© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
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 waiting. Thank you very much for coming despite your busy schedule today. We would like to now start Yahoo Japan Corporation's Fiscal Year 2017 as well as Q4 financial results meeting. This meeting will be broadcasted live online, and also an archived video of this meeting will be available later on.
We would like to now introduce the people who are here with us from our company: Senior Executive Vice President and Corporate Officer and CEO, Kentaro Kawabe; Corporate Officer and CFO and EVP, Ryosuke Sakaue.
Today, we will first have Mr. Kawabe present. Today, we will present the fiscal year 2017 full-year results. For the fourth quarter results, it is available in the appendix in the distributed material. We will have a Q&A session afterwards, and we plan to end at 6 p.m.
Without further ado, we would like to now start the presentation. Over to you, Mr. Kawabe.
I became the CEO from April 1. My name is Kawabe. So I will be delivering the presentations from this time around. I am not used to my position yet, however, I would like to do my best in explaining.
So first of all, from myself, I would like to talk about the fiscal 2017 full year financial highlights. So let me first cover the financial highlights. From this fiscal year, from fiscal 2017, that is, for -- we have called revenue, revenue instead of sales because we consolidated Japan Net Bank, but there is no change essentially. So on year-on-year basis, revenue increased by 5.1%, reaching JPY 897.1 billion. Operating income went down by 3.2%, reaching JPY 185.8 billion.
Here, we show some details. At the beginning of 2017, we talked about investments, and as a result of making investments, advertising-related revenue for the first time exceeded JPY 300 billion. And also, e-commerce transaction value domestically exceeded JPY 2 trillion for the first time ever. For the other KPIs, due to the consequence of variety of investments, our results ended up nicely, as you can see here.
I will continue my executive summary and highlights. For the Media business, like I mentioned already, for the first time, advertising-related revenue exceeded JPY 300 billion. Other than that, video contents are increasing steadily, and we saw more app downloads as well. For the Commerce business, like I've been explaining, due to the effects that we've been generating from investments, e-commerce transaction value surpassed JPY 2 trillion for the first time. And for the Shopping business, we talked about our target being on transaction value for shopping growing by more than 30%, but we were able to exceed 30% this fiscal year.
So I will go into detailed numbers from here on. So for revenue, first of all, we have been seeing increased revenue for 21 consecutive years. Revenue reached JPY 897.1 billion, up by 5.1% year-on-year. Here is the breakout. So there is no large change to the composition.
For our full-year operating income, due to proactive sales promotional activities, operating income decreased by minus 3.2%, reaching JPY 185.8 billion.
With regards to the sales promotional activities, in fiscal 2017, we spent JPY 56 billion. The rough breakdown of the investments are on the right-hand side, and the quarterly comparisons are shown on the left.
Furthermore, in the beginning of fiscal 2017, we said that on top of our base expenses, we would like to further maximize e-commerce transaction value and become a data-driven company, and for this purpose that we will be making additional investments. The results are shown on this graph. For maximizing e-commerce transaction value, JPY 25 billion was our expectation, and we used JPY 23.1 billion, which was 90% of that figure. So we executed 90%, and we were able to exceed our target figures, so we are satisfied with these numbers. And with regards to becoming a data-driven company, we spent our cost in an efficient manner, and due to detailed discussions, there were some items we decided to not spend in. And also, some of the items were pushed out to the next term. So compared to the JPY 15 billion plan, we spent JPY 11.6 billion, which was 80% of our plan.
So for fiscal 2017's operating income, here, we show the factors of change in this chart. For fiscal 2016, operating profit was JPY 192 billion, and due to our business, operating profit grew by JPY 7.5 billion in fiscal 2017. However, like I mentioned, we made investments to maximize e-commerce transaction value, of which weighed by JPY 23.1 billion; and our investment to become a data-driven company weighed by JPY 11.6 billion as expenses. Also, there was a JPY 21 billion year-on-year difference due to onetime factors. And as a result, we reached JPY 185.8 billion in operating income for fiscal 2017. Compared to our guidance at the beginning of the year, it was higher than expected, and we made enough revision at the middle of the fiscal year. And compared to that guidance, we ended up in line pretty much in the middle.
So here, we show the full-year consolidated cash flow for fiscal 2017. Due to our operating activities, we saw plus JPY 75.4 billion in investing (sic) [ operating ] activities. This was related to Japan Net Bank and its consolidation, but the impact was JPY 337.2 billion. And we issued bonds and financing activity-related, therefore increased by JPY 71.7 billion. And at the end of the fiscal year, cash and cash equivalents reached JPY 868.3 billion.
So those were the financial highlights for our fiscal 2017. Now I would like to talk about the usage trends of services during fiscal 2017. First I'd like to explain the Media business. For the Media business, we focus most on daily unique browsers, and DUB via smartphones succeeded JPY 60 million for the first time. All device DUB was 90.53 million.
And the number of monthly active user IDs were due to -- this is something that will lead to data-driven, but it went up by 13% year-on-year, reaching 43.92 million IDs. The reason why we saw a rise was due to the increase in app users.
So with regards to apps, for fiscal 2017, we made a variety of investments, and we were able to increase a lot of app users. And due to a third-party report in Japan, we were able to be #1 in the number of app publishers ranking 2 years in a row. So we had many people who were able to download Yahoo! JAPAN's app.
For advertising-related revenue, as I mentioned at the beginning, for the first time, we were able to exceed JPY 300 billion.
Next is e-commerce in fiscal 2017.
