This is Kawabe from Z Holdings. Thank you very much for attending our announcement for Q2 results of FY 2022. Today's presentation will be given by our co-CEO, Mr. Idezawa. Please move on to the next page.
This is Idezawa for Z Holdings. Here we have the topics for Q2 results. Revenue increase in all segments this quarter, marking JPY 394.3 billion , which is the highest ever second quarter revenue. Even under the unstable macro environment, our adjusted EBITDA marked approximately 50% progress versus our full year's guidance. As for our consolidated performance, LINE's account ads maintain a double-digit growth. Yahoo! JAPAN's search advertising groups grew 6.3% year-over-year, and LINE VOOM also found steady growth in various KPIs.
Travel business also performed well, thus our e-commerce transaction values achieved double-digit growth. Also, PayPay's deficits have steadily decreased due to transaction fees charged to SMB merchants. We announced consolidating PayPay this July, but, still have maintained our full year's revenue as well as our adjusted EBITDA guidances. Please turn to next page. Here, we would like to move on to each of the agenda points you find on this slide. Moving on. First, we will cover the consolidated business results for the whole group. Please move on to the next page. Even under a challenging macro environment, we have marked a record high second quarter revenue. Adjusted EBITDA, on the other hand, decreased due to the absence of YJFX sales gain and execution of strategic investments. Please move to the next page. Here is our FY 2022 policies to achieve our guidance.
PayPay's consolidation was not factored in our initial guidance and will become a downside factor to our adjusted EBITDA. We're also finding revenue decreased mainly in our media business. In order to absorb these impacts, we will optimize our cost across the company to convert our management to a more robust and muscular one. Specifically, we will implement efficient sales promotion mainly in our commerce and strategic business segments and pursue cost optimization in line with the business environment. We still expect changes in the macro environment continue to pose uncertainty. Nevertheless, we aim to achieve our adjusted EBITDA guidance standing between JPY 331.5 billion and JPY 340 billion. Please move to the next page. Here we show results of our strategic investments. In Q2, we executed strategic investment of approximately JPY 11 billion, mainly in our commerce business.
Due to consolidation of PayPay Corporation, we expect better efficiency in capturing new PayPay Card members, and that is why we had not implemented strategic investment towards PayPay Card even in Q2. In light of uncertain business environment for Q3 and onwards, we mean to make decisions in a flexible manner, carefully reviewing our investments, focusing on profitability and returns. Please turn to next page. Here we show our status in ID linkage. Establishing data governance structure is ever more requiring further prudent measures with the recent heightened regulations for personal information protection, as well as the social changes. On the other hand, system development for ID linkage are progressing smoothly without major delays, as we schedule to begin ID linkage from 2023 and onwards. Please move to the next page. Here we show results of business integration and our future roadmap.
Ever since business integration in March 2021, we have promoted not just ID linkage efforts, but have also promoted product and sales collaboration, integration of overlapping areas, and selection and concentration of business, and so forth. In addition to initiatives to create synergy between the two companies, we've also pursued measures to further enhance each company's strength. PayPay Corporation has been consolidated since October, and now with a profoundly powerful customer base with LINE, Yahoo, and PayPay, we will further focus on generating synergies from the entire Z Holdings group. Next, about topics and business results by segment. Please move to the next page. Starting with our media business. Please move to the next page. Here we show market impact and challenges for our media business.
Japan's advertising market is steadily digitizing, but yet continues to be affected by macro and business conditions, especially in our display ads, decreasing advertisement demand. On the other hand, Z Holdings' uniqueness or our account ads and search ads are less affected by market conditions and are demonstrating product strength and amidst this difficult business environment. Please move to the next page. This slide shows advertisement revenue for LINE. Account ads continue to acquire new customers, as well as to find increase in ad distributions by major clients, thereby maintaining strong double-digit plus growth, driving growth of our entire ad business. On the other hand, display ads were affected by economic conditions, declining ad demand in some industries, and thus markets. Thus, we saw slight revenue decrease versus last year. Next is our total advertising revenue for Yahoo! JAPAN.
Search advertising performed well even in this unstable macro environment due to its ease in measuring of its effectiveness. Display advertising, on the other hand, not only experienced absence of last year's special Olympics demand this time, but also a declining advertising demand due to macro factors, and thus marking result of the same level as previous year. Next page. This slide shows product-specific initiatives based on market impacts. Display ads are observing slowdown in advertisers' demand due to changes in business conditions. To counter the environment changes, we will strengthen measures for video or app advertising, which are growth areas.
Account ads continue to make double-digit growth amidst a tough business environment. Here, too, we will further pursue growth by revisiting fee plans, reinforcing CRM features, and enhancing sales activities. As for our search ads, we will further refine and polish our products, including enhancement to search results. Next page. Here we show updates and major initiatives for LINE VOOM. After the renewal to LINE VOOM last fiscal year, we find various KPIs growing steadily with improved products and utilizing a proven user base of LINE. From here, we will further aim to offer differentiating content through acquiring and developing creators, and improve user experience by enhancing functions to create video experience for the growth of video advertising. Please move to the next page. Here we show updates on LINE official account and measures.
