value commerce & affiliate

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


Asia’s Increasing Profile


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


Japanese Internet Users:over 78m by the end of

2006(Over 60% broadband penetration)

Japanese Internet Growth


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


Unique Features of the Japanese Market


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


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.


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


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


Introducing 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


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


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


How it works


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

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

Reporting Templates


Some Affiliate Example’s

Affiliate Links


Comparison Shopping Integration

Site: BEST GATE

Type: Comparison Site

Affiliate Links


Blogs & Fan Sites


Just some of our Clients..


＜ 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.


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


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


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

ValueCommerce134,000

Yahoo! JAPAN130,000

Total 317,000

[Number of Affiliate Partners]


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.


Sep 2006 Mar 2007Sep 2006 B/DSep 2005


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


- 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


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


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


Client Case Studies


Shop Japan Case Study


• 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

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


VC Affiliate Banners/Text Links

Example Partner Promotions

Shop Japan RSS

Banner


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


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


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


Travel Client Case Study


• 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


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


Super Affiliates (Volume)

Points & Loyalty Networks

Blog & Individual Site

s Email Affiliate Channel

Mobile Affiliate ChannelsTravel Client

Affiliate Channels

Web84%

Mobile8%

Email8%

Channel Strategy


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


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


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


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


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


Deloitte Technology Fast 50 in Japan (2003~2006)

value commerce & affiliate

News & Politics

mobile ads

mobile affiliate services

mobile partners

cpm ads

cpc ads

action ads

pc affiliate services

affiliate services market