FreeBit 3843
フリービット
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2021-09-10
2021-06-11
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Summary
The company group finds its strength in accumulated technological skills for development of core technologies related to the internet and management of large-scale systems. FreeBit leverages this strength to provide various services concerning the internet and other areas to corporate and individual customers. The main business areas include providing telecoms infrastructure to internet service providers, offering support for companies entering the mobile businesses, and providing consulting services related to internet businesses. It also acts as a smartphone carrier through Tone mobile Inc., a joint venture company established with Culture Convenience Club Co., Ltd. (CCC).
IT ServicesDiversified Telecommunication Services
Key dates
2014-01-06
Coverage initiation
Executive summary
Provides Internet-based infrastructure services that it terms Smart Infrastructure services
The company group finds its strength in accumulated technological skills for development of core technologies related to the internet and management of large-scale systems. FreeBit leverages this strength to provide various services concerning the internet and other areas to corporate and individual customers. The main business areas include providing telecoms infrastructure to internet service providers, offering support for companies entering the mobile businesses, and providing consulting services related to internet businesses. It also acts as a smartphone carrier through Tone mobile Inc., a joint venture company established with Culture Convenience Club Co., Ltd. (CCC).
The company’s business model has the following characteristics: it leases telecoms infrastructure from telecoms companies; and it uses this to offer a one-stop shop combining a range of services using its original technologies. By vertically combining components, users have access to various internet services. FreeBit said that even global companies who may be industry leaders do not necessarily cover every layer from terminals to telecoms services, so the company considers itself a rare entity (see the Business section).
Trends and outlook
In FY04/21, the company reported consolidated sales of JPY52.0bn (-5.9% YoY), operating profit of JPY3.4bn (+31.5% YoY), recurring profit of JPY3.7bn (+47.6% YoY), and net income attributable to owners of the parent of JPY1.6bn (versus net loss of JPY619mn in FY04/20).
The company's earnings forecast for FY04/22 calls for consolidated sales of JPY43.0bn, operating profit of JPY2.5bn, recurring profit of JPY2.4bn, and net income attributable to owners of the parent of JPY600mn. The company adopted the new Accounting Standard for Revenue Recognition (ASBJ Statement No. 29) in FY04/22. The earnings forecast figures above are based on this new standard; as such, the company refrained from releasing YoY changes versus the FY04/21 results.
Strengths, weaknesses
Shared Research believes that the three main strengths of FreeBit are its senior management, recurring income business, imagination and strength in developing niche markets. Weaknesses include focusing on too many business areas, operating in oligopolistic markets controlled by large players, and governance issues (see Strengths and weaknesses).
Key financial data
Note: FreeBit implemented a 400-for-1 stock split in FY04/13.
Note: The company adopted the new Accounting Standard for Revenue Recognition (ASBJ Statement No. 29) in FY04/22. The FY04/22 estimates above are based on the new accounting standard; for this reason, YoY changes vs. FY04/21 are not shown.
Recent updates
Q1 FY04/22 flash update
FreeBit Co., Ltd. announced earnings results for Q1 FY04/22; see the results section for details.
On the same day, the company announced a resolution on the purchase of treasury stock.
Transaction details
Trends and outlook
Quarterly trends and results
*The company will adopt the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29) and other standards from FY04/22. The figures in the above table for FY04/22 are stated after the adoption of these accounting standards. For reference purposes, YoY comparisons are shown against results prior to the application of these accounting standards
Q1 FY04/22 results
*Net income/loss attributable to owners of the parent
From Q1 the company has adopted the Accounting Standard for Revenue Recognition and other standards. As a result, Q1 sales decreased YoY. In terms of profit, each profit line below operating profit showed an increase due to lower costs and increased usage in the 5G infrastructure support business. The disposal of businesses in the previous year and the application of relevant accounting standards also contributed to profits growth.
Operating results by segment are as follows.
From Q1 FY04/22, in accordance with the new medium-term management plan, SiLK VISION 2024, announced on July 28, 2021, the company has changed its focus from Infrastructure Tech, Real Estate Tech and Advertising Technology to the growth areas it has identified: 5G Infrastructure Support, 5G Lifestyle Support andEnterprise/Creator 5G DX Support and Other. In addition, since the company sold its shares in FreeBit EPARK Healthcare Co., Ltd. (now Kusuri no Madoguchi, Co., Ltd.), in Health Tech, and ALC Co., Ltd., in Ed Tech, last year, these businesses are excluded from the scope of consolidation.
The following YoY comparisons are calculated by reclassifying the actual results of the previous year into the new segment categories and excluding the impact of business disposals.
5G Infrastructure Support
Although sales declined due to the application of the Accounting Standard for Revenue Recognition, and the recording of some wholesale bandwidth sales on a net basis, as well as changes in voice service plans, the actual usage of services is increasing. As a result, after adjusting for the net impact of the application of the Accounting Standard for Revenue Recognition, sales were in line with the previous year. Profits increased YoY due to an increase in mobile bandwidth usage and a reduction in fixed network costs.
With the spread of teleworking and home study due to the pandemic, the use of many internet-based services has continued to increase, reflecting an increase in online classes and meetings, online video viewing, rich media content (including games), and increased use of social media. In addition, the trend of major mobile carriers offering low-cost plans and sub-brands continues to have an impact on the growth of proprietary MVNO service providers. However, the mobile market is still expanding, and this growth is expected to continue.
In addition to the expansion of the support business for telecoms carriers, including the popularity of MVNE unlimited voice phone call services, the company's ISP support business performed well. Demand for services for general business corporations remained strong, including cloud-related services supporting internet businesses.
5G Lifestyle Support
In the fixed-line network service market, network costs are rising as communication traffic volumes increase, reflecting increased usage of rich content such as online video and games, and the growth of cloud services, as well as the spread of high frequency access products, such as social media and subscription-based network services. On the other hand, the company is launching 5G Homestyle (internet services for housing complexes) which will improve asset values and occupancy rates through the introduction of a high-speed broadband environment. The scale of the business has expanded with the increase in teleworking, online classes, and online video viewing reinforcing the need for a stable internet environment.
In the real estate industry as a whole, there is a high level of interest in real estate technology that utilizes technologies such as AI and IoT. Therefore, demand for new services is expected to grow. Examples of these include smart cities that provide solutions to regional issues by utilizing IoT devices and create new value such as safety and security in daily life, and smart homes that suit consumers' increasingly diversified lifestyles.
In the area of 5G Lifestyle (internet and mobile communication services for individuals), Tone Mobile strengthened its sales network by increasing the number of Kitamura stores that carry its products. For example, the TONE Camera (for iPhone) function, which uses AI to prevent users from damaging their phones when taking selfies, became the first camera app to be approved as a recommended function by the Tokyo Metropolitan Ordinance Regarding the Healthy Development of Youths.
