Operating Reaults for Fiscal Year Ended June 2008 · Investment promotion for Internet enterprises...

Digital Garage, Inc.

Operating Results for Fiscal Year Ended June 2008

August 15th, 2008

Contents

Mission & Business Model ・・・・・・

2

Group Financial Performance Review ・・・・・・

6

Review by Business Segment for Fiscal Year Ended June 2008 ・・・・・・

11

FYE 2009 Full-year Forecast ・・・・・・

36

(Reference) Consolidated Financial Statement Summary for FYE 2008 ・・・・・・

42

Copyright © 2008 Digital Garage, Inc. All Rights Reserved


Mission & Business Model


context company

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Digital Garage creates innovative business “context” for the new internet age and provides unique business solutions for Japan’s new lifestyles, society and industries by linking:

RealLocal

MarketingPresent

&&&&

CyberInternationalTechnologyFuture

Context CompanyContext Company

DG’s Mission


context company

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★ Information Technology

★ Marketing Technology

★ Financial Technology

Produce and incubate Japan’s Internet businesses with optimal use of our three core strengths: IT, MT and FT

DG’s Business Model

IT

FTMT


context company

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KEY CONCEPT

“Create a business group that harmonizes and resonates as a whole, while each business entity operates individually to achieve its business goal”

FEDERATION MANAGEMENT

Centrifugal force Centripetal force

DG Group Comprehensive Long-term Strategy


Group Financial Performance Review


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(¥ million) FYE 2007/June (Actual)

FYE 2008/June (Actual)

Net sales

Operating income

Ordinary income

Net income

EBITDA before elimination or Group deduction

Year-on-Year Performance Summary for FYE 2008 (Consolidated)

39,582

-172

1,803

-375

-2,430

22,243

-1,785

-1,108

-2,850

-3,019

17,338

1,613

2,911

2,475

588

Year-on-Year(Amount) (%)

+130%

-

-

-

◆Net sales showed a significant increase to 39.5 billion yen (a 2.3-fold increase from the previous year), reflecting the performance of newly-consolidated Sogei, Ltd.

◆ The impairment loss of 1.6 billion yen for the incubation business included in cost of sales is the primary factor behind the decline in performance

◆ System problems impacted negatively on ECONTEXT's performance in meeting its initial target◆ The extraordinary loss of 400 million yen includes: 170 million yen loss from securities write-

down, 60 million yen impairment loss on operating assets, 100 million yen for Sogei‘s restructuring costs and 70 million yen for expenses related to ECONTEXT’s system problems

-38.1

Performance Review The decline in performance was due mainly to the impairment loss suffered by the incubation segment and profit on stock sales falling short of target


context company

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Segment Data for FYE 2008 (Consolidated)

(¥ million) FYE 2007/June (Actual)

Net salesOperating income

**15,326

EBITDA

**1,841

2,627 **

Net sales -2,012

Operating income -284

EBITDA* Operating income and EBITDA for segments are based on figures prior to elimination or Group deduction

284 -

FYE 2008/June (Actual)

39,196

2,566

3,397

385-1,594

-1,594

Business segments: Solutions, Portal/Weblog and Finance

Investment segment: Incubation

Year-on-Year(Amount) (%)

23,870

725

770

-1,627

-1,878

-1,878

+160%

+39.4 %

+29.3 %

-80.8 %

-

-

◆Strong performance by newly-consolidated Sogei and digital promotion efforts by DG&Ibex attributed to profit increase in Solutions segment

◆ Healthy results for Portal/Weblog segment due to further Kakaku.com growth and profit gain by e-book distributor DG Mobile

◆ Finance segment suffered from ECONTEXT's temporary cost increase and Growth Partners' poor performance

◆ Incubation segment posted large loss due mainly to impairment loss of 1.6 billion yen

Segment ReviewFurther growth for business segments evident in operating income of 2.5 billion (40% increase from previous year)


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Comparison of Consolidated Segment Net Sales and Operating Income

