Executive summary

Business overview

ZUU Co., Ltd. runs ZUU Online, a site targeting individuals with financial assets of more than JPY30mn. The site contains financial and economic news and feature columns (information the company considers useful for investing). The company provides information about crowdfunding products, investment consulting services, and products targeting high-net-worth individuals. ZUU also sells MP Cloud (a content management system it developed for ZUU Online) to financial institutions.

Kazumasa Tomita, ZUU’s CEO, founded the company in March 2013. Before that, Mr. Tomita worked at Nomura Securities Co., Ltd. (the core company of Nomura Holdings, Inc., TSE1: 8604), where he gained experience in asset management services targeting business owners and other high-net-worth individuals. In FY03/21, the company generated revenue of JPY2.8bn (+51.0% YoY) and operating profit of JPY14mn (operating loss of JPY107mn in FY03/20). From FY03/22, the company has designated its service categories as “retail fintech” (targeting individuals) and “corporate fintech” (targeting businesses and company owners). In Q1 FY03/22, retail fintech produced revenue of JPY627mn and operating profit of JPY288mn, while corporate fintech generated JPY142mn in revenue and an operating loss of JPY26mn (comparable figures not disclosed for Q1 FY03/21).

Retail fintech: The company produces revenue in four ways (from largest to smallest). The first is advertising revenue from customer referrals (performance-based advertising). Second, the company sells MP Cloud (a content management system for websites) to financial institutions and earns listing fees from virtual stores operating on ZUU Online. The third source of revenue is advisory/matching commissions, and the fourth is membership fees. Customers in the first category are mainly financial institutions (securities, credit card, and FX companies). In the second category, customers include banks and other financial institutions, as well as non-financial institutions, such as NTT Docomo Inc. (Nippon Telegraph and Telephone Corporation, TSE1: 9432). Customers in the third category are high-net-worth individuals that use ZUU Online. In the fourth category, customers are ZUU Online users.

In Q1 FY03/22, monthly unique users (UUs) of the company’s media platform (including ZUU Online) totaled 14.8mn (CAGR of 96.6% from FY03/14 to FY03/21), members (paying plus non-paying) numbered 149,000 (CAGR of 78.1% from Q1 FY03/20 to Q1 FY03/22), and ARPU was JPY2,600 (CAGR of 14.0% over the same period).

The rise in ARPU was due mostly to increases in per-customer revenue from referrals and advertising. Revenue from customer referrals is a product of the number of unique users, the conversion rate, and amount per customer referral. To increase the conversion rate, the company publishes articles by experts (to boost the site’s credibility) and maintains constant control over the information it provides. It controls information by adjusting screen layouts, ad space, and the information it sends users. Advertising revenue is a product of the number of impressions (number of times an ad is shown) or page views times unit advertising fees. ZUU provides MP Cloud to other companies, and some content is shared. The content is linked through a single sign-on (logon with a single ID and password allows access to multiple web services and applications). The company explains that mutual customer referrals help boost the number of page views.

According to the company, the value of online transactions in the finance-related sector (investment trusts, life insurance, home loans, and real estate) exceeds that of consumer goods (clothing, food, and the like). Accordingly, ZUU can command higher rates from its advertisers than would be possible for ads for consumer goods.

Corporate fintech: ZUU generates revenue through organizational consulting (PDCA and other corporate services) and the generation of funds through crowdfunding.

PDCA services (PDCA Cloud and PDCA Engineering) target the CEOs and owners of small and medium-sized companies. PDCA Cloud uses cloud computing to make the PDCA process visible in management and sales. PDCA Engineering is a type of business/organizational consulting that leverages the Onisoku PDCA approach. “Onisoku,” which means “very fast,” is a term coined by CEO Kazumasa Tomita. Onisoku PDCA refers to high-speed application of the PDCA cycle. A book about this approach, Onisoku PDCA, was published in October 2016.

The company uses The Owner, a media platform for providing information to company owners, to attract potential customers and sell PDCA services. In Q1 FY03/22, The Owner generated 2.6mn monthly page views (+168.3% YoY). Members totaled 21,500 (+860.0% YoY) and total company owner leads came to 12,000 (+200.0% YoY).

Average revenue per account (ARPA) was JPY4.4mn (+6.3% YoY). ARPA is revenue from corporate fintech divided by the number of revenue-generating customers. CAGR was 18.2% from Q1 FY03/20 to Q1 FY03/22. PDCA Engineering is the largest component of ARPA, followed by equity-type crowdfunding. Other components are PDCA Cloud, loan-type crowdfunding, M&A brokerage, and matching. ARPA is growing thanks to an expanded service lineup, starting with PDCA Cloud and PDCA Engineering and extending to IPO and IR support.

In corporate fintech, the company generated an operating loss because expenses (for marketing and to hire the IT personnel to develop services) precede the acquisition of customers for PDCA services and crowdfunding. According to the company, it takes 4.2 months to recover costs. (This figure is calculated as LTV per month of JPY430,000 divided by customer acquisition cost of JPY1.8mn. LTV per month is average annual revenue from a corporate fintech client during the year after customer acquisition, divided by 12.)

Earnings trends

In FY03/22 revenue was JPY3.4bn (+21.0% YoY), the operating loss was JPY245mn (JPY14mn operating profit in FY03/21), the recurring loss was JPY243mn (JPY8mn recurring profit in FY03/21), and the net loss attributable to owners of the parent was JPY231mn (JPY300mn net loss in FY03/21). Retail fintech produced revenue of JPY2.6bn (+29.5% YoY), and corporate fintech delivered JPY783mn (-0.5% YoY). Counting only the costs associated directly with each domain, retail fintech generated operating profit of JPY853mn, and corporate fintech incurred an operating loss of JPY198mn.

The company's FY03/23 forecast projects revenue of JPY3.7bn (+10.1% YoY), operating profit of JPY372mn (versus operating loss of JPY245mn in FY03/22), recurring profit of JPY370mn (versus recurring loss of JPY243mn in FY03/22), and net income attributable to owners of the parent of JPY216mn (versus net loss of JPY231mn in FY03/22).
The company plans to focus on profits in FY03/23. As a result, it aims for record-high operating profit, of JPY372mn. The company expects to grow profits through SEO recovery in retail fintech, higher revenue from corporate fintech (now that it has made upfront investments to build the foundations for the business), and by benefiting from an improved cost structure (the result of upfront investments). The company notes, however, that when OPM exceeds 10%, it will redirect profit toward investments in future business growth.

The company has no formal medium-term management plan. However, the company has said it plans to build an investor user base on a media platform, centered on ZUU Online, that it will use to match users with financial products and services. ZUU also intends to expand its asset consulting and product offerings, such as crowdfunding product guides and matching with independent financial advisors.

Strengths and weaknesses

Strengths:

The company has a strong sense of awareness of its role in helping financial institutions use IT to attract customers. ZUU offers a more extensive service lineup than competitors that focus specifically on media operation.

ZUU has more users and members than other finance-focused media and is the first choice for financial institutions aiming to attract customers over the internet.

ZUU uses MP Cloud to configure media for other companies. These media are then linked to ZUU’s own to generate mutual customer referrals and increase access and member numbers.