On Yahoo! Premium member IDs, SoftBank members, with which we have strength in our collaboration compared to the end of last fiscal year, we have grown by 60% or 1.6x. And it is about to reach 20 million, having already reached 19.79 million.
For the shopping transaction value, as I've mentioned -- as mentioned, at the first -- or the start of the fiscal year, we have achieved the 30% or more of growth year-over-year -- 31% growth or JPY 627.6 billion.
Yahoo! Shopping transaction value grew by more than 30%, which is from the buyers growing significantly in numbers primarily. The reason, as I've mentioned earlier, is because we have more Premium members, and that was also because we strengthened collaboration with SoftBank. As a result, Yahoo! Shopping transaction value, 72% were generated by Yahoo! Premium members, which resulted to growth.
Yahoo! Shopping business model is advertising revenue model. Fiscal '13, when we started the e-commerce strategy, it has grown by sevenfold to JPY 25.5 billion.
Next, auction-related transaction value, for the first time, has surpassed JPY 900 billion. Auction-related transaction value has marked JPY 942.6 billion.
Yahoo! Auction and Yahoo! Shopping and YAHUOKU, on those platforms, Yahoo! Wallet transactions take place. And with the growth of e-commerce, we've seen transaction value grow to around JPY 1.4 trillion.
The Yahoo! Wallet, as a settlement purpose or a means of settlement, the valid credit card holder numbers since issuing the Yahoo! Japan Card have grown eightfold to 4.68 million holders.
Credit card transaction value have further exceeded the growth of the cardholders from or since the launch of the Yahoo! Japan Card, have grown 15x, close to reach JPY 1 trillion by attaining JPY 954.6 billion.
With the investments that we've made primarily in fiscal '17, we've marked these growth that we are -- have reported on. And from here onwards, from fiscal '18, April, on which I would like to brief you on our measures. From fiscal '18, April, we have changed the top management. And on part of the new management, the Internet still has infinite growth potential and also will grow as an industry as well further as we see the market. And in that context, Yahoo! Japan has garnered the support of numerous myriad of users. We are in -- well positioned to actually shape the future, and the future that we are about to shape with our users are how we're going to grow the business. Coming to that strategy, I'd like to go through a few slides here.
First, as shown here, this is actually a synergy map that we commonly share with our affiliates internally. This is an action map of Internet users. On the Internet, they encounter various information, and they explore and search information that may benefit them or in detail as an action. And as a result, if they are convinced that they would like to use this information, they may actually use it paid or unpaid. And of course, these settlement also in terms of paid transactions. All the information will take place and be settled on the Internet. And if the Internet content that they have acquired, if it's beneficial, they are satisfied, and they will repeat their purchases on the Internet platform, coming back on top again of -- encountering information on the Internet. So this is a virtual cycle of growth, which all of us have experienced daily.
And in shaping the future, we have redefined our strengths. The behavior that we see on the Internet, Yahoo! has all the pieces of services in every segment, and we have a myriad of users, which we believe is our ultimate strengths, which we have come to recognize again. But traditionally, Yahoo! has actually delegated the growth to each group company. But going forward, we'd like to create greater synergies through our services. And by doing that, we'd like to mutually grow our services and also to grow our KPIs mutually in each service segment. And also further, by taking a user's perspective, they can -- we can provide actually one-stop servicing, which is also very attractive for the users and the users' experience by providing a one-stop shop platform, is how we can grow further our business, is to also stay true to our principles. And the greatest key driver of growth is the data part in the center.
Traditionally, Yahoo! Japan in the past, each service had its service database, which was only deployed to grow their service in their segments only. But since last year, we have actually invested in data-driven services. And by using a uniform data format, it's usable across platforms as well as it can be used in different segments or across segments to grow usage. Across segments is how we have reshaped the data sharing and to provide the unique customer experience to grow our business and to shape the future.
This is for Internet user, I would say we are actually having every piece of service segment that are covered. However, we need to focus more on our investments and our resources to prioritize as well. And the resource priority areas on top of -- on part of the new top management, we have these 3 areas that we have aimed to become #1 as our top priorities: first, which is to become #1 in e-commerce transaction value as well as in Internet ad sales as well as in the new business of mobile payment transaction value. And in each segment, how we are going to aspire to become #1 in each segment?
E-commerce, especially on sale of goods, which is our first focus in becoming #1, sale of goods e-commerce, if we position it in our service map, is in these 3 areas and services. So e-commerce transaction value in the future will be represented in totality of the sales of these areas. And if we consolidate all of that, the sales of goods was approximately JPY 1.8 trillion for fiscal 2017. In becoming #1 domestically, we need to further grow this figure. And how could we grow the figure then? As shown here, in fiscal '17, the driver of our e-commerce growth was the Premium member base that has grown, including SoftBank members and also more frequent shopping that multiplied the growth. And as a result, the Premium member transaction values accounted for 75%. In the 20 million members of the Premium member base, there are many still not Premium members that are actually trying to start shopping, and there's a lot of potential to explore in that area further in frequencies as well as the unit transaction value, where we see great potential for further growth. From fiscal '18 onwards, our Premium membership will be the key focus and driver going forward.
Not only that, in order to become #1 in Japan as a marketplace, we would like to continue to improve our quality. One is the variety of products, the number of products we have. When someone goes shopping, we want to ensure that we have everything available. With regards to method of shopping through the smartphone, we would like to ensure we improved the UI and UX, so we offer convenient shopping. And also, I will talk about mobile payment later on in detail. Based off that, with offline companies, we would like to deepen our tie-up, so that we can increase transaction value increasingly.