Net sales Operating incomeYear-on-Year

+18％

-1.7％

+38％

+65.8％

+280%

+31.8％

4,972 7,761

29,279

2,8854,847

6,706

2,167

2,718

3,210

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

FYE 2006 FYE 2007 FYE 2008

FinancePortal/WeblogSolutions

124430 566286

907

1,505

605

503

494

0

500

1,000

1,500

2,000

2,500

3,000


Year-on-Year

FinancePortal/WeblogSolutions

FYE 2006 FYE 2007 FYE 2008


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Comparison of Consolidated Segment Net Sales and Operating Income

2,4492,012

3850

500

1,000

1,500

2,000

2,500

3,000

Incubation

1,098

284

-1,594

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

Investment segment: Incubation

FYE 2006 FYE 2007 FYE 2008

Net sales Operating income

Incubation

FYE 2006 FYE 2007 FYE 2008


Review by Business Segment for Fiscal Year Ended June 2008


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＜新設＞

Ⅳ Finance segment

＜新設＞Ⅲ Incubation segment

Ⅱ Portal/Weblog segment

Ⅰ Solutions segment

Group Business Segments

IT system design and development, design/plan/implement marketing activities

Internet financial services for settlement, currency exchange and insurance, etc.

Investment promotion for Internet enterprises (business incubation)

Portal business (e.g., Kakaku.com, CGM and weblog services)


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Business Overview:

I Solutions Segment <To B Solution Businesses>

◆Engages in commissioned businesses (To B) for IT solutions and marketing solutions

◆Integrates real media and web media, including advertising solicitation gateway operation for the Group's media business Launches ROI-oriented next-generation marketing solution business

◆Sogei to be called "DG Communications"

◆Engages in commissioned businesses (To B) for IT solutions and marketing solutions

◆Integrates real media and web media, including advertising solicitation gateway operation for the Group's media business Launches ROI-oriented next-generation marketing solution business

◆Sogei to be called "DG Communications"

➤DG Solutions Co., Ltd.

➤DG&Ibex, Inc.

➤Creative Garage, Inc.

➤DG Media Marketing, Inc.

➤DG Communications, Inc.

Intermediary holding company for Solutions segment

Next-generation solutions provider for sales-focused business

Comprehensive media services (graphics, video, etc.)

Group's media business operation and comprehensive web advertising solicitation

Comprehensive advertising agency for real estate and general consumer products

Investment ratio Descriptions

100%

100%

100%

94%

100%

Establishment/Subsidiary dates

06.1/06.1

83.9/04.12

03.2/03.2

06.3/06.3

62.11/07.4

Consolidated companies

(formerly Sogei)


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Business Overview: Solutions Segment Performance

Sales for Solutions segment Operating income for Solutions segment

7,761

29,279 28,000

0

5,000

10,000

15,000

20,000

25,000

30,000

430

566

415

0

100

200

300

400

500

600

7,761 million yen 430 million yen 643 million yen

Net sales Operating income EBITDA

29,279 million yen

(277% increase year-on-year)566 million yen

(32% increase year-on-year)

861 million yen


FYE 2009 Forecast

FYE 2007 Actual

FYE 2008 Actual

28,000 million yen

(4% decrease year-on-year)

415 million yen


720 million yen


(¥ million) (¥ million)

FYE 2007 FYE 2008 FYE 2009 FYE 2007 FYE 2008 FYE 2009


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Functional Positioning of Subsidiaries in Solutions Segment

Evolving into a group of companies that can provide Evolving into a group of companies that can provide solutions for eversolutions for ever--changing business and consumer changing business and consumer needs <To B Solution Businesses>needs <To B Solution Businesses>

