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[Foreign Language] [Interpreted] Thank you very much for joining us in Z Holdings' FY '20 Q3 Business Results Conference Call. Regarding the business results presentation material, it is already in our website. The participants from Z Holdings are as follows. We have Mr. Ryosuke Sakaue, Managing Corporate Officer, Group CFO; Mr. Takao Ozawa, EVP, Senior Managing Corporate Officer; and Mr. Chiaki Fujimon, Managing Corporate Officer, Group CTO; and Mr. Hiroshi Kataoka, Corporate Officer of Yahoo! Japan. Firstly, we would like Mr. Sakaue to walk us through Q3 business results. Then we will open the floor for Q&A. We are scheduling the entire session to go for about 90 minutes. We would like to start the conference call. Mr. Sakaue, please.
[Interpreted] I am Sakaue of Z Holdings. Thank you very much for joining us in the conference call. Before walking you through the business results, I would like to give you some background information. Regarding strategic explanation, including LINE, we will hold a separate session in March. And so we will let you know of the detail later, and I hope that you will participate in that session as well. Today, we will talk about business results and talk about the investment results of Q3 and also what we believe will be the final revenue and operating income in closing Q4. So overall, the impact of 2019 has been ameliorated in Q3. So we were able to recover to pre-COVID-19 situation. And from the end of February, since we have been impacted already by impact last February, we will try to compare the 2. And in terms of the second half, there are different risks that we have to bear in mind. And we try to conduct stress test and come up with conservative numbers. So regarding impairment loss, we will be processing that in the second half and aim at having operating income of JPY 160 billion. So that is the general backdrop I would like you to bear in mind when listening to my presentation. The first page is the topics. Regarding revenue and operating income and our Commerce business transaction volume went up. So year-on-year, it went up by 19 -- 14.9%. And in terms of operating income, with the investment, we had to renew the existing system of credit card business and decided to retire to record retirement loss. So it was, year-on-year, minus 8.1%. Throughout the full year, we would invest in Commerce. So we will try to secure revenue of JPY 1.14 trillion and operating income of JPY 160 billion, as given in the full year guidance already. Please turn to Page 4, which is our P&L, and I already explained to you about the revenue and operating income. EBITDA is positive even though operating income is in the minus. The reason is we had a non-cash recording of retirement loss. Therefore, there is a difference between the positivity of EBITDA and the activity of operating income. Next page. It shows Y-o-Y comparison of Q3. You see 3 gold bars, which are Commerce, Media and ZOZO, and we are trending favorably. Therefore, we were able to increase our revenue and operating income. And we had investment in marketing. And also, we renew our credit card system, so we had record retirement loss. And therefore, the operating income for Q3 was minus 8.1% Y-o-Y, landing at JPY 43.9 billion. Page 6, the second half status of our investments. In last business results announcement, I mentioned that we will constrain our investment and try to hold until the second half and try to be aggressive in making investment looking forward. On the left, you see Q3, mainly, we have sales activity cost, and there has been an increase of JPY 10.8 billion year-on-year. You see the breakdown. And mainly for EC merchandise, we have conducted aggressive investment. As a result -- what are the results? Our shopping transaction value went up by 33.7% year-on-year. And also, YAHUOKU! reuse increased by 7.4% year-on-year, and this is first high single-digit growth in 18 quarters. I will talk about it later, but including reuse and other KPIs, we were able to make improvements. And in terms of the investment for the sales activity, we believe it to be JPY 21 billion. Because we plan to conduct new services in Q4, so we will strengthen our marketing. So you can see that if you look at Q3 and make a year-on-year comparison, there is not much of a growth. And in terms of Commerce, we plan to conduct a major campaign, and also, LINE integration will most probably happen on March 1. So along with that, we will try to strengthen our corporate branding. And those items are all included in our Q4 sales activity cost. Page 7, please, and this shows the guidance for full year operating income. As mentioned before, there has not been any change, so we aim at securing JPY 160 billion. Up until Q3, we have [ JPY 122 billion ] so far. So what is our outlook for Q4? On the right, you see the comparison in between in the Q3 and Q4, which is a Q-o-Q comparison regarding the income. In terms of Commerce business, regarding gross income, there are some seasonality. And so, as compared to Q3, there will be less in Q4. And also, our marketing costs will increase on Q-o-Q basis. And also, we are scheduled to have business integration with LINE. And so we have onetime expense related to the integration. As a result, Q4, we aim at operating income of JPY 17.8 billion. So in totality, we plan to land at JPY 160 billion. Regarding top line, there might be some ups or downs. And how are we looking at the top line for Q4? I will talk about that in later slides. So let's go by segment. Please turn to Commerce business, Page 10. This is the slide you are very familiar with, and I've walked you through this many times. So please focus on credit card. So we tried to restrain our sales cost activities, and there has been less offline use because of COVID-19. And so group-wide, we are seeing some deceleration. After Q4, we will launch new services. So we will conduct PR activities, which will be a driver for yet another growth. Next, please take a look at Commerce business, Yahoo!, Page 12. This shows KPIs of Yahoo! Shopping and PayPay and try to walk you through what is the benefit and results of the investments. So on left, you see new buyers increase of 40.7%. In Q1 and Q2, we grew, but further on in Q3, we outdid our normal momentum. On the right, you see average in spend per buyer, and there has been some