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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you very much for your patience. Thank you very much for coming today despite your busy schedule. We would like to start Yahoo Japan Corporation FY 2018 Second Quarter Business Results. We have live distribution of the content today, and also, we will archive the content so please bear that in mind.
I would like to introduce the members from our company: President and Representative Director, Mr. Kentaro Kawabe; CFO, Corporate Officer, Mr. Ryosuke Sakaue. Today, President Kawabe will give the presentation. Then after the end of the presentation, the floor will be open for Q&A. We plan to end around 6:00.
Now Mr. Kawabe, please.
Good afternoon, everybody. I would like to give you the presentation of FY 2018 second quarter financial results.
What are the topics for Q2? There are 2. Firstly, the growth in terms of paid search advertisement revenue was in double digit for 2 consecutive quarters. And also, at the outset of this fiscal year, we mentioned that we will go into the mobile payment area, and we were able to launch PayPay, a smartphone payment service on October 5.
This slide shows the executive summary of our performance regarding revenue and operating income. I would like to deep dive into these 2. Firstly, revenue.
In the previous presentation of the financial results, I've mentioned that we will be changing the accounting policy. And ex this change, for 2 consecutive quarters, we were able to increase by 10% year-on-year, recording JPY 237.3 billion as our revenue for Q2.
Now talking about operating income. I will explain to you in details using this slide. In Q2 of FY 2017, our operating income was JPY 42.7 billion. This quarter-wise, due to the growth of advertisement revenue in particular, there was increase of JPY 4.9 billion. And on top of that, there was an increase in SG&A because of business growth, and it so happens that this amounted to JPY 4.9 billion. And therefore, plus and minus, net-net, it was flat, i.e. JPY 42.7 billion.
But on top of that, we have to have data-driven, human resources and also develop a new system, and also, we want to create new future so we have investment to challenge the future. And in this quarter, year-on-year, we ended at JPY 35.5 billion, minus 16.9% year-on-year. So this is within the range of what we have announced at the outset of this fiscal year. There is another major event to note this past quarter. Shareholder composition has dramatically changed. The major shareholder of Yahoo!, KK, was as indicated on the left, and we purchased treasury stocks. And Altaba actually sold all their holdings. And on September 28, we canceled 9% of the treasury stock that we hold as a result. Currently, Yahoo!, KK, we have been in business for more than 10 years, but the floating stock amounted to 51%. So this is a major change that I want to note and relay to you today.
Next, I would like to talk about the results by segments. We have Media business and Commerce business and other businesses, and this chart summarizes the results of each segment. And today, I would like to talk in detail of our Media and Commerce businesses.
Firstly, Media business. In the previous result announcement, I mentioned that we want to focus data-driven business under the new leadership. And so the KPI that we will focus the most will be monthly logged-in user ID. That being the case, today, I would like to explain to you the status of monthly logged-in user ID. Year-on-year, we were able to grow by 10%, recording 45.87 million users.
And those logged-in users, how much did they spend? Year-on-year, we grew by 12%. As a result, advertising-related revenue grew by 7% year-on-year, posting JPY 79.3 billion. And so we were able to enjoy very robust growth. Display and Paid Search Advertising revenue breakdown is shown on this chart.
Now talking about Paid Search Advertising revenue. As mentioned at the outset of this presentation, as in line with Q1, we were able to grow in 2 digit, i.e. 13% year-on-year. At one point in time, we were in the negative, but we were able to make a dramatic revamp and go into growing trend.
Marketing Solutions business-wise, I understand that ad fraud has been a major social issue, and we came up with different countermeasures. Why? We believe that we are the leading company of the Internet, and so we need to have a robust media platform and try to secure the transparency and reliability of the Internet advertisement. And we should try to establish the foundation and that will not be affected negatively by the outside factors. We need to secure the trust of advertisers, and we want people to trust Yahoo! JAPAN. And if that becomes a reality, we know that we will be able to increase the advertising revenue.
What did we do so far? In this past quarter, we conducted different countermeasures. And on September 21, we decided to terminate the provision of YDN to the websites that were conducting ad-fraud activities. And we came up with very stringent guidelines for ad distribution on October 25. And so for the media that passes this guideline, we started to continue providing ad distributions. But if not, we do not provide the distribution of ads to those websites.