WEB Solution/Sales Promotion

Web marketing Creative

Comprehensive Advertising for real estate and

general consumer products

August 4th, 2008

WEB + WEB +

PromotionPromotionFour mass media formats + Four mass media formats +

CommunicationCommunication

Portal/Portal/WeblogWeblog

FinanceFinance

IncubationIncubation

Solutions segmentSolutions segment

Cross-Group facilitation of comprehensive solutions for new

contexts

Development of diverse communication methods/new media

formats fitting new contexts

II

IIII IIIIII IVIV

• Real estate

• Living

• ECO Environment

http://www.dgmm.co.jp/home.html


context company

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Highlights and Forecasts of Subsidiaries in Solutions Segment

DG&Ibex, Inc.II

FYE 2008 Highlights- Launched Group-wide collaboration project for developing online shopping platform for Microsoft products

- Record-high profit achieved by robust digital media business

- DG&Ibex's solutions won multiple international awards "New York Festival" "THE WEBBY AWARDS” (2 consecutive years), etc.

Aim to become a comprehensive IT + marketing company that provides a “half-step ahead” advantage to clients by combining our strengths in digital technology (+ Web media) and analog technology (+ retail)

New IT + Marketing Company

◆Expand digital business area and enhance solutions that integrate real and Web- based media

Mid- and long-term strategy

Mid- and long-term strategy

535,210

741,604

1,465,561

2,010,140

922,837

226,043 291,800

537,509

34.1%

53.7%

16.6%

24.0%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

(¥ thousand) Three-year comparison of DG&Ibex digital business

Organically integrate the other’s strength in

being a half-step ahead

digital analog

Gross profit ratio comparison (segment-to-Group)(Right axis)

Sales by segment(Left axis)

FYE 2005 FYE 2008FYE 2007FYE 2006


context company

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DG Media Marketing, Inc.

FYE 2008 Highlights- Launched CRM-type "Point Mall Service" for Orico and Resona Card members- Started employment portal site "Shigoto IN" - Provide ongoing support for Group media

Expand "Point Mall Service" business and engage in direct marketing business

(1) Increase sales through existing point mall site and develop new client base for upcoming services

(2) Expand into direct marketing business by strengthening existing affiliate business system (performance-based advertising)

Creative Garage, Inc.IIIIII

Expand business through enhanced cross-media function

(1) Increase orders for one-stop Web solutions that provide seamless services for everything from graphics to editing and design

(2) Achieve growth in Web-and-graphic interlocking promotion business

Mid- and long- term strategy Mid- and long- term strategy


IIII


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Sogei, Inc.

Evolve into communication partner by shifting focus from real estate to one that includes the general consumer industry

(1) Make a fresh start with new president and company name

(2) Boost high profitability of existing advertising business through optimizing Sogei's

strength in real estate

(3) Expand business collaboration with Dentsu and with Group subsidiaries

FYE 2008 Highlights

- Despite deterioration of the condominium market and anticipatory investment for newly-started

Mansion DB , Sogei achieved a surplus for the first time in four years (on a

net-net basis)

- Mansion DB, a real estate portal site and a collaboration business with Kakaku.com that was

launched in May 2007, became fee-based three months into operation. With its nation-wide

expansion that began in December 2007, Mansion DB is showing a steady increase in the

number of PV/UU/information inquiries. It also gained recognition as a major real estate

portal


IVIV


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◆

Anticipate further growth of robust Kakaku.com group

◆

Swiftly establish next-generation CGM (Consumer Generated Media) business

◆

Achieve business expansion for DG Mobile through boosting e-book market share and providing video advertising services

◆

Acquired Japanese IP from U.S.-based Technorati and moved into 7:3 (DG:TRUS) joint venture stage

◆

Anticipate further growth of robust Kakaku.com group

◆

Swiftly establish next-generation CGM (Consumer Generated Media) business

◆

Achieve business expansion for DG Mobile through boosting e-book market share and providing video advertising services

◆

Acquired Japanese IP from U.S.-based Technorati and moved into 7:3 (DG:TRUS) joint venture stage

Business Overview Portal/Weblog Segment

➤Kakaku.com, Inc.

➤4Travel, Inc.

