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Copyright © 2007, ValueCommerce Co.,Ltd.
Electronic Retailers Association
April 25, 2007
E-Commerce in Asia/ JapanBrian Nelson, CEO & President
Copyright © 2007, ValueCommerce Co.,Ltd.2
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
Copyright © 2007, ValueCommerce Co.,Ltd.3
Asia’s Increasing Profile
Copyright © 2007, ValueCommerce Co.,Ltd.4
Asia’s Increasing Profile
Copyright © 2007, ValueCommerce Co.,Ltd.5
Asia Forecast - eCommerce & Online Advertising
eCo
mm
erce
U
S$
Mill
ion
sO
nlin
e Ad
s U
S$ M
illion
s
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
2005 2006 2007 2008 2009 2010
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
China eCommerce Korea eCommerce Japan eCommerce
China Online ad revenues Korea Online ad revenues Japan Online ad revenues
Copyright © 2007, ValueCommerce Co.,Ltd.6
Japanese Internet Users:over 78m by the end of
2006(Over 60% broadband penetration)
Japanese Internet Growth
Copyright © 2007, ValueCommerce Co.,Ltd.7
Estimates of Internet advertising expenses
0
100
200
300
400
500
600
2005 2006 2007 2008 2009
2005 2006 2007 2008 2009
Mobile ads 30.0 44.0 55.4 66.6 77.5
E-mail ads 11.9 13.1 14.0 14.6 15.0
Content linked ads 1.3 2.5 4.5 8.0 13.9
Search linked ads 59.0 75.4 92.7 110.6 129.2
Web ads 170.0 207.1 247.7 288.8 330.4
Total 272.2 342.1 414.3 488.6 566.0
0
20
40
60
80
100
120
2005 2006 2007 2008
PC affiliate services 25.1 39.7 58.5 81.9
Mobile affiliate services 6.2 11.2 17.5 24.5
Total 31.4 51.0 76.0 106.4
Estimates of the Scale of the Affiliate Services Market
(Unit: billion yen)
(Source: Dentsu Communication Institute)
(Source: Yano Research Institute)
actual estimated estimated estimated
20052006
(estimated)2007
(estimated)2008
(estimated)
ValueCommerce holds amarket share of around 20%.
(Unit: billion yen)
Japanese Market Continues to Grow
Copyright © 2007, ValueCommerce Co.,Ltd.8
Unique Features of the Japanese Market
Copyright © 2007, ValueCommerce Co.,Ltd.9
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
Copyright © 2007, ValueCommerce Co.,Ltd.10
PC Internet Users Mobile Internet Users
User only of cellular phone, PHS, and portable terminal (Data: IAC Ministry)
4,980
5,722
6,1646,416
6,601
2,5042,794
4,484
5,825
6,923
657
1,061
1,453 1,511
1,921
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2001 2002 2003 2004 2005
(10
thou
san
d)
World leading in Mobile Internet use…In 2005, the number of
mobile internet users exceeded PC
users.
Copyright © 2007, ValueCommerce Co.,Ltd.11
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
34.4 54.196.9
154.280.993
118.3
164.6
423.8
44.1
88.6
050
100150200250300350400450
2002 2003 2004 2005
(billio
n ye
n)
Mono Service Transaction
179.3 213.3 260.3 315.0119.3
170.9259.3
407.4
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
2002 2003 2004 2005
(billio
n ye
n)
Mobile contents market Mobile commerce market
Copyright © 2007, ValueCommerce Co.,Ltd.12
Products Purchased with Mobile eCommerce
50.4
37.7
36.6
29.3
24.7
23.3
19.2
15.6
13.7
13.0
12.7
5.5
5.2
4.5
3.3
0.5
51.9
33.0
33.2
28.3
21.2
22.6
24.7
16.4
13.7
11.1
12.4
5.4
5.5
5.2
3.2
0.6
0.0 10.0 20.0 30.0 40.0 50.0 60.0
clothes, accessories, fashion
books, magazines
CD, video, DVD
cosmetics, hair care
home furnishings
seasonal gifts
medical supply, health food
event tickets
hotels, lodging
home appliances
airline and railway tickets
PC hardware
gifts and flowers
PC software
others
uncertainty
2006/ 10 N=795 2005/ 9 N=651
Copyright © 2007, ValueCommerce Co.,Ltd.13
Introducing ValueCommerce/
Copyright © 2007, ValueCommerce Co.,Ltd.14
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
Copyright © 2007, ValueCommerce Co.,Ltd.15
1.Internet advertising is shifting towards cost-per-action ads.
2. 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
Copyright © 2007, ValueCommerce Co.,Ltd.16
ValueCommerce Media Partners Internet User
Branding
Individual Sites
Specialized Sites
High volume Sites
Premium Sites
Ecommerce
Lead Generation
- Travel sites
- Shopping sites
- Financial sites
- Hobby sites
- Auction sites
Text link
Banner Ads.