Next is striving to become #1 in Internet ad sales and what kind of strategies we have in order to realize this, which is shown on this diagram. So for Internet ad sales, in order to become #1, in the case of Yahoo! Japan, we need to expand the media or increase our media power. So you can see that reverse triangle, but as you can see at the top, we will continue to focus on daily unique browsers and also increase app downloads, and our reach is more than 90% already. So to the 90%, we would like to increase DAU per day as well as time spent -- and increase time spent. And with regards to media power, as we strive to increase it, we would like to also reinvent the UI and UX so that our users can naturally enjoy and come into contact with advertisements. So we would like to optimize and maximize, so we have more users and more frequency. We'll be able to maximize the advertising effects. And ultimately, we would like to maximize the advertising effects through data-driven as well as increasing conversion rates, so that our advertisers can feel that the best conversion is being delivered by Yahoo! Japan so that they will be enticed to work with us even more. So in fiscal '18, there are 2 areas that we would like to particularly focus on. One is in the area of expanding the media power. This is video content. In this fiscal year, we will be enriching the offering we have. High quality videos will enable new users to come and even for existing users. Up until now, they may have just been reading text news, and they may have only stayed at our site for 3 minutes a day, but we would like to increase the time spent. Yesterday, there was incident, and there was a live streaming for it. Today, there is the Korean Peninsula talks happening, the summit meeting. So video content has become enriched. But this is something we would like to focus on even more so as to maximize the media power and time spent. Moreover, with regards to advertising effects, in optimization of advertising effects, the key driver, we believe, is going to be video. For fiscal 2017, we had you waiting for a long time in some cases, but we made indeed content video. This year, we will have more premium video ads in place as new products. By doing this, we would like to become #1 in ad revenue.
So this is the last component of becoming #1, which is being #1 in mobile payment and transaction value. Even if we call this a new business, there's a reason why we believe we can become #1 in this area. It is the number of Yahoo! Wallet accounts. In the past several years, Yahoo! Japan reinforced our e-commerce business, and therefore, for online settlement payment accounts, we have now close to 40 million. So on a daily basis, they utilize Yahoo! Wallet for online payments. So from a user point of view, Yahoo! Wallet is a method that they're using all the time. But going forward, they will be able to use this wallet offline as well as online. So we believe they will feel closer to this service because they use it all the time. And mobile charging is going to be linked as we advanced into the offline field. That is why we believe that this is the utmost strength we have in order to become #1 in this field. Also for payment, QR codes and bar codes is easy way to pay, and we would like to utilize its method. That's what we're planning for. And for QR code settlements, from where are you able to use this is a very important user experience, the Yahoo! Japan app or the web version in smartphones. Because we have a reach of 90%, a majority of people already have -- will have this service at their hands. That is the way we would like to start providing this service. And here is our time line or schedule of starting this service. In April, we are already enabling payment of tax and utility bills using bar codes. From the top app of Yahoo!, you are able to do this. Furthermore, we are planning in June a display payment, meaning users can show their QR codes at stores, so the POS system will be reading your QR code. So for convenience stores or drugstores, who have large POS systems, will be able to respond to this introduction of function. And in autumn, for the smaller stores, we will be able to offer a repayment function. So the store, we'll have our QR code picture, and the users can scan the bar codes and enter that amount they're going to be -- pay before they settle. So that is another function we will be introducing around the autumn time frame. But in our case, we want to be able to enable offline payment in a easy way, and we believe that is strength that our company has. Another thing in fiscal 2018, that we would like to do is to increase the number of merchants using our payment service. I said that we would like a payment service that can be used anywhere in a simpler manner. Yahoo! Wallet that is used online is something we would like to allow to use offline. However, if the users go to a store and are not able to use this service, it will be disappointing for the users, and penetration will be bad. Therefore, for the retail stores around the autumn time frame when we have the repayment function equipment installed, we would like to have more merchants who are able to respond so that we could deliver this payment service. Whatever the case may be, the Yahoo! Wallet that is used online and offline Yahoo! Wallet, we would like to add these 2 transaction values together in striving to become #1 in transaction value in Japan. So that is our current plan.
Finally, let me talk about our expectations for operating income in fiscal 2018. I just talked about 3 areas in which we would like to become #1, and we would like to work dynamically to create a good future, and therefore, we would like to invest for these new challenges: First of all, for ad revenue maximization. In order to become #1, we will be investing into video-related contents, and that will add up to approximately JPY 10 billion. For commerce-related, which is to launch the mobile payment services, we expect to launch JPY 20 billion additionally.
So accounting for these items, here is the factors of change in operating income for fiscal '18. Starting from the left, JPY 185.8 billion was the result for fiscal 2017. However, there were some several onetime factors. So if you take them out, JPY 170 billion was the adjusted result for fiscal 2017. So this is what we were capable of doing. Then also, in fiscal 2017, the expenses spent were account -- if account -- we account for those items in JPY 170.3 billion. As a result, for fiscal '18, we are expecting JPY 15.4 billion of business growth and improved efficiency. And we'll be investing in personnel expenses, which is JPY 9 billion. And also we'll be investing in facility-related expenses, which is JPY 6.4 billion, and we will take them out.