Enterprise/Creator 5G DX Support
Although a proportion of segment sales were recorded on a net basis following the application of the Accounting Standard for Revenue Recognition, sales were up YoY. Profits growth was underpinned by factors such as cost improvement, in addition to the robust performance of existing businesses.
The market for internet marketing and advertising technology services is recovering as economic activity gradually picks up following the sharp drop in demand due to the pandemic. Against this background, in its existing businesses, the company focused on expanding its advertising technology-related services, as well as looking to provide internet advertising services, particularly commercial products, for the DSP and video advertising sectors. In addition, the company released BitStarNetwork, an influencer DX service jointly developed with BitStar Corporation, as a new business initiative to drive medium-term growth.
Full-year company forecast
The company's earnings forecast for FY04/22 calls for consolidated sales of JPY43.0bn, operating profit of JPY2.5bn, recurring profit of JPY2.4bn, and net income attributable to owners of the parent of JPY600mn. The company adopted the new Accounting Standard for Revenue Recognition (ASBJ Statement No. 29) in FY04/22; as such, it refrained from releasing YoY changes versus the FY04/21 results. Meanwhile, the company provides a reference value for FY04/21 consolidated sales of JPY41.7bn, which factors in the impacts of the sale of businesses (JPY5.1bn), adoption of the Accounting Standard for Revenue Recognition (JPY4.5bn), and a change in the accounting period of a consolidated subsidiary (JPY600mn). Versus this figure, its sales forecast for FY04/22 represents an increase by JPY1.3bn (+3.1%).
FreeBit aims to expand its businesses based on the "pre-5G" concept outlined in the digest of its new medium-term management plan, SiLK VISION 2024. The company says it will continue to make strategic investments to achieve such business expansion by FY04/24, the final year of the medium-term plan.
According to the company, the strategic investments will be centered on the mobile, lifestyle, and manufacturing domains, where it anticipates major evolutions and therefore sees as areas that drive future company growth. The company plans to invest in digital transformation and new business development, and in FY04/22, has allocated a total budget of up to JPY2.0bn for strategic investments (including unused investment budget from FY04/21).
FreeBit plans to release its new medium-term management plan in full scope in July 2021.
Long-term outlook
For the company, silk implies a new standard of connectivity, the evolution of connectivity from the network of nodes and visible connections to a seamless fabric of smooth silk-like threads. In the eyes of the founders, silk also implies a uniquely Asian solution, the Internet that is built based on different principles compared with the inefficient W3 Internet that is not suitable for bandwidth-constrained mobile solutions, especially in densely populated Asian countries.
SiLK VISION 2010 was focused on a hybrid strategy of targeting internet service providers with package solutions incorporating FreeBit’s original connectivity technology.
With SiLK VISION 2013 the company entered the online ad space and started MVNO and cloud-related efforts. The purpose was to grow vertically, addressing more layers of the value chain (such as advertising) by acquiring businesses in relevant areas.
The new SiLK VISION 2016, announced in March 2013, is about mobile revolution, lifestyle revolution, and manufacturing revolution. By way of what the company calls the Multi Layer Component Integration (MCI) strategy, FreeBit plans to vertically integrate the multi-layer services built in SiLK VISION 2013 and to proceed with horizontal development in the three areas of mobile revolution, lifestyle revolution, and manufacturing. Primary components: mobile and lifestyle.
In mobile, the company wants to target emerging MVNOs with a range of products and services, from connectivity support and cloud-based services, to middleware and physical devices, unified under the umbrella of SiLK Experience.
Regarding the lifestyle revolution, FreeBit wants to be a part of products and services, primarily in the medical field, that address the needs of Japan’s aging society and using sensor technology, machine-to-machine communication, and Big Data analysis.
The company believes that given the demographic trends in Japan and elsewhere, there is demand for low-cost solutions that facilitate remote diagnostics, prevention, and monitoring of health parameters and progress of therapy.
Long-term vision
Management has focused on long-term changes in Information Technology (IT), especially the following three factors: Moore’s Law; the theoretical limitations of lithium ion; and limitations of radio wave frequency. Under Moore’s Law, integration density of semiconductors doubles every one year and a half, which allows for inferences about evolution of computers. Theoretical limitations of lithium ion lead to understanding of limitations of battery capabilities Based on these pieces of information on the future, coupled with “limitations of radio wave frequency,” the company will consider what is needed and what is possible for the long term.
Business
Business description
The company group has its strength of accumulated technological skills for development of core technologies related to the internet and management of large-scale systems. Using the strength, FreeBit provides various services concerning the internet and other areas to corporate and individual customers. The main business areas include providing telecoms infrastructure to internet service providers, offering support for companies entering the mobile industry, and providing consulting services related to internet businesses. It also acts as a smartphone carrier through Tone mobile Inc., a joint venture company established with Culture Convenience Club Co., Ltd. (CCC).
Business model
The company’s business model has the following characteristics: it leases telecoms infrastructure from telecoms companies; and it uses this to offer a one-stop shop combining a range of services using proprietary technologies. The core of its management strategy is patented technologies. According to the company, it creates a number of low-priced high-quality services by combining its patented technologies. It has developed original network services by combining technologies, including patented ones, and marketing that catches user needs in advance. By combining the necessary components, users have access to various internet services. FreeBit said that even global companies who may be industry leaders do not necessarily cover every layer from terminals to telecoms services, so the company considers itself a rare entity.
FreeBit is acquiring patents in growth areas to differentiate itself against other companies. It has acquired many patents both in Japan and abroad. According to Patent Result Co., Ltd., the company ranked fourth in patent asset value in emerging markets as of end December 2014.
(Source: http://www.patentresult.co.jp/news/2014/12/emergingmarket02.html).
Business segments
In FY04/15, FreeBit had six segments, of which four were services to corporate customers: Broadband Infrastructure, Cloud Computing Infrastructure, Advertising Technology Infrastructure, and Next-generation Internet and Ubiquitous Infrastructure. Of the remaining two segments, one was B2C, services to individuals led by subsidiary DTI, and the other was Other Businesses. However, at a presentation of its business results in June 2015, the company announced that it will introduce a new segmentation method per type of service to clarify the trends of the key business areas. The new five segments from FY04/16 are the Broadband, Mobile, Advertising Technology, Cloud, and Other businesses.
The main differences between the old and new segments are the following three points.
Note: Result figures are the company’s retroactive adjustments. FY04/17 figures are FreeBit’s forecasts.