Drive traffic to Ecommerce sites
Purchase!
Deliver Ads.
Bes t travel
My Travel
Bes t travel
My Travel
DEF TRAVEL
Bes t travel
My Travel
ABC TRAVEL
Travel
Travel
Travel
XYZ TRAVEL
Click!Click!
Ad distribution
What is Affiliate Marketing
Copyright © 2007, ValueCommerce Co.,Ltd.17
How it works
Copyright © 2007, ValueCommerce Co.,Ltd.18
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
Copyright © 2007, ValueCommerce Co.,Ltd.19
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
Copyright © 2007, ValueCommerce Co.,Ltd.20
Sophisticated Reporting Dashboard / Interface
Reporting Templates
Copyright © 2007, ValueCommerce Co.,Ltd.21
Some Affiliate Example’s
Affiliate Links
Copyright © 2007, ValueCommerce Co.,Ltd.22
Comparison Shopping Integration
Site: BEST GATE
Type: Comparison Site
Affiliate Links
Copyright © 2007, ValueCommerce Co.,Ltd.23
Blogs & Fan Sites
Copyright © 2007, ValueCommerce Co.,Ltd.24
Just some of our Clients..
Copyright © 2007, ValueCommerce Co.,Ltd.25
< Reporting samples>
Clients receive the following services:
Dedicated online marketing strategy and planningCustomized reporting, analysis, and consulting servicesCreative advertising managementMultiple campaigns and rich media functionalityPartner & alliance recruitmentPartner approvals, grouping and optimizationAdvanced 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 - ConsultingExtensive data, expertise & experience.
Copyright © 2007, ValueCommerce Co.,Ltd.26
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 ServicesComprehensive Search & Online Marketing Solutions
AnalyticsSite Data ReviewLog File Analysis / ReportingConversion Analytics
Production / Usability Site ReviewNavigation & Usability DesignWeb Design / Production
Online AdvertisingDigital Media Campaign PlanningMedia Planning / BuyingCreative Design & Execution
Search Engine Optimization (SEO)Site Analysis & ConsultingWeb Tuning & Site OptimizationWebsite Ranking & Reporting
Pay Per Click Advertising (PPC)Keyword Selection / BuyingBid / Budget ManagementCopy Writing / Translation
Affiliate Marketing (International)Campaign Planning & OptimizationAffiliate Program Management Detailed Reporting / Analysis
Copyright © 2007, ValueCommerce Co.,Ltd.27
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 2006Sep 2005 Jul 2006Dec 2005 Feb 2006
Nov 2006Jan 2006Sep 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 PromotionOverseas 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
AUCTIONSTRAVEL
Business Travel
MESSENGER Premium Services
SHOPPING SHOPPING
AUCTIONS
TRAVEL
Web Hosting
ValueCommerce Advantage – Yahoo! Alliance
Copyright © 2007, ValueCommerce Co.,Ltd.28
ValueCommerce + Yahoo! Affiliate
Affiliate Program for Yahoo! Geocities & Yahoo! Blog users Affiliate Program for Yahoo! Auctions users
Yahoo! Japan Geocities, Blog & Auction monetization
Copyright © 2007, ValueCommerce Co.,Ltd.29
Compound Network growth with Yahoo! Japan
ValueCommerce134,000
Yahoo! JAPAN130,000
Total 317,000
[Number of Affiliate Partners]
ValueCommerce187,000
VC’s affiliate network expanded with the Yahoo! JAPAN tie-upLargest 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.
ValueCommerce404,000
Sep 2006 Mar 2007Sep 2006 B/DSep 2005
Copyright © 2007, ValueCommerce Co.,Ltd.30
Affiliate program that directs mobile user from internet to store1) User receives points for making reservations to visit the store via the affiliated point site2) 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
VCAffiliate
QR Code or Email Access
User receives points for making reservation
Reservation and purchase are confirmed by affiliatePoints are awarded to user via the point site
Banner Access
User visits store
VCAffiliate
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
Copyright © 2007, ValueCommerce Co.,Ltd.31
- Yahoo! JAPAN Auctions Affiliate ProgramWebsite owners and bloggers can earn commissions by carrying ads on items auctioned at Yahoo! JAPAN Auctions.
