TOKYO (The Japan News/ANN) - By capturing an overwhelming share of the market, the plan to merge Yahoo Japan operator Z Holdings Corp. and Line Corp. is aimed at strengthening their customer bases.
The plan to merge Yahoo Japan operator Z Holdings Corp. and Line Corp. is aimed at strengthening their customer bases by capturing an overwhelming share of the market amid intensifying competition in the digital field.
With the presence of foreign IT giants such as U.S. Amazon.com, Inc. increasing, Yahoo and Line will compete together as the operators of a Japan-based platform.
An option under consideration is for SoftBank and South Korean internet services firm Naver Corp. to set up a joint company that would be the largest shareholder of ZHD and have Yahoo and Line under its control, the sources said. The new joint company would be a subsidiary of SoftBank.
Yahoo President Kentaro Kawabe and Line President Takeshi Idezawa are said to be leading the reorganization. They are believed to share a sense of crisis over the grueling domestic competition in such fields as smartphone payments, online shopping and mobile phone operations.
Yahoo’s PayPay and Line Pay have been locked in a fierce battle over customers for smartphone payments, repeatedly launching refund campaigns.
In July-September, PayPay suffered a loss of about ¥20 billion in its settlement business, while Line suffered a loss of ¥13.9 billion in its businesses including Line Pay, due to heavy advertising costs. Even after expanding its market share, PayPay fell into a situation where “you can’t make a profit just through the settlement business,” Kawabe said.
Regarding online sales, Yahoo has lagged behind Rakuten Inc. and Amazon in Japan in terms of the volume of products sold on its website. Yahoo’s move in September to acquire Zozo Inc., the operator of clothing retailing site Zozotown, was aimed at increasing its market share and closing the gap with Rakuten and Amazon.
With the acquisition of Zozo, Yahoo handles a total of ¥2.6 trillion in distribution transactions, comparable to Rakuten’s ¥3.4 trillion and the ¥2.7 trillion of Amazon’s Japan branch.
Kawabe has said confidently, “We aim to be No. 1 in the domestic online shopping business,” although his company still has a long way to go to take a commanding lead in that field.
Masayoshi Son, chairman and chief executive officer of SoftBank Group Corp. (SBG), which Yahoo is affiliated with, has repeatedly said, “The top market share will gradually increase profitability.” Both Yahoo and Line have begun looking for a merger in line with Son’s maxim.
Aiming for No. 1 in smartphones
Changes in the mobile phone business, which has been seen as a stable field for SBG, may also have encouraged Yahoo and Line to negotiate.
Rakuten, which competes with SBG regarding the internet and in other fields, has announced its intention to enter the mobile phone business by setting up its own base stations. Rakuten’s move has made it difficult to forecast what kind of competition will be seen in the field.
SBG has been known as “the most competitive mobile phone operator,” according to an analyst, as it has already launched its Line brand of budget smartphones, thus covering everything from premium to budget smartphones.
The integration of Yahoo and Line will also make it possible for the two companies to aim for the top spot in the mobile phone business.
But Son is not just targeting domestic leaders. According to sources familiar with the matter, SBG is looking to compete with the platforms of what are collectively known as GAFA, world IT giants including Amazon and Google.
SBG is also focusing on investing in overseas “unicorns” with growth potential, again with its eyes on GAFA. China’s leading e-commerce company Alibaba Group Holding Ltd., in which SBG invested in 2000, has grown to almost catch up with GAFA in about 20 years.
There are currently no companies in Japan that can compete with GAFA in the IT field. Observers are watching to see whether the merger of Yahoo and Line will create a powerhouse in the industry.
The Japan News