Weaknesses:

Most ARPU from the media platform comes from customer referrals and advertising revenue, which are susceptible to economic fluctuations and advertisers’ choices.

Recognition of ZUU Online is low, and the numbers of unique users and total members are lower than for sites that do not focus on finance.

The market for loan-type crowdfunding market is immature, and the market is affected by issues that ZUU cannot control, such as scandals at other companies.

Key financial data

Recent updates

ZUU records non-operating exenses and extraordinary losses

On May 13, 2022, ZUU Co., Ltd. announced financial results for FY03/22, which included the posting of non-operating expenses and extraordinary losses.

The company evaluated its holdings of investment securities and determined that the actual value had fallen significantly below their book value. The company recorded this impairment as a loss on valuation of investment securities, recording JPY30mn in extraordinary losses.

As the company continues to generate losses in its Crowdfunding business, it has declared a loss on the valuation of shares of subsidiaries and affiliates, recording JPY87mn in extraordinary losses. In addition, the company recorded as non-operating expenses a JPY75mn provision for doubtful accounts on loans to consolidated subsidiaries.

As the valuation losses and provision for doubtful accounts are eliminated in the consolidated financial statements, the company’s consolidated financial results are unaffected.

Trends and outlook

Quarterly trends and results

Full-year FY03/22

Operating performance

• Revenue: JPY3.4bn (+21.0% YoY)
• Operating loss: JPY245mn (JPY14mn operating profit in FY03/21)
• Recurring loss: JPY243mn (JPY8mn recurring profit in FY03/21)
• Net loss attributable to owners of the parent: JPY231mn (JPY300mn net loss in FY03/21)

Retail fintech produced revenue of JPY2.6bn (+29.5% YoY), and corporate fintech delivered JPY783mn (-0.5% YoY). Counting only the costs associated directly with each domain, retail fintech generated operating profit of JPY853mn, and corporate fintech incurred an operating loss of JPY198mn.

The company reported 20,660,000 unique users of the retail fintech media platform, up 61.2% from 12,816,000 in FY03/21. Total membership was 160,000 (+10.3% YoY, +1.9% QoQ), and ARPU was JPY3,300 (1.65x YoY, +32.0% QoQ).

In corporate fintech, The Owner had 2,598,000 monthly PVs, the number of members was 37,000 (2.3x YoY, +18.2% QoQ), the total number of company owner leads was 18,000 (+63.6% YoY, +20.0% QoQ), and ARPA was JPY3.9mn. The total amount generated from Cool (loan-type crowdfunding) was JPY507mn (JPY121mn in FY03/21), and the number of deals to date was 17 (four). The amount raised to date through Unicorn (equity-investment-type crowdfunding) was JPY628mn (JPY419mn in FY03/21), and the number of deals to date was 35 (19).

Fintech Platform business

Despite a temporary decline in performance stemming from search engine algorithm changes implemented in July 2021, overall performance in the customer referrals business continued to be strong thanks to growing awareness regarding the company's media and a steady user visit count. Additionally, the company continued to generate strong results through its business of furnishing and providing operational support for media systems, which is centrally focused on MP Cloud. On the other hand, the company incurred advertising expenses associated primarily with video-based in-car taxi cab advertisements for PDCA-related services. Consequently, segment revenue was JPY3.3bn (+23.4% YoY), and the operating loss was JPY49mn (compared to operating profit of JPY247mn in FY03/21).

Crowdfunding business

In FY03/21, the company began building a system for the direct provision of financial services. Because these costs are front-loaded, revenue in FY03/22 was JPY78mn (-31.5% YoY), and the operating loss was JPY196mn (operating loss of JPY232mn in FY03/21).

Company forecast for FY03/23

• Revenue: JPY3.7bn (+10.1% YoY)
• Operating profit: JPY372mn (versus an operating loss of JPY245mn in FY03/22)
• Recurring profit: JPY370mn (versus a recurring loss of JPY243mn in FY03/22)
• Net income attributable to owners of the parent: JPY216mn (versus a net loss of JPY231mn in FY03/22)
  

The company plans to focus on profits in FY03/23. As a result, it aims for record-high operating profit, of JPY372mn. The company expects to grow profits through SEO recovery in retail fintech, higher revenue from corporate fintech (now that it has made upfront investments to build the foundations for the business), and by benefiting from an improved cost structure (the result of upfront investments). The company notes, however, that when OPM exceeds 10%, it will redirect profit toward investments in future business growth.

The company expects Q2 sales and profits to be slightly higher than in Q1, due to delayed returns on some corporate fintech. After recovering from a dip due an update to Google’s core algorithm and more users (leads) as a result of upfront investments, the company expects monetization to accelerate as it moves into 2H.

For the past three years, the company has followed the same strategy for retail and corporate customers: make large-scale investments in order to build the user base to provide solutions. By augmenting the individual user base, the company has aimed to expand the target market for corporates (that wish to borrow from retail investors) and providers of financial instruments. Now, the company plans to turn its focus toward the latter audience, accelerating bilateral network effects by providing information to the base of retail customers that desire it, and providing more solutions.

The company’s retail fintech strategy is to attract individuals who are deeply interested in finance and investing via ZUU online, Net Money, and vertical media, and then to provide those individuals with diverse solutions. Now that it has established a certain level of infrastructure and profitability, the company plans to strengthen the solutions it offers the user base and enhance network effects.

It corporate fintech strategy is to offer solutions to company owners who are members of its media (called “The Owner”). These solutions cover such areas as general management, business, HR and organizations, finance, and IR. Moving forward, the company aims to expand business in each of these categories by enhancing its solutions and providing customers with more value in each area.

One key initiative for targeting organic growth will be to accelerate network effects and expand data, leveraging a now-stronger user base. Success in doing so should allow the company to reduce the cost of acquiring product information on both the retail and corporate fronts, reduce funding costs, and ascertain product needs by leveraging data. These moves should further accelerate financial transactions. In addition to organic growth, the company plans to engage in M&A and investments. In M&A/investments, the company will put priority on building the foundations for sustainable medium- to long-term business growth in FY03/23 and beyond.

Historical differences between initial company forecasts and results

Medium-term business plan

Medium- to long-term direction

The company's conceptual direction for the medium to long term is to use its platform to connect sources and users of funding. As fund-raising methods, the company is looking at reducing lot sizes, tokenization*, and conversion to NFTs*. Tokenization and distribution create markets for assets. For instance, stock markets bring together providers and users of capital, creating a system that increases the liquidity of shares and attracts funds. The company aims to provide similar mechanisms to attract funds.

KPIs

In retail fintech, KPIs are user visits per month, number of members, and ARPU. KPIs in corporate fintech are PVs, number of members, and ARPA. As KPIs of future performance, in retail fintech the company also looks at assets held for high-net-worth individuals and in corporate fintech it looks at the number of company owner leads.

ZUU’s thoughts on financial restructuring

The company cites “financial restructuring” as its growth strategy. Broadly speaking, existing financial institutions have functions targeting individuals and businesses. Institutions funnel individuals’ assets to companies (either directly or indirectly), and return value to individuals through yields or price increases.

