Yahoo! Japan: Mobile Fillips Revenues

Yahoo! Japan Corporation (OTC:YAHOY) reported its Q4 FY 2015 results on May 1 (fiscal year ends in March). For the quarter, the company posted 9.3% year-over-year growth in revenues to ¥117.8 billion ($983 million) . Operating income increased substantially by 9.8% to ¥52.4 billion ($440 million) as effects of the ‘no fee’ strategy for its shopping division eased. While the company reported 8.4% growth in advertising revenues to ¥69.3 billion ($580 million), the transaction value across shopping, auctions and listing services grew by 7.6% to ¥305.1 billion ($2.55 billion).

The company posted 4.9% year-over-year growth in revenues to ¥428.4 billion ($3.57 billion) for the fiscal year 2015. Operating income increased marginally by 0.4% to ¥197.2 billion ($1.64 billion) as overhang from the ‘no fee’ strategy impacted margins. While the company reported 7.4% growth in advertising revenues to ¥249.8 billion ($2.09 billion), the transaction value across shopping, auctions and listing services grew by 7.6% to ¥1.19 trillion ($9.93 billion). The highlights of the results are below.

See our complete analysis of Yahoo! JAPAN here

Mobile Boosts Revenue And Transaction Value

As stated in our pre-earnings note, 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 year, the firm posted a healthy increase in mobile page views, which grew by 43% to 29.45 billion, and now account for 44% of total pageviews for Yahoo. ^[1] This translated into ¥24.8 billion ($210 million) in ad revenues or 35.9% of ads revenues for the company during the quarter. Furthermore, e-commerce transaction value through smartphones now amounts to over 36% of total transaction value, and stands at ¥110.8 billion ($920 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 45.92 million. This was also one of the main drivers for the increase in mobile page views across Yahoo! Japan. As the company is increasing content across its properties, we believe it will be able to leverage its dominant position in the Japanese Internet landscape to drive mobile revenue growth in the coming years.

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 strategy, the company added over 200,000 store ids for its shopping portal in the last year, 39,000 of these were added in Q4. With this increase in store ids, the number of products listed across its shopping website increased by 68% year over year to nearly 160 million. The transactions value, across shopping, auction and listing divisions, grew by 3.2% year-over-year to ¥305.1 billion ($2.55 billion). We expect that as product listing 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 inline with the current market price.

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