Broadband
In the segment, the company provides original network services by combining telecoms infrastructure, leased from telecoms carriers, with state-of-the-art technologies, including patented ones. It provides around 300 internet service providers nationwide with a high-speed internet backbone. The company also focuses on internet service provider (ISP) services for condominiums, covering technological surveys, specification design, and maintenance. It also provides Flet’s optical line services for companies (ISPs) and individuals in response to the NTT group’s starting to resell wholesales of its optical fiber services. In FY04/16, the segment took over the former Broadband Infrastructure business (for corporate customers) and the fixed-line services of the former B2C segment (for individuals).
Fixed-line services to corporate customers (the former Broadband Infrastructure)
The fixed-line telecoms services taken over from the former Broadband Infrastructure segment provide a full range of outsourcing services to general Internet Service Providers (ISPs) or ISPs customized for condominiums, covering everything required to operate their business, including network infrastructure, mobile connections, applications to billing and call center operations.
The company leases private lines from telecoms providers and resells them to small and medium ISPs at a commensurate profit margin by combining original technologies for controlling traffic peaks and ensuring connection authentication. The company believes that its advantages are its ability to control traffic peaks and to ensure reliable connection authentication by original technologies, including patented ones. This fixed network business trades under the “YourNet” brand; FreeBit receives fees based on how many users the customer ISP has (i.e., the ISP’s user account numbers).
The standard connection fees vary by the ISP; SR Inc. believes that these range from under 300 yen per month to 700 yen per month. There are added services such Web e-mail and security services (for around 50 yen per month) but most customers use the basic connection service.
Sales are through direct marketing to the ISPs. Main client ISPs include DTI (a FreeBit subsidiary), GIGAPRIZE Co., Ltd. (also a subsidiary, NSE Centrex: 3830, an ISP for housing complexes) and Hi-Bit Inc. As of March 2014, the company had contracts with around 300 ISPs who had 400 brands.
Major competitors include NTT PC Communications Inc. (Nippon Telegraph and Telephone Corporation, TSE1: 9432), Marubeni Access Solutions Inc. (Marubeni Corporation, TSE1: 8002) and Internet Initiative Japan Inc. (TSE1: 3774).
While the company has not disclosed fixed-line user numbers, due to growth of ISPs to condominiums, fixed-line users increased 6.5% YoY in FY04/15. The number of user households at condominiums, the core of fixed-line services, increased 64.5% YoY to 100,829 at end FY04/15, exceeding the company’s target of 100,000. The company said it aims at 140,000 condominium households in FY04/16 through cooperation with major housing construction companies.
Fixed-line telecoms services to individuals (former B2C)
DTI, a wholly owned subsidiary, mainly provides the fixed-line telecoms services to individuals, taken over from the former B2C segment. DTI procures network access from FreeBit and offers internet connection services to individuals and housing complexes on a pay-as-you-go basis. A similar company is Asahi Net Inc. (TSE1: 3834).
Mobile
FreeBit established this segment in FY04/16 by integrating the mobile-related services, which had been dispersed in some of the former segments. The core businesses of the segment are the mobile services to corporate customers, taken over from the former Broadband Infrastructure segment, and the mobile services to individuals, taken over from the former B2C segment.
Mobile business for companies (former Broadband Infrastructure)
As a mobile virtual network enabler (MVNE), the company sells the “freebit MVNO pack,” an MVNO support package for companies joining the MVNO business.
The freebit MVNO Pack uses NTT Docomo’s network and assists MVNOs in providing proprietary plans to end users. To meet operator needs, it can also provide services including a traffic visualization tool, API, original terminal, VoIP, and several applications. FreeBit said that the service dramatically reduces the participation risk in the MVNO business, which needs investments worth hundreds of millions of yen (according to the company) and enables MVNO companies to establish original and flexible services at low costs and for a short period (one month at shortest). The service can cover needs in various business areas, such as operators with general users, those with member users, and electronic communication between objects.
Among users of the freebit MVNO Pack, U-NEXT Co., Ltd. uses the service for a mobile data transmission service (U-mobile*d), and Toshiba Corporation (TSE1: 6502) adopts it for an M2M service (a shopping assistance service). Within the FreeBit group, the service is in use for the prepaid SIM card service for foreign tourists, the low-priced SIM service by consolidated subsidiary DTI, and the communication service to consumers by equity-method affiliate Tone mobile.
Tone mobile-related business
FreeBit entered the smartphone carrier business in November 2013. Under the freebit mobile brand, the company sells its own internally developed smartphones, packaged with an unlimited data, voice enabled wireless plan for JPY2,000 per month. In its initial plan, FreeBit aimed to eliminate intermediary margins to create a business model that can respond rapidly to consumer demand through vertical integration of planning, manufacturing, and sales. However, with the aim of strengthening selling ability and accelerate the start-up, the company in February 2015 announced an alliance with Culture Convenience Club Co., Ltd. (CCC), transferring the free bit brand to Tone mobile Inc., a joint venture firm between FreeBit and CCC, with a stake of 49% and 51%, respectively. As Tone mobile is thus a FreeBit affiliate accounted for by the equity method, FreeBit’s performance does not reflect its sales directly. However, since FreeBit has struck an exclusive agreement with Tone mobile to provide its telecoms network and terminals, these revenues are reflected in the company’s sales. Tone mobile started sales of smartphones at shops of the TSUTAYA rental video and book store chain under the umbrella of CCC. The JV plans to expand its services gradually, such as participating TSUTAYA’s T Points reward system, running campaigns with TSUTAYA, providing discount services to users for TSUTAYA’s online music download.
Mobile business for individuals (former B2C)
Consolidated subsidiary DTI provides various mobile services for individuals. DTI plans to focus its efforts on the DTI SIM service, which was launched in August 2013.
The DTI SIM, which uses the freebit MVNO Pack, is a high-speed data transmission service using NTT Docomo’s FOMA (3G) and Xi (LTE) networks, realizing low-priced, high-speed, and stable operations. It uses the NTT Docomo network so coverage is wide. FreeBit is using low prices to drive sales, where SIM cards are bought online and sent by post to end users.
Ad Technology
The segment provides solution services for online advertising in areas like search engine optimization (SEO), pay-per-click ads, social media-using services, display ads, and affiliate advertising, by way of proprietary marketing platforms. The segment took over the former Advertising Technology Infrastructure business in FY04/16.
The company’s subsidiary, Full Speed Inc. (Mothers: 2159) and Full Speed’s subsidiary, For it Inc., offer Web marketing services such as pay-per-click ads, affiliate advertising, and search engine marketing advertising solutions. Customers are mainly small and medium-sized enterprises (SMEs), with affiliate ad sales done mainly via agencies and the other advertising products sold directly. Costs comprise personnel expenses for salespeople, media procurement costs and payments for affiliate ads.
