Yahoo Japan supplies an exhaustive range of services comprising advertising, commerce, and content, and it has secured a position similar to mass media in the Internet sector. It boasts dominant media value in the PC space.
However, Yahoo Japan is seeing a decline in part of its advertising revenue due to the increasing popularity of smart devices, putting pressure on the firm to change its business structure. Ad demand is generally firm due to improved earnings at advertisers, but with the shift among consumers to smartphones Yahoo Japan has not seen growth in query and customer numbers, primarily in its PC business. As a result, we believe premium ad revenue will fall sharply and sponsored search revenue will remain flat.
Yahoo Japan has leveraged its advertising technology to continually roll out new ad products and grow revenue. Right now the firm is experimenting with adding timeline functionality to its home page for smart devices. By using big data it aims to develop more effective ad products. However, the home page is Yahoo Japan's principle medium, so it is being very cautious in making this change. We believe it will take several years for the firm to develop new products, launch them, and start to see ad revenue grow again.
Yahoo Japan needs to secure and train human resources. The major source of differentiation when developing new ad products is the usage of Yahoo Japan's big data. However, we believe it vital for the company to analyze these data and combine them with other data (online and offline purchasing behavior) to find meaning in all the information, and then based on this develop new solutions (highly effective new ad products). We think it could be difficult to do this with existing human resources that have mainly dealt with display ads and sponsored search ads.