slight growth. New buyers as compared to existing buyers tend to have low average spend. And -- but we were able to increase the new buyers and also increase the conversion of the existing buyers. So therefore, in totality, average spend per buyer went up. Next slide, please. Next page, I'm going to talk about the profitability. Left-hand side, this is the shopping advertising take rates and the ratio of sales activity cost. By making that aggressive investments, still, we try to make sure that we don't have any negative spread between the 2. So this means that we call it a disciplined investment. Right-hand side, this is the in-house payment ratio. In the Yahoo! Shopping and PayPay Mall, we introduced the PayPay and also, we're having this -- and the promotion events of Cho PayPay Matsuri, that's Super PayPay Festival. Now we could push up the in-house payment ratio, so the EC take rate and also for the payments. And we try to offer and also encourage the close use of these 2 services for our own customer base. Next, let me talk about the ZOZO. Last Friday, the ZOZO have announced really their fabulous and wonderful business performance already. As we all are aware about it now, [indiscernible] is perhaps since that the ZOZO have joined the group, mainly for the traffic of the Media that Yahoo! can offer and that ZOZO could also take advantage of it; and also for the PayPay Mall, but also have the synergy effects on -- in terms of business. And in many areas, we can work closely together with ZOZO. And of course, that their own efforts and stand-alone efforts have delivered the goods. But taking all these into considerations, now transaction value have been growing continuously and as well as that the growth of the income and profitability like this. On top of that, on the right-hand side, you can understand that not only for the clothes and the shoes, now the ZOZO have expanded the scope of merchandising also include to -- including cosmetics. It's not only simply the selling the cosmetics in the EC side but also -- but taking the offering that ZOZO [indiscernible]. So with that kind of new technology that ZOZO offered to their substantial users, for have -- because synergy of the business and technology. Now ZOZO, it has very good customer base, and the millennials or that the Generation Z. So now there's ZOZOCOSME, ZOZO cosmetic, and can also grow in this customer base, mainly. And we would like to also push this, the cosmetics business, and the ZOZO as a group as a whole with a united manner. Next, let me talk about the fintech business on Page 17. So this is the KPI for PayPay. We always present it. And including all this, the KPIS, now the growth of PayPay has been really steady so far. Next to Page 18. As far as the PayPay is concerned, at the beginning of this fiscal year, now we have started and we have announced that many monetizing efforts for the PayPay. And at this time, so on the -- and the bonus operation has been started and the application of PayPay. So now, we have total about 1.9 million users of this service. So this mini application of PayPay can -- they can manage the PayPay bonus so easily. So it was really effective for us to acquiring many users. So the company, with an offering that's the bonus operation, well, as the management of PayPay applications, it's once called a One Tap Buy, One Tap Buy, but now it changes the name to the PayPay Securities. So based on this PayPay's infrastructure that we can also expand the scope of the financial business, including the investment trust fund and the like in the future. Next, let me talk about Media business in Page 20. This is about advertising business revenue. When I look at all of the total of the advertising, the JPY 42.6 billion -- I'm sorry, that JPY 93.4 billion, 6.7% growth. Here [indiscernible] guidance we had presented before. So when we just look at the breakdown for each of the products, as for the search advertising, and it's not almost a flat from that the Q3 and from that -- this in a year. And tourism is one of the main areas for the search advertising. But in the Q3, in the beginning of the Q3, it just seems to recover a bit, but now have dropped in the latter half of the Q3, so that's why. And in Q3, on year-on-year basis, that search advertising revenue grew minus 2.8%. But on the other hand, the display advertising, we have more traffic. And we have -- also, we have promoted an access for display advertising. And also, I mentioned earlier, now it has -- advertising for the shopping have grown. So taking all this into consideration, they have grown like this. And particularly in the programmatic advertising, it has grown by 21.1%, dramatic growth. And when it comes to this and the reservation advertising have -- is starting to recover from the major advertisers and also for the [Foreign Language], the tax for the government that contributed to that, to the mitigate, and shrink that, the margin level, off like that. So that let me talk about our forecast on the Q4 outlook on Page 22, please. When it comes to the shopping, now we have the past 1 year of the consolidation of ZOZO. And also, we have spent the JPY 10 billion and return campaign for the customer. So that's why -- and that's just why we had the last year, so that's -- we have ended. And also, now we are talking about making additional actions. So that's why we'd like to secure at least about this, the middle of the 20% growth for the shopping business. This is our outlook in Q4. But when it comes to advertising business, currently, that emergency declaration is issue. So that now in Q4, again, that we have to be in [ vain ] in a difficult business environment. But at the same time, in the Q4 last year, and we have some of the higher demand from advertising and the year-end. So in IDFA, due to this, we have some impact on retargeting. We will have some impact in Q4. So this reaction from the last Q4, and this -- the impact will be included. But we would like to do the utmost to make it flat and hopefully, that's some kind of slightly, some positive growth. This is what we like to do. And last of all, let me talk about that the business integration with LINE. Please look at Page 24. And the March 2021, next month, is the target month for the completion of integration. So this is an update from the 3 months ago. Now the end of last year, now the LINE Corporation delisted. And