So various pieces of data acquisition is what we are trying to do. We're working hard to do so and we're trying to look at a variety of options. Ozawa-san, do you have anything to say?
Are you talking about POS data for example?
No, no, I was -- I want you to elaborate on what you meant by buying store report.
POS data at the retailers are something we are thinking about sharing. We have that in view. So it's too weak if we know a certain user used PayPay at a certain retailer, so it might be revenue share, it might be buying data from the retailer. I think there's various schemes considered, but what person bought at what store, we would like to share in some sort of way.
Okay, got it. Second question is numbers-related. So challenge expenses and advanced investments, I was thinking that this year we're going to have less of that. So for sales promotion and advertisements, it was JPY 56 billion in March '18 and JPY 70 billion plan in March 2019. However, the JPY 70 billion was your budget and how much did you use against that? And if possible for March '20 for shopping related to JPY 70 billion sales promotion expenses, what are you thinking for this fiscal year? In this year's plan, are special expenses being accounted for or are you just thinking about normalized types of expenses? Should we look at it that way or not? If it's normalized, it's fine, but if you're going to continue on with your investments, so against the JPY 70 billion last fiscal year, is it going to be JPY 90 billion or JPY 100 billion or JPY 80 billion this year? Please give me the numbers.
Thank you very much for your question. For the detailed numbers, we have to look into it, so I should refrain from giving you a ballpark figure here, but does the CFO have anything to say?
For just sales promotion expenses for 2018 fiscal year, it was JPY 71 billion. So it was in range with our expectation, excluding advertisements, just sales promotion fees. Advertisement was about JPY 80 billion. For 2019 in our plans fiscal year for Shopping we are striving for more than 20% growth, so regarding sales promotions, more than the growth rates we are expecting, we are hoping that the costs will be lower in growth. We will be creative and with our sales promotion initiatives so that the sales promotion growth can be less than GMV growth. Does that answer your question?
Yes.
Any other question? Fourth row from the front.
I am Tsuruo of Citi Securities. The first question is on SoftBank. So can you tell me what kind of partnership that you have with SoftBank? You have SoftBank members and what is the penetration of your business into them? And I want to know what kind of relationship that you have including basket-size?
We are trending very well regarding the partnership that we have with SoftBank. There are 3 mainly. First one is PayPay that I have explained to you today. We have the acquisition at SoftBank store, but in 7 months we were able to increase the merchants by more than 500,000. And without the sales-force of SoftBank, we would not have been able to attain this. And also they have worked in acquiring more members. One is YJ Card, they worked in acquiring YJ Card at their store. And at the beginning, we have YJ Card and SoftBank card, but we concentrated on the YJ Card and that led to the increase of transaction value of e-commerce. So that has been very beneficial to us and also premium member we were able to grow by 1 million and this is because of the partnership that we have with SoftBank and there is no doubt about it. Any other point?
No, nothing to add.
So we are having a positive synergistic relationship with SoftBank.
So SoftBank subscribers, what percentage are premium members of Yahoo?
Well, I don't have the number with me right now. So we will look into the matter and get back to you later.
And in terms of the average ticket size, I guess it is lower than that premium member?
You're talking about e-commerce?
Talking about Yahoo! Shopping.
There is a gap between the members through SoftBank and the original Yahoo premium members, the gap is still there. So we will put our effort to reduce the gap. And so the percentage of Yahoo bank's subscriber being the shoppers, it is increasing, but I don't know whether we were disclosing this number or not, but I will look into the matter. And so amongst the premium members, we have increase in the SoftBank users. So in terms of the overall transaction value being generated by premium members, it is increasing, but they are premium members who are not doing Yahoo! Shopping. And so the overall trend hasn't changed much because SoftBank users are increasing the premium members of Yahoo.
The second question is on media business. Last term revenue went up, but operating income was down by JPY 15 billion and I know that you are expanding much, but then the marginal profit is quite high. So can you give me some backdrop? And if the revenue is 2 digit, what will be the operating income going forward?
In FY 2018, in terms of paid search, the cost of sales has changed. So even though the revenue went up, the operating income did not grow that much. And also regarding the videos for content, the cost has been incurred more than the revenue. Regarding FY 2019 in terms of the paid search, the ratio will not change. So if the revenue goes up, then the operating income will trend as in the same way as that of 2018. Regarding depreciation and we will be incurring somehow more depreciation in 2019.
Last year you worked on video. What was the percentage for video advertisement?
You are talking about revenue? Well, I shared with you smartphone which was JPY 5.3 billion and including PC about JPY 11 billion is the revenue generated by Yahoo video. And of course, we're not satisfied, we want to grow the video advertising revenue more and we will put our effort to realize that. GYAO! service is growing. [ MAU ] is growing, [ SOE ] stream advertisement of GYAO! will be increasing in FY 2019.
Any other questions? Anyone else? If not, it will be the second round, but the person in the very front, you can ask a question again.
Sorry, it's my second time. But here's my first question. For YAHUOKU!, I -- you were saying that you would like to reinforce and reestablish the business, but how do you envision the growth path? So can you share with us your vision?
So there's competition, so we can't let you know everything, but based off that Ozawa-san will talk about how we're going to revamp the business.
I hope I can give you a direction that makes us sound positive. But it's a service that's hard to use, which we would like to make easier to use. And we would like to change our customers somewhat. So there might be some people who are using YAHUOKU! here, but it's basically for maniacs, it's basically male and the age groups are high. That's the segment of users. So it was acquiring female users, people in their 20s. When you think about that, YAHUOKU! was trying hard to acquire those segments too. However, for the younger people in this room, or for the women in this room, we need to go after you more through our services, and that is the base off which we're going to consider new services, and we need to make it easier to use. So YAHUOKU! is basically an auction service. And it was a service that faced limitations, but we would like to change -- switch gears and approach the service in a new way. It's -- we can't really share much with you right now because during fiscal '19, if something comes out, we would like to explain why we did so later on.
So a quick question for Miyazawa-san. Last year in July, app premium ads started. What's the progress? And how popular are they? And how are you going to expand the business this fiscal year? That's all.
Thank you very much for your question. Thank you for -- video ads and premium ads were relatively popular due to the rate revisions that we did and we were selling on a device [ cup ] basis, but now we are catering to all devices. So we designed -- redesigned our product and those are proving to be popular for this fiscal year. In the area of video, we would like to continue to put more emphasis on video, whether it be in-feed or premium. We are starting to see some success stories arise. So we would like to roll that out horizontally so that we could generate more revenue with video ads throughout the year. So with regards to the areas where the market is growing, but Yahoo has not monetized yet as much is app install ads for this year. We would like to attempt to enter that space more. Does that answer your question?
Any other questions? No more question. Thank you very much. We would like to close for the day. Once again, thank you very much for your participation.