Next, I would like to talk about media video strategy. At the outset of this fiscal year, I mentioned that we want to turn ourselves into a video-oriented company. So in this past quarter, we have externally and internally enhanced the video contents, especially around Yahoo! top page. In today's Nikkei newspaper, you saw the article about creators program, which is at the bottom of this chart. And so this is an internally built content that can be made available through Yahoo! pages.
So regarding top page video-viewing time, year-on-year, we were able to grow by threefold.
So that concludes the Media business, what we have endeavored in this quarter.
And now going on to the Commerce business. Starting with the transaction value for e-commerce or for sale of goods. And so we have changed the way, and now we are disclosing the numbers for the sale of goods. And it has been growing 11% year-on-year, a double-digit growth. And inside this, by each services, the revenue are shown as -- in the chart.
Among this, the shopping-related advertising revenue is beyond the transaction value. It has increase of 28% year-on-year. And so as a result, the advertising take rate is steadily increasing.
And the line graph, that is the point reward expenses, and the expense for the point is now hovering in a controllable way. Therefore, the Yahoo! Shopping revenue is more easily to be created, and we have been changed in such a way in this quarter. And regarding the Commerce business especially done by Yahoo!, commerce services by Yahoo!, how is the profitability is going on is the question that we get often in relation with the investment that we do. And so since we have announced our financial result, we are utilizing this chart, and we would like to utilize this chart once again for explanation.
So what to note is each time we have been disclosing, it was always in comparison with the previous year of the same term. But then this is different. This is the trend from the second half of FY '17. And so at this, it shows our profitability is now improving, and YJ card is now turned profitable. So the profit is still small, but then, now it is on top of our profit.
And on top of this, the Yahoo! Shopping deficit. And what we started this fiscal year as an additional investment for expense for the new challenges, even on top of this, the profitability and the operating income was 2.8% growth and amounted to JPY 33.8 billion. And so the service itself, even if we do the investment, the growth is going on steady. So that is what we can state from our side.
And so main services for our side is YAHUOKU!. And YAHUOKU! is now revamped, and we have been announcing that it should be growing strongly. And in this quarter, we have done several measures. Let me explain on that.
So for a long time, you had to have a Yahoo! Premium membership in order to place product listing. But then, even if you are not the premium member, you can list a product on auction. This starts from November. And from here on, the number of items or product listed is probably going to be increasing.
And those who are Yahoo! Premium member, they have some incentives. For instance, the usage -- system usage fee for winning bid is going to be rather inexpensive compared to others. Therefore, we would like the -- to create a design so that non-Yahoo! Premium member and member -- premium member would like to follow us. And for this first -- second quarter, we have been announcing the measures to revamp and improve for YAHUOKU!, which is shown on the chart.
And regarding the Commerce business, we are most focused on the mobile payment business. To this, I would like to detail. First of all, the mobile payment is named PayPay for ourselves, and the launch has been conducted at last on October 5. So this is an app for single launch. It is a PayPay application launch. And after this, Yahoo! JAPAN app, which has the most biggest DAU, we would like to utilize PayPay in this as well.
But then, first of all, PayPay started independent. And on October 25, Alipay QR code and PayPay QR code has been integrated in Japan. And by this integration, every resident in Japan can use PayPay and those people visiting Japan from foreign countries, via Alipay, can utilize PayPay's QR code. And this is something that other mobile payment cannot do.
And the important thing to mention is the settlement merchants. These are all national chain merchants, so convenience stores and electric stores or restaurants chains. And so people are utilizing our apps. And for the individual merchants, we are now having a sales end to approach them. Therefore, steadily, these small shops, too, that can handle us is increasing.
This is the comparison with competitors, showing what is special about PayPay. So currently, we are deeming and proceeding to make Japanese society a cashless society, and the government is supporting this, too. And so we are going to be advancing so that the whole society of Japan would become cashless. But then, now when the users start thinking which mobile payment to use and when they start thinking, we would like to be chosen #1. To that -- and from the merchants or the shops and from even the users, we want to be the most convenient and the most liked, favored payment applications.
And regarding this PayPay -- the structure of PayPay, the business structure has changed from the initial plan. So this was explained in the first quarter. But the so-called mobile payment business is done, and the revenue and the expenditures are going to be on the record. But then, it is going to be recorded under PayPay. Therefore, for mobile payment business, Yahoo! JAPAN is going to be investing into PayPay, and that is going to be the way the money is going to be moving.