As LINE becomes more prevalent as communication infrastructure with customers, we find more people using LINE official account and a steady increase in number of paid accounts as well. In addition to leveraging Z Holdings Group rich touch points to its maximum, we will promote use through product reinforcement and stronger monetization so that LINE official accounts will be used furthermore. Please turn to the next page. Next, I'll explain our commerce business. Please turn to the next page. As Yahoo Shopping and PayPay Mall merged on October the twelfth, and the renewed Yahoo! JAPAN Shopping started, I'd like to talk about the progress. First of all, merchants' applications for promotion package plans have been strong, and the percentage of transaction volume accounted for by stores subscribing to the paid option has increased by more than 30% compared to before the integration.
Measures to increase Blue Ribbon stores also developed steadily, with the ratio of Blue Ribbon delivery services doubling from the previous fiscal year after the integration of sales platform. In line with the integration of the sales platform, sales promotion measures have been simplified to improve recognition as a main e-commerce store used on a daily basis. The integration of the sales platform proceeded smoothly, and the transaction value is trending firmly. The base campaign will be restructured to make the Mall simpler and easier to understand. Please turn to the next page. Next, I would like to explain the investment policy for the commerce business. After the integration of the sales platforms for the multi-EC, we will focus on user retention rates and LTV, aiming to achieve stable growth and transaction value.
We have been focused on sales promotion measures to grow transaction value in the past, but as shown in the graph, we have been improving the efficiency of fixed points that are awarded. On the other hand, we will make disciplined investments in acquiring new customers, focusing on continuation and retention. In addition, we will make improvements on the product itself and further increase the efficiency of sales promotion expenses in line with the integration of the sales platforms. By reviewing our investment policy, we'll create a sales platform that can grow stably while streamlining sales promotion expenses as a percentage of transaction volume. Please turn to the next page. Next, I'd like to explain about LINE Gift, the social commerce product. The LINE Gift platform is something only Z Holdings can provide, and we will continue to develop and invest into it with an eye on the future.
The use of LINE Gift for seasonal events have been growing steadily and the online gift-giving is becoming customary. We are also expanding our product lineup, including cosmetics-related products, which have seen a significant increase in transaction volume. As a new measure, we'll further expand transaction volume by linking LINE Gift and Shopping, Yahoo Shopping order data and enriching the number of products. Please turn to the next page. Next is overseas e-commerce. The e-commerce markets of Taiwan and Thailand, our focus markets, continue to grow. We are expanding LINE's EC transaction value. In response to changes in the macro environment, we will be conscious of investment discipline as we strive to improve profitability by making exceptional improvements to our product. Please turn to the next slide. This slide shows the results of e-commerce transaction volume.
Overall, e-commerce sales continue to achieve double-digit growth, reaching JPY 1,026.2 billion. In addition, the resumption of the economy has led to strong growth in the travel business, and domestic service-related EC recorded high growth of 41.1% over the previous fiscal year. Please turn to the next slide. This slide shows the results of domestic merchandise sales transaction value. The impact of the resumption of the economy was relatively limited, with both the Shopping and reused businesses growing steadily at 8.7% and 8.8% year-over-year respectively. Due to the closure of some services overall, domestic merchandise transaction value was +7% year-over-year with the closure of OT Direct. Please turn to the next slide. Finally, I'd like to explain our strategic businesses. Please turn to the next slide.
First, we'll discuss the goals and key measures for PayPay and PayPay Card. We will strive to expand the combined use of QR code payments and credit card payments and aim to improve ARPU. Regardless of the payment method, whether it be QR code or credit card, et cetera, we will provide a seamless payment experience that starts from the app, enabling PayPay payments in a variety of scenarios. For example, we provide immediate notifications when PayPay and PayPay Card are used, and plan for a centralized management of statements and integration of benefits to PayPay Step in the future. In addition, Z Holdings plans to introduce an attractive gold card that is unique to us. Please refer to the next slide. The next chart shows the growth of PayPay before and after the consolidation.
The number of PayPay points users has exceeded 7 million, and the number of PayPay Insurance mini app subscribers has exceeded 1 million. The financial services based on PayPay are steadily expanding. Monetization measures in areas other than payments are also making steady progress. Please turn to the next page. This is an overview of PayPay's business. The number of registered users exceeded 50 million as of August 2022. GMV also continues to steadily grow, and we aim to expand the business even further through the consolidation. Revenue growth is accelerating after starting to charge transaction fees to SMB merchants since October last year. EBITDA is currently in the red, but we will promote measures so as to turn the business profitable by providing a seamless payment experience together with PayPay Card and acquiring new members more efficiently. Please turn to the next slide.