in our -- currently now and by that February 28, now the LINE successor and the tender offer of Z Holdings shares by LINE Corporation after that. Now that the business will be -- now we're separated and will be integrated under the Z Holdings. So end of March, the next year, we will complete this process, and everything is going steady. And so now we plan to complete all this process on the March 1, 2021. So this is the -- we made the announcement of the business integration, about 1 year and a couple of months ago. But now this is that basic scheme and the structures. And this is including the scheme from the share exchanging rates or that all this framework of scheme have never changed since we have announced. Now getting closer to the complexion of integrations, and we have some questions about what will be that the goodwill of the PPA. Currently, now we are still discussing with our corporate auditors, but now, let me explain about the outline of the mechanism. So when you think about this is not to the acquisition of the usual TOB, but we like to take advantage of this and the share change. So just like this. So acquisition value of the LINE is that -- and February 26, and before that, and the closing price of that in February 26, before the March 1, will be multiplied by that number of shares issued and the minus net asset of the LINE. This will be allocated into the goodwill or intangible fixed assets like this. But at this moment of time, it's really flexible that we cannot have a fixed about this acquisition cost. So that would be more allocated on the goodwill, so that is subject to the change, still. So this is only the framework. And when it comes to the PPA, so this is IFRS basis. So the part of this PPA will be and written off. So [indiscernible] next year, we can provide you more detailed information and numbers. That's all that the business performance of Q3 of the Z Holdings. Thank you very much. Thank you.
[Foreign Language] [Interpreted] [Operator Instructions] So first of all, SMBC Nikko Securities, Mr. Maeda, please.
[Interpreted] I have 2 questions. So do you want me to pose you one question at a time? Or should I ask you 2 questions?
[Interpreted] Please pose 2 questions together.
[Interpreted] The first question is about Commerce shopping. last year, ZOZO became a consolidated entity during the fiscal year. So excluding ZOZO, what will be the apple-to-apple comparison? And what was the impact of promotion? And what is the momentum you are feeling? So can you answer my first question? And going to the second question which is on advertising. In terms of search advertising, in Q3, it was minus. And you mentioned that you were not surprised by that. But when you look at the market, search advertising seems to be recovering, at least that is my impression. So maybe your share is decreasing because of the competition with Google or maybe if there is a decrease in travel, for example. So maybe the market as a whole is not recovering. So can you comment on your take?
[Interpreted] Thank you very much, Mr. Maeda. First question about shopping. In November last year, we consolidated ZOZO. So excluding that, there has been an increase of 25% year-on-year. We conducted promotional activities, but we were able to nonetheless increase more than 20%. And so we value our results to some extent. And is there any comment from Ozawa-san? If so, please chime in.
[Interpreted] No, I don't have anything to add.
[Interpreted] Then let's move on to the second question about SS. I don't know about the details of Google. But regarding [ MPLA ], I believe that Google Shopping-related item is growing. In terms of Z Holdings, we have shopping and we have shopping advertising. And that is how we provide you with the results. So it's very difficult to compare on an apple-by-apple basis, the SS advertising revenue. Regarding Yahoo! SS advertisers, travel-related companies are our major advertisers. Therefore, we have been greatly impacted by the current COVID-19 situation. Did I answer your question?
[Interpreted] Yes.
[Interpreted] [Operator Instructions] Next from Sato-san from Jefferies Securities, please.
[Interpreted] So this is Hiroko Sato of Jefferies Securities. I have 2 questions. My first question is, in auction, now it's called the [ DU ] but now -- and you have the -- and the upper of high of the single digits and for the first time in 18 quarters, right? It seems like that for the last time, it's starting to take off. But now in the Q3, in order to have this growth in the Q3, what kind of actions did you take? And after Q3, after this onward, then you can -- can you maintain this momentum and -- after this? And what's your strategy? And my second question is, now you want to increase your sales activity cost in the Q4, right? So -- and also now you will plan some kind of a major big campaign in the year end. But -- so for example, in our GMV growth for the target of 20% is still very conservative. Can we expect a further end of target of 30%, for example?
[Interpreted] Okay, thank you very much, Sato-san. When it comes to reuse, reuse business, okay -- and Ozawa-san is going to supplement later, but then, when it comes to reuse business, first of all, and the Q3 last year was minus 5%. So that's -- so last year was actually really low. So that's why we have this growth this year, but in a year -- but when it comes to sales activities, we stopped the sales activities in the Q1 and Q2. And when we started that, the promotion and including coupon, so including PayPay Flea Market, PayPay flea mall. And it has been very, very capable and -- the platform. So that's why if we just put an intensified promotion, so we can expect growth. And also in Q4, we'd like to and accelerate this momentum. But then also, I explained earlier and now we have the forecast like this in the presentations. But next -- your second question is about, yes, we're going to make some aggressive investments. And also -- and I would like to have more -- a higher target. We'd like to achieve that anyway. And stemming from the February -- the late February about the masks or the sanitizers, they're starting selling like very well. So this is one we experienced last year. That's why on a year-on-year basis, we now like to -- currently, the target is in the middle of 20%. Ozawa-san, do you have anything that you would like to explain additionally?