So once again, I would like to explain this in detail and also mention about the commerce-related expense for new challenges, and this is JPY 20 billion that we have explained in the first quarter. And I would like to explain how this is going to be hovering and trending. So first, let us start from this area. And so we first started with the Yahoo! Wallet, the mobile payment launch expensed from the Yahoo! Wallet. And then the acquisition fee for the Yahoo! JAPAN Card was JPY 2.8 billion in the first half and JPY 5.4 billion investment in the second half. And so that investment is going to be made.
But other than that, right now, we're under consideration if -- whether we're going to be having any use of this budget. So this -- so we do not need to utilize all JPY 20 billion for the budget. How are we going to use the rest? We are considering that right now, and there are some options.
And one option is that we're going to have PayPay auction on the top page of Yahoo! JAPAN. So we will be using some of this budget for the promotional expense. And also, due to the changes in the market, we might need to enhance our sales promotion activities. And if that becomes the case, we will be utilizing this remaining budget for that end as well.
Another point to explain. This is on the guidance for full year operating income. At the outset, we mentioned that the operating income will fall in the range of JPY 130 billion to JPY 140 billion, and that was our guidance back then. And considering the first half operating income, which trended very favorably, we would like to adjust the guidance to JPY 133 billion to JPY 143 billion.
And so this is an upward revision, but the range is within JPY 100 billion. The reason is we will all have to expend in new challenges of e-commerce, and we haven't ironed out the details. So we have to factor that in. And also, there is a downside factor as well. We have countermeasures for ad frauds, and we don't know how much there will be a dip in the advertising revenue.
And also, the global market is becoming very bearish. And so it's not that there is any particular risk that we are seeing in the horizon, but we do have to bear in mind some negative economic outlook. Therefore, these are the downside factors, but still, we decided to make upward revision for the operating income for the full year. Lastly, I would like to talk about the direction of new businesses under the new management.
Regarding the new business, I would like to explain the overall direction using the slide. Yahoo! JAPAN actually consumed different data on the Internet and created different services such as news and search. And on top of that, we want to make net -- offline services more convenient. Yahoo! Travel and Yahoo! restaurant reservation, Yahoo! ticket. And the acquisition of Ikkyu actually fall into this category of providing convenience for O2O transactions.
The Internet industry's trend itself is focused on the usage of online to make offline more convenient and more interesting. So this is a convergence of the 2 worlds, and we would like to aggressively work into the integration of online and offline. And so I believe that one of the directions that we will be heading toward is the convergence of online and offline worlds. And the examples are written on the slide. And in some instances, we will provide these services or, in some instances, we might provide support to the operators who will provide services in these domains. So with that as a backdrop, we conducted different endeavors in Q2 to integrate online and offline.
First example is the usage of big data to score users, and this is still on experimental base. I mentioned that we are focusing on ID log-in services. And by having the logged-in ID users, we can further accumulate information to provide score services that will, in the end of the day, enhance services that we can provide to the users. We work with the external party to conduct a pilot run of what we can do in this domain.
What kind of merits the users can enjoy, it is written on the right-hand side. There will be different O2O Internet services, and we can simplify the procedures. And also, we can provide more rewards to the users through our services. So in the end of the day, we do hope that our new endeavor will lead to the further enhancement of services that the users can enjoy.
Another example. This is provision of offline sales promotional solutions. This is still underway, and we have made the announcement in Ad:tech the previous month. And this uses PayPay, so PayPay- and Yahoo!-based activity log. And we use the purchase history as well so that we can identify the users and accuracy can be increased and the sales of offline and online can be converged together so that when we approach our users, the big data of those 2 domains can be utilized. And we do hope that we will be able to start the launch as soon as possible, and we will let you know as soon as we finalize this plan.
This is just an image of what we mean. This is the promotion tool for national accounts. For example, there is a new beverage, and over Yahoo! site, they increased the awareness of such a sales campaign. It's not just tech spot, rather at convenience stores and supermarkets. If you buy this, there's a QR code, and you can use PayPay to scan the QR code. And then using PayPay application, you will be able to get cash back through this application. This is innovative, and there are some benefits that the parties can enjoy.
On the left-hand side, you see users who are interested in a new product. And by using Yahoo! ID, you can identify whether that person actually bought or not, and their information can be sent back to the manufacturer of this drink, for example.
