Media Business

FY2021 – Results^*

• RevenueJPY641.2 B
• Adjusted EBITDAJPY260 B
• Adjusted EBITDA (Margin)40.6%

* From FY2022-Q1, Yahoo Japan Corporation’s financial service which had formerly been recorded in Strategic Business has been transferred to Media Business. LINE Corporation’s services that had been recorded in Adjustments have been transferred to each business segment. Accordingly, past data and comparisons have been retroactively adjusted to conform to the current segments.

Our View of the Market Environment

In 2021, total advertising expenditure in Japan recovered significantly to JPY6.8 trillion for the full year (YoY +10.4%), due to the easing of the impact of the global outbreak of the COVID-19 pandemic continuing from 2020 through the second half of 2021, as well as the increasing digitalization of society. In particular, expenditure on Internet advertising maintained a high growth reaching JPY2.7 trillion (YoY +21.4%), and accounted for 39.8% of total advertising expenditure. As a result, for the first time, Internet advertising expenditure surpassed the total advertising expenditures in the four traditional media markets of television, newspapers, magazines, and radio which totaled JPY2.5 trillion (YoY +8.9%)^*1.

Internet advertising media expenditure, which constitutes approximately 80% of Internet advertising expenditure, expanded to JPY2.2 trillion (YoY +22.8%)^*2 due to a recovery from the previous year, when consumption was sluggish and ad placements declined due to the impact of the pandemic. Paid search advertising reached JPY799.1 billion (YoY +17.7%)^*2 while display advertising reached JPY685.6 billion (YoY +19.6%)^*2, both expanding to constitute approximately 70% of Internet advertising media expenditure. Furthermore, video advertising surpassed the JPY500 billion threshold for the first time, largely increasing to JPY512.8 billion (YoY +32.8%)^*2. This was due to the continued demand from users who had to stay home as a result of the declaration of a state of emergency and pre-emergency measures to prevent the spread of COVID-19, which were applied for an extended period of time in many regions in Japan. Increased demand for video streaming services due to the Tokyo 2020 Olympic and Paralympic Games also contributed to this result.

Offline sales promotional measures have been difficult to conduct during the pandemic prompting major platform operators to actively provide digital sales promotional solutions using their own point reward systems. This has diverted sales promotions to the online domain, further contributing to the increase in Internet advertising media expenditure.

Social advertising on social media services grew significantly to JPY764.0 billion (YoY +34.3%)^*2. Social advertising targeting social media platforms, excluding video-sharing platforms, is the largest in scale in this category, and has expanded to JPY316.8 billion.

With the implementation of the revised Act on the Protection of Personal Information in April 2022, there is a heightened awareness over compliance, and we believe efforts to comply with the revised act and to improve advertising quality also provide opportunities for Internet advertising to develop. In anticipation of the cookie-less era, Yahoo Japan Corporation ("Yahoo! JAPAN") and LINE Corporation ("LINE"), which both have first party data, will grow with the market by balancing the protection of user privacy and the marketing needs of businesses.

Although there is still a sense of uncertainty in the macro environment, such as the impact of the pandemic, further growth in the Internet advertising market is expected, driven by the rapid digitization of society and other factors.

1. *1 Source: 2021 Advertising Expenditures in Japan, DENTSU Inc.
2. *2 Source: Advertising Expenditures in Japan 2021— Detailed Analysis of Expenditures on Internet Advertising Media, DENTSU Inc.

Results of FY2021 and Priority Initiatives in FY2022

Results of FY2021

The revenue of Media Business for FY2021 amounted to JPY641.2 billion (YoY +74.7%), accounting for 40.9% of total revenue. This is due to the consolidation of LINE Corporation as a result of the business integration in March 2021, recovery in advertisers’ demand, and product improvement measures, etc. Adjusted EBITDA increased 59.9% YoY to JPY260.0 billion.

LINE's Advertising

Total advertising revenue of LINE significantly grew to JPY188.9 billion (YoY +25.0%), of which display advertising revenue totaled JPY109.9 billion (YoY +33.7%). From early May 2021, LINE began permanently displaying advertisements and various content at the uppermost slot in LINE's chat list, and this has resulted in an increase in advertising inventory. In addition, LINE launched a new advertising product, Talk Head View Custom, in September 2021. This programmatic advertising, displayed at the uppermost slot in the chat list mentioned above, is designed to make flexible distributions of ads according to the client's products and sales drives. From November 2021, Timeline, a feature that enabled family members and friends to post activities to each other, was renewed to a video platform, LINE VOOM. Leveraging this opportunity to enter the short-form video market, LINE aims to increase its video advertising revenue over the medium- to long-term.

Account ads also increased its revenue to JPY72.7 billion (YoY +17.5%), and the number of LINE Official Accounts also grew to 18.5 million (YoY +23.2%). This is mainly due to the strong performance of the LINE Official Account business which accounts for 70 to 80% of revenue. Since this advertising product is less susceptible to business conditions than display ads, and is more likely to be used on an ongoing basis, it has been able to steadily expand its revenue.

Yahoo! JAPAN's Advertising

Total advertising revenue of Yahoo! JAPAN, including shopping-related advertising revenue, was JPY392.6 billion (YoY +11.0%), resulting in the first double-digit growth since FY2013, which was mainly due to the capturing of the demand recovery in the market, and product improvements.