The company aims to recast the retail banking domain as “retail fintech.” ZUU aims to connect its user base (people who access ZUU Online and Net Money and have a strong interest in finance) to financial institutions entirely digitally, enabling users to open accounts at these institutions and selling them products. Once legal restrictions are eased, the company plans to expand its lineup by offering new types of financial intermediation, such as security token offerings (STOs).

Similarly, the company intends to restructure the corporate banking offered by existing financial institutions through “corporate fintech.” ZUU provides services (business support, such as strategic consulting, and funding support through crowdfunding) mainly to company owners who are members of its media (called “The Owner”). To facilitate comprehensive support for companies on the business and finance fronts, ZUU offers PDCA Cloud and meevo. PDCA Cloud is designed to make the PDCA process more efficient in management and sales, while meevo is specialized software as a service (SaaS) for meetings.

By covering both retail and corporate fintech, the company aims to create a system that raises funds from individuals (retail) for corporates, and grow its businesses targeting both.

The company believes that financial institutions in general will change as digitalization progresses. While some areas may remain analog, the company believes financial services targeting the mass market will have to be digitalized. (See the “Business model” section for details of the five household segments.) Otherwise, financial institutions will not be able to remain profitable by lowering their operating costs. While financial services for the mass market will become digitalized, the company believes services for high-net-worth individuals will be face-to-face. ZUU seeks to match advisory services with individuals in the semi-high-net-worth to upper-mass-market zones (assets of JPY30mn to JPY100mn). For mass-market individuals, the company will digitally match financial institutions and products.

From his experience working at financial institutions, ZUU founder Kazumasa Tomita concluded that a company’s structure was determined by the way it was funded. For this reason, ZUU’s business model focuses on increasing the number of members first and providing them with services second.

Legal reforms and company strategy (See the “Market and value chain” section for details on legal reforms.)

Act on Sales, etc. of Financial Instruments

The “Act for Partial Amendment of the Act on Sales, etc. of Financial Instruments, etc. to Improve the Convenience and Protection of Users of Financial Services” was enacted on June 5, 2020. As a result, in November 2021 the “Act on Sales, etc. of Financial Instruments” was renamed the “Act on the Provision of Financial Services.” This revision newly established the financial service intermediary business.

In the past, organizations needed to obtain approval and register themselves as intermediaries according to the financial products and services they offered: banks as banking agents, securities companies as financial instruments intermediaries, and insurance providers as insurance agents. The new financial service intermediary business permits brokerage in all areas (banking, securities, and insurance) with a single registration. In the past, intermediaries could handle products and services only on behalf of specific financial institutions and were subject to supervision and guidance. This arrangement made it difficult for intermediaries to take the customer perspective when offering products and services. Shared Research understands that establishment of the financial service intermediary business will make such customer-centric provision possible, as intermediaries will not be subject to supervision and guidance. After this law goes into effect, the company plans to acquire a financial service intermediary business in order to provide services to customers.

As of September 2021, the company’s business model centers on advertising revenue. Once this legal revision goes into effect, however, the company plans to expand its target market, obtaining a license to act as a direct broker and earn brokerage commissions. The company explains that commissions on financial instruments represent a larger market than commissions on advertising. The former is worth approximately JPY20tn (the JPY1,948tn in financial assets held by individuals [household sector] as of end-2020 according to the Bank of Japan’s “Capital Circulation Statistics” announced on March 17, 2021 multiplied by 1%), while the latter is valued at approximately JPY1.2tn (JPY6.2tn in total advertising expenditure, based on a February 15, 2021 Dentsu survey report called “2020 Advertising Expenditures in Japan” multiplied by 20%).

Security token offerings (STOs)

Security tokens are digitized securities in the form of tokens, and a security token offering (STO) is a method of using this technology to raise funds. Amendments to the Financial Instruments and Exchange Act went into effect on May 1, 2020. As a result, security tokens are now classified as Article 2 (1) securities, the same as national government bonds, corporate bonds, municipal bonds, and stocks.

Investing in unlisted equities

From the viewpoint of investor protection, solicitation of investments in unlisted equities by securities companies has in principle been prohibited. At the same time, routing risk money toward new and growing unlisted companies is one aspect of the government’s strategy for growth. To facilitate the supply of growth capital, the Financial Services Agency’s Market System Working Group, established in October 2020, is considering revisions surrounding the issuance and secondary market for unlisted equities.

As September 2021, the company was also reviewing its policy on STOs (electronic shares) and unlisted equities. At present, most companies do not issue share certificates for unlisted shares. Allowing such shares to be registered as STOs would create a market for buying and selling them. The company is considering ways to develop business in this area, including through the operation of a platform.

Perspective on M&A

The company is considering the acquisition of companies involved in fintech* (services, media, and other aspects), technology (blockchain and AI), and finance. Through such acquisitions, ZUU would aim to realize its corporate vision more quickly and strengthen its foundation.

Business

Business model

ZUU operates financial media such as ZUU Online, a site mainly targeting upper-mass-market to high-net-worth individuals with financial assets of JPY30mn or more. The company also offers crowdfunding products (Cool and Unicorn), IFA matching and other asset consulting services for high-net-worth individuals, and provides asset consulting. In addition, ZUU sells MP Cloud (a content management system for websites) to financial institutions, leveraging its expertise in media operation to provide consulting in the area of digital marketing.

The company operates a platform for media (centered on ZUU Online) to attract users and members and works to increase the matching rate by providing a wide range of solutions. Increasing the matching rate requires the company to accurately connect users with the products and information they seek by showing them the pages of content they are looking for. Achieving this means providing appropriate information to incoming members in a timely manner. To boost the site’s credibility, the company publishes articles by experts. Such articles earn the site higher ratings on Google and other search engines, elevating the site’s search ranking. Google also awards points for sites that with an easy-to-read page structure.

The company has an in-house team of SEO specialists who are constantly working on optimization measures. Recent updates to Google’s core algorithm occurred in December 2020 and July 2021. Initially, these updates had a negative effect on ZUU’s site, but the SEO team implemented countermeasures within about two weeks.

Before opening a brokerage account, a person might run a Google search to see a ranking of brokerages by popularity. A high ranking on this list might encourage the user to click on the link to ZUU’s site and, if they find it useful, go on to open an account. To achieve a high ranking in searches for finance- and investor-related keywords, the company works to match users’ needs by providing them with appropriate information and content.

According to a March 2020 membership survey, 25.7% of ZUU Online members were businesspeople at the general manager or higher level (14.1% were company owners, 4.5% were executives, 7.1% were general managers or higher, 11.2% were section managers, 13.1% were unit heads or supervisors, 33.8% were rank-and-file workers, 5.7% were specialists, and 10.4% were categorized as “other”). By ownership level, 20% of members had assets in excess of JPY30mn, 20% had between JPY10mn and JPY30mn, 60% had JPY10mn or less, and 50% had annual salaries of JPY7.5mn or more. Looking just at paying members, the percentage of high-net-worth individuals was higher. ZUU provides private wealth consulting (advise on asset formulation) to high-net-worth individuals with assets of more than JPY100mn. ZUU explains that it set this target because private banks generally target individuals with assets of more than JPY200mn. Of members, 70% are in their 30s to 50s (particularly high percentage in the 40s), 10% are in their 60s, and 20% are in their 20s.