[Interpreted] Yes. Sakaue-san, thank you very much. This is Ozawa speaking. Then when it comes to YAHUOKU!, we are very sorry that we have been causing much of the -- your concerns about the effort. But now we have make this growth this time. As also Mr. Sakaue mentioned that last year, we filled in promotion. That's why -- and on a year-on-year basis and you had some reactional and boost from the business this year. But now we also -- and we have improved that product. And so that's -- although we're making promotion, we had some defects in the products that promotion doesn't make any sense. But now, now we have the products on which we can make the expected results on the promotions. Also, the [indiscernible] has also contributed to the expanded basis of this reuse market in Japan. So that is also that favorable environment for us. So -- and the market of reuse is and have been expanding. And in this environment now that reuse on the business also in our business that enjoyed attentions. And when it comes to Q4, we already have announced and started and like to -- and PayPay Flea Market, we offer at a half the price, making the price and the fees really half. So that's why for the [indiscernible] now, but I think we need to focus on growing the top line of business. So that's why -- and we take advantage of this campaign in Q4. And YAHUOKU! also, we'll keep on working on that. But now -- so that seems now we have some difficult in Q3, but now, we have some success mainly Q4 last year. That's why -- and we also like to have success. But we are not sure about how much of the success of the Q4 [indiscernible]. And when it comes to shopping business, also have already been presented at the main presentations, but -- and COVID-19 is really confusing factor. So that is very difficult for us to clear projection of business due to this COVID-19 factor. So that's why I'd like to go over 30%. But now -- but I don't want to miscommunicate to you. That's why we have -- currently, the formal figure is still this 20%. But going towards the end of the fiscal year, we already have -- is implementing that big campaign. So that's why we're not trying to exceed that, our current target, hopefully, and then actual basis. That's what we think. Thank you very much.
[Interpreted] And I have the other additional question that when it comes to [ DUs ], now you -- and making the fees and half, but it is only temporary or that this is [ primary ] discounts of the fees and thus, all the fees will be kept and half of this on account level, right?
[Interpreted] So it's not -- it's a permanent one, I don't know about exactly. This is that the reduction of fee is not a campaign. So in the sense that this is the recurring or the permanent.
[Interpreted] Next, Nomura Securities, Nagao-san, please.
[Interpreted] I am Nagao, Nomura Securities. I have 3 questions. Question number one, Sato-san mentioned about PayPay Flea Market and change in the fee structure. And I want to know what is the backdrop. And also, after the change, what has been the change in the transaction volume? And I'm especially talking about PayPay Flea Market, and I want to know, there will be some acceleration in the transaction volume. Question number two about the results. In terms of the investment loss as compared to Q3 of 2019, it has been lowered. And I believe that PayPay profitability improved, contributing in a positive manner. So can you tell me the details? Mr. Sakaue, you mentioned about the recovery of PayPay, and I want to know what kind of monetization scheme you have going forward. Last question. So when you look at the advertisement of Q3, in October and November, so we did not have any emergency declaration. But now we see a decline in the traffic because of the declaration. And I believe that you plan to go flat in Q4. But now, the declaration has been reissued and extended. So there might be some leeway for the positive increase in advertising. But when you look at the unit price and also by volume, what will be the status going forward? Maybe it might be difficult to categorize, depending on the product that you're talking about.
[Interpreted] Thank you, Mr. Nagao-san. And regarding flea market, Mr. Ozawa will explain to you later. So I will answer questions 2 and 3. And we have Mr. Kataoka in charge of Media, so he might add to my response regarding question number 3. Now about 2, the loss is PayPay. And in Q3, loss was about JPY 10 billion, and 25% has been incorporated in our final results. And regarding monetization using PayPay, we have the earned bonus. And also we provide loan and also installment payment on PayPay, and that is our services that we will be launching in the future. So PayPay Securities and YJ Card will be the entity that will get the revenue, but then they will be profit sharing to PayPay. So we can't monetize PayPay using those services. Let's move on to the third question. So you want to know about the traffic of Q3. And based on that, what is our outlook for Q4. In Q4, it is quite similar to shopping. Last year, in March, the traffic increased. So in Q4, I do not think that year-on-year, there will be any major dramatic increase in traffic. As I have mentioned in my presentation, last March, the auto OEMs had the last minute spending of advertisement because they already budgeted it. So I'm talking about the reservation advertisement. But our sales team believe that in March, there will not be as many last-minute advertisement like last year, so year-on-year, it might go down by about 30%. We don't know for sure, though. So display advertisement might be in a challenging situation given the backdrop. Nagao-san, you did not mention about it, but IDFA-wise, I believe that we will be impacted some time in March. So it is already factored in. So it will be in the magnitude of, say, JPY 100 million negative impact on YDN. So those are all factored in our Q4 outlook. So about flea market fee change and what will be the growth rate, if there is any comment from Ozawa-san about PayPay, please add to my explanation.
