Declining demand due to financial market volatility and an economic slowdown

「The group's solutions business mainly provides financial and economic information to financial institutions and other customers. Consequently, if an economic slowdown or sharp market volatility occurs, business activity by financial institutions, including their advertising spending and investment in the group's solution products, may decline significantly.」

「For FY2027/3, in addition to the soft market environment for network and affiliate advertising, we recognize an uncertain business environment caused by factors including algorithm changes and the rise of AIO (AI Optimization, the concept of optimizing operations and services using AI).」

「During the interim consolidated accounting period, while the advertising market remained weak, the company worked to withdraw from loss-making businesses in which it had been investing for growth, as decided at the end of the previous consolidated fiscal year, and to strengthen its creator economy-related businesses and improve its network advertising inventory.」

「In addition to advertising rates and page views for 「ライブドアブログ」 falling more than expected and the prolonged period of low advertising rates, affiliate advertising revenue also slowed sharply following the reversal of the initial impact of the new NISA.」

「Although network advertising rates are on a recovery trend, the pace of recovery was below the company's expectations and hindered profit recovery in the current fiscal year. At the same time, the company confirmed a continuing improvement trend, with the second quarter marking the bottom.」

「During the nine months ended the third quarter of the current consolidated fiscal year, revenue increased substantially from the same period of the previous fiscal year. This was due to synergies between 株式会社ライブドア, which became a subsidiary on 28 December 2022, with a deemed acquisition date of 31 December 2022, and the group's existing business assets, steady growth in consumer subscription revenue in both the media and solutions businesses, and an increase in performance-based advertising revenue resulting from the elimination of cannibalization among the affiliate sites operated by the company, which had been an issue in the previous fiscal year. On the profit side, cost reductions through PMI following the acquisition of the livedoor business progressed beyond the initial plan in the media business, and the bottoming out of the advertising market was also confirmed. However, recovery in network advertising rates was slower than expected, there were delays in acquiring some information-related solutions, and measures to diversify revenue, a core element of the medium-term plan, took concrete shape ahead of schedule. As a result, the company prioritized securing growth opportunities early over short-term results and incurred upfront investment costs to implement revenue diversification measures ahead of schedule, leaving it in the process of recovering from short-term profit pressure.」

「Although conditions are improving, the pace of profit recovery to date fell below initial expectations due to the delayed recovery in the advertising market. To improve margins from the second half onward, the company is actively pursuing further cost reductions through greater operating efficiency as PMI progresses, measures to increase advertising revenue, development of new functions and services, and the acquisition of new revenue sources by leveraging its existing management assets, a central pillar of its medium-term plan.」

「As the downward trend in network advertising rates continued through the nine months ended the first quarter of the current consolidated fiscal year, the company has been actively taking measures to expand the sports-focused vertical media business mentioned above, increase advertising revenue and secure new revenue sources.」

「In terms of revenue, performance-based advertising revenue in the media business was adversely affected by the global slowdown in the advertising market and changes to web search engine specifications. Meanwhile, the solutions business continued to grow steadily year on year.」

「In terms of revenue, performance-based advertising revenue in the media business was adversely affected by the global slowdown in the advertising market and changes to web search engine specifications. Meanwhile, the solutions business continued to grow steadily year on year and progressed broadly in line with the initial plan. However, in addition to a deterioration in the sales mix, upfront investments in expanding personnel to accelerate medium-term growth, launching new services, initial development associated with service expansion, and data and licensing costs created factors that pressured short-term period profit.」

「The impact of the external environment, including market conditions, continued, with the monthly average number of unique users and visiting users down 900,000, or 9.8%, and 2.67 million, or 9.4%, respectively, year on year. Although net advertising revenue from companies remained solid year on year, the impact of market conditions and other external factors began to emerge in the second quarter of the current consolidated fiscal year, particularly in performance-based advertising linked to individual investors' appetite for activities such as opening brokerage accounts.」

「During the nine months ended the first quarter of the current consolidated fiscal year, the total monthly average number of unique users of the group's media sites was 8.38 million, and the number of visiting users was 25.48 million. Affected in part by market conditions, these figures were down 1.30 million, or 13.5%, and 4.52 million, or 15.1%, respectively, from the same period of the previous year, although」

「Although the group was affected by a sharp deterioration in market conditions in the fourth quarter of the current consolidated fiscal year, the total monthly average number of unique users of the media sites operated by the group remained solid at 8.76 million, down 460,000 users, or 5.0%, from the previous fiscal year, while the number of visiting users was 27.51 million, down 380,000, or 1.4%.」

「Although advertising revenue was affected by the prolonged weakness in the external environment amid the COVID-19 pandemic, performance in the fourth quarter of the consolidated fiscal year was above the previous year because display advertising contributed strongly to revenue.」

「Advertising revenue was affected by the external environment, and some advertising rates remained weak. However, the paid service 「株探プレミアム」 (Kabutan Premium) grew steadily, and subscription revenue expanded substantially. As a result, revenue for the nine months ended the third quarter of the current consolidated fiscal year was ¥982.238 million, up 4.5% year on year, while segment profit was ¥332.962 million, down 4.4% year on year.」

「At the same time, uncertainty in the economic environment due to the prolonged spread of COVID-19 is also a concern, and the company believes it will need to continue monitoring the impact on the equity and other capital markets.」

「If an economic slowdown or sharp market volatility occurs, business activity by individual investors, including their investment appetite, advertising spending by financial institutions, and investments by financial institutions in the company's solution products, may decline significantly.」