Search advertising grew 13.3% YoY to JPY184.6 billion. The main reason for this result is that in FY2020, advertisers' willingness to advertise declined due to the uncertainty caused by COVID-19, but in FY2021, their appetite gradually resumed. Meanwhile, display advertising totaled JPY207.9 billion (YoY +8.9%); out of which programmatic advertising totaled JPY181.5 billion (YoY +10.4%). The result of programmatic advertising was mainly due to the improvement of KPIs such as cost-per-click as a consequence of enriched ad formats, promotion of automatic bidding, improvement in distribution accuracy, as well as increase in the transaction value of shopping business resulting in an increase in shopping-related advertising revenue (included in programmatic advertising). Reservation advertising totaled JPY26.3 billion (YoY 0.0%), which was a result of the shift in the advertisers' demand from reservation advertising to programmatic advertising, as well as decrease in ad placements in some industries due to the changes in the macro environment (e.g., shortage in semi-conductors).

Various initiatives have also been launched to generate synergies with LINE. In October 2021, Yahoo! JAPAN Ads Display Advertising (Programmatic-based) began distribution to LINE NEWS, and there are plans to have LINE's ads distributed to some of the ad slots in Yahoo! JAPAN. In addition, from July 2021, applications to open LINE Official Accounts are accepted for all stores of Yahoo! JAPAN Shopping. Since many stores start using the free plan with no fixed monthly fee and move on to the paid plan after understanding the benefits, it takes a certain amount of time to realize revenue increase, but we are working to expand Account ads.

Priority Initiatives in FY2022

For the full year Media Business, outlook (as of November 2, 2022), LINE's advertising revenue is expected to be JPY198.3-207.7 billion (YoY +5.0-10.0%), and Yahoo! JAPAN's advertising revenue is expected to be JPY392.6-412.1 billion (YoY +0.0-5.0%). Adjusted EBITDA is expected to total JPY268.2 billion (YoY +0.8%).

To achieve the outlook, efforts will be made to increase the amount of ad placements by strengthening the sales collaborations between Yahoo! JAPAN and LINE, as well as to expand the previously mentioned mutual distribution of ads on the two platforms. The sales collaboration between SoftBank and Yahoo! JAPAN in advertising, which has been pursued for several years, has proven to have a certain level of effect, thus will continue to be promoted to increase revenue. Furthermore, a strategic investment in the scale of JPY50-70 billion is planned for the entire company in FY2022, and around 20% is planned to be spent in the Media Business. The investment is planned to be mainly made in improving features in advertising services and expanding the features of vertical search, such as restaurant reservations. The aim of these investments is to increase advertising revenue and transaction value.

We will also continue our efforts in developing advertising and sales promotion products to realize our full-funnel 1:1 marketing solution. This is a one-stop solution that provides marketing activities from online/offline awareness raising to purchasing and repurchasing, which make advertising effectiveness visible. Currently, this initiative is being adopted by some consumer goods manufacturers, but we will continue to develop new markets while strengthening sales proposals and expanding revenue.

Sustainability Initiatives in the Media Business

The Z Holdings Group will contribute to the realization of more affluent and convenient lifestyles by solving all kinds of social issues, including responding to administrative DX (digital transformation) in cooperation with local governments in Japan and contributing to disaster prevention and mitigation. In addition, to fulfill our responsibility as a digital platform operator, we will establish a sound operational framework and disclose the details of our operations in a transparent manner.

3.11Project "Norikoeru Chikara (Power to Overcome)"

Yahoo! JAPAN and LINE have both worked in the areas of "disaster prevention," "disaster relief," and "disaster recovery." As a first step in their collaboration, the two companies jointly implemented "Norikoeru Chikara (Power to Overcome)" to collect contents to send thoughts and raise support for the disaster-affected areas of the Great Eastern Japan Earthquake and information useful for disaster prevention in the year marking the 10th anniversary of the earthquake. This project has provided many people with knowledge about disasters and the situation in the disaster-stricken areas, creating opportunities to take actions for disaster prevention and donations for the future. Some of the programs include: "Smartphone Evacuation Simulation," "Searching is Empowering," "Knowledge is Empowering." "#Arekara watashi wa (Me since then)," and "#Korekara watashi wa (Me from now)." Moving on, Yahoo! JAPAN and LINE will continue to collaborate to realize a better future that is safe and secure.

• More details (Japanese only)

"Transparency Report on Advertising Service Quality"

The "Transparency Report on Advertising Service Quality," which compiles the screening results conducted to enhance advertising service quality, is released regularly by Yahoo! JAPAN. Yahoo! JAPAN will continue to promote various efforts for transparency and quality improvement, and provide information on details of these efforts in order to satisfy all of its customers, including Internet users, advertisers, and partners.

• More details (Japanese only)

"LINE Transparency Report"

"LINE Transparency Report" is a regular report released since the second half of FY2016. The report sheds light on how LINE Corporation and its group companies handle data entrusted from its users in the maintenance and operation of various services provided by the LINE Group. The LINE Group will continue to update this report on a regular basis to increase its transparency so that its users can access the services with a sense of security.

• More details (Japanese only)

Major Services and Products

LINE Ads

Display Ads

Account Ads

Yahoo! JAPAN Ads

Search Advertising

Display Advertising

Other Ads

Others