[Interpreted] This is Ozawa speaking. Regarding the flea market, if we can grow functionally, I believe that we will be satisfied. But unfortunately, the numbers have not been the level that we were looking for. We are taking different measures, and the fee reduction is only one countermeasure that we are pursuing. And on top of that, we are adding more functions, and we are trying to mix and match different measures to see the growth. As compared to YAHUOKU!, I believe that we can reduce the fee by 50% in flea market so that we will be able to compete with others and take the growth trajectory. And I know that just by reducing the fee by half will be enough to go back to the growth trajectory. So with YAHUOKU! and Yahoo! Shopping, we're going to collaborate so that we will be able to grow the flea market. When you talk about the transaction value, there will be a clear growth. And in terms of e-commerce revolution, we try to increase the available merchandisers. And we had a [ premier ] fivefold point of all the buyers in the past. So we must try to provide them, but both to the tenants as well as the buyers. So once we have more tenants, there will be attractive merchandisers in the mall. But we will not be able to suddenly grow by tenfold or twentyfold. So it's not the case in which next month, we can grow by ten to twentyfold and grow dramatically. That is not the scenario that we have on our mind. Now about monetization of PayPay, we don't have to look at the cases in China. But having said that, monetization of PayPay will focus on the payment and also the interest rate that we will be able to get. And also, we can have O2O, which is traffic referrals to the merchants. So we had different financial services under PayPay. And as mentioned by Mr. Sakaue, we can extend [ a loan ], and different services are in our pipeline, and coupon can be used O2O-wise. And there are many users leveraging all those coupons. And so we can have a tripartite relationship so that we can grow our business.
[Interpreted] Thank you very much. So Mr. Kataoka, if you want to add about traffic, please mention your comment now.
[Interpreted] And this is Kataoka speaking. We have the extension of the emergency declaration. So in terms of the number of users, we are seeing an increase. And in the metropolitan area, the emergency declaration has been extended for another month. So in terms of advertisement placement by the sponsors and clients, there will be some fluctuations. So as mentioned by Mr. Sakaue, in March, there will be some ups and downs in March. That's all for me.
[Interpreted] So I believe we answered all the questions. Thank you.
[Interpreted] Next from Citigroup Securities, Mr. Tsuruo, please.
[Interpreted] Yes, this is Tsuruo. I have 2 questions. My first question is, for growth of GMV, particularly in the shopping, would you please, a little more breakdown, I'd like to know about it, would you be a bit more specific, GMV over shopping? For example, Yahoo! Shopping and payment mall -- PayPay Mall. And particularly, I'm interesting in PayPay Mall. We have been operating for just 1 year since the start-up. And it's in good or bad? Or so -- if there's any problems or the issues, and what were the challenge? Or would you be a little more specific? My second question is that this is for the prospective for the next fiscal year. But now you had just ZOZO in the business performance in Q3. And now -- and also, you were able to stay the same for the target of JPY 160 billion of operating income. But if -- how long you will continue this level of investments? And now you can just -- we can expect about the further growth of the operating income. How long will you make this account level of aggressive investments?
[Interpreted] Okay. Thank you very much. First of all, Sakaue will answer for these 2 questions, after will be supplemented by Mr. Ozawa.
[Interpreted] First of all, for the Q3 growth of GMV, when I get into the breakdown in the shopping, 25% growth, excluding ZOZO. And -- but PayPay Mall, we have just started, so that's why the growth of PayPay Mall is really substantial, although we cannot disclose all the numbers. But it's not the shopping, but the PayPay Mall is now the driving force of growing this merchandising value. But also, looking from the users that [ some of them ] are cross listing. So that's why for -- it's not so much -- we'd still just would like to grow both, not when putting on each side of emphasis. But -- so that's why -- would you please look at as a whole and for both. But that's true that PayPay Mall has made a major contribution to this growth. So that's why the take rate for advertising, PayPay Mall is higher than the Yahoo! Shopping Mall, yes. And for your second question, so when it comes to the future growth of the income, so also, we're going to explain in more details in March, including that the integration of the business of LINE. So because how we should do -- how we can create a synergy with LINE and after the integration is completed. So that's why I'm going to explain in more details in March in that presentation. But basically, we'd like to maintain this that the growth potential and positive growth potential. So if there's anything to add, Ozawa-san?