Here are some major KPIs for the payment and financial businesses. With the consolidation of PayPay, the transaction volume of PayPay Card remained steady from the previous fiscal year, although the execution of strategic investments was restrained. Deposits at PayPay Bank expanded from the previous fiscal year despite changes in the business environment. In addition, we are seeing a steady expansion in LINE Securities since the start of the services. As of end of September, after 3 years, over the shortest period of time, we have been able to exceed 1 million accounts. Next, I'd like to talk about the forecast for this fiscal year. Please turn to the next slide. Revenue. Due to the decline in the revenue from display ads, PayPay consolidation has not been accounted for, which will be an increase for revenue.
Adjusted EBITDA, due to the consolidation of PayPay and the decline in display ads, is going to be a declining factor. In order to absorb this, we will be optimizing costs and we'll be moving towards leaner management of the company. Revenue as well as adjusted EBITDA, we have decided to maintain our beginning of year guidance. The macro environment will be watched closely so that we could raise profitability even more. Please turn to the next slide. Finally, I would like to explain the remeasurement gain from the PayPay consolidation. We expect to record a remeasurement gain of JPY 148 billion from the business combination in the third quarter of fiscal year 2022. We do not expect any impact of income taxes on the remeasurement gain.
We have made bold investments to win in the cashless payment market, and in just four years, we have established ourselves as the leading cashless payment infrastructure in Japan. We will recover a large return on investment and will strive to nurture the business into the third pillar of our operations following media and commerce. Please refer to the next slide. This concludes my presentation. Thank you for your attention. Next, we would like to move on to Q&A.
We will first take question from Mr. Maeda from SMBC Nikko Securities. Please unmute yourself.
Thank you very much. I have two questions, so I'd like to ask all at once. First of all, LINE display ad. This is declining in terms of the profit. I know there's the market environment, but I do feel that you are seeing a deep drop. Of course, there has been the activities that you have been working on last year, which there's an absence this time, so I understand this. How do you assess this? And till when do you think this trend is going to continue? That's my first question. My second question is about cost. You are trying to appropriate the cost, reduce the cost to make sure you'd be able to have better EBITDA. Where are you going to be controlling?
As a result of cost control, would there be a rebound in the cost, in other words, cost increase in next fiscal year? I'd also like to hear your thoughts about how you expect your cost to go in the next fiscal year. That's my second question.
Yes. Thank you. For the LINE display ads, this is Idezawa. I'd like to answer your question. Just as you pointed, display ad, it is true that we're finding a decline year-over-year in terms of performance. Of course, this is because the demand is low amidst this slowing economy. If we try to look at this per product, per service, this is something that we did go over in our presentation, but we, at the moment, are trying to push LINE VOOM into a short video platform. As in terms of KPI, we know we are making very good progress. In other words, people are looking at these videos longer time.
When we look at the ad, advertisement side, ad client, some of the ad clients, we do see some change. Alongside that, CPM is tentatively dropping. It has to do with the market environment, but also those changes in what we're doing with LINE VOOM in terms of service, and that is why we're seeing a decline this time around. Now, what is our outlook from here? Now, in terms of the economic outlook, we do have to expect the situation is still going to be tough. On the other hand, on Q3, this is going to be the high season of the year. We do expect there is going to be expansion of demand, and so we do want to make sure we be able to keep up our good work.
Now, also, within our guidance, we talk about LINE display ad and the range. The range here, we did make a change here, revision here. It does seem like we're showing a weaker outlook this time, and so that is the current explanation I can offer you. That's my response. Thank you. The second question will be answered by our CFO, Mr. Sakaue.
Yes, this is Sakaue. FY 2012, the second half cost, there are three factors behind this. First is Yahoo Shopping cost optimization, rationalization by integrating some of the Shopping space. Second is about the strategic business.
In other words, fintech business, be it Yahoo or LINE, or this is about PayPay or LINE brand. How to put more efficiency in the acquisition. Also this is something that would have to do with our business that we'd be doing. When it comes to like personnel, like hiring costs, we do want to control there. We do want to make sure we be able to optimize the cost which follows the current environment trend. This is something that we do believe we'd be able to control by like JPY 30 billion. This is something that we expect to happen in FY 2022. Now, how does that going to impact our cost outlook for FY 2023? Now, you did hear from Mr. Idezawa that we still do expect a tough business environment for FY 2023.
This is something that we all agree among the management here. Again, in FY 2023 too, we are going to make sure that we be able to optimize the cost, especially around our fixed cost. That's our thought now. Now, I think this is going to be a very good opportunity for us to revisit how we manage ourselves. In other words, to make sure we be able to convert ourselves into a more robust management. Also for FY 2023, in addition to what we're doing, especially for the strategic business, there will be some business that still would be making a loss because it has just started. We expect, even though there could be a loss, that amount of loss would be lessened, and so that is how we expect to find growth in terms of our profit.
Well, I do want to ask a bit of a follow-up to my first question. Again, you talked about LINE VOOM, the impact there. Now, yes, there was this display ad, you were stuck there because of how well you'd be able to stream the advertisement there. Now, should I expect the current situation to continue for like the next 12 months, and afterwards there is going to be an acceleration to the contribution of our business? In other words, is it going to start growing after a year?
Well, thank you for that question. Yes, just like you mentioned, the change that we're doing, this is something that we are doing intentionally.