Which will leave around the expenses being -- offsetting the business growth that we expect by improved efficiencies. So we expect to come at the same level of the prospected or projected operating income level of 2018, as we had in fiscal '17, excluding onetime factors. We also expect JPY 30 billion of expenses for new challenges, as we have explained. And we do expect JPY 130 billion to JPY 140 billion as the endpoint. As the top new management, we have this challenging plan.
Shaping the future by making this expense for new challenges, ultimately, in attaining all the -- in all 3 areas. Number one, we'd like to grow our operating income, which is shown in this pie chart. Operating income, the pie chart, by attaining the #1s in the 3 segments, we'd like to grow it as much as we can. In 2020s, we'd like to reap the profits and to make them into profit contributors. And also, we'd like to grow and change the composition as well. Operating income: media accounts for 2 and commerce business by ratio is 1. And when commerce business becomes more a profitable business base, they will be accounted for 1:1 on a ratio basis. So commerce business will grow faster than media business. And in going forward from here, we will launch new businesses. And in those new businesses, we need to also, to this extent, to realize tangible profits to be generated. So media and commerce would be 1:1 in ratio, and we will have new businesses also contribute in fiscal year 2020 and beyond, and we'd like to seek a successful growth as well.
As I've mentioned, as the new top management, we still have infinite growth to explore around the Internet, and we can be unique in shaping a big future for us and to develop user action that's -- only the Yahoo! Japan is well positioned to create.
With this resolved, we do hope that we will get and attain your understanding the best we can. And the challenge of becoming #1 in the 3 segments, our strategy, of course, we do -- actually, in the given time, only highlighted some areas, but we have an IR Day on May 23, where we can -- or when we can give more detailed plans and strategies of growing our businesses, not only myself but also presence of our Media, Commerce and Technology group will be present to give more in-depth ideas in more detail.
By growing our business under this challenging plan, we'd like to gain the understanding and consent of our shareholders, of course. Not only the major shareholders but also with minority shareholders, we'd like to have a good dialogue to have a thorough understanding and able to gather their support in advancing this plan. So we do hope you will make the best use of your time, making yourself available for IR Day on May 23. Thank you very much.
Without going any further, I'd like to stop here. Now we'd like to go into the Q&A session.
[Operator Instructions] So that person on the very front row in the center, please.
I'm Nagao from Nomura Securities. I have 2 questions. First, Slide 50, in fiscal 2020, which the pie chart, President Kawabe said that this is a big target. Could you give you -- could you give us more specific plans of how you're going to attain this major target, which is my first question, please?
As I've said, we are going to make a good amount of expense. And to justify that, we need to, to the extent possible, to grow our profits as well in operating income. To give you a picture, especially for mobile payments, for instance, this is a completely new business as well as globally. The business model is still to be established. So we can't give a detailed time line. In order not to mislead you, we are trying to be actually just as blunt as -- or vague as saying in the period after 2020.
The second question is, 49, the page before that, which the factors, in fact, you have JPY 30 billion for expenses for new challenges that you have earmarked for fiscal '18. Could you give us more of a specific idea of -- in mobile payment for instance, how you're going to grow your margins? How much you have earmarked for that? As well as for media content investments, how much have you earmarked? Could you give us a breakdown more in detail of the JPY 30 billion?
To give you a rough idea, JPY 10 billion for media-related as well as for video production and JPY 20 billion for commerce-related. For JPY 10 billion of media-related production is for content procurement expenses as well as with partners to produce original content is included and to promote that as well are included as expenses. For mobile payment, to be honest, I think we will get more insights of the breakdown as we go forward. But at least for fiscal '18, at least we have started to grow the merchants, where mobile payment could be used, which will be a primary area of our focus of expenses, development costs as well as user incentives, of course. Our other major areas, we will go as we advance to figure out how much would be expense, and we'd like to give a detailed disclosure of information as we go forward.
One quick follow-up, please. So having heard what you said, the expenses for new challenges include promotion costs. In fact, JPY 560 billion was promotion. How much do you expect for this fiscal year?
CFO Sakaue, in fact, is expecting JPY 70 billion.
Which is different from JPY 30 billion that has been just mentioned, which, in fact, excludes ASKUL and [ AK ]. So therefore, apple-to-apple with fiscal '17 is JPY 70 billion.
The person, second row from the left. The person in the white shirt, please.
I am Yoneshima from Credit Suisse. I also have 2 questions. My first question is related to -- somewhat related to the earlier question on Page 50, the 2020x maximizing earnings. But when you look at last year, you had -- you talked about spending JPY 40 billion and ultimately ended at JPY 35 billion. And for this year, it's JPY 45 billion, if you include people development. But in the 2020s, it seems that the advance investments are continuing to rise, and that's pretty scary. You spent last year and you're going to spend this year, and are you going to do it next year, and your profits are going to continue to decline? That's the impression I got. But what are your thoughts around it over the medium to long term? What kind of image should we have?
All right. Under the new management and how we are comprised, we have clear business strategies -- we would like to have clear business strategies as we engage in the business. In comparing with Mr. Miyasaka's days -- well, I was basically a COO back then so I know his days very well. But under his leadership, it was all about shifting to smartphone, or else, we weren't going to be able to survive. So it was a survival phase. And Mr. Miyasaka was successful in leading the way so that we can transition to smartphones. But in any case, we would like to have clear business strategies going forward, meaning we would like to ensure we have a good plan in place as we put together our investment plans. We're not going to do it at -- off the cuff and continue to make investments one after the other. That's something I could responsibly say. We will ensure we have a good strategy before we decide on the investments we make. But I have to also say that when you look at the Internet, it's a place in market where many new things start to emerge. So even if we do have a clear strategy, if something new is poised to be launched or come about, we would like ensure we explain to you that we would like to do something new in those cases. But it's not as if we keep on seeing new things emerge and our investments are going to go on forever. It's more going to be around making investments to become #1 in the 3 aforementioned areas. So there might be increased investments in those areas, but it's not as if we're going to see increased challenges that we're going to go after one after the other.