[Interpreted] Yes. Yes. This is -- when it comes to PayPay Mall is -- I don't say that it's just a substantial growth. But anyway, that the growth of PayPay Mall is really an -- up to our expectation when it comes to growth of PayPay Mall. But let me talk about -- looking from the users. So the users would like to use the PayPay Mall or Yahoo! Shopping, and some users will use them separately. But now the PayPay Mall merchandisers are also including a part of that Yahoo! Shopping. And so that's why -- and some of that -- many of the users constantly purchase the PayPay Mall products, although they visit at the Yahoo! Shopping Mall. So that's why we think that's, for example -- and including PayPay Mall products, I would like to just more making all the service more comprehensive. So there's a PayPay Mall that focus on some kind of product, so that's why someone is interested. And all those on the group of merchandisers, they visit only for the PayPay Mall. But also, that's the same -- exactly the same that merchandisers evolved on the shopping. So that's why for user -- but it's not so many users [ are allowed ] to that to make the shopping only on exclusively PayPay Mall. It's not that. So that's why it's just crossing between the 2 platforms. But -- and as a result, some of the merchandisers that would be listing on the PayPay Mall is now sold like this. Because that depends on that conditions and what the quality of that, and the merchants as different in the PayPay Mall. It's more high quality, for example. That's why it's -- but we are now looking at that. All this -- the sums up of this -- all these transactions, including both the PayPay Mall and Yahoo! Shopping. So that's why -- it's not that we're not focusing not only on that Yahoo! Shopping, that we're just looking at the both of these, combined.
[Interpreted] Okay. I understand. I have just one follow-up question. And when I look at -- we're also waiting for that, the performance -- the guidance of Rakuten. But so far, GMV of Rakuten is it will be -- when you have the apple-to-apple comparison, the Rakuten is a little bit higher than you. And they don't have any promotion in Q3, but they'll also will have some promotion in Q4. But still, you would be behind from the Rakuten when it comes to GMV. So what's the reason?
[Interpreted] Yes. And in short, this is that the capability of the shopping mall will be easily reflected on this growth. So we need to do more. Yes, we're on the step. And we're also -- now we faced the COVID-19, so that they stay at home. They don't visit the shop, so that's why they turn to more on the Internet shopping. And they turn to the Rakuten, Amazon, for example, more than the shopping malls. And also, for example and -- they spend in the JPY 10,000, and in the end, they spend about JPY 15,000 in the end, including all the services. So that's why in the past, that's about -- the Amazon has a 20 years or 10 years or 20 years experience. So that's why -- we have only had about [ 18 ] years. So that's why there's some difference in the capability of the platform, shopping platform between these 2 giants and us. On the other hand, the [Foreign Language] and the scheme that's the [ longer ] tax and the program offered by the government is the Rakuten have a very favorable business and achievement of this [Foreign Language] and hometown tax donation program offered government. And -- but it had been really -- grow. This program had been serving as the driving force of this [indiscernible] business of this. So that's why this hometown tax donation program is one of the difference in the business between Rakuten and our platform. So just like this, these are all of the factors. And now we have still been behind Rakuten now. So that's why -- but after the integration with LINE, we need to also emphasize the business, reinforce the business also in the series, yes. Thank you very much.
[Interpreted] The next question is Mr. Kim Han Joon at Macquarie Securities.
Great. I have a question on the chart on Page 13 of your presentation. This is the left chart that shows a shopping advertising take rate versus the ratio of sales activity cost. I wanted to double check if this is a KPI that management focuses on in managing the EC business. And if so, how do you think about the spread between these kind of dimensions happening? I think if I'm understanding your fourth quarter outlook, it looks like we'll probably be slightly negative, but how do we think about the spread improving over time? And then related to that, if this is a major KPI, how do we think about fulfillment cost and logistics cost? And do we -- how do we think about making investments into logistics as part of something that improves the overall user experience and the ability to grow the EC business? But how do we capture that from a numeric kind of metric standpoint? If you can help me understand that part, that will be fantastic.
[Interpreted] Okay. Thank you very much for your question. Let me explain for some points, and Ozawa-san is going to have additional response. On Page 13, the chart on the left-hand side, this is one of the very important KPI. This is not all, but for example, that how we can have the loyalty of the customers and how we can acquire the customers, and a lot of the different KPIs. But out of these KPIs, when you look at the profitability and this has been important KPI, yes. So -- but this is about -- now we're showing that advertising take rate, but also for the revenues of the fee, the payment fees, this also would be included. So when it comes to 5%, about the low of the 5% is the advertising take rate this quarter, just like this. As for the Q4, now the size of the promotions or how much of the orders, that depends on that. That varies from that situation. But the spread will be narrower than Q3, and just like the -- and getting closer to the split, and we have -- in the Q4 and the last year, 2019. But also, as I mentioned earlier, we have more customers and now on the middle and long basis -- long term, we can expect to grow. So that's why we'd like to make a balanced approach. So when it comes to the -- for the improvement of the spread in the future, as also Ozawa-san had mentioned earlier, but still, we are behind the Amazon or Rakuten, yet we still try to catch up them -- catch them up. So that's why we need to make the disciplined investment. But anyway, for the short-term basis, we'd like to -- and making the spread narrower with one of our targets, okay? And last of all, I bet you have some misunderstanding. But when it comes to logistics costs, and as for the PayPay Mall and the Yahoo! Shopping, and we don't recognize all those [ latest ] cost as a cost okay? Because that -- the merchant would pay this cost, so that's why it's not represented, so that is not -- they want to recognize it by us, right? So that -- those logistics have nothing to do with our cost structure. I hope you understand it.
Ozawa-san, do you have anything to add?