LINE and Yahoo display ad, we are trying to offer more video contents and ad video contents, and this has been something that we wanted to work on. Here we'd like to make sure that we'd be able to make good progress. The service KPI is making good progress there. We are sort of fine-tuning our business to strike the right balance between the contents and the service that we'd be able to offer, and we expect that we should be able to find an acceleration improvement, and that's our current plan. That is my response.
Thank you very much.
The next question is from J.P. Morgan Securities. Ms. Mori, can you unmute and go ahead with your question?
Thank you very much. I have two questions as well. Both may overlap with Maeda-san's question. One is about LINE display ads. The negative number was a little bit shocking. According to your explanation, you were talking about VOOM or the former timeline that has been dropping. Apart from that, for news or Talk Head View, for those areas, it seems that it continues and maintains positive growth. Is that the way I should look at it? Is that correct? Also for the second half for LINE ads. When you do the deduction and get the guidance for the second half. I think it's going to be flat or 10%. For account ads and for display, if you were to break it down, what is your outlook for the second half of the year? If you can give me some numbers, that would be great.
My second question is about next fiscal year and the JPY 390 billion number that Sakaue-san was giving out earlier. Can you break that down digitally a little? Meaning JPY 50 billion-JPY 60 billion increase in profit is what you're probably going to strive for, and you're going to make cost execution more efficient for your existing businesses, and you're going to have less loss-making businesses. As you've mentioned from before, there are fluctuations around investments. What's your stance on that, and what is your outlook on PayPay as well, looking out into next fiscal year? How would you like to achieve the expectations?
You have a diverse range of businesses in place, and when there are a lot of things we can't notice from the outside, and are you going to make your business portfolio leaner or slimmer going forward? Do you have any intentions of doing so?
Thank you very much for your question. Regarding the first question, Idezawa-san will answer your question, and the second question will be responded to by Mr. Sakaue. Idezawa-san, please.
Thank you very much for your question. In LINE, from other media services point of view, for each of the services we have, demand has been subsiding lately, so we have been able to maintain business about flat on a year-over-year basis. On the other hand, for VOOM, it's in a structural change phase, so it is moving in an extraordinary way. That's the overall picture. Regarding the breakdown, we do not give out detailed disclosure, unfortunately. If you refer to the details, you'll probably know. For official accounts, it continues to be firm, so it's probably in the high teens. For the other products, it is not growing as much. That's pretty much the mix. That's it for me.
Regarding the second question, at this point in time, this might be redundant with what I've already explained, but right now, by segment or you were saying you want more detailed information, we still have uncertainty around where we're going to end at the end of the year, upon finishing the second half. We'd like to give out more guidance upon finishing the year. Of course, we would like to quantify various things. I think structurally, there are four factors qualitatively, top line growth leading to profit growth, which is unpredictable at this moment. We believe the hurdle is high, therefore.
This is overlapping with what I've said about this cost optimization and regarding investing into strategic businesses as well as reducing the losses that are being generated by our strategic businesses is what we would like to do in order to achieve the +JPY 50 billion to +JPY 60 billion growth in profits by implementing the two measures that I mentioned in particular. Mori-san, regarding making the business slimmer, consolidating the businesses, as well as being more selective and having focus. First of all, we made an announcement around the sales of the Livedoor business, for example, because we wanted to increase the profitability of our business and to make the management leaner. We have been having discussions internally, and we would like to continue to implement these measures in fiscal 2023 as well.
Although this was qualitative, that's it for me.
This is Kawabe speaking. Regarding the second question, I'd like to follow up on Mr. Sakaue's comments. Next year, JPY 390 billion EBITDA record high is the commitment we have made, and we are determined as management to achieve this expectation. Therefore, as Mr. Sakaue just explained, there are some existing services that we are delivering where we're not expecting substantial growth or expecting sustained losses. In that case, we would like to ensure that we slim down the businesses by taking bold action. The co-CEOs will exert their leadership so that next year's JPY 390 billion can be achieved no matter what. On the other hand, there is uncertainty around economic sentiment, and uncertainty is growing.
Therefore, at the top line level, if the market is going to cause any significant changes, in that case, we would like to make announcements swiftly, accordingly, as well as in a timely manner. We would like to make the year progress next year with determination.
That was a follow-up comment from Kawabe. Thank you for your question. Thank you. Next question will come from Mr. Munakata from Goldman Sachs. Please unmute yourself.
This is Munakata from Goldman Sachs. I also have two questions. My first question is about your e-commerce business. In your new guidance, when I look at it seems like GMV has been kept, but then the adjusted EBITDA is now revised upwards. I think this is how you made it. You're going to be controlling your investment, but you still are trying to expect growth in GMV. Why do you think this is possible? Let's say if this year, if you're going to be holding down specific strategic investment, is that going to hinder growth in the following year? Can you give us your thoughts here as well? My second question is about your ad business.
