Yahoo! Japan Earnings: Mobile Bolsters Growth Yet Again

Yahoo! Japan Corporation (OTC:YAHOY) reported its Q3 FY 2015 results on February 4^th. (Fiscal year end with March.) The company posted 4.7% year-over-year growth in revenues to ¥107.5 billion ($920 million). Operating income increased marginally by 0.3% to ¥49.9 billion ($420 million) as effects of the ‘no fee’ strategy for its shopping division eased. While the company reported 5.4% growth in its advertising revenues to ¥62.1 billion ($530 million), its transaction value across shopping, auctions and listing services grew by 8.1% to ¥324.4 billion ($2.76 billion). The highlights of the results are as follows.

See our complete analysis of Yahoo! JAPAN here

Guidance For Q4 FY15

The company expects Q4 FY15 revenues to be in ¥112-114 billion ($950 million-$970 million) range, an increase of 4%-6% over Q4FY14. It expects operating income to be in ¥48.7-50.7 billion ($410-430 million) range.   

Mobile Boosts Revenue And Transaction Value

In our pre-earnings note, we stated that we would closely watch the progress the company has made in its mobile advertising division. The increase in mobile ads revenue was instrumental in bolstering search ads revenues. According to our estimates, mobile advertising contributes nearly 20% to Yahoo! Japan’s total value. During the quarter, the firm posted a healthy increase in mobile ad revenues, which grew by 52% to ¥21.2 billion ($180 million), and now account for 34% of total ad revenues. ^[1] Furthermore, e-commerce transaction value through smartphones now amounts to 35.4% of total transaction value, and stands at ¥114.7 billion($980 million). We believe that revenues from this division will account for almost 25% (of total revenues) by 2021, as ad budgets increasingly shift to mobile users.

During the quarter, the company reported 51.2% year-over-year growth in smartphone daily unique browsers (DUB) to 42.43 million. As a result, the number of monthly smartphone pageviews grew by 55% year over year to 27.32 billion. As the company is increasing content across its properties, we believe that the company will be able to leverage its dominant position in the Japanese Internet landscape to drive mobile revenue growth in the coming future.

During the earnings announcement, the company also stated that it is entering the game publishing business for smart connected devices to monetize its swelling mobile user base and the increasing popularity of Smartphone in Japan. The company, GameBank, was launched in January, and aims to support developers in promotion and localization of game content.

Transaction Value Across E-commerce Properties Grows as Listings Rise

While the search and listings ads division contributes 16.7% of Yahoo! Japan’s total value, the online shopping and auction division contributes 14.5%, according to our estimates. The company removed listing and tenant fees for its websites in Q2 FY14 (Q3 CY13), to stimulate growth and increase the number of listed sellers. The number of listed sellers is important for Yahoo! Japan’s shopping division because as listings grow, more users are likely to find and buy products on its site, which will increase the transaction value across Yahoo! Japan’s shopping websites.

As a result of this new strategy, the company added over 243,000 store ids for its shopping portal in the last fifteen months, 50, 000 of these were added in Q3. With this increase in store ids, the number of products listed across its shopping website increased by 50% year over year to nearly 143 million. The transactions value, across shopping, auction and listing divisions, grew by 8.1% year-over-year to ¥324.4 billion($2.76 billion). The company reported 2.5% year-over-year growth in revenue to ¥26.45 billion ($230 million). This has been the first quarter in which it posted growth since it stopped requiring listing fees and cut down its take rate for the transaction across its shopping sites. We expect that as this strategy gains more traction, Yahoo! Japan’s revenues will increase due to higher transaction value across its sites. Currently, we estimate that by 2021, the transaction value from shopping and auction divisions will grow to ¥400 billion and ¥780 billion respectively.

We are in the process of updating our Yahoo! Japan model. At present, we have a $8.29 price estimate for Yahoo! Japan, which is 20% above its current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research

1. Yahoo! Japan Presentation [↩]