A sharp decline in advertising revenue drove the company-wide revenue decline, making media recovery the biggest variable for FY2027-H1

FY2027-Q1 consolidated revenue was ¥1,944 million, down 10.1% year on year, while operating profit was ¥16 million, down 82.1%. By segment, media business revenue was ¥1,004 million, down 11.6% year on year, and the segment posted a ¥48 million loss. Solutions business revenue was ¥857 million, down 0.8%, while segment profit was ¥81 million, up 114.0%. The company-wide decline in revenue and profit can be attributed to deterioration in the media business outweighing improvement in the solutions business.

The supplementary materials to the earnings release show the breakdown of the ¥218 million year-on-year decline in revenue as follows: advertising revenue decreased by ¥174 million, media subscription revenue increased by ¥2 million, other media revenue decreased by ¥5 million, recurring revenue increased by ¥43 million, subscription revenue within the solutions business increased by ¥25 million, and spot revenue decreased by ¥81 million. The decline in advertising revenue alone accounted for approximately 80% of the company-wide revenue decline, making ad-rate trends the most important short-term earnings variable.

The company attributes the revenue decline to search engines and ad-serving providers revising traffic-quality controls and ad-serving standards in response to large volumes of access to financial media generated by generative AI, including the increase in so-called bots. In the past, changes to search-engine specifications and cannibalisation between sites have also affected performance-based advertising, confirming a structural risk arising from dependence on both search traffic and ad rates. However, as of FY2027-Q1, the company had not disclosed the impact by ad rate, bot ratio, page view or number of ad slots.

In FY2027-H1, we will look for signs that the year-on-year decline in advertising revenue has narrowed from ¥174 million and assess how far the media segment loss of ¥48 million has improved. Key points in assessing the achievability of the full-year forecast will be whether optimisation and additions of ad slots have actually led to a recovery in ad rates and revenue, and whether growth in subscription revenue and recurring revenue continues to offset reliance on advertising.