In the advertising, yes, you talked about the slowdown of the economy, but then, how do you expect this is going to impact you? Now, LINE or Yahoo, let's say, like in the second half, how much of that economic impact have you baked in in your outlook for the second half? Let's say if the economy is going to become even more sour, do you think you'd be able to still keep your guidance by, for example, slimming down your cost even further? Do you think there's more options like that? That's my question. Second question.
Thank you very much for your question. Your first question, this is about e-commerce, and so Mr. Ozawa will answer, and then your second question will be answered by Mr. Sakaue. Mr. Ozawa, please.
Yes, this is Ozawa. Thank you very much for your question. From this year, or to be more specific, for the second half, the cost here will be about point. The cost per point will be controlled more, and we're going to be very mindful about P&L. This is exactly what we have been expressing. Now, the impact to GMV, would there be any impact to e-commerce GMV? Now, in the first half, the growth rate was low. This is something that we have been aware. We are going to keep our guidance, and this is because we're looking at the full years. This was a 15% range growth in the first half, and in the second half, we're expecting that the growth rate is going to slow down.
That's what we expect. With that, we have the full year's guidance. Now, what is going to be our assumption for next fiscal year? Again, as we look into the entire P&L, how much can we invest in our e-commerce is exactly something that we are revisiting.
Now, even if there is going to be a slowdown in the growth in the second half, we do not expect that is going to immediately impact the growth in the coming year. Again, we at the moment are focusing on the P&L. We want to be very disciplined in deciding how much we want to invest. Once we have the further guidance, we hope we'll be able to share more information in that regards. That's my response.
Thank you. This is Sakaue. I will answer your second question. For LINE advertisement, basically, we expect it is going to slow down or stay pretty flattish versus Q2. Now, Yahoo advertisement, the growth rate we saw in Q2 will slow down, and it is something that we have factored in revising our full year's guidance. You did hear earlier from Mr.
Ozawa. Yahoo advertisement does include some Shopping advertisement to some extent, and so that's also something that we also looked at when we revisited our guidance. Now, do we expect a further dampening of the economy? Now, you did hear from Mr. Kawabe earlier on. Now, if the economy dampens even further, we will make sure that we then will share with you our thoughts at that point of time. But that's my response.
Thank you very much. Thank you.
Thank you for your question. The next person is from Citigroup. Tsuru-san, over to you.
Yes, I'm unmuted. I also have two questions. My name is Tsuru. My first question is regarding the JPY 30 billion decline in profits, and you were saying that media and PayPay consolidation was affecting this. Can you break this down?
Because I'm looking at page 30 and your guidance, and this is the new EBITDA guidance based off the cost reduction measures you're going to take. I would like to have a better understanding by segment. Secondly, for PayPay consolidation, it's great that there's no impact on EBITDA, but for impact on other key financial KPIs, apart from the revaluation gains, I would like to learn more. One is about the gains and losses associated with the consolidation. No taxes are going to be incurred, but at the taxes level, the equity portion accounted portion is going to be deducted, right? But for the balance sheet, total assets and debt, how much of expansion are you expecting due to the PayPay consolidation? Those are my questions. Thank you very much.
For both of the questions, Mr. Sakaue will take them.
Regarding the JPY 30 billion negative decline in profits for PayPay consolidation, a little bit over JPY 20 billion is the contribution, and the other is the media segment's challenging revenue. The balance, which is less than JPY 10 billion. That's the breakout. Secondly, regarding the PayPay consolidation and the impact on key financial indicators, first of all, for the P&L, for top line, there is a positive impact. Therefore, for the Fintech business or strategic business, we have made an upward revision due to the consolidation of PayPay. For the overall revenue for the company, because we have revised down the outlook for media, we have left the guidance the same for the entire company. PayPay consolidation doesn't really contribute to the overall revenue guidance for the company.
For the evaluation gain in Q3, JPY 140.8 billion will be recognized, and it's above the operating profit level, where it's going to be recognized. This is the gain associated with the 33% stakes. It will cascade down to the net profit level as well. With Tohmatsu, we are still having discussions, which is our auditor. There might be some fluctuation, but that's our basic way of thinking. For the balance sheet and the integration, as a group, the consolidation will start in earnest from the third quarter. At that point in time, we would like to walk you through the actual details. As of end of September, for assets, +JPY 700 billion was added, and more than half of the JPY 700 billion is associated with deposits liquidity.
Because of the structure of PayPay, the users charge their accounts, and that is reflected as deposits on the balance sheet. That is the reason why. For liabilities and net assets, it's about JPY 700 billion as well. Because it's opposite account, we have the deposit, which offsets the liabilities and net assets. We will give you the details in Q3, presumably in our appendix. We will make the disclosure then, but that's it for now. Thank you.
I have two follow-up questions. My first question is, in your first explanation, you were talking about the media business, and for this business, the deterioration in the earnings environment, JPY 10 billion is going to drop off, and you haven't really accounted for cost reduction. Is there any space for cost reduction? That's my first question. Can you take that first?
Thank you for that question. To a certain extent, for media as well, we are intending on engaging in cost reduction, but compared to commerce, acquisition fees is not really a big factor, structurally speaking. That is why, this is how it looks like.