And if you know how much shop space that bottle needs and if you want all the shoppers of interest to purchase the drink, by using Yahoo! JAPAN's logged-in ID information, we can understand the volume of purchase that will be expected and have sufficient stock on the shelves so that there will be no lost opportunity for the manufacturers. So this is the kind of benefits that we would like to provide in the future. Third, new businesses is to collaborate with Softbank under Softbank Vision Fund so that we will be able to introduce global entity services to Japan. Vision Fund is investing in multiple companies, but these are not in Japan yet. And so when they decide to come into the Japanese market, we would like to assist them and let you know. That is all for Q2 earnings results.
Lastly, regarding the future announcements of financial results. Regarding Q1 and Q3 financial results presentation, we would like to do these events via conference calls. There are many analysts who cannot participate physically, but nonetheless, they want to ask questions. So in order to embrace all the people who want to ask questions, we would like to take the form of conference call. As soon as we decide on the details, we will post to you the information on our IR website. So starting from Q3 financial results presentation, we would like to do it via conference call.
And so this is the second earnings presentation under the new management. So we would like to continue being an entity who will create a new future, which can be possible only by us, i.e. the convergence of the real and the Internet, and we will be united in pursuing this end.
Thank you very much for your attention.
From here on, we would like to open the floor for question-and-answer. So if you do have any questions, please wait for the microphones to be handed to you. Please make sure to state your name and your affiliation and make sure your questions would be -- is up to 2. And if you have several questions, please wait for your first question to be answered before you raise your second question. And you can ask in Japanese or in English.
So if you have any questions, please raise your hand. And so the person on the right-hand side, the third row, please.
Sugiyama from Goldman Sachs Security. I have 2 questions. First of all, it is about the -- when is it that you're going to be coming on to the track of profit? And so the 12% of growth has been seen on the Yahoo! usage time, the time spent. But then -- but the display of Yahoo! JAPAN is now going into data-driven company. And if it is so, then this time spent should also increase, too. So when is it that you're going to be becoming profitable? And the waterfall chart of the revenue and the SG&A is now shown together, which is not normal, is what I think. And so the revenue from the advertising and the expenses, when is it going to go -- become the revenue? When is it? Please tell me.
So that was your first question? All right. And so I will answer, and that will be followed by Mr. Sakaue. And so from this fiscal year, in order to have expense for new challenge, we're having an extra investment; therefore, the e-commerce business investment that has been going on and then the investment to become advertising #1. And plus that, we have additional investment. Therefore, I would like you to follow us through for a long term. But as you have said, the KPI is steadily growing. Therefore, in the very end, compared to without us doing nothing, the profit is going to be growing, and that is the scenario that we have created. Therefore, we're working under the scenario. Therefore, please follow us through. And for the second point, Mr. Sakaue is going to be elaborating.
For the consolidated issues, too, there are various factors included in. And it just coincidentally became flat, the SG&A and the profit and the revenue. And so it's not going to be a structural factor, that is what I understand, in a macroeconomic way. So this was a quarter 2 comparison, and it was flat. The reason why this came out is, right now, we're now hiring key personnel, including a retention plan, too. And there, we see an intensification. Therefore, the expense is growing for HR. And the other thing is about ASKUL. Compared to last year, the logistics and the distribution were suffering the cost heaviness. Therefore, here, the ASKUL is showing the deficit. And so that was specific about quarter 2. And within the whole total for the whole year, fiscal year, we have set the guidance for the full year and the base operation. We have been announcing that we were going to be flat. That is way that we would like to go on.
So please keep your questions very short.
And so PayPay, you're not utilizing T-POINT. And so are there any indications why you are not using T-POINT for PayPay, please?
The reason why PayPay does not apply T-POINT is there are -- there is merchants that is not connected or linked to T card. And PayPay should be used in every area, every corner of Japan. Therefore, we thought matching with T card is not good. But then, having said that, the e-commerce business, Yahoo! Shopping and T-POINT is functioning well, including the awareness of the user. Therefore, we do not intend to quit this T-POINT. We would like to continue on.
Now anybody else? The person sitting at the center, third row from the front.
I am Yoneshima of Crédit Suisse Securities. I have 2 questions. The first question is about advertisement revenue. You mentioned about ad fraud countermeasures and mentioned that maybe there is a negative impact on the revenue. But starting from the second half, I want to know what is your take on the advertising revenue, including the impact of ad fraud.