Pay-Per-Click Ads
The listing rank of pay-per-click ads depends on the bidding price (set by users). Commissions depend on transaction volume in media where the ads appear, such as the websites of Yahoo Japan Corporation (TSE1: 4689) and Google. FreeBit receives commissions on the order of a few percent. The major advertising agencies are the main players in the pay-per-click market.
Full Speed has developed a “pay-per-click ad automatic optimizing tool” to give its users an advantage. This tool calculates conversion patterns for key words by date and time, and automatically sets the most appropriate publishing pattern using mathematical calculations. It also uses Google and Yahoo Japan’s Application Programming Interfaces to bid and manage the pay-per-click ads automatically.
Affiliate Advertising
Competitors in the affiliate advertising field include such companies as F@N Communications Inc. (JASDAQ: 2461).
For it Inc. uses a program it developed called Affiliate B for personal computers, smartphones and feature phones. For-it offers affiliate services through a network of over 300,000 websites and places ads on leading media sites to take advantage of its own technology, which has synergies with search engine optimization (SEO).
SEM Advertising Solutions
Main competitors in this field include CyberAgent, Inc. (TSE1: 4751) and GMO Internet, Inc. (TSE1: 9449).
Full Speed uses search algorithms to minimize changes in advertising display rank. It is also working to help its users’ ads reach the top ranks more quickly, and stay there when they get there. It has a success-fee based plan and a monthly-fixed price plan. In the fixed-price plan there is a Full Speed group program and a monetized SEM program which offers not only search engine optimization but tools for usability analysis and promotion analysis as well, for a fixed monthly charge. Based on Full Speed’s Internet marketing knowhow (services to attract customers and analysis tools), it aims to maximize its users’ sales promotion results and offers a subscription service to companies.
In addition to the core businesses (SEM advertising solutions, pay-per-click advertising, and affiliate advertising), the Ad Technologies Infrastructure business plans to expand into the territories of third-party ad serving (3PAS) and display ads.
3PAS involves an ad server carrying out overall management, including placing ads in a variety of media and measuring effectiveness. Historically, ads were placed one by one with each advertising medium, but once submitted to the 3PAS ad server they can be published on any media platform, improving ad distribution efficiency.
Display ads were traditionally limited to purchasing advertising space through the advertising agencies of major media outlets such as Yahoo, but this was inefficient and gave rise to a market with leftover inventory. The company can produce a set of customer characteristics based on the user’s search and media browsing history making retargeting easy, which it sells to advertisers. It views this as entering a new market which represents an advance on targeted marketing.
From July 2013, SEM Advertising Solutions started jointly developing with Full Speed an advertising management system for display ads via real time bidding (RTB). Using “Big Data” analysis technology it is possible to distinguish the user characteristics an advertiser is targeting in real time for targeted ad placement. FreeBit aims to grow the ad distribution business through this initiative.
Cloud business
The segment provides a range of cloud services like IaaS (infrastructure as a service), SaaS (software as a service), and VPN (virtual private network), using expertise accumulated in operating data centers in the Broadband Infrastructure business. It also provides a virtual server service and a large-scale mail system, making the most of its cloud technologies. The segment took over the former Cloud Computing segment and the cloud services of the former B2C segment in the segment change in FY04/16.
Cloud services (former Cloud Computing Infrastructure)
The Virtual Data Center business combines the company’s original virtualization technology with operation technology, and its proprietary technology can be used to virtualize entire networks. The company also virtualizes data centers. In traditional data centers, one server unit could only ever be used as one server, but in a VDC, one server unit can theoretically be used as a number of servers. The company is able to use virtualization technology to partition the server into as many as 250 virtual server units. Assuming one rack has 20 servers, there could be 5,000 virtual servers in one rack, and even at a charge of just 500 yen per virtual server, the total is 2.5 million yen. Adding value through technology can enable prices to be set low.
The company states that cloud computing can enable additional traffic to be handled at zero cost because of an advantage that it can use broadband lines it purchased for the cloud business. Broadband networks usually sell both up and downstream capacity, but download volumes overwhelmingly dominate Internet traffic, so there are vacancies in upstream traffic. By using the vacancies for the cloud service, additional traffic cost could virtually be free.
Sales in the VDC business comprise virtual machine user fees (daily charges for vCPU, i.e. no charge when server is off, or monthly charges), UTM （Unified Threat Management) fees (monthly charges), and network costs (pay-as-you-go or flat charges).
Disaster Recovery
Disaster Recovery is likely to grow even faster due to natural calamities and corporate data backup needs. With this in mind, the company entered the Disaster Recovery business in FY04/14, offering the Cloud Backup product to large corporations and CloudDisk Local Backup to small- and medium-sized corporations.
Disaster Recovery refers to the restoration and repair of systems damaged in natural disasters, or the provision of equipment or systems in anticipation of such events. MIC Research Institute forecasts that the Japanese domestic disaster recovery market will grow by an average of 10% per year to reach 281 billion yen in 2016.
CloudDisk Local Backup entails moving in-house servers to the cloud (Cloud Disk). It makes data management more convenient and avoids what had traditionally been troublesome to maintain and had limited access. At the same time, it lessens risk by automatically backing up data at regular intervals in a dedicated machine on office premises. The company sells the service through its sales agents (including its own ISP agents) involved in direct sales.
Cloud services (part of the former B2C segment)
This business, taken over from the former B2C segment, includes ServersMan@VPS and ServersMan@Disk with individuals as users.
Main group companies (As of end April 2015, shares in parentheses, including indirect holdings）
Consolidated subsidiaries
Equity-method affiliate
Profitability snapshot, financial ratios
Note: Figures may differ from company materials due to differences in rounding methods.
Market and Value Chain
Market overview
Broadband market with continued propensity to expand, driven by mobile broadband
According to MM Research Institute’s survey in November 2014, there were102.1m broadband subscribers in Japan (end September 2014), topping the 100m threshold. This includes fiber-to-the-home (FTTH), Asymmetric Digital Subscriber Line (ADSL), Cable TV (CATV), Long-term Evolution (LTE) and Broadband Wireless Access (BWA). FTTH contracts rose by 713,000 (3%) from end March 2014 to 26.1 million at end September 2014. The net increase slowed from 757,000 in the same period a year before. The institute forecasts that growth of FTTH will continue slowing due to expansion of mobile terminals and high-speed mobile data transmission, although there will be some expansion of demand owing to the development of wholesale of optical fiber services by NTT.