➤Technorati Japan, Inc.

➤DG Mobile, Inc.

➤CGM Marketing, Inc.

Word-of-mouth travel information website "4Travel"

Blog search engine "Technorati Japan"

Mobile e-book distribution platforms and content

Advertisement matching service between bloggers and advertisers "AD-Butterfly"

Price comparison website "Kakaku.com"

II Portal/Weblog Segment <To C Solution Businesses>

97.12/02.6

03.10/03.10

05.1/05.1

04.2/04.2

06.8/06.8

[Kakaku.com's investment ratio]

Investment ratio DescriptionsEstablishment/Subsidiary dates

Consolidated companies

40%

73%

70%

80%

51%


context company

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Business Overview: Portal/Weblog Segment Performance

Sales for Portal/Weblog segment Operating income for Portal/Weblog segment

FYE 2007

FYE 2008

FYE 2009

4,8476,706

9,300

0

2,000

4,000

6,000

8,000

10,000

9071,505

2,900

0

400

800

1,200

1,600

2,000

2,400

2,800

9,300 million yen


2,900 million yen


3,880 million yen


4,847 million yen 907 million yen 1,348 million yen

6,706 million yen


1,505 million yen

(66% increase year-on-year)1,885 million yen






context company

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Numerous Weblog sites in “Long Tail” market

CGM advertising businessCGM advertising business

CGM search & syndication businessCGM search & syndication business

CGM content/media business CGM content/media business

Search trafficAdvertising revenue

API/Tag network

Expand and enhance CGM business in three individual areas

Portal/Weblog Segment Business Structure and DG Group’s Business Activities

DentsucciADKDGMM

Shipping portal Shipping portal

Traffic

August 1st, 2008 Signed licensing contract with TRUS

August 1st, 2008 Signed licensing contract with TRUS

http://www.adbutterfly.com/about/index.html

http://4travel.jp/

http://mansion-db.com/


context company

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(millions of PV) (in tens of thousands of people)Monthly access data (April 2002 to July 2008)

Kakaku.com Group's capability as media vehicle rapidly strengthening due to boosted website traffic for affiliated businesses

TSE:2371Kakaku.com, Inc.

Subsidiaries in Portal/Weblog Segment: FYE 2008 Highlights

50

100

150

200

250

300

350

400

450

500

550

600

650

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

02/4 02/10 03/4 03/10 04/4 04/10 05/4 05/10 06/4 06/10 07/4 07/10 08/4

PV

Numbe r o fu se rs

Acquired eiga.com Launched Tabelog.com

Launched fx-rashinban.com Acquired 4Travel Launched Mansion DB

Succeeded yoyaQ.com

Launched photohito.com

Launched okyuu.com

08/7

Affiliated websites Affiliated websites Monthly users *Monthly users *

23,160,000

* Monthly unique users per website

Calculation: kakaku.com, yoyaq.com, e.yoyaq.com, 4travel.jp, tabelog.com, mansion-db.com, eiga.com, tv.eiga.com are browser-based and fx-rashinban.com, kakakufx.com, okyuu.com, photohito.com are IP-based.

* Calculation methods have been revised: 4travel.jp since April 2007 and kakaku.com, yoyaq.com and e.yoyaq.com since October 2007.

Affiliated websitesAffiliated websitesMonthly PVMonthly PV **

619,820,000(June 2008)

※※

(Tabelog.com/6 million)


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Word-of-mouth travel information website "4Travel"

Monthly access data(2004/1-2008/7)

Subsidiaries in Portal/Weblog Segment: FYE 2008 Highlights

4Travel, Inc.