Regarding ad fraud, quarterly basis, there were impact of about JPY 1 billion or so. And we don't know what will happen in the next fiscal year, but this fiscal year-wise, in terms of advertising revenue, I think it will be in the middle range of single digit. Regarding SS, in the first half, we grew by 13%. So in the second half, we believe that we can grow by 10%. So for the full year, we can grow certainly more than 10% regarding paid search advertisement. Talking about display. And because of the impact of ad fraud, for the full year, the growth will be, say, the first half of single-digit growth, I believe.
Then moving on to the second question about mobile service business structure. You have PayPay and you have Softbank and Yahoo! JAPAN and you have Alipay, I believe. And if Alipay uses it, is there any monetary payment made and you will be conducting promotion and acquiring merchants where PayPay can be used? And I want to know what kind of activities you have on mind.
So I would like to answer that question. About the promotion, at one point, PayPay will pay. And we have PayPay on Yahoo! application, and we want to promote that for Yahoo! users. And for that promotion, Yahoo! will be bearing the cost. But in terms of point, cash back, and maybe there might be a major campaign for that, that will be handled by PayPay. And regarding resources, including HR, PayPay will be paying for that. Your second question is about what if Alipay uses it. So the merchants will be paying the merchant fee to Alipay. So regarding PayPay, there will be no cost and no revenue for that transaction. So PayPay and Alipay either can be used. So from the user's point of view, the same QR code is used, but PayPay company just shares the QR code with Alipay. So these are 2 totally different transactions. Thank you.
Any other question? So the person in blue in the first row, please.
This is Sawada from ACE Research Institute. So regarding PayPay service, I would like to know about how you are advancing with ensuring the merchants -- number of merchants. And now you are going nationwide. So I don't know if you can disclose the number of merchants, but if possible, please and how you feel about this and where you are aiming for.
Regarding number, this is undisclosed, excuse us. But then, for the progress, for the sales, the first point, we were suffering because there was no product. And honestly speaking, the merchants did not have to hurry. Therefore, we thought we should do more. Therefore, we had an earlier launch than we have expected. And now the merchants understand and they get the image because the product is already there and the scheme is already there. Therefore, we're having much more effective sales. The chain stores and individual merchants were responding, both of them. And so within this fiscal year, I think we will be able to come near or achieve the number that we aim for. So we're going to be having a start task.
So next is about ad fraud. You said about downside risk for ad fraud. And within the long term, what is going to be the expectation for the upside? And so you're going to be excluding the bad part and you're going to be responding to the media, so I would like to know your thinking, please.
It is just as you said, and it was shown on our purpose #3. So those are within our upside, too. For ours, we're investing a lot of digital marketing, and we have been a victim of ad fraud in the past, too. So from our failing, we don't know. So we want the advertisers to place their ads on a very credible area. Therefore, even if there's a downside risk, we're going to be responding to this correctly and then getting high credibility from the client that Yahoo! is doing well while managing the venue for them. And that's going to be leading an upside for us. I don't know, we have to take some more time to think about this, how we're going to be doing.
And are you having any impact on the unit price? If so, when you're going to be having a smaller amount of advertisement, I think the unit price is going to be changing a lot.
[ From Mr. Miyazawa. ] Regarding the ad fraud countermeasure, maybe in the short run, we're going to be impacted and go into a negative. But from the client side, the response from the client, rather than we have been expecting, people are much more favorable. They are saying that Yahoo! was so brave in taking this judgment, and they take this action very highly. But then, how much is it going to be up-leveling the unit price? We have not factored that in yet at this point. Therefore, it is not included in our numbers. But then, if it's going to be related to our higher evaluation, then the bid could be led to a higher area. So we are going to be making an effort to have that higher bid.
Any other question? Person sitting in the front, please. Please wait for the microphone to be fetched to you.
I am Nagao of Nomura Securities. I have 2 questions. First question, I understand that you started launching in July. And I am talking about premium smartphone video advertisement. I want to know what is the status right now. And in the second half and in FY 2019, do you think that will boost your revenue?
So Mr. Sakaue will answer first.