In the future, if you need to cut costs, do you think you will be able to? For now.
I wasn't able to hear you well. Apologies.
In the future, when it becomes necessary, will you be able to cut fixed costs in a large way for media? This time around, it seems that, you don't have that much sales promotion costs associated with the business or variable costs. But if you have to cut fixed costs, will you be able to?
To a certain degree, yes.
For example, information provision fees and content procurement are areas where we will confirm in the second half going into 2023 to see where there's opportunity to cut costs.
The second confirmation point is JPY 148 billion. I thought this was the consult gain, but for the entire company. That's only a third. Which means the total valuation gain is at JPY 450 billion. SoftBank guidance was saying JPY 150 billion-JPY 160 billion. The size is completely different from what you've been saying. Can you talk about the mechanism behind this? I'm not really sure.
Well, for SoftBank's guidance, that's probably the beginning of your guidance, but please confirm that with SoftBank.
The way of thinking about it is, as you could see in the presentation, at this moment, we have the fair value, fair price valuation of PayPay, and the vendor did this for us. The amount of stake, the investments we've made up until date, we looked at its book value, and PayPay was a loss-making entity. For the book value portion, the book value continues to decline, and that was processed accordingly. The difference between the two elements creates the gain on remeasurement related to business combination, which is approximately JPY 148 billion.
I probably need to ask SoftBank, but the reason why this gain increased so substantially, was it due to changes in operation or because you were conservative? What changed in the past six months?
Well, the logic of how they issued their guidance at the beginning of the year is something I am not aware about the details of. I think you should confirm with them.
Got it. Thank you. That's it from me. Thank you very much.
Thank you very much. Next from Okasan Securities, Mr. Okumura, please unmute yourself.
Thank you very much. This is Okumura from Okasan Securities. Thank you very much. I have two questions in regards to your Shopping part business. Now, within your Shopping business, GMV in Q2 grew by 9%, so that was the actuals. It excludes LINE Gift. The pure Mall GMV growth, I'm assuming it must have been a bit lower than that 9%, but. When you look at the situation, what is the impact from reopening to the e-commerce? Do you find that you've been able to win or lose against your peers? How do you assess yourself looking at how you were able to do in Q2? That's my first question.
My second question, again, has to do with your Shopping business. The Mall's integration that you talked about, so I think it was like on slide 18 and onwards, but the promotion package, you said, it was doing really well. What is the take rate from Q3, like Q-on-Q or Y-on-Y? Do you think you are going to find some growth because of this, the applications to promotion package plan? For GMV. Within the earlier Q&A, I think you said versus the first half, you are going to see a slowdown in growth rate in the second half. Is this because of the economic impact? Or, how do you assess the contribution or impact coming from the Mall integration?
Do you think it didn't really have much contribution to GMV growth, and that's why you're expecting a slowdown in the second half? That's my second question.
Thank you very much for your question. Both questions will be responded by Mr. Ozawa.
Yes. Thank you very much. This is Ozawa. Your first question, what is the impact from the reopening? Yes, we do expect there must have been some impact from the reopening of the economy. But then I think it all has to do with some of the activities that we've been seeing from the past. In other words, our existing users are purchasing more. We did, of course, campaigns which seem to have fit well. Also, for the paid, for example, the delivery, some of the s-
The paid option is also proving well. Reopening is, yes, one factor, but also the service enhancement is also playing its part. That is why we're seeing this year-over-year growth. Now for the numbers, I hope you'll be able to follow up how this is going to trend. That's my response to your first question. Your second question, again, you talked about promotion package. Yes, it is doing well. Yes, it was something that we knew that we had to do well. Take rate, we didn't want to lower it, but still we wanted to offer value being felt by the sellers. I think we have been able to do well in that sense.
The PayPay Mall, we had taken 3%, but that's gone. Still, we have been able to cover up for that. It's not like we're seeing an immediate ups and downs, but it seems like Q2, Q3, we seem to be well on track to be able to keep the previous trend. It's really within this 5% range, but it seems like we should be able to keep we'd be able to keep this good trend. I think Mr. Sakaue can follow up, add on to my part.
Also, you talked about you said about excluding LINE Gift. Now, the Shopping growth rate that we have disclosed, in other words, Yahoo.
PayPay Mall, the growth rate is pretty much similar. LINE Gift is growing, and the denominator itself is getting larger in that sense. Yahoo Shopping and PayPay Mall, I mean, the absolute value, of course, is much larger, and there'll be larger contribution coming from these parts. That would be my follow-up comment.
Thank you very much. If I can just add one follow-up question. Within the earlier Q&A, you said there had been some impact from the reopening. When you say that, did you see some change in the frequency of the purchase? Like, did you see any change in KPI, and that's why you said you do see some impact contribution coming from the reopening?
Yes. Thank you very much for that.
