Overview of Macromill <3978>

1. Business Segments and Service Offerings

The reporting segments consist of the 'Japan Business' and 'South Korea Business', with the Japan Business divided into three areas. The characteristics of each area are as follows:

(1) Japan Business (FY June 2024 revenue performance of 37.7 billion yen, consolidated revenue composition ratio 86%)

- Focus Area (FY June 2024 revenue performance of 14.8 billion yen, consolidated revenue composition ratio 34%)

Provides online and digital research, which are core businesses. With a gross margin of approximately 60%, this business has a higher profit margin compared to other areas, serving as a driver for profit expansion and aiming for high profitability and stable growth. The billing system is based on 'number of survey respondents x number of questions', and handles tens of thousands of projects on an ad hoc basis annually. While most projects are ad hoc, many cases result in continuous orders when utilized for fixed observations, leading to high repeat rates and a stable revenue base. Customer demand is somewhat linked to the economy, but stable demand expansion is expected due to factors such as diversified customer base, advancing understanding of consumer behavior within companies, and the prevalence of marketing techniques utilizing data.

- Strategic Investment Area (FY June 2024 revenue performance of 6.7 billion yen, consolidated revenue composition ratio 15%)

Comprising data consulting, global research, and new businesses, this sector aims for business model transformation, targeting double-digit revenue growth and future profit contribution. With a gross margin of around 30% and in an investment phase due to the high-growth market, strategic investments are made to sustain stable revenue growth in the medium to long term as a group, aiming to expand future profit contributions. The distinguishing factors from other areas include project sizes being significantly larger in all areas of data consulting, global research, and new businesses, with some projects being in the tens of millions to billions range. Additionally, data consulting stands out for its billing system based on person-month model. The expansion of this sector is expected to generate new revenue from online and digital research, while also providing a boost to the revenue from the focus area.

- Infrastructure strengthening area (actual sales for the year ending June 2024: 16 billion yen, revenue composition ratio: 37%)

It is composed of subsidiary groups that operate offline and data provisioning, as well as joint ventures with advertising agencies and other companies.

Among the subsidiary groups are joint venture companies with the company and Dentsu Group <4324>: Dentsu Macromill Insite Corporation, QO Co., Ltd. (formerly H.M. Marketing Research Co., Ltd.) in a joint venture with Hakuhodo, a joint venture with CareNet <2150>, and Monitas Co., Ltd., which was acquired as a subsidiary in July 2023. This area focuses on specialization to enhance its 'strengths' and aims to establish higher competitive advantage and entry barriers. The gross margin aims for stable growth and continued profit contribution at around 45%.

(2) South Korea business (actual sales for the year ending June 2024: 6.1 billion yen, revenue composition ratio: 14%)

In South Korea, the subsidiary Macromill Embrain Co., Ltd. engages in marketing research business. Similar to Japan, Macromill Embrain has a strength in online research and uniquely owns its own panel base among major research companies in Korea. The marketing research market in Korea had a high proportion of offline research methods such as mail, telephone, and face-to-face surveys compared to Japan. However, due to the impact of the COVID-19 pandemic, offline research has been replaced by online research, leading to an increased proportion of online research. With this background, the company holds a high market share in the online research market in Korea.

2. Business Model

The company's main business, online research, collects and analyzes information from consumers through research conducted via the internet, which helps companies develop and improve the products and services they offer in the market. The company has built a panel network of approximately 36 million people domestically, conducts surveys tailored to the marketing challenges of client companies, and collects high-quality information by providing a portion of the compensation as incentives to the panel members. In addition to survey results, the company provides data linked with demographic information to client companies, allowing them to utilize information for marketing purposes that they cannot obtain internally. Through such services, the company reveals 'consumer insights,' referring to motives and true feelings that consumers themselves may not be aware of. In recent years, the research industry has been redefined as the 'insight industry,' and the company goes beyond traditional research to provide support for solving client business challenges and offering recommendations for marketing strategies. The company is driving a transformation from a 'research company' to a 'comprehensive marketing support company,' aiming to contribute as a partner in client marketing. In both existing and new business areas, the company's 'panel base' is seen by our company as a competitive advantage that differentiates it from others.

(Author: FISCO Guest Analyst Ryoji Mogi)