Electronic Retailers Association: Electronic Retailers Association April 25, 2007 E-Commerce in Asia/ Japan Brian Nelson, CEO & President


Affiliate Consolidation Globally: Affiliate Consolidation Globally Japan Europe US US, Europe, Japan US, Europe 1999 1999 1998 1996 1998 Yahoo! Japan (AOL) ValueClick Rakuten DoubleClick / Google Where When Ownership


Asia’s Increasing Profile: Asia’s Increasing Profile


Slide4: Asia’s Increasing Profile


Asia Forecast - eCommerce & Online Advertising: Asia Forecast - eCommerce & Online Advertising eCommerce US$ Millions Online Ads US$ Millions


Japanese Internet Growth: Japanese Internet Users: over 78m by the end of 2006 (Over 60% broadband penetration) Japanese Internet Growth


Japanese Market Continues to Grow: Estimates of Internet advertising expenses Estimates of the Scale of the Affiliate Services Market (Unit: billion yen) (Source: Dentsu Communication Institute) (Source: Yano Research Institute) actual estimated estimated estimated 2005 2006 (estimated) 2007 (estimated) 2008 (estimated) ValueCommerce holds a market share of around 20%. (Unit: billion yen) Japanese Market Continues to Grow


Slide8: Unique Features of the Japanese Market


Japan leads in Consumer Generated Media: Japan leads in Consumer Generated Media Japanese users are the most active publishers in the world More than 25% of Japanese Internet users self-publish content via Websites, Blogs and SNS Sites Blog registrants grown 83% in the last months. SNS users increased by 79% over the past six months


World leading in Mobile Internet use…: World leading in Mobile Internet use… In 2005, the number of mobile internet users exceeded PC users.


Japanese Mobile eCommerce Market: Mobile Market Breakdown Mobile eCommerce Breakdown Japanese Mobile eCommerce Market Mobile eCommerce- purchases, subscriptions, services Contents- downloads to phone, ring tones, screen savers Usage of next generation electronic cash enabled phones (Felica) on the rise


Products Purchased with Mobile eCommerce: Products Purchased with Mobile eCommerce


Slide13: Introducing ValueCommerce/


Introduction to ValueCommerce: Introduction to ValueCommerce 234 Japan Staff & 50+ Moscow R&D office 1,600+ eCommerce clients, 400,000+ media partners 600+ million Ads a day; 25,000+ transactions per day Strategic partnership & Capital relationship with Yahoo! Japan Operate Sozon (Search & Agency business) as a subsidiary Leading Performance Marketing Company in Japan


Japanese Market Trends: Internet advertising is shifting towards cost-per-action ads. Step 1: In the initial stage, the most common form of Internet advertising was CPM ads, a commission for which was paid for every thousand page views. Step 2: CPC ads emerged as the mainstream. The attracting effect can be better measured with CPC ads than with CPM ads. Step3: More and more e-commerce firms choose the CPA program based on actual sales and registrations. Cost per mille (i.e. thousand impressions) (CPM) Cost per click (CPC) Cost per action (CPA) 1995 ROI Increasing demand for cost-effective cost-per-action ads 2007 Japanese Market Trends


What is Affiliate Marketing: Ad distribution What is Affiliate Marketing


Slide17: How it works


ValueCommerce Mobile Affiliate Network: ValueCommerce Mobile Affiliate Service Media Partner Merchants E-commerce, memberships, subscriptions, and brand awareness Mobile Internet pv count : 250 million/ month Click through count: 5.53 million/ month Transactions: 14,000/ month Approved Mobile Partners　 Adding 300-400 partners per month. 12,736 Partners ValueCommerce Mobile Affiliate Network


Affiliate Platform – Targeting Control: Affiliate Platform – Targeting Control Manually reviewed & categorized partner sites (400,000+ sites) Sophisticated content and quality based segmentation & offer targeting Ability to group, communicate and manage relationships


Sophisticated Reporting Dashboard / Interface: Sophisticated Reporting Dashboard / Interface Reporting Templates


Some Affiliate Example’s: Some Affiliate Example’s Affiliate Links


Comparison Shopping Integration: Comparison Shopping Integration Site: BEST GATE Type: Comparison Site Affiliate Links


Blogs & Fan Sites: Blogs & Fan Sites


Just some of our Clients..: Just some of our Clients..