Reopening, the contribution coming from the reopening, it's not that we're seeing a specific change in KPI. In other words, it's not that we have been proactively trying to figure what the contribution is from the reopening per se. For example, it's like we are seeing some growth in some segment, and whenever we do some hearings with the shop owners, they're saying that, yes, they're seeing some favorable trend. That's really the feel that we have when I said seeing a contribution coming from the reopening. It's not like we saw this specific contribution through these trends. There must have been some ups and downs,
well, thank you.
Why do you expect the growth rate to decline in the second half even though you're seeing a good moment right now? That's my follow-up question.
Well, sorry, I had not really been able to respond to your earlier question, and I think I need to follow up in answering your first part of the first question. Again, we have been doing some campaigns. Cost-wise, we have been really disciplined. For example, last year or even in this first half, we had been launching campaigns. Compared to that, how much points people will be able to enjoy is going to go down. The proportion of the cost per point against the GMV is going to go down.
That's the part that we expect to see some impact.
Thank you very much for being specific. Thank you very much. That's all my question. Thank you.
CLSA, Mr. Oliver Matthew, please unmute and go ahead with your questions.
Hi. Two questions. First question, could you remind us what you think are the most important benefits from the ID linkage, please? Maybe if we could have comments from LINE and the Yahoo side. The second question, on the PayPay app now, it seems PayPay Mall has disappeared and replaced by Day-to-Day Mall or some new app. Could you tell us more about the changes there and what synergies that PayPay will have with the Yahoo Shopping business? Thank you.
Thank you very much for your questions. I'll take the first question, this is Kawabe, and the second question, Mr. Ozawa, will take that question. Regarding ID linkage, after conducted, the synergies that can be expected is, first of all, from a user point of view, LINE, Yahoo, PayPay, services will have a higher correlation, therefore higher linkage. It will be more convenient, from the user point of view. From a business point of view, frequency of using the services should increase, and therefore we'll have more opportunities to expose ads and sell through our e-commerce platforms. That's the benefit from a user's point of view. Also from a business point of view.
Due to ID linkage, various pieces of data will be accumulated, especially for LINE advertisements, targeting precision will enhance. Over the medium to long term, if we're able to reach ID linkage of 80% or more, which we're targeting, the unit price for LINE ads can go up by presumably 5%-10%, 15%. Also for LINE, Yahoo, PayPay sales promotion or advertisement products that has linkage will be easier to provide target-wise. We would like to generate a top line worth of JPY 100 billion through this kind of linkage-based advertising products. Also for LINE, PayPay, Yahoo, data, because we will be seeing an accumulation of the data, we'll be able to understand our users more, and we'll be able to be more precise in the recommendations that are made.
For the buyers of Yahoo Shopping, their average spend or the amount of users may increase. That's another benefit. We would like to double the number of buyers for the ads. Also by understanding users better, we will be able to recommend relevant financial products as well in our financial business. We'll be able to increase the users. Also for PayPay Card, we would like to increase the number of members by 3x by generating synergies. However, the more progress we make on ID linkage, the impact is going to become greater. Next year, when ID linkage starts, we're not going to see an immediate result come through. It's going to happen over time. It's going to happen in several years' time. That is the time range we are considering in generating synergies.
That was the first question's answer. The next question will be taken by Mr. Ozawa.
For e-commerce at Z Holdings as well as Yahoo Shopping, to PayPay users, we would like to have them use our services as much as possible, and that's what we've been doing from the past. Specific measures were on the PayPay app, we had PayPay Mall so that PayPay users can use PayPay and accumulate a lot of points, if they buy through the PayPay Mall. That was the mini app through which we were providing our services. Many users were buying products through PayPay Mall, through the PayPay app. We wanted to make this stronger, so we're doing two things. PayPay Mall, Yahoo Shopping, we integrated them together so that the sales platform can become more validated.
Up until now, there may have been some PayPay users that were just buying through PayPay Mall because they could accrue a lot of points, but now we are including Yahoo Shopping products as well. All the products are subject, and if they pay through PayPay, they could get + 5%. On top of that, on the PayPay app, up until now, our PayPay users were using a lot of daily necessities. We have updated the offering on the Mall so that we can increase the frequency, because there are some customers who are using the service for the first time. They may have not been a Yahoo Shopping user, but rather than trying to recommend Yahoo Shopping, if it's water, we could just give them a value approach for their daily necessities.
Let's say we have water that is at a reasonable price. We're not sure whether this initiative is going to work out well. We're midway in our efforts, but like I mentioned at the beginning, we want to capture as many PayPay users as much as possible so that they could use e-commerce at Z Holdings. We're implementing a variety of initiatives, and we're going through trial and error, and this is one of the measures we're implementing. That's it for me.
Okay, thank you.
Mr. Mori from J.P. Morgan.
Sorry, this is my second time, but I wanted to ask a follow-up question given this, the opportunity. For your equity method loss, and I think in the others, you have more numbers in Q2. As a result, the PayPay part has gone down, but then overall, you're saying it hasn't changed. Can you give us a little more information what you mean here? Also, as you look into the next fiscal year, anything below EBITDA, what is your outlook? Can you also share your thoughts?
