Yahoo Japan: Revenue Growth Across E-Commence, Online Ads And Financial Transaction Services Continues

Yahoo Japan Corporation (OTC:YAHOY) reported its fiscal Q4 results on April 26. In line with our expectation, Yahoo Japan’s revenues grew 7.6% year over year (0.6% Q-o-Q) to ¥222.73 billion ($2 billion), primarily on the back of a 12.6% surge in the transaction value at the shopping business (e-commerce), which grew to ¥486.4 billion ($4.37 billion). Additionally, operating income grew by 33% y-o-y to ¥39.8 billion ($357 million). Additionally, the company reported 9.6% y-o-y growth in advertising revenues to ¥78.6 billion ($706 million). As we had expected and noted in our pre-earnings note, mobile revenues continued to boost overall revenues during the quarter as Japanese consumers continued to use smartphones for shopping and browsing. The highlights of the results are detailed below.

See our complete analysis of Yahoo! JAPAN here

Mobile Boosts Ads Revenue And Transaction Value

According to our estimates, mobile advertising contributes 48% to Yahoo Japan’s online advertising revenues and makes up 34% of our estimate for Yahoo Japan’s total value. Mobile transactions accounted for over 51.4% (¥250 billion) of the company’s transaction value for the quarter. Furthermore, the increasing penetration of mobile devices aided in the growth of mobile ad revenue, as the smartphone revenue ratio continued to exceed 50% and contributed ¥41.73 billion (53.1%) to ad revenues. ^[1] We believe that revenues from mobile ads will account for almost 21% of total revenues by 2023, as ad budgets increasingly shift to mobile users. We also believe that as the company is increasing the content across its properties, it will be able to leverage its position in the Japanese Internet landscape to drive mobile revenue growth in the coming years.

Transaction Value Across e-Commerce Websites Grows Again

The online shopping and auction division contributes 13% of Yahoo! Japan’s total value, according to our estimates. The company removed listing and tenant fees for its websites in Q2 FY14 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 sites.

Yahoo Japan’s online shopping division continues to lag due to intense competition from incumbents such as Amazon and Rakuten, who list more products on their sites. According to export.gov, Yahoo Shopping is ranked fourth with a market share of 3.2%. ^[2]

The company’s transaction value across shopping, auction and listing divisions grew by 17.4% year over year to ¥486.4 billion ($4.37 billion). We expect that as product listing gains more traction, Yahoo Japan’s revenues will increase due to higher transaction volumes across its sites. Furthermore, since online sales only account for 5% of all retail sales in Japan, the untapped market for the company presents a huge opportunity to grow its business in the coming years.

Transaction Value And Membership Growth In Credit Card And Wallet Services 

In 2014, Yahoo Japan forayed into credit card services. In Q4, the credit card transaction value for the company increased by 116% to ¥184.6 billion ($1.65 billion) and the number of valid card holders increased by 63% to 3.6 million.

The number of Yahoo Wallet Accounts and transaction value also grew during the quarter, signaling strong adoption in the Japanese market. This was the 16^th successive quarter in which the company has reported growth for e-payment services. While the number of wallet accounts grew by 9.1% to a record 36.53 million, the transaction value grew by 18.7% to ¥323.6 billion ($2.91 billion). This translates into ¥885 per account, up from ¥800 a year ago. We expect this trend to continue in the coming quarters.

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1. Yahoo! Japan KPI Metrics [↩]
2. Japan – eCommerce, February 22 2017 [↩]