Initially, ZUU Online targeted mainly upper-mass-market to very-high-net-worth individuals. In Q1 FY03/21, the company launched Net Money, a media platform targeting the mass market to the upper-mass market. The new platform targets people who want to open a brokerage account to start investing, issue credit cards, or open forex accounts. Users enter the site via search engines and use it to compare rankings. Both media aim to attract users who are interested in finance and investing.

Outsourced writers author content for ZUU Online and Net Money. The company edits this content, checking the information before posting it. Articles by prominent writers may be published with bylines. ZUU also posts content provided by companies it has vetted.

Licenses held

Unicorn, Inc., a subsidiary, is licensed as a “type 1 small-amount electronic public offering service provider.” This designation allows Unicorn to engage in crowdfunding (equity investment type), soliciting for unlisted equities and handling initial placements, using the internet to attract large numbers of investors each providing small amounts of money. The investment amount is limited to JPY100mn per year for borrowing companies and JPY500,000 per investor. Also, investment solicitation is limited to inviting people to browse internet websites and send e-mails.

Cool Services Inc., another subsidiary, has a lending business license. Cool Inc., a sub-subsidiary that invests in trusts and conducts agency business, is licensed as a Type 2 business under the Financial Instruments and Exchange Act. These licenses allow the company to conduct loan-type crowdfunding and provide funds.

According to the company, it is unusual for a single group to have licenses allowing it to engage both in crowdfunding (equity investment type) and loan-type crowdfunding. One competitor, Campfire, Inc. (unlisted), has both licenses. ZUU offers its 15mn monthly users extensive content to attract them to its media.

Target markets: definitions and issues (retail fintech)

Nomura Research Institute divides households into five categories based on their net financial asset holdings. Households with net financial assets of less than JPY30mn are defined as the “mass market,” those with JPY30–50mn are the “upper-mass market,” those with JPY50–100mn are “semi-high-net-worth individuals,” those with JPY100–500mn are “high-net-worth individuals,” and those with more than JPY500mn are “very-high-net-worth individuals.” The company has identified the following issues for each category.

Corporate size and issues (corporate fintech)

Venture companies are categorized according to funding rounds indicating their phase of growth. (Investors refer to these as “investment rounds.”) The company indicates the following issues at companies at each of the five levels (Seed Phase, Series A, Series B, Series C, and Series D).

Service domains

In FY03/21, the company categorized its domains as “fintech services” and “salestech services.” ZUU revised these categories from FY03/22, into “retail fintech” and “corporate fintech.”

The former “fintech services” category included advertising, customer referrals, paying members, digital stores, advisory/matching, and loan-type crowdfunding (equity investment type). The new “retail fintech” contains services previously included in “fintech services” plus MP Cloud (formerly in “salestech services”). MP Cloud was brought into this category because the service itself is a BtoC business, although it involves alliances with other companies. Retail fintech also includes new businesses: wealth management (asset management for high-net-worth individuals) and credit scoring.

The former “salestech services” category included MP Cloud and PDCA Cloud. The new “corporate fintech” category includes constituents of the former “salestech services,” as well as loan and stock types of crowdfunding, which was previously part of “fintech services.” The reason for this recategorization was that loan-type and equity-investment-type crowdfunding are a BtoB business, as it seeks to raise money for companies.

Retail fintech

The main sources of revenue are customer referrals/advertising, MP Cloud (a media configuration platform), digital shops, and advisory/matching. In Q1 FY03/22, monthly unique users (UUs) of the company’s media platform (including ZUU Online) totaled 14.8mn (CAGR of 96.6% from FY03/14 to FY03/21), members (paying plus non-paying) numbered 149,000 (CAGR of 78.1% from Q1 FY03/20 to Q1 FY03/22, continuing to rise QoQ). ARPU was JPY2,600. Although ARPU is fluctuating on a short-term basis, CAGR was 14.0% over two years. The company is working to raise ARPU by increasing the matching rate and lineup.

The reason for the growth in ARPU is that the per-customer profitability is increasing. This is mainly thanks to higher customer referrals and advertising revenue.

Customer referrals refers to customers directed to corporate clients’ websites via ZUU’s articles and landing page. (The landing page is the page of the site where people accessing the site initially “land” via an ad.) Revenue from customer referrals is calculated as unique users times conversion rate times customer referrals. Revenue from customer referrals rises as the conversion rate increases. To boost these figures, the company strives to improve site credibility by posting articles written by specialists, as well as by providing users with suitable information in a timely fashion.

Advertising revenue is calculated as the number of impressions or page views times the unit ad rate. The number of impressions or page views correlates to unique users. A rise in the number of unique users does more than just contributing to ZUU Online; it also helps to build the media ecosystem (a support system that enables each service to profit through cooperation). Providing the content management system MP Cloud to other companies creates a link between ZUU’s and other companies’ media via a single sign-on.

ARPU breaks down as follows, from highest to lowest constituent percentage.

(1) Income and advertising revenue from customer referrals (performance-based advertising)

Customer referral clients (advertisers) are largely based on brokerage accounts opened at securities companies. Other categories are mostly performance-based, such as new credit card registrations, FX or other financial accounts opened, or customer conversions. Under these arrangements, the company receives a commission when a user opens an account. Commissions per account range from several thousand to tens of thousands of JPY. The company sells ad space to advertising agencies and other media companies. ZUU Online is advertising-focused, while Net Money is focused on customer referrals.

(2) Financial DX support and digital store opening fees through MP Cloud

The main customers for financial DX support are financial institutions. The company provides MP Cloud, a content management service for websites. Digital store refers to a virtual store operating on ZUU Online. Opening a digital store on ZUU Online gives the store owner a way to connect with customers.

(3) Advisory/matching fees (consulting high-net-worth individuals)

Providing asset advisors’ profiles in a digital store creates a way to match users and asset advisors. In addition, experienced company employees provide asset management services for high-net-worth individuals (assets of JPY100mn or more). As of September 2021, total assets of private wealth members (members who are high-net-worth individuals) exceeded JPY200bn.

(4) Membership fees from paying members

The company works to increase the number of members, both paying and non-paying. Rather than charges from paying members, the company focuses on attracting users with high positions and income levels.

To increase ARPU, the company is leveraging its user base and expanding its lineup of solutions. The company also works to raise ARPU by maintaining constant control over the information it provides users. For instance, if customer referrals are more profitable, the company directs customers to referrals. If overall media revenue can be raised by matching financial DX support and digital stores per user, the company directs customers there. The company controls information by adjusting screen layouts, ad space, and the information it sends users.

ARPU times total members does not equate to revenue because ARPU is included in categories (1) and (4) but not (2) and (3). The company counts revenue from its 15mn monthly users as retail fintech revenue.