September, we have many advertisements, and so the video revenue in terms of advertisement went up. And regarding the forecast for Q3, we haven't changed our forecast. Full year-wise, we have given you the guidance, but then we are shy of the guidance figure regarding advertisement revenue as a whole. And the video advertisement cannot complement for the shortage, so to speak. In Q2, smartphone video advertisement increased fourfold year-on-year. Having said that, as mentioned before, PC is in the negative domain. So net-net, the positivity has been offset. The smartphone advertisement will grow, I believe. PC revenue will go down. So we need to find out how we can make up with the loss on PC side. We want to be device-agnostic, and we can design the advertisement accordingly. And also, we can shortage -- shorten the period in which advertisement is shown. And we need to monitor the brand delivery KPI as well. We will change the designs of the products so that premium advertisement, as a whole, can be revamped.
Second question is on PayPay. It is about the merchants that can handle PayPay. I actually looked into the promotions that you're conducting vis-à-vis the merchants. And for the transaction value, you are giving 1% payback. And so this is available only to the first 300,000 merchants. So in January 2019, you want to have 300,000 merchants, I believe, and that is the pace at which your sales force is working at. So is my understanding correct?
Mr. Ozawa, please.
Well, maybe I should not talk too much, but I can at least say that the 300,000 merchants is too small a figure. So we launched the service in October. And frankly speaking, for users, if we ask them does it make sense for them to use PayPay, we are still behind the competitors. And in terms of the transaction fee, if it is under the payback scheme of 1%, maybe it is not that attractive. There are different chain stores as well as independent merchants, and we have to decide the second at which we conduct promotion. And of course, we will have PayPay on Yahoo! application, and we have to look at the timing and to coordinate the matter with the sales force. So depending on the timing, there might be some leeway between December way up to, say, January. So the sales force would like to reach 300,000 merchants before January 2019, if possible. But I cannot tell you the exact timing or the volume. But in terms of the momentum that we are feeling, we believe that 300,000 merchants is a given. You have competitors providing mobile payment, and Japan is heading to a cashless society. We need to have many merchants because if PayPay can be used at Store A but not at Store B, it will be inconvenient. And so we want to make sure that we can encompass as many merchants as possible and PayPay has much resources for a sales force. And Softbank corporate sales force is working to increase the number of merchants. So we want PayPay to be the mobile payment operator with the largest number of merchants in Japan.
Any other questions? From the right hand, the person in white shirt, please.
Mitsubishi UFJ-Morgan Stanley Securities. Araki is my name. So on September, there was an ad fraud. But then if you did not have the ad fraud, how would the result be? And you said there was an impact of JPY 1 billion. But then a year ago, did you still have that ad fraud included and first quarter was a positive? And if the sales of ad fraud is included in the first quarter, it's not a positive, but then it's going to be flat? And so if you have been having an impact of JPY 1 billion, that is going to be decreasing year-on-year. And so I would like to be organized about this JPY 1 billion and about the ad fraud. This was my first question.
Mr. Sakaue, please.
Regarding the ad fraud countermeasures, we have been continuing on from the past. Therefore, we announced on a very large way in September, but then for quarter 2, starting from the initial, a long urgent area has been cut. Therefore, it does look decreased Q-on-Q, quarter-on-quarter. But then, for quarter 2, rather -- for the product side, last year's quarter 2 was revised, and therefore, FY 2017 year-on-year seemed to be growing. And so let us detail on this. For the in-fill -- in-feed ad, in 2017 Q2, we did not put on the advertising that we were set to put on the in-feed. But then after this, the format for in-feed for YDN, if the advertisers would like to post this advertising upon us, then we put it on the advertisement format. Therefore, bid has been accelerating. Therefore, it has been growing. And ad fraud countermeasures has been going on, so things were mixed within YDN has been seeing.
So you say JPY 1 billion is going to be decreased. So what do you mean by this? What is the impact?
And so we have suspended or temporarily terminated some of the distributions.
That's going to go away in the third quarter?
Yes.
So last year, you did not distribute?
Let me answer. So to be accurate, the countermeasures for ad fraud has been ongoing. So starting from the non-YJ, we have been always experiencing this ad fraud. Therefore, we have been making the countermeasures. And for the malicious one, we have been paying back to the advertisers by each time such an event happened. But then, this time, we stepped in further. And as we have announced on our release, the distribution via SPP is all blocked. And by this, the impact has been showing up greatly. And regarding this, that included very good media, too, and we had to confirm this one by one or else we are not going to be starting this advertising. So this is a totally different policy compared from last year. Therefore, impact is large. And so conversely, the advertisers have been praising us for this courageous judgment. And the good media is going to be starting, and that is something that we are doing right now. Are we okay? So that was your first question?
