Business Overview 4. DX Regional Collaboration Project Signpost's DX and Regional Collaboration Project started in March 2022 with the establishment of the DX and Regional Collaboration Division. It aims to provide products and services that contribute to regional collaboration by collaborating with local financial institutions nationwide, utilizing its own DX technology and open innovation. In August 2022, it began working with Oita Made Co., Ltd., which was established with the investment of multiple companies in Oita Prefecture, including Oita Bank, to sell original products made in Oita Prefecture to both domestic and overseas markets and to match local companies and Signpost's products and services in order to promote the revitalization of Oita Prefecture's economy. In addition, in April 2024, it started offering DX support services for medium-sized and small businesses. As the first effort, it supports the creation of DX declaration by (The) Fourth Hokuriku Bank, Ltd. (Niigata City, Niigata Prefecture) to deploy DX declaration support services to the market. Furthermore, it will realize new solutions by commercializing its own technology and open innovation and promote regional collaboration through innovation.
Interspace (2122) was established in 1999 with internet advertising as its main business objective and operates two businesses: performance marketing (formerly internet advertising) centered on affiliate advertising and media. In the composition ratio of business segments for the cumulative second quarter of the fiscal year ending September 2024, performance marketing accounts for over half of revenue and operating profit at 62.0% and 59.8%, respectively, but aims to expand the media business to the same level of profit as performance marketing in the future.
As of the end of March 2024, the group has nine consolidated subsidiaries. In Japan, there is Storefront Co., Ltd., (which spun off in April 2018) that mainly operates store affiliate services, Tag Studio Co., Ltd. (established in 2018) that operates comparison and review type media, 4Meee, Inc. (sub-subsidiary in January 2018) that operates media services such as "4Meee" targeting women in their 20s, and "4yuuu" targeting highly sensitive housewives and moms, Unite Project Co., Ltd. (sub-subsidiary in April 2020) that operates "Juku-sil," a portal site for learning institutes, and N1 Technologies, Inc. (which received the business of the web site improvement tool "Kenshakawa" (currently renamed to "SiteLead") from tact in April 2023), operating four performance marketing businesses in Southeast Asia (Indonesia, Thailand, Singapore, Malaysia). There is also one equity method company (49% investment ratio) established through joint ventures with local companies in Vietnam (deploying performance marketing services).
1. Performance Marketing Business In the performance marketing business, it comprises performance advertising (affiliate advertising) via Access Trade, operated by the company and its foreign subsidiaries, store-type DX solutions "Mobile Window (formerly Storefront Affiliate)," and web site improvement tools "SiteLead," operated by N1 Technologies, among others. Approximately 65% of revenue is from performance advertising income, and the remaining from marketing solution sales from store DX-type solutions and "SiteLead." Among performance advertising operators, it is one of the major players in the industry, with competitors listed on the stock exchange, such as Fan Communications (2461), Adways (2489), ValueCommerce (2491), and Rentorax (6045).
Performance advertising is an internet advertising based on an achievement contract, which refers to advertising products that pay operating fees to website operators (partner sites) and email magazines that post advertisements based on the occurrence of final outcomes such as product purchases and document submissions. As an intermediate stage from advertisers to these advertising posters (media partners), operating agencies (affiliate service providers) such as the company that provide affiliate programs intervene. With regard to the method of recording revenue, since the application of the "Accounting Standards for Revenue Recognition," etc. from the fiscal year ending September 2022, the company has changed the method of recording revenue to the amount obtained by deducting media costs from the advertising fees paid by advertisers and recording it as sales. Since media costs, etc. that were recorded as cost of goods sold are no longer recorded, there is no impact on operating profit. Regarding sales gross margin rate for advertising handling, it is approximately at a level of 20-30%, with the remaining being compensation paid to partners (based on the old accounting standards).
Affiliate advertising refers to internet advertising based on the achievement reward system that refers to advertising that advertisers pay advertising operators (affiliate providers) who provide affiliate programs to advertising posters (media partners) such as websites (partner sites) and email magazines that have posted advertisements to remunerate them in response to the occurrence of final effects such as product purchase or document request. As an intermediate stage from advertisers to these advertising posters, operating agencies such as the company that provide affiliate programs intervene. As for the method for registering sales revenue, since the application of the "Accounting Standards for Revenue Recognition," etc. from the fiscal year ending September 2022, the company has changed the method for registering sales revenue to the amount obtained by deducting media costs from the advertising fees paid by advertisers and recording it as sales. Since media costs, etc. that were registered as cost of goods sold are no longer registered, there is no impact on operating profit. The sales gross margin rate for advertising handling is approximately at a level of 20-30%, with the remaining being compensation paid to partners (based on the old accounting standards).
An affiliate program is a tool for advertising executioners to post advertisements on their own websites, and easy-to-use tools are provided by each operating agency. The company developed "Access Trade" in 2001, and as of the end of March 2024, the number of registered partners is approximately 2.67 million sites, and the number of operating programs is 3,630. In particular, since 2019, the increase in the number of overseas partners has been remarkable, and it has reached over 70% in the recent past. The expansion of online business in Southeast Asia also shows that affiliate services are popular.
In addition, the store-type DX solution mainly provides services at mobile phone sales stores. Shop clerks recommend content apps and services provided by advertisers to smartphone buyers, and a performance fee is generated when they start downloading or using the service. In the case of a monthly subscription service, revenue is generated based on the number of remaining contracts. As shop clerks directly explain and propose products and services to customers, it becomes a cost-effective advertising service for advertisers. At present, the sale of security products for smartphone users, which is a monthly subscription service, accounts for the majority and is characterized as a stock-based business model in which revenue accumulates depending on the number of contracts. The competition is MTI <9438>.
The web site improvement tool "SiteLead" is a monthly subscription-based service that aims to improve the landing pages and conversion rates of the operated web site. It provides a heatmap analysis that displays the bounce rate and visualizes where users are likely to bounce, as well as various bounce prevention features such as pop-up and recommendation widget functions. While competitors provide the same services at around 30,000 yen per 100,000 PVs on a monthly basis, "SiteLead" is characterized by its extremely low price of about 3,500 yen. As of March 2024, the number of contracts exceeded 3,000, and while the center was previously individual business owners, recently the strategy has shifted to expand sales to corporations such as Internet advertising agencies.
2. Media Business
In the media business, content-type media and comparison and review-type media are operated. The core business is content-type media, accounting for about 80% of revenue (external customer revenue). Among them, the information platform for mothers, "Mama Sta," has about 9.83 million UUs and about 900 million PVs per month, and is the largest media in the same field. It is an advertising revenue model for improving brand awareness, and the display and tie-up advertising posted on the same media are sources of income. Since it is an industry-specific media, the level of advertising unit prices is higher than that of general portal sites, as client companies can easily reach target users and have a large number of monthly users. In addition, we focus on content-type media targeting women, and operate lifestyle media "saita" targeting women in their 40s and 50s, trend media "4MEEE" targeting women in their 20s, and yoga and beauty online news media "Yoga Journal Online".
On the other hand, comparison and review-type media is a performance-based business model that earns revenue by sending potential customers to client companies that post information on the same site. There are also "塾シル" (study abroad portal site) operated by Unite Project, "転職派遣サーチ" and "転職Finder" (comparison and search sites for personnel service companies), and "プロリア" (programming school review site) operated by TAG STUDIO.
(Written by FISCO guest analyst, Jo Sato)