Most of the total member count is from ZUU Online members. ZUU believes there are limits to the number of users a single media can generate. For this reason, ZUU provides other companies with MP Cloud, which links some of these companies’ content with ZUU’s own via a single sign-on. This arrangement boosts customer referrals to/from ZUU Online and MP Cloud and customers’ websites, increasing access and user numbers.

Indirect support services

ZUU Online (media platform)

Provides information about asset management, investment, and other areas of finance

More than 150,000 members (as of September 2021)

Paying memberships cost JPY1,628/month (including tax) for the standard plan, which targets corporate managers and high-net-worth individuals. The professional plan, targeting people who work at financial institutions, is priced at JPY5,478/month (including tax). The number of paying members is not disclosed.

With this platform, the company targets upper-mass-market to very-high-net-worth individuals.

Customers with digital shops include Aozora Bank, Ltd. (TSE1: 8304), SBI Securities Co., Ltd. (a consolidated subsidiary of SBI Holdings, Inc., TSE1: 8473), SBI Life Insurance Co., Ltd. (a consolidated subsidiary of SBI Holdings, Inc., TSE1: 8473), Mizuho Securities Co., Ltd. (a consolidated subsidiary of Mizuho Financial Group, Inc., TSE1: 8411), and other financial institutions, as well as publishers and real estate companies.

Net Money (media platform)

Net Money was a monthly print publication containing investment information, published monthly from 2006 until publication was suspended in 2017. In 2018, the company acquired this business from the Fuji Sankei group. In August 2018, the company resumed publication, moving it online in FY03/21.

Provides information about financial institutions, allowing for comparisons of securities firms, FX companies, and card loans

Targets the mass to upper-mass market

MP Cloud (short for Media Platform Cloud, a media configuration platform)

The company developed MP Cloud as a content management system (CMS) for ZUU Online. In December 2019, ZUU began selling MP Cloud to other companies, as well. In addition to such CMS functions as building, managing, and operating websites, MP Cloud has customer management and user trend analysis functions. These help companies to ascertain demand for financial products based on page browsing history and the time users spend on pages.

MP Cloud has five main functions: (1) content submission and management, (2) multiple membership status creation and management, and links with other systems, (3) a channel function for posting information about and services from other companies, (4) personal account page management (allows users to list content they have browsed), and (5) functionality for paying members. MP Cloud also has a payment function that can be used to recruit people to paid seminars.

ZUU Online is linked via a single sign-on (logon with a single ID and password allows access to multiple web services and applications), allowing mutual customer referrals.

The company provides support ranging from media configuration to content and marketing. Other companies also provide content management systems, but MP Cloud is designed for financial media. It differs from other platforms by offering analysis of members and users. MP Cloud is a highly specialized CMS that ascertains needs of the finance, real estate, and investment fields based on users’ page browsing history and time spent on individual pages.

Corporate clients include such financial institutions as MUFG Bank, Ltd. (a subsidiary of Mitsubishi UFJ Financial Group, Inc., TSE1: 8306), Daisan Bank, Ltd. (San Ju San Financial Group, Inc., TSE1: 7322), Mizuho Securities Co., Ltd. (Mizuho Financial Group, Inc., TSE1: 8411), and LeTech Corporation (Mothers: 3497).

Among non-financial institutions, corporate clients include NTT Docomo Inc. (Nippon Telegraph and Telephone Corporation, TSE1: 9432), Daimaru Matsuzakaya Department Stores Co., Ltd. (a subsidiary of J. Front Retailing Co., Ltd., TSE1: 3086), as well as companies involved in travel, education, and healthcare.

NTT Docomo Inc. (Nippon Telegraph and Telephone Corporation, TSE1: 9432) and ZUU jointly operate the financial media “fuelle” and “Money Times.” In April 2021, the company began full-fledged operation of a financial portal site with NTT Docomo called “dmenu Money.” (dmenu is the portal site provided by NTT Docomo for its smartphones and tablets.)

MP Cloud is provided on a monthly billing basis. Once a website is built, corporate clients often sign up for long-term contracts. Both initial costs and monthly costs can run from several JPYmn to tens of JPYmn, depending on site scale.

Direct support services

Wealth management (consulting)

Consulting for individuals, including such areas as asset management and tax saving

Although most high-net-worth individuals in Japan are company owners, the company believes that there is a lack of services for advisors covering overall assets, including business capital. The company has started to organize private advisory organizations in the form of family offices, which are popular in Europe and the US.

These services target high-net-worth individuals to very-high-net-worth individuals.

The company plans to build a platform to connect asset data and management information.

Credit scoring

The company is thinking of launching a credit scoring business (as of August 2021).

The company has developed a wealth score targeting high-net-worth individuals for ZUU Online. The company is thinking it could provide products and asset management advice based on these scores, as well as providing the system to other companies.

This service targets semi-high-net-worth individuals to very-high-net-worth individuals (to be expanded sequentially).

Ryoichiro Omori, a former executive officer of Mizuho Bank and a former representative director of J. Score Co., Ltd. (an early Japanese provider of credit scoring services) joined ZUU’s CEO office in September 2020 to lead the development of a credit scoring business. In September 2017, J. Score launched AI Score Lending, an unsecured lending service for individuals that adjusts loan interest rates and amount available based on individual credit scoring.

Corporate fintech

ZUU generates revenue through organizational improvement (PDCA and other corporate services), the generation of funds through crowdfunding, and M&A brokerage and matching.

The company acquires customers for its PDCA services through sales efforts targeting CEOs and other managers of small and medium-sized companies. To get their attention, ZUU uses The Owner (a media platform for company owners that provides information related to corporate management and business succession). The company’s main approach is outbound sales (a company-led sales method for acquiring customers and developing sales channels). Mostly, ZUU approaches the leads generated through its media. Another method is to sign sponsorship agreements with sports teams, which then introduce the company to small and medium-sized companies in the regions where they are based. Another approach is to generate leads through company-led study sessions.

In PDCA services, the company sells PDCA Cloud and other products. It also reviews the design of KPIs, checks that the PDCA cycle is functioning properly, and offers consults with customers on the usage status.

In Q1 FY03/22, The Owner generated 2.6mn monthly PVs (+168.3% YoY) and 21,500 members (+860.0% YoY). Accordingly, the total number of company owner leads was 12,000 (+200.0% YoY). The number of company owner leads represents the sum of The Owner members who select “company owner” as a member attribute plus the number of leads the company generates itself.

ARPA was JPY4.4mn (+6.3% YoY). ARPA is revenue from corporate fintech divided by the number of revenue-generating customers. CAGR was 18.2% from Q1 FY03/20 to Q1 FY03/22. PDCA Engineering is the largest component of ARPA, followed by equity-type crowd funding. Other components are PDCA Cloud, loan-type crowdfunding, M&A brokerage, and matching.

ARPA is growing thanks to an expanded service lineup, starting with PDCA Cloud and PDCA Engineering and extending to IPO and IR support.

The total number of company owner leads indicates the number of approaches ZUU makes to obtain customers. In corporate fintech, the company believes the total number of company owner leads times ARPA approximates the size of the approachable market. According to this calculation, the size of market was JPY52.3tn in Q1 FY03/22.