Yes. Thank you very much for your question. We will ask Mr. Sakaue to answer that question.
Yes, I will respond. That others part, more than half of the others is what we do in Thailand. In other words, LINE MAN is a food delivery service, and there is a loss there. LINE MAN, we're trying to make this profitable. We're working on that, but still it is a loss-making service. That is why these others in FY 2022, you're seeing a tangible figure there. Now, as we look down the road, yes, there will be some seasonal factors causing some ups and downs every quarter.
Even as we look into the next fiscal year, be it LINE MAN service or be it other services that we'd be doing in Thailand or in the bank business and this is something that we do want to make sure that we'd be able to boost likewise Demae-can service as well. So anything the loss for the equity method to help businesses we do want to make sure we'd be able to boost the figures.
Now, otherwise anything below EBITDA line. Again, most would be loss coming from equity method entities, but of course there'll be some other factors causing some plus and minus. Again, it's really the equity method on entities that would be the larger portion of this. That's my response.
Thank you very much. Also EBITDA. Can we expect that from next year and onwards there is going to be like a positive trend? Can you be clear? The trend for EBITDA as well as net profit trend, do you think it's going to be moving in tandem?
Yes, basically, yes. That's the idea.
Thank you very much.
Thank you. From CLSA Securities, Mr. Oliver Matthew.
Could you tell us more about competition? How much do you think the Japan internet advertising market is growing currently? Do you see yourself losing market share or gaining market share going forward? Who are you targeting to gain market share from? Thank you.
Thank you very much for your question. Our marketing and sales, Mr. Idezawa, the marketing sales officer, will take that question.
Thank you very much for your question. Regarding the digital media market in Japan, it's shown on page 11. It is expanding quite nicely and steadily. Compared to other countries around the world, compared to their digital ratio, we believe in Japan there's still space to grow. Regarding the market, one of our features is we have search and display ads, and through LINE, we have CRM type official accounts available for search. We share the market with Google. So that's a pretty steady situation. For display ads, currently, there is shift to video like YouTube, as well as like, TikTok, which is short videos. So those are the two major trends we're seeing in the shift to video. For our case, we are attempting to grow this part of the business, starting off with LINE through LINE Film.
For the CRM official account, for LINE is a unique asset to Z Holdings, and we don't face competitors. Overall market share-wise, in line with market growth, we are growing as well. For video, our imminent challenge is to focus and grow the video offering we have. That was the market environment as well as where we stand in the market. That's it from me. Thank you.
Okay. Could I just check, do you consider PayPay coupons as an advertising product or not? Could you talk us through the economics of PayPay coupons? Are the brands paying something to PayPay to push these coupons? Does Z Holdings benefit from this?
Thank you very much for your question. I, Kawabe, will take your question. There might be someone who's going to follow up. First of all, for PayPay Coupon and what kind of service it is, broadly speaking, it's an advertisement. We have the advertisement aspect and the sales promotion aspect, and this is a typical sales promotion type of product. That's how we position it. Revenue-wise, PayPay merchants pays to PayPay. Yahoo, LINE does not recognize any sales. That's the end of my comment. Thank you.
How do they pay? They pay as some of the discount portion or they pay per click or what is the economics of PayPay Coupon?
Thank you very much for your follow-up question. We have a director of PayPay, Mr. Ozawa, so he will take your question.
I will take your question. Regarding the source of the discount, the seller is going to shoulder the amount of discounts that are provided. The manufacturer, in some cases also, burden the discount. PayPay does not account for any of the discounts. Campaign-wise, in a rare case, there might be times when PayPay subsidizes a certain program, but they hardly shoulder the cost in most cases. That's it from me.
Okay, thank you.
Now going to take question from MUFG Morgan Stanley Securities. Mr. Araki, please unmute yourself.
Yes, sorry, just one thing I wanted to confirm. You said there is going to be revaluation again, and is this going to be counted in your adjusted EBITDA?
Yes. We'll ask Mr. Sakaue with the response then.
Sorry, I know, this is, this must have been difficult to read from our materials, but it is not going to be counted in our adjusted EBITDA. Thank you very much.
Thank you very much. With that, time has come, so we will end the Q&A session. Before we close, we will ask Mr. Kawabe to give a closing remark.
Yes. This is Kawabe. Thank you very much once again for joining this session. Thank you for staying with us till the very end. Now, the progress for this fiscal year, as well as how we are trying to go for the next fiscal year, we want to be, we do want to keep our intention in doing our activity. We want to make sure that we be able to raise the better possibility in achieving our guidance, and that is why we are going to be making sure we invest. There is going to be more, of course, a rationalization, but the main focus is how we be able to make a more muscular, robust management of this business.
Of course, when we look at the current economy, globally, there's more uncertainties. If there is an even more uncertainty in the market condition, we do want to make sure that we disclose promptly to share with you our thoughts then. It's not that we have any plans at this moment to share with you our next views, but then I just wanted to make sure everyone knows that you will hear more from us if we find any changes. With that, thank you very much for joining our Q2 result announcement.