- RSS banner 2.0RSS 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 ProductsA Constantly evolving Space
Copyright © 2007, ValueCommerce Co.,Ltd.32
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 personnelDevelop new services and functionsSecure 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 servicesPossible M&A with businesses owning services superior in e-commerce and online advertisingPossible global M&A
Key strategies for the future
Future Strategies
Copyright © 2007, ValueCommerce Co.,Ltd.33
Reven
ues
Period
Growth of existing
businesses
New products and services
Partnerships and alliance
M&A
2005200420032002
SEMSEMSEMSEM
MatchsmartMatchsmartE-mail/Mobile
AffiliateServices
AffiliateConsulting
Service
Product Links(MyLink)
Product Links(MyLink)
SEO
RSSRSS
From past growth to the future
2006 2007
Future Strategies: Roadmap for Growth
Copyright © 2007, ValueCommerce Co.,Ltd.34
Client Case Studies
Copyright © 2007, ValueCommerce Co.,Ltd.35
Shop Japan Case Study
Copyright © 2007, ValueCommerce Co.,Ltd.36
• 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
Copyright © 2007, ValueCommerce Co.,Ltd.37
Affiliate Strategy: 2 pronged approach
Shop Japan Branding• Shopping and Lifestyle related site
s, portals, and blogs• Cross-media electronic marketing r
aises brand awareness
Targeting Sales of Key Products• Comparison shopping sites, portal
s, 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
Copyright © 2007, ValueCommerce Co.,Ltd.38
VC Affiliate Banners/Text Links
Example Partner Promotions
Shop Japan RSS
Banner
Copyright © 2007, ValueCommerce Co.,Ltd.39
Partner Network
Total Affiliates Selling Affiliates New Affiliates
0
2,000
4,000
6,000
8,000
10,000
12,000
10月 11月 12月 1月 2月 3月
Partn
er S
ites
0
50
100
150
200
250
New Sign Ups
Copyright © 2007, ValueCommerce Co.,Ltd.40
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
10月 11月 12月 1月 2月 3月0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Monthly Performance
Clickthroughs Impressions
Clickth
rou
gh
sIm
pre
ssio
ns
Copyright © 2007, ValueCommerce Co.,Ltd.41
0
2,000
4,000
6,000
8,000
10,000
12,000
Oct-06 Nov-06 Dec-06 J an-07 Feb-07 Mar-07
Monthly Transactions
Web, 91%
Email, 8%
Mobile, 1%
Transactions
Average Cost of Sale- 3,000 Yen
Copyright © 2007, ValueCommerce Co.,Ltd.42
Travel Client Case Study
Copyright © 2007, ValueCommerce Co.,Ltd.43
• 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
Copyright © 2007, ValueCommerce Co.,Ltd.44
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
Copyright © 2007, ValueCommerce Co.,Ltd.45
Super Affiliates (Volume)
Points & Loyalty Networks
Blog & Individual Site
s Email Affiliate Channel
Mobile Affiliate ChannelsTravel Client
Affiliate Channels
Web84%
Mobile8%
Email8%
Channel Strategy
Copyright © 2007, ValueCommerce Co.,Ltd.46
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
4月 5月 6月 7月 8月 9月0
100
200
300
400
500
600
Pa
rtn
er
Site
sN
ew
Sig
n-u
ps
Total Affiliates Active Affiliates New Affiliates
Partner Network
Copyright © 2007, ValueCommerce Co.,Ltd.47
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
4月 5月 6月 7月 8月 9月0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
Impressions Clickthroughs
Clickthroughs Impressions
Monthly Performance
Copyright © 2007, ValueCommerce Co.,Ltd.48
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
4月 5月 6月 7月 8月\ 0
\ 5,000,000
\ 10,000,000
\ 15,000,000
\ 20,000,000
\ 25,000,000
\ 30,000,000
\ 35,000,000
Transactions Commission Value
Transactions Affiliate Commissions
Average Cost per Sale - ¥352
Sales Performance
Copyright © 2007, ValueCommerce Co.,Ltd.49
Site Category Imp Clicks CTR Transactions Aff CommTravel / Hotel 115,457,335 3,933,322 3.41% 103,367 \ 27,925,033Internet / Online Service 44,370,580 1,839,676 4.15% 35,602 \ 9,589,341Online Shopping 10,208,122 1,097,363 10.75% 27,143 \ 7,439,918Search Engines 23,091,349 960,972 4.16% 17,297 \ 4,943,249Business 9,562,075 414,211 4.33% 10,065 \ 2,484,794Entertainment 10,735,018 351,348 3.27% 7,689 \ 1,988,748Lifestyle 13,630,209 142,908 1.05% 2,685 \ 746,765Software 2,810,800 39,782 1.42% 2,526 \ 494,074Culture & Education 2,206,404 44,370 2.01% 2,085 \ 455,590Community Sites 6,592,275 83,877 1.27% 1,495 \ 373,955
The “Long tail” of other content verticals are important…
Affiliate Performance by Category
Copyright © 2007, ValueCommerce Co.,Ltd.50
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
01/2
006
02/2
006
03/2
006
04/2
006
05/2
006
06/2
006
07/2
006
08/2
006
09/2
006
0
500
1000
1500
2000
2500
3000
Click-Thrus Transactions
Average Cost per Sale - ¥446
Mobile Affiliate Channel
Copyright © 2007, ValueCommerce Co.,Ltd.51
Deloitte Technology Fast 50 in Japan (2003~2006)
Copyright © 2007, ValueCommerce Co.,Ltd.52