[Interpreted] Yes. So this is the -- now you're looking at the chart, and this is -- that's the yellow line. It represents that this is that -- the 5% is the advertising take rate and that the merchant paid to us. And below that, this is the gray and silver line is that, including the -- now we are -- now this, for example, given the point so that's all under our control. So -- but sometimes before, it will be just reversed. So that's why we spend more ourselves, then that's the fees we received. So that would have a negative spread. But now this chart represents that now we have the positive spread, and the situation has been proven, okay? So this is the comment I would like to add now.
[Foreign Language] [Interpreted] JPMorgan Securities, Ms. Mori, please.
[Interpreted] I have 2 questions. The first question is about detail. On 7, you had the Q4 analysis. And in terms of Commerce business, gross operating income reduction of JPY 10 billion. And maybe I do not understand it well. But in terms of the seasonality, I want to understand why you expect gross income to decrease this month. And second question, and this is similar to other analyst questions, but in terms of shopping fee and [ regrowth ], we expected it to grow further. But listening to what Mr. Ozawa mentioned, when you look at the market as a whole, you are seeing some tailwind. But given your position, it might be -- it is focal for you to ride on that momentum. And you plan to be #1 in e-commerce merchandise. And I believe that you might need to increase your investments and you might have a very high expectation vis-Ã -vis the integration with LINE. And maybe an expectations of above levels, but what is the status quo that you are analyzing, given the position that you have in the market?
[Interpreted] Thank you very much, Mori-san. Regarding question number two, Mr. Ozawa will respond to it. So I will take care of Slide #7, which is the gross income of Commerce. This is the Q-on-Q comparison, and there are 2 factors to mention. ZOZO already gave the financial results, and in the area of fashion and Q3, which is end of the year, we'll have momentum. But when you compare Q3 and Q4, it tends to push down the gross income. And also in Q3, the travel reservation trended well, and we were able to secure some gross income. But as you know, given the current backdrop in Q4, travel, especially O2O will have a negative contribution to the gross income.
[Interpreted] So the first factor is the annual seasonality, and the second component is a special factor given COVID-19 environment?
[Interpreted] Yes, you're right. And then Mr. Ozawa, please respond to the second question.
[Interpreted] As already explained before, we have Yahoo! Shopping and PayPay Mall, and we have some issues to overcome. PayPay Mall has been established some time ago, but we need to tackle logistics issues because we don't have in-house logistic mechanism. So if you want to purchase something online -- and I believe that many [ FIs ], I do not think that you can get it delivered the next day. But if you go to Rakuten, even though you might have to pay more, you can get it the next day or earlier than us. And maybe it might be more expensive on their side, but for the buyers like users point of view, that might be more beneficial. Mid to long term-wise, we need to resolve these logistic issues, and we are partner with Yamato [indiscernible]. Having said that, in Q3, we increased the point reward. So maybe we might cause some inconvenience to the buyers as compared to other malls. But I believe that there are the people who go for us because they want to get more points. So we know that there are positive promotion impact. But we need make fundamental improvements to the service, such as the awareness level and the logistics and convenience. And these problems cannot be overcome in a short period of time. So we have to have a long-term perspective. So there are 2 perspectives: one is short term; and another, long term, and we have to pursue both. And given the current environment, long term is the key driver now. So fundamentally, we need to improve the options and selectivity and logistics. And these are the areas that we need to focus on going forward. And after the integration with LINE, we need to factor in LINE user base into our mall. And in Q3 and Q4, we are going to collaborate with PayPay. And fortunately, we are seeing some positive impact. And as compared to other operators, and maybe we are not as convenient as others, so we try to make up for that by providing more points so that we will be able to retain our users. And at the same time, we're going to work on the long-term issues as well. So I hope that you will kindly continue monitoring our performance. Thank you.
[Interpreted] Next, Mr. Okumura of the Okasan Securities, please.
[Interpreted] I'm Okumura of Okasan Securities. Do you hear me?
[Interpreted] Yes, I can hear you.
[Interpreted] Okay. I have 2 questions. My first question is about this programmatic advertising. And now you have assumed a -- the [ below ] 10% was your assumptions. But now you also offer some shopping advertising as for the YDN or in-feed YDN or -- and I don't think that your business performance was more favorable than your forecast. So that -- what's the reason of this rather favorable business performance? And the -- then also about this Q4 and about 30% down on it, but what's the reason of that? My second question is that -- and then my question about the credit card. So acquisition of the credit card memberships have declined. So you don't spend -- you spend so much on the Q3 for the promotion. But now your competitors are growing in the number of members acquisition. But why you failed to -- and your -- just acquisitions have just declined and were not so much favorable?
[Interpreted] Okay. I understand the question. Thank you very much. And when it comes to the advertising in Q3, and this is -- the reason of this, the difference from the forecast is that, particularly, we focus on the demand but also emphasize on the product developments. But now the demand can -- comes back more than we had expected. That is the major reason of this favorable business performance. And then the forecast is -- so in the many verticals and many customers have made the major comeback in demand and the recovery in the demand in the many verticals and on a Q-on-Q basis. And particularly -- so this is the YDN. They were formerly called YDN. And telecom, telecom industries or the auto manufacturers, automobiles, these are -- that's the major verticals, and we did not expect but this bounced back more than we have expected. And when it comes to this -- and the media, growth on the media advertising is, here, there's about the middle of the single digits and the low or middle of the single-digit growth is the forecasted growth. And when it comes to shopping, so when it comes to the shopping advertising, and it's now -- the growth of advertising more than that goes of GMV. So that's a couple of percentage more than that GMV growth, we expect that advertising growth. And you -- because that the take rate will keep growing. This is background.