By type of network, mobile broadband (LTE and BWA) numbers are rising due to soaring numbers of smartphones and high-speed mobile users. At end September 2014, fixed lines (FTTH, ADSL, and CATV) accounted for 34.7% while mobile (LTE and BWA) accounted for 65.3%.
The institute expects that fully spread services over the next five years of BWA, such as LTE-Advanced, WiMAX, and AXGP, will boost mobile broadband users further, with the number likely to total 82.5 million at end March 2015 and surpass 100 million during FY2015. As a result, the institute forecasts that mobile users will account for 79.8% of overall broadband users at end March 2019.
Online advertising grows in importance
Out of 21 industries, ad costs highest in cosmetics/toiletries; 2014 outpaced market growth
Japan’s total advertising spending was JPY6.2tn in 2014, up 2.9% YoY, marking a third consecutive annual increase despite the 2014 consumption tax hike, according to a report on advertising expenditures released by Dentsu Inc. (TSE1: 4234) in February 2015. Of the country’s 21 sectors, 14 increased advertising spending through newspapers, magazines, radio, and television (excluding satellite media).
Spending by media type (year-on-year comparisons in parenthesis)
▷ Newspapers (98.2%)
▷ Magazines (100%)
▷ Radio (102.3%)
▷ TV (102.8%)
▷ Internet (112.1%)
Advertising spending through newspapers, magazines, radio, and television grew 1.6% YoY. The market for online advertising exceeded JPY1tn for the first time, by rising 12.1% YoY due to services targeting smartphones and ads using new technologies and video clips. Spending on promotion media also increased for three years in a row, increasing by 0.8% YoY.
Online advertising, FreeBit’s specialty, comprised 17.1% of all ad spending, compared with 15.7% a year earlier. The ratio represents more than a threefold increase from 10 years ago as more people use the internet with the spread of smartphones. The company expects this trend to accelerate.
Strengths and weaknesses
Strengths
Senior management: deep industry knowledge: Senior managers are pioneers in the Japanese Internet industry, according to the company. Founder Mr. Ishida has deep technical knowledge and is well connected. The former chairman of Sony Corporation (TSE1: 6758), Nobuyuki Idei, and Jun Murai, a Professor of Keio University, are within his circle. Dr. Murai is known as the father of the Internet in Japan, and Mr. Ishida studied under him at university. Mr. Ishida’s experience underpins alliances that cross industry
Recurring income business: Around 90% of the company’s revenues are recurring income streams linked to total subscriber numbers. This business model enjoys stable cash flows.
Imagination and strength in developing niche markets: Trying a variety of business models and looking everywhere for the potential of the Internet is in the company’s DNA. For example, the low-cost, low-speed ServersMan SIM LTE data service is a unique product serving the needs of a niche market. It is still hard to tell whether the long-term vision that the company has set forth under the names lifestyle revolution and production revolution will succeed. But such pronouncements make investors aware of the company’s long-term potential.
Weaknesses
Too many focuses: For its small size, the company operates under a broad vision that may be interpreted as focusing on too many business areas. FreeBit has started or bought businesses only to exit many of them at a loss. As a result of these excursions outside what Shared Research would define as FreeBit’s core business, coupled with aggressive acquisitions, the company’s financial strength tended to weaken. In FY04/15, the financial position improved due mainly to the capital alliance with CCC (leading to a capital increase of around JPY3bn), with its equity ratio rising to 50.9%, current ratio to 180.4%, and the ratio of interest-bearing debt to operating cash flow improving to 1.4x (end FY04/15). Their future moves deserve attention as the company remains aggressive in developing new businesses.
Operates in oligopolistic markets controlled by large players: Although the degree of concentration varies for different components of FreeBit’s business, it tends to be a dwarf among giants. As a result, it appears difficult for the company to attain and sustain lasting advantage or build a sizeable business, making it a perennial small niche player.
Historically, governance issues: the company’s organizational structure is difficult to manage and operate, given the complexity of numerous subsidiaries and affiliated companies. In order to avoid a repeat of similar incident that came to light in 2013 when its subsidiary was involved in accounting irregularities, stronger governance and a simpler organization are needed.
Historical performance
Historical results
Previous earnings results (for reference purposes)
Full-year FY04/21 results
*Net income/loss attributable to owners of the parent
In FY04/21, the company sold off its FreeBit EPARK Healthcare business (Health Tech segment) and the ALC Press business (Ed Tech segment); as a result, full-year sales declined YoY. Meanwhile, all profit levels improved YoY thanks to higher service demand that lifted profit in the internet infrastructure category. The company's business restructuring efforts also contributed to profits growth.
Infrastructure Tech
Sales were up YoY on the back of increased demand for mobile communication infrastructure services such as MVNO support package services and internet security services. The rise in demand was driven by the spread of home-based learning and telework amid the pandemic, which led to greater user access to online classes, meetings, and videos through their home Wi-Fi networks. Still, segment profit fell YoY; the cost ratio of fixed-line services remained high, mainly due to greater traffic of data-heavy content such as videos.
Real Estate Tech
In the area of internet services for housing complexes, to expand the number of households it serviced, FreeBit focused on obtaining a steady stream of orders from major customers while winning new customers. For newly constructed properties, the company stepped up its sales efforts for PWINS, a new product that eliminates the need for construction work when replacing equipment in the future. For existing properties where the company expects further demand in the future, it promoted sales of SPES with the aim of expanding market share. As a result, the company achieved growth in the cumulative number of households it serviced, and sales and segment profit finished up YoY.
Advertising Technology
Sales and earnings were down YoY in this segment, since consumers chose to stay at home amid the pandemic, which meant the company was less successful in soliciting online ad viewers to visit the brick-and-mortar stores of the advertisers. In FY04/21, the company focused on online advertising services centered on its advertising technology-related services such as DSP marketing. Additionally, it worked to cultivate new markets that are more immune to the spread of COVID-19.
Health Tech
All shares held by the company in Freebit EPARK Healthcare, the main business in this segment, were sold on October 30, 2020. Freebit EPARK Healthcare and its subsidiaries were excluded from the scope of consolidation in Q2 FY04/21 (August-October 2020), resulting in lower sales and higher profit YoY in this segment.
Ed Tech
All shares held by the company in ALC Press, the main business in this segment, were sold on November 30, 2020, and ALC Press and its subsidiaries were excluded from the scope of consolidation. As a result, segment sales fell but segment loss narrowed YoY.
Cumulative Q3 FY04/21 results
*Net income/loss attributable to owners of the parent
In cumulative Q3 FY04/21, sales declined but profits grew YoY. In addition to the effect of excluding For Members, FreeBit EPARK Healthcare and ALC Press from the scope of consolidation, sales were also affected by the impact of the COVID-19 pandemic on the Advertising Technology business. On the other hand, due to the expansion of the company's communication infrastructure services such as mobile communication infrastructure services, cloud-related services, and internet services for housing complexes, operating profit and other profit lines increased YoY.