(Nielsen/Netratings: excerpt from July 2008 survey)

Monthly users *1 Monthly PV User postings *2 Traveler membersTravel photosAdvertised businesses

2,550,000 users27,640,000 PV

730,00055,666 users

3,770,0001,088

0

4

8

12

16

20

24

28

32

0

40

80

120

160

200

240

280

320

PV

Numbe r o fu se rs

07/404/1 06/4 08/405/404/4

2005/1/28Became

subsidiary

08/7

*1 Date based on browsers (as of June 2008)*2 Total postings for word-of-mouth/travel journals/BBS/Q&A columns

* Data collected is browser-based (prior to April 2007, it was based on web server log file analysis)

Traffic rankings oftravel information

websitesURL

Reach(％)

1 4travel 4travel .jp 2.62 rurubu.com rurubu.com 1.83 ab-road ab-road.net 1.44 Travel .co.jp travel .co.jp 1.45 Global Trotter arukikata.co.jp 1.06 Travelko-chan tour.ne.jp 0.9

(millions of PV) (in tens of thousands of people)

http://4travel.jp/


context company

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Highlights and Forecasts of Subsidiaries in Portal/Weblog Segment

DG Mobile, Inc.FYE 2008 Highlights- Enhanced new services for e-books and video content in order to accommodate widely-adopted 3G

mobiles and growing wireless broadband market (e.g., iPhone)- Launched new video advertising media for mobile products

Engage fully in content distribution and video advertising (new growth core) to ensure continuous surplus

* Data: cumulative total between April 14th, 2008 and April 30th, 2008

< D2C video advertising>

Preview event advertising

Media exposure Campaign page Video Client website Preview event

20,22520,225 9,4459,445 6,4546,454 1,1021,102Number of Viewed/ Clicked-through/

applied*

Number of Viewed/ Clicked-through/

applied*

46.746.7%%5.45.4%%

D2G advertising achieved 47% viewed and 5% applied rates -approx. 50 times more than 0.1 to 0.2% CTR generated by typical Internet-based ads

GMobile Guide

Video advertisement

September December March June

<E-book websites for DG Mobile>

Number of websites launched shows steady increase

2007 2008

0

10

20

30

40

50

60

70

80

26

9

2

33

9

2

40

9

2

54

7

6

37374444

5151

6767

119119%%

116116%%

131131%%

DG websitesLegend

Free websites

Client websites assisted by DG



context company

-25-

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Sep Oct Nov Dec Jan Feb Mar Apr May Jun0

1

2

3

4

5

Number of registered blogs (Left axis)Number of impressions (Right axis)


CGM Marketing, Inc.

FYE 2008 Highlights- Shift from "start-up loss" phase to fully-fledged operation" phase- Full-scale launch of ad market place for bloggers and advertisers

Number of registered blogs increased to approx. 7,000 registered/rapidly grew to 137 million impressions monthly (1/4 of total PV at Kakaku.com)

- Launched Japanese-version of in April 2008. Pioneering ad product development ahead of U.S. Twitter

Maximize market impact through CGM network's variety targeting

(mil.)

<Registered blogs and total impressions (actual)>

20082007

<CGM media network>

Other CGM categories

DG-related CGM websites

Long-tailed blogs

Ad distribution engine

Ad matching/analysis engine


http://tabelog.com/


context company

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Technorati Japan, Inc.


FYE 2008 Highlights- Licensing contract signed between DG & U.S. Technorati on July 31st, 2008Established 7:3 (DG:Technorati) joint venture by third-party allocation for capital increase

Establish new business model based on "No. 1 blog search technology"

Former contract status

Marketing agreement

U.S. Technorati to decide on fee-based API use

Customized IP for Japanese market belongs to U.S. Technorati

New Technorati Japan J/VMedia power increased: Capable of adding unique services and new frameworks that fit Japanese market

Flexibility increased: Capable of independently formulating monetization method using TRJ member assets

Profitability increased: Improved profitability due to elimination of revenue sharing

Many constraints could drag down new business initiatives Optimal flexibility enables swift

implementation and evaluation of new business model

Shift from "marketing contract" phase to "collaborative business" phase



context company

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Business Overview Incubation Segment

➤DG Incubation, Inc.

➤DG&Partners, Inc.