ValueCommerce Advantage - Consulting: ＜Reporting samples＞ Clients receive the following services： Dedicated online marketing strategy and planning Customized reporting, analysis, and consulting services Creative advertising management Multiple campaigns and rich media functionality Partner & alliance recruitment Partner approvals, grouping and optimization Advanced budgeting features ValueCommerce provides major corporations with an experienced team of experts to help manage and build online sales channels for each client. Clients gain access to industry-experts who understand their client’s marketing metrics and objectives and have already demonstrated results. Daily data (in graph form) Number of affiliate partner websites Click counts and the number of orders ValueCommerce Advantage - Consulting Extensive data, expertise & experience.


VC Advantage: Agency Services: ValueCommerce acquired an SEO specialist company, Sozon in 2005. From its SEO roots and position as a Japan’s leading provider of Search Engine Optimization software, Sozon has since evolved to become a leading Search and Online marketing agency for the Japanese & Asian markets. ValueCommerce consolidated its agency & International service offering under the Sozon brand at the end of 2006. VC Advantage: Agency Services Comprehensive Search & Online Marketing Solutions Analytics Site Data Review Log File Analysis / Reporting Conversion Analytics Production / Usability Site Review Navigation & Usability Design Web Design / Production Online Advertising Digital Media Campaign Planning Media Planning / Buying Creative Design & Execution Search Engine Optimization (SEO) Site Analysis & Consulting Web Tuning & Site Optimization Website Ranking & Reporting Pay Per Click Advertising (PPC) Keyword Selection / Buying Bid / Budget Management Copy Writing / Translation Affiliate Marketing (International) Campaign Planning & Optimization Affiliate Program Management Detailed Reporting / Analysis


ValueCommerce Advantage – Yahoo! Alliance: Sep 2005 Alliance with Yahoo! JAPAN has continuously evolved　 May 2005 Aug 2005 Invitation to Yahoo! JAPAN research monitors and light monitors Jul 2005 Aug 2005 Aug 2006 Sep 2005 Jul 2006 Dec 2005 Feb 2006 Nov 2006 Jan 2006 Sep 2005 Aug 2006 Yahoo! JAPAN as an e-commerce website (advertiser) Yahoo! JAPAN as a media distribution channel Invitation to launch stores Yahoo! JAPAN Affiliate Program Domestic hotel booking Sales Promotion Overseas tour and hotel booking Storematch (paid listings on Yahoo! Auction) Shoppingstorematch (paid listings on Yahoo! Shopping) Matchsmart (paid listings matched on site content) Nov 2006 All products covered in the database Yahoo! JAPAN provides its Japanese text analysis technology. SHOPPING AUCTIONS TRAVEL Business Travel MESSENGER Premium Services SHOPPING SHOPPING AUCTIONS TRAVEL Web Hosting ValueCommerce Advantage – Yahoo! Alliance


ValueCommerce + Yahoo! Affiliate: ValueCommerce + Yahoo! Affiliate Affiliate Program for Yahoo! Geocities & Yahoo! Blog users Affiliate Program for Yahoo! Auctions users Yahoo! Japan Geocities, Blog & Auction monetization　


Compound Network growth with Yahoo! Japan: Compound Network growth with Yahoo! Japan ValueCommerce 134,000 Yahoo! JAPAN 130,000 Total 317,000 [Number of Affiliate Partners] ValueCommerce 187,000 VC’s affiliate network expanded with the Yahoo! JAPAN tie-up Largest in the affiliate marketing industry ValueCommerce used to recognize a single site that collectively represented all the websites in the Yahoo! JAPAN Affiliate Program. From Sep 2006, this was changed to count all unique websites included via Yahoo! JAPAN. ValueCommerce 404,000 Sep 2006 Mar 2007 Sep 2006 B/D Sep 2005


ValueCommerce Mobile: RealAffiliate: Affiliate program that directs mobile user from internet to store 1) User receives points for making reservations to visit the store via the affiliated point site 2) Upon completion of purchase at the store, the user is awarded additional points via the ICReader using the Felica enabled handset ＰＣ　point site Mobile point site QR Code or Email Access User receives points for making reservation Reservation and purchase are confirmed by affiliate Points are awarded to user via the point site Banner Access User visits store After purchase, user zaps IC Reader w/ handset WebTo function confirms sale and points User receives additional points based on purchase Collaborative Project with NTTDoCoMo ValueCommerce Mobile: RealAffiliate


