CEO Comments

Kaoru Hayashi

Representative Director,
President Executive Officer and Group CEO,
Digital Garage, Inc.

CEO Comment “Financial Results for Q2 of Fiscal Year Ending June 2011 and Progress as a “Social Media Incubator””

As approved at the special board meeting on February 9, we hereby announce the following summary of our financial results for the second quarter of the fiscal year ending June 2011.

Highlights of financial results for the cumulative period through Q2 of FYE June 2011

1. We were able to outperform the results for the same quarter of the fiscal year ending June 2010, as well as our initial forecasts for Q2 of the fiscal year ending June 2011, which were upwardly revised on December 27, 2010. We were also able to return to profitability by logging ordinary income in Q1 and operating income in Q2.

2. As key factors, we can cite (1) our new media development solution, which was highly appreciated in the Hybrid Solution Segment (the competitiveness of which was increased through the reorganization in the preceding quarter) and (2) the fact that we were able to partly dispose of our investment portfolio in the Venture Incubation Segment thanks to the robust overseas private equity market.

3. In the Media Incubation Segment, which we are focusing on as a growth driver, we believe that we have established the position of Twitter as one of the largest social media in Japan, given the fact that the number of Twitter UUs has exceeded 12 million (source: NetRatings Japan).

4. As for progress in monetization, a new profit line infrastructure that follows banner ads was established through the large-scale official Twitter site renewal in September 2010. In the area of our proprietary media twinavi, we are also preparing to extend social media to the platform business.

The Digital Garage Group announces “this year’s slogan” at the general kickoff for all employees every year. We chose the following slogan this year:

Local Context on the Social Web
“Social media extends to games, real-time Web and now business…”

Our business highlights during the first six months of this fiscal year are as follows:

I. Entry into the e-book business and development of the smartphones business
In view of the business synergy generated by social media in the e-book market, which is expected to grow rapidly, we took an approximately 15% stake in Media Do Co., Ltd., a promising venture engaged in the e-book and content delivery platform business, and became its largest external shareholder in December 2010. We will aim at bringing new added value to the e-book market through measures including a Twitter-based service for sharing information and reviews on e-books among users. The entire Digital Garage Group will also cooperate to fortify the functionality of the “Contents Aggregation System” that Media Do offers as a core commercial distribution system in the e-book market. Specifically, we are planning to combine the system with Digital Garage’s electronic settlement service and ad solicitation, while also adding social network functionality to it.

In addition, we promoted the reorganization of our mobile business in view of the rapidly expanding smartphone market. When entering the e-book business, we revised our official site business (which depends on telecom carriers targeting existing mobile handsets) and established Wheel, a company aimed at accelerating the development and commercialization of smartphone services centering on social media. We will also consider making an e-book viewer compatible with multiple devices. The details will be announced in the near future.

II. Enhance services for enterprises to generate profit from social services
We have also started expanding the business that makes the most of our expertise in the corporate use of social media, which we built up through our support for the Twitter business in Japan. In addition to “Tweetmanager,” an operational/marketing support tool for enterprises that proactively use Twitter for the promotion of their products, in a bid to offer new ToB services that use other social media along with Twitter, we formed a partnership with HootSuite of Canada, a company that provides a dashboard type tool to collectively manage various social media including Facebook, Foursquare, LinkedIn, mixi and Twitter, in December 2010. We will support the HootSuite business in Japan as the sole agency for domestic fee-based HootSuite accounts. HootSuite is being used by more than 1 million people across the world and is recognized for its high ratio of Japanese users.

We also started our full-fledged microblog service “BirdFish” for sharing information inside the company in October 2010. Using Twitter-like postings, the service can spread information in real time to a larger number of employees compared with email, instant messages and other existing communication tools. In respect to the marketing of BirdFish, we are enhancing alliances with partner companies including Internet Initiative Japan Inc. (IIJ). IIJ is planning to offer a solution that uses its cloud type groupware service “IIJ GIO Cyboze Garoon SaaS” and BirdFish in combination.

III. Investment in Silicon Valley-based hot venture Path and exploration of new investments
In the Venture Incubation Segment, which is aimed at finding the new businesses that will support the future of the Digital Garage Group, we agreed to make an investment in U.S.-based Path, the company that operates the “Path” photo and video sharing service primarily targeting iPhone users. Unlike the general usage of Twitter, Facebook and other social media, Path is designed for sharing photos and videos within a private network and specializes in enabling users to share information and events with very close people such as family and friends.

In respect to discovering new investments, we chose four teams to participate in the second-phase “Seed Accelerator” program for incubating startups at our “Open Network Lab” jointly operated with, Ltd. and, Inc. in December 2010. After a three-month incubation period, we will invest in the teams that we consider to have the potential to develop a business in the global market with the aim of generating startups that will spread out around the world from Japan through our sustainable support for business development.

In these days where a movie is made about a social media startup, the Digital Garage Group – a Social Media Incubator – is committed to expanding its business through the creation of an ecosystem that brings benefits to both enterprises and users.

We sincerely appreciate the continued support and guidance of our shareholders and investors.

  1. Home
  2. Investor Relations
  3. CEO Comment “Financial Results for Q2 of Fiscal Year Ending June 2011 and Progress as a “Social Media Incubator””