➤DG New Context Fund

Venture business investment

Investment fund management

100%

80%

62% Stock management

05.7/05.7

05.9/05.9

05.10/05.10

III

◆

Create new Internet business that reflects DG's corporate philosophy

◆

Play supportive role for further growth for each DG segment and achieve steady profit contribution to Group. Investment operations through international business angel scheme centering on Joi Ito’s Lab are steadily expanding

◆

Actively engaged in localization and incubation developments with focus on Silicon Valley-area Internet businesses

◆

Create new Internet business that reflects DG's corporate philosophy

◆

Play supportive role for further growth for each DG segment and achieve steady profit contribution to Group. Investment operations through international business angel scheme centering on Joi Ito’s Lab are steadily expanding

◆

Actively engaged in localization and incubation developments with focus on Silicon Valley-area Internet businesses

Incubation

Investment ratio DescriptionsEstablishment/Subsidiary datesConsolidated companies


context company

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Incubation Sales Incubation Operating Income

2,012

385 4500

500

1,000

1,500

2,000

2,500

284

-1,594

70

-1,800

-1,400

-1,000

-600

-200

200

600

450 million yen

(17% increase year-on-year)70 million yen 70 million yen


385 million yen


-1,594 million yen -1,594 million yen

FYE 2007

FYE 2008

FYE 2009





context company

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Investment strategy revised to reflect current severe business environment Active business investment with focus on Silicon Valley

OverseasOverseas FundFundDomestic Domestic

Direct Direct InvestmentInvestment

Ass

ess-

men

t

×○ △

ⅠⅠ ⅡⅡ ⅢⅢ

シードアーリー

シードアーリー

ミドルミドル

レイター

セカンダリー

レイター

セカンダリー

アルクセルシスｲｺーﾝﾃｸｽﾄジャストＰカカクコムﾀ゙ｲｷｻｳﾝﾄ゙ザイオンＤＡＣ

ＩＰＯ

Alc Group

CELCYS

ECONTEXT

Just Planning

Kakaku.com

Daiki Sound

Zion

DAC

Middle

LaterSecondary

Incubation Segment Business Overview

Significant revision of investment strategy palatable to currentSignificant revision of investment strategy palatable to current market conditionsmarket conditions

Focus on "business-specific investment" while freezing "omni-directional investment" via funds

ThreeSF, Inc.Etology, Inc

EXITII Overseas 5 companies/investment

balance 1.2 billion

IIII Fund

IIIIIIDomestic direct investment

13 companies/investment balance 350 million

14 companies/investment balance 1.2 billion


context company

-30-

Next-generation SNS service provider for online game usersThreeSF, Inc.

Sold to EA

(exited)

Threefold capital gain with investment duration of 19 months (sold to Electronic Arts of the U.S.)

Investment result

LinkedIn Corporation

Largest developer and provider of SNS services for business users worldwide

Collaboration in Japan

Incubation Segment Overseas Investment Overview

Company name Business area Status

Global WiFi community provider

(Undisclosed)

Mini-blog service pioneer, No. 1 in global market share

FON Wireless Limited

Fotonauts, Inc.

Twitter, Inc.

Holding

Holding

Holding

Promote awareness of effective open business network with major Internet media in collaborative effort with Keio University Kokuryo Lab.

Business-specific investment

Largest U.S. blog search engine

Technorati, Inc.Holding

Etology, Inc.

One of the top online providers in the ad marketplace

Partly sold

(exited)

Technology mashup

Launched by integrating technologies from both parties (CGM Marketing responsible for sales in Japan)

Marketing in JapanTwitter: World's first advertising and fee-based service models currently under development in Japan

Fon: Ranked 2nd globally in penetration rate


context company

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Business Overview Finance Segment

➤ECONTEXT, Inc.