ValueCommerce - New Products: - Yahoo! JAPAN Auctions Affiliate Program Website owners and bloggers can earn commissions by carrying ads on items auctioned at Yahoo! JAPAN Auctions. - RSS banner 2.0 RSS Banner 2.0 offers considerably enhanced functions. It supports image, audio and video content and enables affiliate partners to freely create RSS banners based on RSS feeds from e-commerce websites. - ValueCommerce Web Service This service registers product information from e-commerce websites on a product database and offers an Application Program Interface (API) for searching to affiliate partners, to deliver higher sales to both e-commerce websites and affiliate partners. - Pay per Call ad tracking technology - Yahoo! JAPAN Shopping storematch When any Yahoo! JAPAN Shopping customer performs a product search by entering a keyword that coincides with the word pre-registered by a merchant, the text ad designated by the merchant (advertiser) is automatically displayed. A Pay per Call service using affiliate marketing makes it possible to identify details about past phone calls with customers, specifically what websites from ValueCommerce’s affiliate network have led to phone communications from customers. ValueCommerce - New Products A Constantly evolving Space


Future Strategies : Enhance the content linked ad distribution service. Boost the search engine optimization (SEO) service. Execute further expansion of the consulting service. Promote corporate alliances and M&A. Enlarge the scale of services to continuously lead the affiliate marketing industry. Attain a growth in sales from existing clients and acquisition of new corporate clients Recruit and train skilled personnel Develop new services and functions Secure powerful media Enlarge the media network Improve the SEO technology, launch new services Strengthen the sales force Implement integrated control of online marketing and e-commerce operation including media recruiting Focus on prospective alliances with portal sites, blogs, SNS services, and mobile services Possible M&A with businesses owning services superior in e-commerce and online advertising Possible global M&A Key strategies for the future Future Strategies


Future Strategies: Roadmap for Growth: Revenues Period Growth of existing businesses New products and services Partnerships and alliance M&A 2005 2004 2003 2002 SEM Matchsmart E-mail/Mobile Affiliate Services Affiliate Consulting Service Product Links (MyLink) SEO RSS From past growth to the future 2006 2007 Future Strategies: Roadmap for Growth


Slide34: Client Case Studies


Shop Japan Case Study: Shop Japan Case Study


Shop Japan Profile: Leader in the electronic marketing industry both in Japan and worldwide “Shop Japan Branding” is core business strategy Web Shop for e-commerce Running Affiliate program since 2000 Utilizes Web, Email & Mobile affiliate channels Shop Japan Profile


Affiliate Strategy: 2 pronged approach: Affiliate Strategy: 2 pronged approach Shop Japan Branding Shopping and Lifestyle related sites, portals, and blogs Cross-media electronic marketing raises brand awareness Targeting Sales of Key Products Comparison shopping sites, portals, and blogs Offering partners over 35 products from around the world Performance Structures Web CPC Web CPA ¥1 CPC (Specifically targeted) 1 – 25% - percentage for Booking / Lead Mobile CPA 1 – 25% - percentage for Booking / Lead Result: A loyal network of partner sites dedicated to Shop Japan products


Example Partner Promotions: VC Affiliate Banners/Text Links Example Partner Promotions Shop Japan RSS Banner


Partner Network: Partner Network Total Affiliates Selling Affiliates New Affiliates


Monthly Performance: Monthly Performance Clickthroughs Impressions Clickthroughs Impressions


Monthly Transactions: Monthly Transactions Transactions Average Cost of Sale- 3,000 Yen


Travel Client Case Study: Travel Client Case Study


Client Profile: Top 5 “Online Travel” Company Provides accommodation information for 80,000+ destinations in Japan Online Bookings for 15,000+ Hotels Running Affiliate program since 2003 Utilizes Web, Email & Mobile affiliate channels Client Profile


Campaign Structure: Performance Structures Web CPC Web CPA ¥1 CPC (Specifically targeted) ¥200 - ¥800 - ‘fixed fee’ for booking / Lead Key Targeting: Travel related information sites, portals & blogs Points & Comparisons Sites Broad targeted of site categories Mobile ¥1- ¥5 CPC + ¥800 CPA Campaign Structure


Channel Strategy: Super Affiliates (Volume) Points & Loyalty Networks Blog & Individual Sites Email Affiliate Channel Mobile Affiliate Channels Travel Client Affiliate Channels Channel Strategy


Partner Network: Partner Sites New Sign-ups Total Affiliates Active Affiliates New Affiliates Partner Network


Monthly Performance: Impressions Clickthroughs Clickthroughs Impressions Monthly Performance


Sales Performance: Transactions Commission Value Transactions Affiliate Commissions Average Cost per Sale - ¥352 Sales Performance


Affiliate Performance by Category: The “Long tail” of other content verticals are important… Affiliate Performance by Category


Mobile Affiliate Channel: Average Cost per Sale - ¥446 Mobile Affiliate Channel


Deloitte Technology Fast 50 in Japan (2003~2006): Deloitte Technology Fast 50 in Japan (2003~2006)