Infrastructure Tech
The cost ratio on fixed-line services remained high as users accessed more data-heavy content such as online classes, meetings, videos, and games, and used social media more frequently through home Wi-Fi networks with the spread of home-based learning and telework resulting from the pandemic. However, due to increased demand for mobile communication infrastructure services such as MVNO support package services and internet security services, sales and profits increased year on year. Tone mobile, a smartphone service developed by DTI, has launched the “Go To Anshin Smartphone” campaign, with the price of the current 2020 model devices (TONE e20) cut to zero to increase the number of users.
Real Estate Tech
In addition to the steady trend of growth in internet services for housing complexes, profits were helped by the exclusion of For Members from the scope of consolidation in the first half of the year, resulting in higher sales and profits YoY. In addition, the company focused on expanding its service offerings to differentiate itself from its competitors. These included the installation of PWINS (Wi-Fi access point for housing complexes) and Giga Direct Connect (dedicated line internet connection service for large housing complexes) that aims to improve user convenience by enabling safe and secure teleworking and video viewing for residents as well as increase the value of the properties for the owners.
Advertising Technology
In addition to focusing on the rollout of performance marketing platform afb, a performance fee-based product, the company worked on expanding the influencer business by starting to offer a beta version of the influencer service, Influencer DX, using analysis technology based on big data and AI. The business has been on a recovery trend following a period of sharp decline due to the pandemic and has benefited from demand in the beauty and finance sectors as a result of consumers staying at home.
Health Tech
All shares held by the company in Freebit EPARK Healthcare, the main business in this segment, were sold on October 30, 2020. Freebit EPARK Healthcare and its subsidiaries were excluded from the scope of consolidation in Q2 of the current fiscal year (August-October 2020), resulting in higher sales and profit YoY in cumulative Q3.
Ed Tech
All shares held by the company in ALC Press, the main business in this segment, were sold on November 30, 2020. ALC Press and its subsidiaries were excluded from the scope of consolidation in Q3 of the current fiscal year (November 2020 – January 2021), resulting in lower sales and narrower loss YoY in cumulative Q3.
1H FY04/21 results
*Net income/loss attributable to owners of the parent
In 1H FY04/21, sales and profit grew YoY. Demand for the company’s telecom infrastructure services rose due to higher demand for telework as a result of the COVID-19 pandemic.
Infrastructure Tech
As in Q1, the cost ratio on fixed-line services remained high as users accessed more data-heavy content such as online classes, meetings, videos, and games, and used social media more frequently through home Wi-Fi networks with the spread of home-based learning and telework resulting from the pandemic. At the same time, sales and profit rose YoY, aided by higher demand for telecom infrastructure services, including MVNO support package services, as telework adoption spread rapidly.
Real Estate Tech
The company strengthened ties with a major partner and focused on expanding the number of houses serviced, mainly through selling SPES to existing properties. This led to steady growth in internet connection services geared toward housing complexes, which resulted in higher sales and profit.
Advertising Technology
In addition to focusing on expanding the influencer business, the company worked on growing online advertising services centered on advertising technology-related services such as DSP marketing and content for the video ad market. In addition, for affiliate ad services, the company worked to expand businesses that leverage its affiliate platform’s strength of high affiliate satisfaction while widening its scope of services. However, the COVID-19 outbreak adversely affected sales and profit in the advertising business, especially for travel advertising and advertising services to increase store traffic.
Health Tech
The Health Tech business had posted losses since its launch in 2016. However, the business continued to grow in scale, mainly driven by customer acquisitions for FreeBit EPARK Healthcare’s drug history notebook app and solution services for pharmacy operators. As a result, sales grew YoY and the segment turned a profit.
Ed Tech
At subsidiary ALC Press, which operates the Ed Tech segment, sales and profit fell substantially YoY as services were suspended at the instructor-dispatch language training and study abroad-related businesses due to the COVID-19 pandemic. In addition, earnings from its mainstay book sales business were down.
Q1 FY04/21 results
*Net income/loss attributable to owners of the parent
The company reported higher sales and profits YoY in Q1 FY04/21. Demand for the company’s telecom infrastructure services rose due to higher demand for telework as a result of the COVID-19 pandemic.
Infrastructure Tech
The cost ratio on fixed-line services remained high as users accessed more data-heavy content such as online classes, meetings, videos, and games, and used social media more frequently through home Wi-Fi networks with the spread of home-based learning and telework resulting from the pandemic. At the same time, sales increased and profit doubled due to higher demand for telecom infrastructure services, including MVNO support package services, as telework adoption spread rapidly.
Real Estate Tech
Sales and profit both increased thanks to steady expansion in internet connection services geared toward housing complexes. In addition, the company invested in the field of real estate tech for future expansion and improved line quality.
Advertising Technology
In addition to focusing on expanding the influencer business, the company worked on growing online advertising services centered on advertising technology-related services such as DSP marketing and content for the video ad market. Further, for its affiliate ad services, the company expanded its business base by aggressively expanding its overseas operations and developing new businesses. However, the COVID-19 outbreak adversely affected both sales and profit in the advertising business, especially for advertising services to increase store traffic.
Health Tech
The Health Tech business had posted losses since its launch in 2016. However, the business continued to grow in scale, mainly driven by customer acquisitions for FreeBit EPARK Healthcare’s drug history notebook app and solution services for pharmacy operators. The company also liquidated unprofitable businesses, which led to improved profitability. As a result, sales grew YoY and the segment turned a profit.
Ed Tech (established in Q3 FY04/19)
At subsidiary ALC Press, which operates the Ed Tech segment, sales and profit fell substantially YoY as services were suspended at the instructor-dispatch language training and study abroad-related businesses due to the COVID-19 outbreak. In addition, book sales were down due to the closure of bookstores during the Japanese government’s emergency declaration.
Balance sheet
Note: Figures may differ from company materials due to differences in rounding methods.
Income statement
Note: Figures may differ from company materials due to differences in rounding methods.
Statement of cash flows
Note: Figures may differ from company materials due to differences in rounding methods.
News and topics
Dividends of surplus
On June 11, 2021, FreeBit Co., Ltd. announced the details on dividends of surplus.
FreeBit decided to pay a year-end dividend of JPY7 per share for FY04/21, based on its policy of maintaining stable dividend payment with due consideration to the company's financial standing. It had previously left dividend payment for FY04/21 as "undetermined," given the uncertainties surrounding the COVID-19 pandemic's impact on the operating environment.