Indirect support services

The Owner (media platform)

The Owner, which launched in August 2019, is operated by ZUUM-A, a joint venture with Nihon M&A Center Inc.

As its name suggests, the platform targets company owners. The Owner provides management-related information and offers matching services in such areas as business succession and exit options.

The Owner targets startup to medium-sized companies.

Nearly half of members are company owners or executives: 38.4% of members are company owners, 7.8% are executives, 10.1% are general managers or higher, 10.2% are section managers, 6.5% are unit heads or supervisors, 12.5% are rank-and-file workers, 6.2% belong to some other category, 5.1% are specialists, and 3.1% are not working.

Cool (crowdfunding [loan type])

Loan-based fundraising (See the “Market and value chain” section for details on crowdfunding.)

Targets are medium-sized to large companies.

As the general level of awareness of social lending is low, the company prioritizes its safety and reliability as an investment product. The main target for deals involving this sort of lending is listed companies. The secondary target is companies that Nihon Hoshou Co., Ltd. (a consolidated subsidiary of J Trust Co., Ltd., TSE2: 8508) will guarantee. The loan agreements for Cool’s loan-type crowdfunding state that if the debtor fails to repay the loan, invested principal may be forfeit unless a guarantee or collateral are in place. The company uses Nihon Hoshou guarantees and mortgage agreements to increase the security of investors’ principal.

Most customer referrals (investors) come through ZUU Online.

This type of funding is often used for real estate deals, such as private lodgings.

Some corporate customers that have arranged deals through this service have also set up funds with coupons and other investor benefits.

Unicorn (crowdfunding [equity investment type])

This type of funding raises funds through shares (See the “Market and value chain” section for details on crowdfunding.), and may involve HR or IR support.

Targets are unlisted startup companies.

Most customer referrals (investors) come through ZUU Online.

In May 2021, the company released a shareholder agreement* to address early exits by issuers and shareholders (investors). As crowdfunding (equity investment type) increases the number of shareholders suddenly, in the past it has not been used in the past for startups with venture capital. Exits from startup companies tend to be via IPOs or acquisitions. For share-based acquisitions, a single shareholder could block a potential acquirer’s plans to buy all a company’s shares. Shareholder agreements help avoid this situation. Acquisitions are an increasingly popular way for issuers and stock investors to recover invested funds.

The screening team, which includes Unicorn’s CEO (Jiro Yasuda), is made up of people from financial institutions.

As of September 2021, Unicorn was doing two to four deals each month, forming deals worth around JPY90mn/month.

Direct support services

PDCA Cloud (SaaS-type service)

PDCA Cloud uses cloud computing to make the PDCA process visible in management and sales.

Targets range from startups to large companies.

Largely two types of services are offered.

1. PDCA Cloud

This is a SaaS-type service that uses Onisoku PDCA to standardize a company's proprietary know-how and spread it throughout the company.

2. meevo (launched in FY03/22)

This is a SaaS-type service to improve productivity of internal meetings using Onikisoku PDCA and improve the organization to achieve its goals.

PDCA Engineering (consulting)

Consulting on how to strengthen businesses and organizations by utilizing “Onisoku (very fast) PDCA*.”

Targets range from startups to medium-sized companies

ZUU has performed this consulting for more than 250 companies (as of September 2021).

The service generates initial and monthly fees. Consulting agreements range in duration from several months to around one year.

Largely three types of services are offered.

1. Onisoku CXO

This provides consulting services to COO or CFO on management and business improvement plans.

2. Onisoku PDCA for IR 

Consulting services are offered for companies aiming for IPO, including the creation of IPO success stories.

3. Growth Servey (launched in FY03/22)

Research and report on existing business analysis are offered along with market analysis.

ZUU Financial Network (support for corporate growth)

This service uses ZUU’s financial network to support business growth, fundraising, investment exits, and asset management.

Targets range from startups to medium-sized companies

Customers with M&A or business succession needs are referred to ZUUM-A.

Cost structure

In FY03/21, non-consolidated sales made up accounted for 96.1% of consolidated sales. Operating profit was JPY250mn on a non-consolidated basis but JPY14mn on a consolidated basis. Below is a breakdown of cost on a non-consolidated basis, where the company discloses this information.

On a non-consolidated basis, the cost of revenue ratio was 25.8% in FY03/21. The largest cost component was advertising (44.2% of the total), followed by outsourcing (31.3%). For media operated jointly (such as with NTT Docomo), the company books all revenue for that media and records the costs (advertising expenses) associated with the joint media portion. Advertising expenses for MP Cloud also include the people used to attract corporate clients to the media platform. The costs of outside authoring of content for ZUU Online and MP Cloud are treated as outsourcing expenses.

In FY03/21, on a non-consolidated basis the SG&A expense ratio was 64.9%. The largest component was personnel expenses (35.5% of all SG&A expenses), followed by business outsourcing fees (14.2%) and advertising expenses (11.3%). Within personnel expenses, the company is allocating more staff to departments that engage in SEO and conduct analysis and work to boost ARPU and ARPA. Business outsourcing fees are for outsourced engineers. Advertising expenses are mainly to acquire members, but free memberships are not necessarily linked to sales, so they are recorded as SG&A expenses. Other expenses in corporate fintech are the costs of holding study sessions for prospective clients.

Revenue and operating profit by service domain

The company first began disclosing operating profit individually for retail fintech and corporate fintech in Q1 FY03/22. In Q1 FY03/22, retail fintech delivered revenue of JPY627mn and operating profit of JPY288mn (OPM of 46.0%). Corporate fintech produced JPY142mn in revenue and an operating loss of JPY26mn.

These results show that as of Q1, the company was still at a stage where expenses (for marketing and to hire the IT personnel to develop services) precede the acquisition of customers for PDCA services and crowdfunding. According to the company, it takes 4.2 months to recover costs. (This figure is calculated as LTV per month of JPY430,000 divided by customer acquisition cost of JPY1.8mn. LTV per month is average annual revenue from a corporate fintech client during the year after customer acquisition, divided by 12.)

Business overview by segment

Fintech Platform business

Media operations

The company develops and operates its own media to attract individuals who are interested in finance, and matches financial institutions with these individual users. At the same time, ZUU supports the sales and marketing activities of corporate clients who want to reach such users.

The revenue model involves placing links to corporate clients from articles and content posted on the company's media. When users click on the text or images, they are directed to the corporate client's website. The company receives advertising fees based on the number of customer referrals and the number of approved applications resulting from customer referrals.

According to the company, the value of online transactions in the finance-related sector (investment trusts, life insurance, home loans, and real estate) exceeds that of consumer goods (clothing, food, and the like). Accordingly, ZUU can command higher rates from its advertisers than would be possible for ads for consumer goods.

Providing solutions to corporate clients

The company helps corporate clients build and operate media platforms and provides consulting on digital marketing. In these ways, ZUU helps corporate clients advertise, attract customers, and generate purchasing activity on the Internet. The company also provides consulting services, mainly based on PDCA.