My second question is, you've talked about striving to become #1. How much of a #1 do you want to be before you're able to generate good profits? If you're marginally #1, for example for advertisements, I believe you're already #1 in Japan. But we are seeing sluggish growth, and there are some smaller players that are growing. So even if you are #1, it's really hard to become -- it's really hard to see profit growth these days. For -- so for e-commerce and mobile payment, you want to be -- you need to be a dominant #1, or else, it's really hard to grow earnings substantially. So when you're seeing #1, what kind of #1 do you envision? Is it a little bit #1 or a dominant #1? Are you looking for a #1 where no one else will be able to catch up with you? For example, you're JPY 1.8 trillion transaction value for e-commerce compared to others, do you want the second player to be only 1/2 of your transaction values? Because I think that's the level of dominance you need to have in order to overwhelm others and to become profitable in a very significant way. So can you define what it means to become #1?
Well, we're running a business, and we're a management. So of course, we would like to be as dominant as possible, but we also are taking a practical approach. First, we want to exceed the current leader in the category. Your point about not being able to grow earnings substantially unless you're your dominant #1, I don't really agree. Because for e-commerce, in fiscal '15, I think -- no, it was fiscal 2016 when point expenses were contained tentatively in the take rate. Gain was generated, and we were able to prove that even if we reduce the point program. So if we control ourselves at the size we're in, we are confident that we will be able to generate earnings. And we were able to confirm that back in 2016, and that's the base of which we are planning right now. But in any case, we would like to strive become #1. And even if we're not dominant, we still believe we will be able to generate earnings.
The next question, please raise your hand. In the center, the second row please, wearing pink.
I'm from JPMorgan, Mori. I have 2 questions with you guys. Question is on 49, the factors of change currently by business growth, actually I think you are eating out or offsetting your growth of profits by the fixed cost growth with the growth of your business. So it's very difficult to grow above your fixed cost growth going forward, additionally. In fact, how could you overgrow, in fact, this by generating more business growth and improved efficiency? What is the time line that you would expect for this to really take off?
For next fiscal year, we don't expect ads to grow substantially. And therefore, it wouldn't pay off in terms of growth and profits to pay off completely or more than compensate for that cost. But in investing for the new areas of businesses, if we see actually more contribution to profits than expenses, we expect more business growth profits from improved efficiencies. So for this current fiscal year would be rather challenging. Should I take it that way? For ads, yes. We don't expect substantial growth to that extent at the moment.
And second question is on mobile payments. This fiscal year, do you have any targets regarding figures in acquiring merchants line, in fact, has a target of 1 million merchants, for instance? In fall, you have mentioned that you want to grow your number of merchants. Do you have certain targets? If you have, share them with us. And how you're going to acquire merchants? Major players have collaboration, especially on the SME front. Could you give us some ideas?
Yes. The merchants, regardless of their size, the larger the better in numbers, regarding user experience. And we've done research, Japanese merchants altogether have around -- they're around 3.7 million retail stores. And by population coverage, we have actually done our calculation of how much of that we can explore in fiscal '18. We have in, fact, contracted sales force to approach them as well as agency or distributor contracts, will grow, we expect the scope of our coverage for merchants.
Any other questions? Please raise your hand. The person in the middle. Person in the first row, second from the left.
My name is [ Sawada ] from The Research Institute. I have 2 questions, too. One is for Mr. Kawabe and the other question is for Mr. Fujimon. My first question is the following. I went to LODGE, and I was looking at [ Data Forest ]. And by having all of these things mixed together, you're trying to create something new. And I heard that Mr. Kawabe came up with this idea through an interview. So can you share any success stories around this?
Well, it's only about 1 year since we started operating LODGE. So when it comes to big success stories, I don't think we have been able to generate anything yet. But once a month, I also go to LODGE and work there. But on the Internet, there are a lot of people who are freelance, who are lean in their work, so being stimulated by what they do is something that I'm feeling, and I think our employees are feeling that as well, with regards to how we measure the effect. In our Yahoo! JAPAN services, if we are able to deliver a new function and if it's a popular function, we're going to call the production people and ask them what is the concept of which they develop that function. We're going to get their feedback. And maybe it was because of LODGE or maybe it's going to be due to the free address system we have, and that's how they were able to add on the new business or new functions. That is how we're going to assess our success. Maybe we should start our process soon, is what I'm thinking.
Maybe I asked the question in a wrong way. Well, in the past, I thought you had some success stories already.
Well, generally speaking, at the SoftBank group or Yahoo! JAPAN, time machine management is what we often do. In the past, for example, we often visited Silicon Valley and put ourselves in that environment so that we could get ideas from the Valley people. For example, when I was in a venture company back in the 1997. I went to Silicon Valley, and I spent a lot of time at the pub, and I really thought back then there was going to be a convergence between Internet and mobile phones. And in Japan, no one was talking about it back then. But then after, I shifted my entire company to mobile and focused on mobile ever since. So more recently in China, 4 or 5 years ago, together with Mr.Son, I went to Alibaba. And when I did so, Jack Ma is like that as well. But the young people at the company, when I ask them what they're thinking about and what's on their minds, they were talking about Alipay in its primitive form actually. So I think exchanging with other cultures is really important, and that is one of the reasons why we decided to invest into mobile payment because we've been stimulated by these kinds of things. So that's a stimulation I'm getting from my past experiences.