[Interpreted] And may I make the follow-on question?
[Interpreted] Yes.
[Interpreted] In order to improve the take rate, and for example, search advertising where new product will be deployed and for improving the take rates and the PayPay Mall, do you have any specific tactics or strategy?
[Interpreted] Yes. Currently, we don't have any idea to implement that new products in the PayPay Mall. And also now the -- now we're just demonstrating that the PayPay Mall is more -- the better for -- better than PayPay Mall. That's why that we had better, higher take rate there. So Ozawa-san, do you have anything that's, for example, anything that you'd like to make a comment for the monetizing in PayPay Mall?
[Interpreted] Yes. Currently, there isn't any specific product that we can just introduce here today, okay? And your second question is about the credit card. And currently, in the Yahoo! Japan card, we don't spend so much promotion. So this is why our growth of the membership have just -- doesn't grow so much. So this is based on the effectiveness and efficiency of investments. And I'd like to just spend more on this, the new credit card, okay? So that's why in the first half and Q3, we don't spend so much on that current Yahoo! Japan card, that's why. So we'd like to have more emphasis on promoting a new credit card we're going to issue after this. So this is our strategy. Thank you very much.
[Foreign Language] [Interpreted] Next, [indiscernible] of [ BOC Securities ].
[Interpreted] This is [indiscernible] at [ BOC Securities ]. Maybe I misheard it, so I would like to push you the following questions. In terms of next month, you will have a cosmetic new launch and launch of luxury as well. And are you going to list it on PayPay Mall as well? So can you tell me whether you have such a plan or not?
[Interpreted] So Mr. Ozawa will provide you with the answer. And ZOZOCOSME will not be listed on the PayPay Mall for now. So Mr. Ozawa, can you follow-up?
[Interpreted] Okay. So as mentioned by Mr. Sakaue, we will sell at ZOZOTOWN. Then after we negotiate with the tenant, we might expand the mall. But right now, nothing is decided.
[Interpreted] [Operator Instructions]. So seems -- it seems there's no questions additionally, so that I would like to close the session. I would like to close the session. But last of all, Mr. Sakaue, would you please make your closing remarks, please?
[Interpreted] Okay. This is Sakaue speaking. Thank you very much. Now thank you very much for joining us this and -- at the meeting of this -- the Q3 business performance.
[Interpreted] And I have just one additional question, it seems like, please. Mr. Tsuruo of Citigroup Securities, please.
[Interpreted] Do you hear me?
[Interpreted] Yes, I can hear you.
[Interpreted] Okay. Okay. My first question is that on Page 7, the chart on Phase 7 and the other wonderful charts, when I make the comparison -- and the Page 5, to compare between the charts on Page 5 and 7. So -- and now we have the positive spread in the first half, and this means that your marketing activity deliver the goods. But in the Q3, on the Q-on-Q basis, you failed to make some -- the fruitful results of activity. Why?
And I'm sorry, if there's any problem for me to look at the chart, would you please do that? So the cross-selling with the SoftBank have never been explained this time, so that what happens with the cross-selling efforts with the SoftBank? If there's any, would you please make a comment?
[Interpreted] Okay. Thank you very much, Mr. Tsuruo. When it comes to charts on Page 5 and Page 7, particularly on Page 7, also, this is also the question of Mori-san, so this is the negative gross profit. This is due to the ZOZO and the tourism. But when it comes to the marketing expenses, with the use for the -- mainly for the shopping, so that's why. And so now we are -- it's not that we just -- we have been spending more of the marketing, although there are some parts of the gross profit have decreased. They're different.
[Interpreted] Yes, understood. Okay. I'd like to make another question on that offline.
[Interpreted] So this minus JPY 10 billion, this is including investment [ plus size ], okay?
[Interpreted] Yes.
[Interpreted] And your second question, so on Page 36 of appendix, you can find out that this is a synergy, JPY 4.4 billion of synergy, we expect we had with the cross-selling with the SoftBank, JPY 4.4 billion in Q3. So that has been growing quarter-by-quarter.
[Interpreted] [Operator Instructions] [Foreign Language] It seems that there is no further question, so we would like to end the Q&A session. Lastly, we would like to get the closing comments from Mr. Sakaue.
[Interpreted] This is Sakaue speaking. Thank you very much for participating in our Q3 results conference call. And on March 1, we will have integration with LINE. So we will try to implement new strategy, and we will hold another session to talk about the details. So I do hope that you will provide us with your support going forward. Thank you.
[Foreign Language] [Interpreted] This concludes Z Holdings' conference call. Once again, thank you very much for participating in this call. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]