Crowdfunding business

Equity-type crowdfunding

Equity-type crowdfunding is a framework that allows many people to invest small amounts of money online in the shares of new, unlisted, growing companies. ZUU uses crowdfunding to connect companies that want to raise funds with individuals who want to invest in the shares of unlisted companies, and earns a fee based on the funds raised. The company's main source of revenue is fees, which it earns by charging about 20% on the total amount of funds raised.  

Loan-type crowdfunding

Loan-type crowdfunding is a framework in which many people invest small amounts of money online to provide loans to companies, and earn interest as a return on their investment. ZUU earns money by lending and managing the funds raised through crowdfunding to target companies. The main sources of revenue are loan processing fees (1–3% of the loan amount) and loan margins (1.5–5% of the loan amount).

In addition, in December 2020 ZUU Online launched a purchase-type crowdfunding service called ZUU Online Funding (beta version). Purchase-type crowdfunding is a framework in which supporters contribute money to a proposed project, and the supporters receive goods and services in return. The main sources of revenue are commissions (10–25%), which are obtained by collecting a percentage of the total amount of support, and commissions (up to 5%) when making payments.  

Market and value chain

Issues financial institutions face

Banks and other financial institutions have seen rates of return decline in recent years due to ultralow interest rate policies. Costs are rising due to high branch and personnel expenses. At the same time, fintech companies and other new competitors are expanding their scope of services. Customers are also demanding better services, so financial institutions face the need to improve both the range and quality of services. These circumstances have caused expense ratios to increase: from 59.4% in FY2015 to 65.9% in FY2020 at banks (6.5pp), rising 8.6pp over that period at city banks and 4.2pp at regional banks.

For banks as a whole, gross operating profit fell by a CAGR of 2.4% from FY2015 to FY2020. Within this figure, domestic gross operating profit dropped 3.7%, and international gross operating profit rose 1.5%. In contrast, expenses fell by only 0.3% YoY, so the expense ratio rose. Shared Research believes financial institutions will need to reduce expenses in line with declining domestic gross operating profit. To do so, they will need to utilize financial intermediary services.

At present, most financial institutions have operational functions (payments, remittances, and deposits) and distribution functions (contacting and developing customers). ZUU thinks that these two functions can be separated, with financial institutions focusing on operational functions and non-financial companies taking on distribution functions. The company believes this would allow financial institutions to cultivate develop potential users efficiently. ZUU aims to help financial institutions attract customers.

A variety of external factors are forcing financial institutions to digitalize their operations (both retail and corporate) and otherwise adapt their business models.

Retail banking

External factors (issues)

A growing number of younger customers, who are digital natives

Deteriorating profitability due to ultralow interest rate policy

Market entry from fintech competitors

Frozen assets due to a rise in assets held by seniors

Necessary measures

Digitalization of business

Establishment of new business domains for diverse individuals

Corporate banking

External factors (issues)

Growing business succession needs as company owners age

Growing need for DX amid COVID-19

Entry of competitors in multiple fields

Deregulation

Necessary measures

Better solutions to meet diverse needs

Support for corporate digitalization efforts

According to Fuji Chimera Research Institute, Inc., the Japanese market related to DX in the finance industry was worth JPY151bn in FY2019. According to the institute, the financial DX market centers on investments in next-generation financial infrastructure services and digital screening and forecasting. In next-generation financial services, the Revised Banking Act of FY2017 led to the configuration of application programming interfaces (APIs). Systems with these APIs began to launch in FY2019 and FY2020. As a result, financial services are expected to become more seamless as services are interconnected. Digital screening and forecasting is also becoming more prevalent as COVID-19 causes companies to accelerate their plans to automate and promote labor-saving operations. By FY2030, the institute expects this market to be worth JPY584.5bn (CAGR of 13.1%).

Fintech market

“Fintech” describes a variety of innovations that combine financial services and information technology. These include cashless payments, virtual currencies, investment/asset management/robo-advisory, crowdfunding (see below), and money transfers using smartphone apps. According to Yano Research Institute Ltd., the Japanese market for fintech (based on revenue at fintech venture companies) was worth JPY214.5bn in FY2018 (+42.7% YoY). The institute expects this market to grow to JPY1.2tn by FY2022.

Legislative reforms related to fintech

Act on Sales, etc. of Financial Instruments

The “Act for Partial Amendment of the Act on Sales, etc. of Financial Instruments, etc. to Improve the Convenience and Protection of Users of Financial Services” was enacted on June 5, 2020. As a result, in November 2021 the “Act on Sales, etc. of Financial Instruments” was renamed the “Act on the Provision of Financial Services.” This revision newly established the financial service intermediary business. Under this law, “financial service intermediary business” means engaging in “deposit, etc. intermediary business operations,” “insurance intermediary business operations,” “securities, etc. intermediary business operations,” or “loan intermediary business operations.” The law also allows fintech companies to act as intermediaries in the sale of banking, insurance, and investment products. Under the current law, sales are generally on consignment from financial institutions, with guidance and supervision from the financial institutions to which they belong, and those financial institutions are liable for compensation for improper conduct.

A financial service intermediary business operator may, upon registration, engage in the business of intermediating banking business, insurance business, financial instruments business, and lending business. Financial service intermediary business operators are independent from financial institutions and are not subject to the guidance and supervision of financial institutions, and the financial service intermediary business operators themselves bear the liability for compensation.

Previously, companies had to register individually as intermediaries to conclude contracts in banking, insurance, and securities, and an affiliation system was in place. The financial service intermediary business allows intermediary services in all fields to be provided with a single registration and does away with the affiliation system.

Revised Banking Act

The Act for Partial Revision of the Banking Act, etc. (the “Revised Banking Act”) was enacted on May 26, 2017 and promulgated on June 2, 2017. The Revised Banking Act was created to promote open application programming interfaces (APIs), facilitating the communication of fintech and banking software. Open APIs make banking functions and data accessible to specific other business operators.

Key points of the Revised Banking Act:

New definitions in the electronic payment agency business: Categorizes electronic payment agents as providers of electronic fund transfer services and account management service

Introduces system of registration for electronic payment agents

Sets obligations for electronic payment agents: obligation to provide explanations to users, obligation to perform services in good faith for users, obligation to conclude contracts with banks

Promotes initiatives related to open APIs (application programming interfaces) for banks

These changes encourage cooperation between financial institutions and fintech companies. For example, before the Revised Banking Act was implemented, consumers had to visit individual banks’ online site to use their financial services. APIs make it possible for consumers to check the balances of multiple accounts and transfer money using smartphone apps.

Security token offerings (STOs)

Security tokens are digitized securities in the form of tokens, and a security token offering (STO) is a method of using this technology to raise funds. Amendments to the Financial Instruments and Exchange Act went into effect on May 1, 2020. As a result, security tokens are now classified as Article 2 (1) securities, the same as national government bonds, corporate bonds, municipal bonds, and stocks. In addition, the law provides that soliciting 50 or more people to acquire electronic record transfer rights constitutes an “offering,” and the company is required to file a securities registration statement and prepare a prospectus, except in cases where the total issue price is less than JPY100mn. Startups and small and medium-sized companies can obtain new means of financing through securitization schemes, and investors can diversify their financial products and increase their liquidity. ZUU began considering the launch of STOs in May 2021.