So my second question is to Mr. Fujimon, with regards to data-driven strategy. After 1 year, how do you assess its progress? And what do you think the challenges are? Or if you want to boast about anything, please share that with us.
I'm Fujimon, the CTO. In the area of data-driven, there are some specific services where we've been seeing success. For specific success, data -- by using data, it's not about just using one piece of data to grow the business substantially. It's more of a accumulation of small successes where we take advantage of data. So product changes would be -- for example, recently, Yahoo! Transit is an app for transportation and for transit projections. We also utilized Twitter data, which -- to with which we have a partnership. We're able to project the congestion of the destination through one of our functions. And actually, I would like to boast that it's well-made. 40 pieces of media have introduced this service, and we are patented for this function. So this is a service that only Yahoo! JAPAN can deliver by taking advantage of data. With regards to overall challenges for the individual services, we would like to use data to grow our business, and we are starting to offer new user experiences. But what we need to do going forward is what Mr. Kawabe referred to earlier. The key driver of our integrated strategy is going to be data. Therefore, it's not just your own data that you have your services, but we need to take advantage of data from elsewhere in order to grow another business, and we need to centrally manage various pieces of data in order to grow another service. So that is the kind of technology we are currently developing. So as soon as that's ready, we believe our services will be developing into a new direction.
Any other questions? Please raise your hand. The far left, the blue shirt person, please.
I'm Tsuruo from Citigroup [indiscernible]. I have 2 questions. First, Rakuten is going to enter the mobile business. It's still 1.5 years until this is completed. In that time span, what is Yahoo! going to do in the given time? Of course, there are reasons from competition that you can't be too specific. How are you going to encircle SoftBank or increase your cardholders as well as how are you going to give incentive points, which are a few ideas that come across my mind? But could you give us more of your ideas?
Probably, Rakuten in making entry to the market, SoftBank as it did make market entry, acquisition will become our fears of members is what we picture. And in that instance, SoftBank users -- Softbank would like to have their users satisfied, and I think we can be useful in that. Premium members are a -- actually equal to the SoftBank members if they have a good shopping experience, have incentive points that they earn. So daily shopping frequencies, we already have, could be further facilitated as well as mobile payment that I've introduced today. In my actual experience, cashless payments, of course, are very convenient, and you couldn't actually live without it. And until the time Rakuten makes full entry, that kind of killer service, for instance, if we could actually share more of those services with SoftBank, I think, is what we need to do.
My second question, as you've become the CEO and it's your first year, as in many cases, you spend a lot usually in your first year to try to accelerate your growth, which is common. Major shareholder, with your talks with SoftBank, do you have a certain time line until when that would be allowed? Because in 1.5 years, Rakuten will make market entry. You don't expect personally, as I would say, as an impression, that you would grow much in terms of profits next fiscal year from your investments this fiscal year. Is that correct?
You mean, in the return, which is -- in returns, which is operating income. The 3 areas of #1 aspirations, it's sure that we've -- had done and pursued #1 in those areas from before, and we need to fully engage in that, of course, for the new fiscal year. But we don't have a detailed dialogue with SoftBank on actually rolling back until when we should do what before Rakuten makes a market entry. But we will have to test how hard it is to try out our ideas in all the 3 areas becoming #1, and we'd like to fully be engaged in that.
Please raise your hand if you have a question. The person with the light blue necktie, third row from the front.
I'm Maeda from SMBC Nikko. I have 2 questions as well. My first question is related to Altaba. During this quarter, they've declared that they will let go of your shares. From your company, have you -- I haven't seen any specific response or action. The minority shareholders will be impacted by this. But with that in mind, how do you perceive this? And if it's possible, can you talk about how the stocks are being released as far as you see it?
First of all, for Altaba, we continue to have discussions with them. From our point of view, the business value as well as the corporate value, maximization over the medium to long term is our utmost mission. Therefore, we are -- we will be looking at a variety of options, and we would like to take action appropriately at the right time. And if we decide to go ahead with one of the options, we would like to swiftly report it to you. With regards to how Altaba is selling down shares or the way they are releasing of our shares, there is nothing from our perspective that we can share with you right now.
So okay. That -- Then here is my second question, midterm operating profits. Of course, growing operating profits is pretty much a given. However, I was just wondering if this will satisfy investors with your explanation. As you start your new business and you get a better response from it, maybe in 1 year time or 2 years' time, maybe it's going to be in 2024 or 2025, by 2024 or 2025, maybe you could give us a deeper -- increasingly detailed plan. And maybe you could exclude the new businesses and talk about what your thoughts are around your existing businesses. And what -- how much of [ OP ] you are targeting for those businesses? So you don't have to do this as soon as possible. But maybe in the next 12 months, do you think you can give us more updated numbers?
Like I mentioned at the end, as we are a new management, we would like to ensure that we have dialogue with all of our shareholders in order to grow our business value. So at an appropriate timing, I would like to share with you what kind of thoughts are on our minds. And also, with regards to the new 3 challenges. There are things that we've been doing from the past. Some we are going to start anew, and it's a mix of these things. And from the things that you -- were existing already, we think at a earlier timing, we will be able to set forth something more in detail. But whatever the case may be, with the new management in place, we are going to update the business strategy and make a new one. And based off that -- this is the first round of that -- those efforts. So there are a lot of -- to be decided, and we don't want to give you any information that is misleading. So once we are able to solidify our expectations, we would like to give you a more specific explanation.
