Yahoo! Japan (OTC:YAHOY) is one of the largest Internet companies in Japan, with a highly diversified product portfolio which includes search, a mobile platform, e-commerce and payment services. The company generated approximately JPY 853 billion ($7.66 billion) in fiscal 2017 (fiscal year ends in March) with company-wide gross margins of approximately 56%. However, only 33% of total revenues were from advertising in fiscal 2017. In FY17, its online ad revenues declined due to lower revenues from desktop ads, which saw a 20% decline. However, revenues from mobile ads grew as Yahoo Japan’s apps gained traction among Japanese users. We estimate that revenues from mobile will account for almost 75% of the company’s online ad revenues and 22% of total revenues by 2024. Trefis believes that the company will continue to report growth in revenues due to the ubiquitous use of smartphones and the popularity of its platform.
Mobile Advertising Platform Key For Growth
According to our estimates, advertising contributes approximately 67% to Yahoo! Japan’s total value. Yahoo! Japan, through its website and mobile apps, reaches over 80% of internet users in Japan. In the last two quarters, over 55% of the company’s advertising revenues originated from a smartphone. We expect that mobile ads will be the biggest growth driver for Yahoo! Japan, as it has one of the largest followings among smartphone users in Japan. Furthermore, as the company continues to add content to its mobile platform, it will increase the number of page views on its mobile ad platform. We forecast monthly page views per unique visitor to increase from around 684 to approximately 770.
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Another factor which will drive mobile ad revenues is the increase in mobile ad spending expected in the Japanese market. According to research firm eMarketer, most ad budgets are now earmarked for mobile devices.  While we expect revenue per 1,000 page views (RPM) to decrease from approximately $2.49 in 2016 to around $2.10 by the end of our forecast period, the cumulative impact of increased mobile pageviews and a healthy RPM will drive advertising revenues from smartphones for our forecast period. As a result, mobile advertising will contribute nearly 75% of total advertising revenues and the majority of advertising value for Yahoo! Japan in the coming years.
We currently have a $9 price estimate for Yahoo! JAPAN, which is in line with the current market price.Notes: