Yahoo! Japan Earnings: Revenues From Mobile And E-Commerce Grows Yet Again

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YAHOY: Yahoo Japan Corp ADR logo
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Yahoo Japan Corp ADR

Yahoo! Japan Corporation (OTC:YAHOY) reported its Q1 FY 2016 results on July 30th (fiscal year ends in March). In line with our expectation, Yahoo! Japan’s revenues grew 10% year over year to ¥110.57 billion ($890 million) . Operating income was flat at ¥86.420 billion ($696 million). While the company reported 9.5% growth in advertising revenues to ¥63.32 billion ($509 million), the transaction value across shopping, auctions and listing services grew by 11% to ¥311 billion ($2.50 billion). The highlights of the results are below.

See our complete analysis of Yahoo! JAPAN here

Mobile Boosts Page View, Revenue And Transaction Value

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According to our estimates, mobile advertising contributes nearly 20% to Yahoo! Japan’s total value. As stated in our pre-earnings note, the increasing penetration of mobile devices aided in growth of mobile ads revenue, which was instrumental in bolstering search ads revenues. Furthermore, mobile page views exceeded desktop pageviews for the first time in May. [1] This translated into ¥24.2 billion ($210 million) in ad revenues or 38.3% of ads revenues for the company during the quarter. Furthermore, e-commerce transaction value through smartphones now amounts to over 30% of total transaction value, and stands at ¥114.2 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 36.6% year-over-year growth in smartphone daily unique browsers (DUB) to 49.23 million. This was also one of the main drivers for the increase in mobile page views across Yahoo! Japan.  We believe  that, as the company is increasing content across its properties, 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 185,000 store ids for its shopping portal in the last year, 35,000 of which were added in Q1. With this increase in store ids, the number of products listed across its shopping website increased by 68% year over year to nearly 180 million. The transactions value, across shopping, auction and listing divisions, grew by 11% year over year to ¥311.1 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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Notes:
  1. Yahoo! Japan Presentation []