Are there any other questions? The second row, the person in the light pink shirt, please.
I am from Mitsubishi UFJ. Araki, Morgan. This is also on the last question. Miyasaka-san said in 2012, by 2020, to double operating income, which was what the slogan was at his time. There hasn't been any follow-up on that since. So having become the CEO, Mr. Kawabe, is it because you don't have much visibility, though you have an idea of what the size of the operating income is going to be in 2 years? Or mobile payments, of course, didn't exist 3 years ago. If you [indiscernible] the company, it was just a slogan? Or is it because you don't have the visibility yet to share with investors for this fiscal year as well as the next fiscal year? Are you going to just postpone the time line? But as the top management of the company, how much visibility do you have, actually? Honestly, if you don't have visibility, please say so. Or if you have visibility but you're not quite sure yet, you can also tell us that as well. And by 2020, the doubling of operating income, how far has it been advancing? And what went wrong if you're not eyeing that target? And there was a story that you're going to actually outgrow Amazon in becoming #1. And how is the update on that? And how is it consistent or not with your current plan?
Okay. Thank you for asking that input and key questions. So I'd like to go in order of time. First, doubling our operating income, which was what we have posted in 2012, in the 2020s, that we've declared or announced, doubling operating income in the 2020s. Well, setting aside whether it's going to be in the 2020s, as top management, we don't intend to change doubling our operating income. But in the time sequence over the last 6 years, from 2012 to 2015 fiscal year, the existing businesses were actually grown by focusing or prioritizing them to a certain extent. In fact, in 2012, we had JPY 160 billion and JPY 180 billion. To that level, we, by doing so, have grown our operating income. But in fact, for the first 5 -- 3 years, correction, the summary internally was that just by focusing on prioritizing on existing business won't grow us any further than JPY 185 billion or JPY 165 billion, unless we grow new businesses or develop new businesses. And on top of that, the Internet is exploding in size. So going forward, in all of the businesses, I think we've discovered the sweet spot, which is most suitable for further growth potential to be explored. So on that, from 2013, '14 and '15 fiscal, we have refocused our growth strategy of gross income. And the changes that we've made various -- are various and numerous, and what's related to what I've announced today is, of course, to carry on with our -- growing our existing business base on top of that in 3 segments I have mentioned. We are aspiring to become #1 as a focus strategy. And therefore, outgrowing Amazon, we haven't given up on that, of course. And how much visibility do we have on the future? As I've answered the previous question, most naturally, we do have more visibility on what we have started earlier. But for new businesses, relatively, we do have a strategy, but we still need to gain more visibility on whether the strategy will work out as we expect it to, which is in advertising. And with the abundant user base, how would things work? Of course, have more visibility, more or less. And commerce is an area that we have raised our focus on, and we may not have insights compared to competitors yet. But in fiscal '16, as I've mentioned, in constraining our points, we didn't see user activity declining, as we had expected that to bring. And we actually have, as a consequence, raised our profit ratios rather in doing that constraining cost. So therefore, we are doing our best within our given visibility. Mobile payments, of course, honestly, is a future area, but we do believe it's a key important driver. Yahoo! is a service engine or a search engine, and where we started to grow our business. And LINE, for instance, they started from a communication platform, and they are expanding in various service platforms currently. So trying to work from the existing platform to actually have a whole suite of services is not many competitors are well positioned in that area, and we believe we have a unique well position attribute in that area. And I've tried to -- actually try to come up with presenting that, which I still need to confirm whether I have gained the full understanding by listening to the questions. So I would say that missed the opportunity earlier in mobile payments. And therefore, for this mobile payments, we can't afford another opportunity to be missed to have a unique whole suite of services that we can capture. And how this will all fall out, of course, needs to be examined as we advance. And to an extent, at least, we have all the key drivers in place. Though, in fact, the ultimate goal of the operating income is yet to be affirmed. We do have the prior experience on major operators, and we are determined to bring the results -- deliver on the results. And of course, visibility in each area varies, but we do believe that we are advancing in the right direction, at least.
Any other questions? I think it's your second question. So does anyone else have a question? All right, then the person in the middle, in the front row.
Sorry, this is Nagao again from Nomura. I have a second question. So for mobile payment and expanding in into real merchants and stores, in the process of doing so, there are a lot of point programs that you can't use online that is offered by the major retailers. But for those stores, if your whole payment is installed, for example, T-POINT integrating it with the major retailer point system, you could connect online and offline point programs. And maybe you could take advantage of that data to grow as a data-driven company. So what -- how do you position T-POINT with online settlements or payments? So that's my first question.
Well, currently, related to user incentives, from a UX perspective, as long as we have a wide range of retailers, I believe users can make payments in a smart way, and we are confident about that. So at this point in time, we are not thinking about any specific user incentives. However, for this to develop in a large way and penetrate Japan, I think these kinds of incentive programs or point programs needed to be sorted out, and we need to figure out what we should do. But currently, we have no specific plans. In this category, the person that's responsible is Mr. Ozawa from the commerce business. So because -- maybe he would like to speak about the mobile business or matters overall.