Crowdfunding market

As its name suggests, crowdfunding refers to the process of raising funds in small amounts from an unspecified (but large) number of people via the internet. The Japan Crowdfunding Council categorizes crowdfunding by type: purchase (including donation type), loan, non-specific, fund, and equity investment types.

Purchase type: An arrangement in which supporters contribute money to a proposed project, and the supporters receive goods and services in return.

Loan type: An arrangement in which an intermediary collects small amounts of money from individual investors and makes large loans to corporate borrowers. This type differs from purchase or donation types of funding in that supporters can earn monetary returns (interest). Being a type of financial instrument, providers of loan-type crowdfunding are subject to the Money Lending Business Act and the Financial Instruments and Exchange Act.

Real estate specific type: This arrangement, which became possible under the Act on Specific Joint Real Estate Ventures, enables real estate to be divided up into small lots to attract investment from individual investors.

Fund type: Like equity-type crowdfunding, companies use this type of financing method to raise capital from individual investors for specific products. Fund-type services are not yet available in Japan.

Equity investment type: Companies use this financing method to raise funds in exchange for offering privately held shares to individual investors. In 2015, small-amount special exception was been made for Type 1 Financial Instruments Dealers that handle stock investments, and services have been available in Japan since around 2017. The investment amount is limited to JPY100mn per year for borrowing companies and JPY500,000 per investor. The crowdfunding business operator must be qualified as a “type 1 small-amount electronic public offering service provider.”

ZUU is involved in purchase, loan, and equity-investment types of crowdfunding. The company believes barriers to entry are high for loan- and equity-investment-type crowdfunding, as these types require financial licenses and expertise. To offer loan-type crowdfunding, a company needs to be registered for “electronic subscription,” which is a Type II financial instruments business under the Financial Instruments and Exchange Act. To offer equity-investment-type crowdfunding, a company must be registered to conduct Type I or small-scale Type I financial instruments businesses under the Act. In December 2020, the company also began handling purchase-type crowdfunding. It had concluded two deals as of September 2021.

Major competing sites:

Purchase type: Makuake (Makuake, Inc., Mothers: 4479), Ready For (Ready For Inc., unlisted), Green Funding (One More Inc., unlisted), Campfire (Campfire, Inc., unlisted), kibidango (Kibidango, Inc., unlisted)

Loan type: Maneo (Maneo Market Inc., unlisted), Crowd Bank (Crowd Bank Corp., unlisted), OwnersBook (Loadstar Bank, Inc., unlisted), funds (Funds, Inc., unlisted)

In 2018, Maneo Market was ordered to improve its operations due to inadequate controls, which had led to the diversion of funds for purposes other than those for which they were solicited. In March 2020, the company stopped accepting account applications.

In May 2021, SBI Social Lending Co., Ltd. (a consolidated subsidiary of SBI Holdings, Inc., TSE1: 8473) announced that it would withdraw from the social lending business. In 2021, the company was found to have neglected its obligation to confirm the use of funds, even though the borrowers had not used the loans in advance as planned.

Equity investment type: Fundinno (Japan Cloud Capital, Inc.), Campfire Angels (Campfire, Inc., unlisted), Angelbank (Universal Bank Inc., unlisted)

Overseas crowdfunding markets

According to Mitsubishi UFJ Research & Consulting Co., Ltd., the total amount of crowdfunding raised on Fundly, a US crowdfunding site, amounted to USD34bn in 2019. Most of these funds were raised in North America (USD17.2bn) and Asia (USD10.5bn). Worldwide by type, loan-type crowdfunding amounted to USD25.0bn (74% of the total), purchase-type crowdfunding (including donation-type) came to USD5.5bn (16%)。

Investing in unlisted equities

From the viewpoint of investor protection, solicitation of investments in unlisted equities by securities companies has in principle been prohibited. At the same time, routing risk money toward new and growing unlisted companies is one aspect of the government’s strategy for growth. To facilitate the supply of growth capital, the Financial Services Agency’s Market System Working Group, established in October 2020, is considering revisions surrounding the issuance and secondary market for unlisted equities. On June 18, 2021, this working group produced its second report, summarizing considerations in the development of an environment for the secondary trading of unlisted securities and institutional arrangements for equity-investment-type crowdfunding.

Internet advertising expenses

According to Dentsu’s “2020 Advertising Expenditures in Japan,” total advertising expenditure in Japan amounted to JPY6.2tn in 2020 (-11.2% YoY), affected by COVID-19. Expenditure on internet advertising continued to grow despite COVID-19, reaching JPY2.2tn (the same level as the four traditional mass media [newspapers, magazines, radio, and television]) and accounting for 36.2% of overall expenditure. “Expenditures for internet advertising media,” which is “internet advertising expenditure” less “internet advertising production costs” and “e-commerce platform advertising costs,” came to JPY1.8tn (+5.6% YoY).

Competitor trends

ZUU’s competitors are NewsPicks (Uzabase, Inc., Mothers: 3966), ITmedia (ITmedia, Inc., TSE1: 2148), and Morningstar (Morningstar Japan Inc., TSE1: 4765). Although these companies have different areas of expertise, they are competitors for media-based paying members and due to their advertising revenue model.

Outsourced writers author content for ZUU Online; the company only edits the content. The company edits this content, checking the information before posting it. Articles by prominent writers may be published with bylines. ZUU also posts content provided by companies it has vetted. This approach is different from the consumer-generated media (CGM) model, where site users post content. ZUU Online does not offer a comment feature. The company does not use CGM because it believes the cost of checking the quality of content would be significant.

NewsPicks

Operates information-oriented media, specializing in economic news. Features news commentary by experts.

In Q2 FY12/21, revenue in the NewsPicks business segment was JPY1.8bn. Of this amount, advertising business produced JPY713mn (+51.1% YoY, 40.4% of total revenue), fee-based billing generated JPY660mn (+10.6% YoY, 37.4%), and other business provided JPY391mn (2.2x YoY, 22.2%)。

ITmedia

SoftBank Group: SB Media Holdings Corp., a wholly owned subsidiary of SoftBank Corp. (TSE1: 9434) owns 50.93% of ITmedia (as of FY03/21).

Operates technology-focused media

FY03/21, consolidated basis: 30 specialized media, 4,000 articles/month, 25mn readers, 50mn UBs*, 400mn monthly PVs

Q1 FY03/22 users: 1,019 companies, 1.0mn members

Morningstar

SBI Group: SBI Global Asset Management Co., Ltd. (a consolidated subsidiary of SBI Holdings, Inc., TSE1: 8473) holds a 41.6% stake (as of FY03/21).

The number of members of the paid version of Kabushiki Shimbun Web (Stock News Web) was 1,771 at the end of Q1 FY03/22 (+59.1% YoY).

As of end-Q1 FY03/22 smartphone app downloads totaled 926,225 (+14.6% YoY). Of this figure, 830,637 downloads were for My Investment Trust (+11.1% YoY), 40,579 were for My Virtual Currency (+36.4% YoY), and 55,039 were for Kabushiki Shimbun (+76.4% YoY).

Competitors’ performance