Revision of earnings forecast, booking of impairment losses (extraordinary losses), and the final amount booked for gains on sales of investment securities
FreeBit Co., Ltd. announced the revision of earnings forecast, booking of impairment losses (extraordinary losses), and the final amount booked for gains on sales of investment securities (non-operating income).
Revised full-year FY04/21 forecasts
Reasons for revision
The previous forecast factored in the impact of a fourth wave of the COVID-19 pandemic in addition to the third wave that hit at the time of formulating the forecast. As businesses in the internet infrastructure category (Infrastructure Tech, Real Estate Tech) performed well, the company expects the earnings to outperform its previous forecast. In addition, the company executed upfront investment largely in line with plans, with a view to medium- to long-term growth. Key initiatives included expansion of human resources, creation of office environment that is compatible with "new normal," liquidation of assets related to 3G and 4G technologies, and investment in pre-5G technology (related to new businesses). FreeBit planned to complete pre-5G-related investment in FY04/21, but some budget remained unspent. Since the company intends to invest this unspent portion in FY04/22, it has made an upward revision to sales and operating profit forecast for FY04/21.
The company expects recurring profit to exceed its previous forecast, backed by the operating profit growth, coupled with gains on sales of investment securities (non-operating income) realized after the sales of shares of a listed company held by consolidated subsidiary FreeBit Investment Co., Ltd (disclosed in February 2021). It expects gains on sales of investment securities of JPY295mn (JPY180mn in the previous forecast).
The company expects net income attributable to owners of the parent to go above the previous forecast on the back of recurring profit growth, despite the booking of impairment losses. In FY04/21, the company reevaluated its asset holdings after reviewing profitability of existing businesses in the wake of reorganization of data centers. As a result, it will record impairment losses of JPY243mn as extraordinary losses.
Revisions to its full-year FY04/21 earnings forecast
On December 11, 2020, the company announced revisions to its full-year FY04/21 earnings forecast.
Revised FY04/21 earnings forecast
Reason for revision
Sales: The company expects demand for infrastructure-related businesses such as mobile services and internet connection services geared toward housing complexes to be strong on the back of heightened telework and stay-at-home demand driven by the COVID-19 pandemic, but has an uncertain outlook on the Advertising Technology business centered on affiliate advertising. In addition, it expects sales to decline following the divestiture of its Health Tech and Ed Tech businesses due to the sale of shares in FreeBit EPARK Healthcare and ALC Press, as disclosed in September 2020, and the divestiture of its real estate brokerage business, as disclosed by GIGAPRIZE Co., Ltd. in the same month.
Operating profit: In addition to the investment plans laid out at the beginning of FY04/21, the company intends to make investments in product development, infrastructure upgrades, growth-oriented personnel expansion, and building an office environment suited for new work styles to prepare for the full-scale rollout of 5G services to ensure continued growth under the new medium-term management plan “SiLK Vision 2024.” Meanwhile, it expects operating profit to come in above the previous forecast, thanks to strong performance in the infrastructure business through 1H, as well as narrower losses from the divestiture of the Ed Tech business, which was affected by the pandemic.
Net income attributable to owners of the parent: Although the company anticipates investment in relocation and optimization of fixed networks and data centers, as well as retirement of legacy equipment in preparation for the full-scale rollout of 5G services, it expects net income to exceed previous forecast owing to the upward revision to operating profit and extraordinary gains from the sale of shares in FreeBit EPARK Healthcare and ALC Press.
Other information
History
FreeBit’s Chairman and CEO, Atsuki Ishida, started Re-set LLC, an Internet content creation and consulting firm, with Nobuaki Tanaka (current President and CFO), in August 1995 while studying at Keio University. From the dawn of the Internet era, his activities attracted industry attention. He subsequently helped establish DTI, an ISP affiliated with Mitsubishi Electric, and spearheaded the growth of the business. He left DTI prior to the company’s initial public offering (IPO), and in May 2000, established FreeBit.com, the forerunner to the current company. He built the business from a core outsourcing service for Internet companies that wanted to run a business without owning all the equipment (as an ISPs’ ISP), which is now the Broadband Infrastructure business.
In December 2001, the company entered a capital alliance with Sony to strengthen its position in anticipation of the increasing links between networks and consumer electronic devices. In December 2002, the company changed its name to FreeBit. In June 2005, it entered capital tie-ups with SKY Perfect JSAT Holdings Inc. (TSE1:9412) and OBIC Business Consultants Co., Ltd. (a subsidiary of OBIC Co., Ltd.; TSE1: 4684), to enhance the evolution and expansion of the businesses associated with Emotion Link (FreeBit’s patented SDN technology). In March 2007, FreeBit listed its shares on the Mothers section of the Tokyo Stock Exchange. It then conducted a number of M&A deals in rapid succession. In August 2007, it acquired DTI, and in March 2009, it bought Media Exchange (now FreeBit Cloud) and Exemode. It also made Full Speed a subsidiary in August 2010, as it continued to aggressively expand business.
In March 2011, the company launched the YourNet MOBILE MVNO service using NTT Docomo’s network. In April that year, Exemode acquired sole agency rights for Japan of China’s largest digital consumer electronics device maker, aigo, and started operations in Japan involving aigo’s hardware connected with its own patented IPv6 virtualization technology.
In November 2013, the company started smartphone carrier business for consumers under the freebit mobile service brand. In March 2015, however, FreeBit and CCC established Tone mobile Inc., a joint venture firm, with the aim of boosting sales of the freebit mobile business, which was transferred to the JV.
Major shareholders
Note: Shareholdings as of April 30, 2020
Atsuki Ishida and Nobuaki Tanaka are among the company’s founders. Jun Murai is a Keio University Professor, and since the dawn of the Internet era in Japan, has been involved in building its technological infrastructure. Mr. Murai is known as the father of the Internet in Japan. Atsuki Ishida studied under him in his student days.
Top management
FreeBit’s Chairman and CEO, Atsuki Ishida, started Re-set LLC, an Internet content creation and consulting firm while studying at university. This made him suited to participate in the creation of Dream Train Internet Inc. (DTI), an ISP affiliated with Mitsubishi Electric, and to drive the company’s growth. After being appointed Chief Strategy Officer at DTI, he became responsible for the overall business, including planning, advertising and content development. In 2000, he founded FreeBit, and was appointed President and CEO. In February 2015, Ishida was appointed Chairman of FreeBit and President of Tone mobile.