From April, I am the President of the Commerce company. My name is Ozawa. Let me sit down, as I answer your question. As Mr. Kawabe mentioned, points are a user incentive. When it comes to settlements, it's about payments of products. It's about paying the money, so we need to separate that from user incentive. With regards to designing user incentives, T-POINT, we have a relationship with them, and that is what we would like to think about mainly. But from a user point of view, in Japan, there is a lot of point programs and incentive programs available, and they are not -- they're all separate. So it's all about reducing that amount of cash payments by enabling people to use their mobile devices, and we would like to centralize their data and try to maximize Yahoo! Wallet, which means that the point program should be converged maybe into one direction or there might be points aside from points. When you look at case studies in China and India, there are some examples available so we're considering what we should do. The finance business and the settlement business for Yahoo!, we are the latest entrants -- entrant. So there is -- we're in the back of the line. However, it wouldn't make sense if we continue to be in the back. So we would like to use the preceding example that is available in the globe and try to figure out what we -- what would be the way to leapfrog the competition. We have 40 million users, and we are trying to figure out what is the best incentive program. So we haven't yet offered clarity on that, but we would like to ensure that we offer the best option to the users. That's all from myself.
And let me follow up on his point. In Japan, as mobile payment penetrates the market, we actually don't think a point program is going to trigger better penetration. We need to offer a better convenience all over cash payments. We need to create a better user experience, or else we don't believe there is going to be a pickup in adoption. If they can pay in a smarter way or an even more convenient way compared to cash, I think there's many ways to innovate user experience in order to improve these things. I would love to give an example, but then our competition will probably copy us, so it's hard to share it here in this room. But it's about the payment experience and making it smarter that will resonate with anyone. And then for the first time, I believe the users will pay through mobile over cash. And compared to the user experience between malls, which is pretty much the same, I think there is more opportunity for improvement in the payment area, and that's the space we would like to innovate.
Here is my second question. For Yahoo! Shopping, you had a 30% target over 3 years. Is this going to be ongoing as a target? When you look at the fourth quarter, it was 20-something percent, and it was under 30%. So from here on, how are you going to go back on track to the 30% target? Or can you share your policy or methods?
In order to become #1 in the space, we believe we are currently #3. And basically, that means that our growth rate needs to be higher than the #1 player and the #2 player, or else, we will never reach the #1 position. So around 30% growth will be the ongoing target until we secure the #1 position. The way we would like to achieve this was explained today in the presentation as well. But to be honest, we were actually really thinking hard and coming up with creative ways in the past several years. Of course, we talked about Premium users that are synonymous with SoftBank users, and there is still more opportunity to develop those SoftBank users. So this is orthodox method, but we will continue to focus on them. But every year, we are thinking about new ways and new additional ways of growth. Ozawa-san, do you have anything to add?
Yes. First of all, for the 30% target, if 30% adds up, it becomes a tremendous number. But of course, Amazon and Rakuten will continue to grow as well. So in some cases, we will need to grow by 40% or 50%. When you look at the current strategies in place, I believe that we need to do more. And you mentioned that in Q4, we grew in the 20% range, but I think the average is going to be 30% growth that we will target. In some quarters, it may go down as low as 10%, and it's going to be patchy quarter-by-quarter. But with new measures, we may strive for 40% or 50%. But obviously, we're running a business, so it's not going to grow by 30% in a linear way. Quarter-by-quarter, we'll probably see fluctuation. And in Q4 last fiscal year, we were doing 10x points for SoftBank users. So it was hard to exceed the target, so there will be some mismatches year-on-year. So how are we going to grow even further? Like we talked about the marketplace quality in the slide, we think that is a very critical component. If you're dependent just on points, that's not the type of marketing we want to do. Marketplace quality currently is falling behind other companies. That is why we are relying on points at this stage. But by doing this, we are creating synergies with SoftBank, and we are seeing benefits come through. So as far as this mix is successful, we will continue. But ultimately, customers will use the service without points. For example, [indiscernible] as a service, they will use, although they're not incentivized. Like Mr. Kawabe said, it's all about convenience. And if we're able to create that for our services, we believe the point cost will come down. But maybe, logistics costs will rise instead and was going to have to [ fresh food ]. So it's all about raising the quality of our core services. But including UI and UX, there are a lot of areas we still need to fix. And also, for assortments, are we going to do food? Are we going to do logistics? So it's all about the essential quality of the marketplace and how we improve it to make it better in order to ensure 30% growth going forward. That would be the key driver.
I think we're coming close to the close. The last question, please? Do you have any question? If you have, please raise your hand. Is this your second question? Is there anyone else for the first time? If there is a last question from someone else? Unless there are -- there is anyone, I'd like to ask the gentleman on the very front row.
I'm sorry to ask the second question. I'm from the Research Institute. I have only one question. [ Sawada ]. The [ 97 ] DAU as a important KPI, smartphones have reached 60 million already. And the Japanese population is about to be reached as a limit. And I believe, we will see the dilution going forward in terms of its importance. Are you going to be replace this with other means going forward?
The Media business key performance indicators, as I understood or I think your question is, DUB or DAU, for instance, as you've mentioned, Yahoo! Japan including the browser version, the reach is coming very close to 100%. And therefore, our discussion will shift from daily numbers that are coming close to 100%, how much density do we have, frequencies on top of users -- or frequencies per day as well as time spent, which add and multiply to the ads placements. Although, this is still discussed internally, that kind of density or area expansion, how could we assure our KPI at the appropriate time, for instance, how could we change the KPI in that direction, I think is a thing that we want better to do.
So that answers your question, and we'd like to close this report analyst meeting. Thank you very much for coming.