So second question is about EC. And so in second quarter, it was JPY 173.5 billion year-on-year, and this was upon the expectation. But then when you have been announcing, you said you're going to be aiming for 30%. Therefore, in the second half, are you going to be looking into a very accelerated promotion? Or else are you going to be revising over your doings? I would like to know about the second half. Also, that is about shopping rather than e-commerce, is it?
Yes, right.
[ From Mr. Ozawa. ] When we're going to be starting on such, we're going to be announcing this. And we would like to start on a campaign any time because it's going to be feeding into the profits in the future. And if the P&L is going to be approving this, we would like to do it. And this is something that we always try to adjust with the shareholders. But then, I cannot step in further to describe this. But then there's a volatility, and this is ongoing or not going. And whether or not it's going to be coming up as a good result, we have to be testing and observe and try to find out where we are going to go. And we're not going to be expecting to draw down our objectives. We're going to be putting in initiatives and countermeasures. So if there's a timing that we must correct this, then we will correct.
Any other question? On the left, third row from the front.
I am Mori of JPMorgan Securities. I have questions on PayPay. First question, I want to confirm about the investment. So you will provide different reimbursement and merits to the users, but regarding this term, you have been investing a lot to develop merchants. But in Q3, regarding the merchant development costs, that it will stable out, but you will be focusing more on promotion. Am I right? And regarding Q3, the more you grow, the more deficit you will be incurring. Am I right regarding this point? I know that you cannot tell us what will be the actual investment amount this term, but can you give me your take on what will be the ballpark figure of investment you will be making this term?
Okay. So I will take that question first. In Q2, we haven't started the service yet at the beginning, so we focus on the development of merchants. And we launched on October 1, which is the beginning of Q3. And Mr. Ozawa mentioned that Yahoo! JAPAN's application, PayPay application will be launched some time in November. And for users, as we have mentioned, we will try to conduct some promotions so that the users will be motivated to use PayPay. So as a result, we believe that we will have more deficit regarding PayPay business. But we are still in the stage of investment. So we want to continue investing, and we want to enlarge the number of users. And we need to monetize on this scheme by coming up with O2O solutions or provide fintech services. So we need to have more services in our portfolio. So all in all, we will be able to enhance the services in totality. So this has been a bird's eye view of the situation.
Now this is Sakaue speaking. For the next half year, we want to conduct the user promotions so that they will be enticed to use PayPay at merchants, and we will also try to develop merchants. So these 2 have a synergetic positive impact. So far, we have been conducting sales activities to develop merchants, but we will try to work in 2 areas simultaneously for the next half year, i.e. working in enlarging the number of users and merchants. It all depends on how many merchants there will be in March. But in 2019 and onwards, I believe that merchant development, of course, will gradually go down. So we want PayPay to be used anywhere they want to. So regarding the total costs, we haven't figured out what will be the ultimate figure. This will be the cost for PayPay. So from Yahoo!'s point of view, it will be the investment and not expense from our point of view.
Moving on to the second question. You have a QR code, but some people wonder whether QR code will be very dominant. Other competitors are using different forms of mobile payment. But I believe that you are taking preparations to deal with any kind of payment. Japanese are used to tap-and-go payment, i.e. touch payment. And maybe the mobile payment scheme might be different, not the QR code. And if that becomes a reality, what kind of countermeasures are you planning today? So this is a long-term vision question, but I would like you to answer this question.
QR code is only one of the technologies that we can use to realize our mobile payment. And we are the technology company, so we need to enhance the convenience and create innovation to pursue the same. Having said that, there are different devices, but hardware cost was a barrier. And I think that was a hindrance for credit card business. So in order to make Japanese society cashless, we need to enable merchants without hardware to accept mobile payment. So we are coming up with simple means to realize mobile payment, and we would likely continue R&D to realize that end. Did I answer your question?
So other than QR code, you are considering solutions that will simplify the smartphone or mobile payment? Or are you saying that the QR code is the answer?
No, no, no. I'm saying that there will be other technologies. Today, I cannot disclose to you other technologies. But centering around CTO, we are conducting R&D for other technologies as well. QR code is not an end unto itself. We want to maximize the payment that is made via Yahoo! through QR code. So considering the cost, QR code is easily embraced by different merchants. And China is the predecessor in this area, so we can just follow suit. And I know that Suica is very convenient, and that is shown in the survey that we see in our survey. And contactless is the answer, and I think we are still in the transitional stage. So no matter what technology we choose, for the merchants and for the users, we need to create new services. And regarding the flow of data as well as money, we want them to go through Yahoo!. And once that becomes a reality, we can maximize on the advertisement business as well. And so we will start out with QR code, but with the changes in the technology, users and surrounding environment, we will be evolving our technology accordingly.