FreeBit President Nobuaki Tanaka (born 1967) had engaged in planning and editing of computer magazines as a freelancer since 1991. In 1995, he established Re-set with Ishida and became representative director. Also joining the foundation of DTI, Tanaka assumed the office of director and supervised the administration and business promotion divisions. Founding FreeBit in 2000 with Ishida and others, he was appointed Vice President and COO. In February 2015, Tanaka assumed the presidency of the company.
Investor relations
The company holds investor briefings twice a year following interim and full-year business results.
Glossary
Moore’s Law
A rule-of-thumb observation by Dr. Gordon Moore, one of the founders of Intel, who in 1965 suggested that semiconductor integration density (capacity) doubles every 18-24 months
Component
Software componentized to fulfill a function.
ISP
Internet Service Provider. Its main business is connecting the computers of its customers (i.e., users) - businesses or households - to the Internet using the telephone network, ISDN or ADSL networks, FTTH (fiber-to-the-home) or dedicated data transmission lines. Customers are able to use Internet services upon signing a contract with an ISP.
MVNO
Mobile Virtual Network Operator. MVNOs do not own their own infrastructure, but lease wireless telecommunications infrastructure from telecommunications carriers. As they are using the equipment of operators with mobile licenses, unlicensed businesses are also able to offer mobile telecommunications services. Given that MVNOs do not own infrastructure, they can begin operations with limited investments. It is thus feasible to run businesses that otherwise would not be viable, that is those that would ordinarily take time to turn profitable and those where demand was thought too small-scale. The Ministry of Internal Affairs and Communications is promoting the entry of MVNOs through its Guidelines for MVNOs (Mobile Virtual Network Operators) related to Applications of Telecommunications Business Law and the Radio Law Pertaining to MVNO (draft released in June 2002, subsequently revised). Lowering barriers to entry in the mobile telecommunications business promotes competition and benefits users through making diverse and low-priced services available.
L2 connection
Layer 2 Connection. Under L2 connections, the MVNO can manage sessions and allocate IP addresses, so there is a greater degree of freedom in service design than Layer 3 connections. The International Standards Organization (ISO) Open Systems Interconnection (OSI) model specifies a network design so that different machines are able to transmit data to each other. Under this model, the functions that computers and other devices with telecommunications capabilities need are divided into seven layers. Layer 2 is the second (data link) layer, and Layer 3 is the network layer.
Xi (Crossy)
Brand name for LTE data transmission service for mobile phones and tablets offered by NTT Docomo.
LTE
Long-term Evolution. A standard for mobile telephony offering higher speeds than 3G. Sometimes referred to as 3.9G in the sense of being a bridge between 3G and 4G, and also sometimes counted as one type of 4G.
IPv6
A next-generation Internet Protocol. Based on the current Internet Protocol, IPv4, which is running out of IP address space, offers enhancements such as larger address space, additional security functions, and the ability to prioritize data transmission based on importance.
Hosting services
One way to use a data center. The user leases servers and/or networks owned by the data center operator, and runs applications. Also known as rental servers.
Virtual private network (VPN)
A service which enables use of the public network as if it were a private network. For example, it can be used for connecting different offices in a corporate network. Costs are contained through the use of private lines.
Housing service
One way to use a data center. A company places its own servers and/or network equipment in a data center, and uses the electricity, network, and a space to install the server rack provided by the data center operator.
Server rack
A dedicated rack where it is possible to install a stack of thin computers. These are installed in Internet Data Centers (IDCs) and companies’ information systems divisions.
Cloud computing
A form of computing whereby it is possible to use all the equipment installed in a group of servers in a data center without being aware of the particular servers. Based on virtualization technology.
VDC
Virtual Data Centers form the infrastructure of a next-generation data center service through the virtualization of the data centers themselves. Construction of a VDC entails virtualization of the servers, networks, storage and security. This creates an environment free from the constraints of place, hardware and provisioning (user demand forecasts).
Virtualization
Technology enabling the operation of one server as though it were several by logically dividing it and running separate operating and application software on the different virtual servers. It may also refer to technology that enables the operation of a number of scattered data centers as though they were one large data center.
UTM
Unified Threat Management. Refers to integrated management of multiple security functions, including antivirus, intrusion prevention, and content filtering, based on a firewall and VPN functionality. It may also refer to equipment which incorporates these various security features.
SDN
Software Defined Network. Technology which uses a single software application for centralized control of the equipment that makes up a computer network. This enables flexible and dynamic changes to the network’s structure, composition and settings. It may also refer to using similar technology to create a number of virtual networks adapted to particular purposes. These may be, to a certain extent, independent of the physical composition of the network such as the location of network equipment or transmission lines, or a network built along such lines. Network virtualization refers to technology which enables the operation of multiple logical networks on a single physical network.
SEO
Search Engine Optimization. One strategy for displaying a company’s own website at the top of search results when a particular keyword is entered into a search engine.
SEM
Search Engine Marketing. Using not only SEO, but using paid search (ad displays when a keyword is searched for) as well. A marketing strategy aimed at attracting paying customers through a search engine.
Pay-per-click advertising
A scheme whereby an ad linked to keywords is displayed alongside the results of an Internet search. Advertisers pay the publisher when the ad is clicked.
API
Application Programming Interface. An interface for an operating system (basic software), application software or Web applications that enables a portion of its own functionality to be easily used by an external application (software or Web service).
Affiliate advertising
A success-fee type of online advertising. The company introduces an affiliate program, under which affiliate member websites and e-mail magazines list their advertisements. Advertising fees are paid when the end result is a purchase or on a per-click basis.
RTB
Real Time Bidding. One type of ad exchange advertising placement technology. Through an auction system it selects the optimal ad for each space as it becomes available in real time. The advertiser’s agent will only submit a bid to the ad exchange if the impression is judged suitable for the advertiser. That is, if it meets the advertiser’s criteria related to the website visitor, publisher and ad display frequency. It is thus an efficient placement method for publishers and cost effective for the advertiser. An ad exchange is where impressions for specific online ad spaces are sold under an auction system, with multiple advertisers bidding through an intermediary.
DSP
Demand-Side Platform. An advertising placement platform used by advertisers (buyers). A DSP offers the advertisers control over budgets, ad submissions, and publication. It also offers the ability to choose the most appropriate ad frame based on budget and user characteristics, and optimization of placement criteria based on past results.
SSP
Supply-Side Platform. Used by the media owners, it is an advertising distribution platform which bundles advertising media.
Display ad
One sort of online ad. A banner ad which is embedded in part of a Web page as a picture, flash object or video.
Ubiquitous
An environment where the Internet or other information networks can be accessed at anytime from anywhere. Once ubiquitous spreads, it will allow work and leisure activities to be carried out regardless of location.
ICT
Information and communications technology. An umbrella term for the technology, industries, equipment and services related to computers and networks.