Any other question? So right-hand side, second person from the front, please.
Ishihara from Daiwa Securities. I have one question. And so whether it be QR code or other payment, in the very end, how do you consider value? How much consumption would you think, by percentage, is it going to be a success for you? Or else maybe, how much business can you capture in order to create a monetization? Maybe a detailed number is probably difficult to disclose, but then I'd like to know about your thinking.
Creating a cashless society in Japan, including our competitors, we would like to change the society and the market based on cashless infrastructure. I think we're going to be working under such precondition. And right now, we lack the digital money for cashless payment right now. Therefore, we would like to increase our capability for cashless payment, including our competitors, and we would like to hold the maximized share here. And so even if we don't have the maximized share, I think we're going to be having better, improved larger monetization. But then on Media and the Commerce business and integration of the payment for the online, offline, in order to create the same level of operating income, we have to have the largest maximizing share. That's the way of our thinking. Anything to add, Mr. Ozawa?
So regarding how we think about the numbers, I think there are a lot of way. For instance, Amazon is now growing its advertising very fast. The e-commerce ratio is 50% for the whole America. And if the share is 50% -- or 7.5% share, let's say that Amazon has that share, then Amazon will know how much people will be buying and who is going to be buying. And based on such data, they're growing their profit. Therefore, let us think that Japan's market is at JPY 100 trillion, and it could be the sales of Aeon or the distribution value. And that's going to be around the range of JPY 10 trillion to JPY 15 trillion. JPY 1 trillion -- and therefore, right now, on the net -- Internet, we are making the transaction payment by JPY 1.4 trillion, and Amazon probably is now having distribution of JPY 2 trillion. And plus travel, that's a range of JPY 3 trillion to JPY 4 trillion, and that's going to be us made a settlement. Therefore, the card settlement, I think the JPY 10 trillion to JPY 15 trillion is not a dream. And it's only Yahoo! that we can make multiplying calculation. Rakuten and Amazon does have media. Yes, that is true. But then Yahoo! JAPAN -- it's only Yahoo! JAPAN that has this widest reach. Therefore, we very much consider that we are going to be very strong. So even if we are going to be at the same level with other companies, we have a very big opportunity of monetization. We have that great effect, and we have a great objective. And that's one of our thinking. It's not having a consensus within the house, but then compared to Amazon, we think that way. Was that okay with you?
Any other question? The person sitting on the very left.
I am Tao of Alliance. I have 2 questions. Firstly, about the full year guidance adjustment that you have made, I want to deepen my understanding. So JPY 3 billion upward revision is made, and you have incorporated the first half upward trend. If that is the case, in terms of second half, you have not quantitatively looked into the matter. Or did you look at the positive and negative? And in the end of the day, did this number offset in the second half?
Regarding the guidance, we increased JPY 3 billion and because we have factored in the favorable trend in the first half. Regarding the second half, if we can reach the internal target, then it will go up. But then, there will be risks in the second half. So looking at the possible outlook that we have, we decided to settle on JPY 3 billion upward revision.
Second question about the change in the shareholder composition. What kind of capital strategy or policy you can take in the future? Do you think it would change the options that you have? So you were not able to -- or maybe I shouldn't say that, but you had major shareholders, and you had to purchase the shares from them in order to realize treasury stock buyback. In the previous shareholders composition, you were not able to do that, meaning that you were not able to conduct buyback out in the open market. But given the new shareholders composition, can you take the initiative to conduct a buyback? Or do you have to consult Softbank? Say, looking at share price today, say, maybe it is below JPY 260, so maybe Softbank might say that you should conduct a share buyback. So if it is inexpensive, do you think you can have free hand to conduct the share buyback without getting the approval from Softbank?
Yes, you're right. But then looking at the shareholders composition, you need to get the consensus from Softbank. But before TOB, there was a very delicate balance of keeping the shareholders composition, but then that is no longer the case with the new shareholders composition. Any other question?
So if not -- we have a little bit of time, and therefore, if you have your second round of questions, please raise your hand. If not, now we would like to close our session. Thank you very much for your participation.