➤Kakaku.com Financial

➤Kakaku.com Insurance

Settlement/logistics platforms

Foreign exchange services

Insurance brokerage

44%

100%

100%

IV◆With ECONTEXT at the core, achieve interim growth of insurance/finance/securities businesses by

utilizing Kakaku.com’s traffic

◆ECONTEXT to support Group's settlement-related solutions in order to respond to increasingly competitive settlement industry and ever-changing market conditions

◆Anticipate rapid expansion of Kakaku.com Financial (foreign exchange marginal transaction services) and Kakaku.com Insurance achieving surplus

◆Growth Partners to achieve mid to long-term growth with third-party strategic partner (no longer consolidated in FYE 2008 and beyond)

◆With ECONTEXT at the core, achieve interim growth of insurance/finance/securities businesses by utilizing Kakaku.com’s traffic

◆ECONTEXT to support Group's settlement-related solutions in order to respond to increasingly competitive settlement industry and ever-changing market conditions

◆Anticipate rapid expansion of Kakaku.com Financial (foreign exchange marginal transaction services) and Kakaku.com Insurance achieving surplus

◆Growth Partners to achieve mid to long-term growth with third-party strategic partner (no longer consolidated in FYE 2008 and beyond)

Finance Segment

00.5/00.5

05.12/05.12

01.3/01.3

<Kakaku.com's investment ratio>

<Kakaku.com's investment ratio>

Investment ratio DescriptionsEstablishment/Subsidiary datesConsolidated companies


context company

-32-


Sales for Finance Segment Operating Income for Finance Segment

2,7183,210

3,600

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0

503 494

100

200

300

400

500

600

700

3,600 million yen


730 million yen


910 million yen



3,210 million yen


494 million yen

(1% decrease year-on-year)651 million yen


800

730

FYE 2007

FYE 2008

FYE 2009





context company

-33-

ECONTEXT, Inc. Hercules:2448

Furth

er d

ivers

ifyin

g se

ttlem

ent m

etho

ds

Approx. 2,200 locations

Total: Convenience stores Approx. 38,100 outlets

Total: Banks and post officesApprox. 28,200 locations

* Internally-calculated data as of December 2007

12,000 outlets

8,500 outlets

7,100 outlets

6,100 outlets

1,800 outlets

1,600 outlets

1,000 outlets

26,000 units

＋

Increasing number of physical locations

CVS settlement

Credit cards

Bank settlement

Internet banking

IC-card e-money

E-money

Approx. 66,300 outlets nationwide

Number of affiliated websites

18,500

Number of transactions 12,630,000

Total amount of transactions

102.9 billion yen

117% 118%135%(year-on-year)

<Previous FYE Results>

Highlights and Forecasts of Subsidiaries in Finance Segment

Connected as of May 2008

(year-on-year) (year-on-year)


context company

-34-For more information, please refer to disclosed information on ECONTEXT, Inc.


ECONTEXT, Inc.

January: added deferred payment e-money "iD"January: provided settlement solutions for "@ E-ticket PIA" in collaboration with leading ticket

distributor PIA February: provided privacy information management service "Privacy Lock"May: added settlement services for Seven-Eleven stores (number of outlets increased by 12,000)June: signed contract involving development and operation of Microsoft's online product

distribution websiteJuly: provided settlement platform for Windows Media Center

Hercules:2448

Name: Privacy Lock

Business descriptions: ASP services for member information management for commercial websites

New service highlights

FYE 2008 Highlights

(¥ thousand)ECONTEXT: transaction amount and number of affiliated stores

[FYE 2008]

Number of affiliated outletsTotal amount of transactions


context company

-35-

Kakaku.com Financial, Inc.


Kakaku.com Insurance, Inc.

0200400600800

1,0001,2001,400

06/4 06/10 07/4 07/10 08/4

4

312423

6

52

4344

3531

16

28

0

10

20

30

40

50

60

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

Number of insurance brokerage contracts

(April 06 – June 08)

Nonlife insurance

Life insurance

08/605/7 07/4 08/606/4 08/4

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

05/4 05/10 06/4 06/10 07/4 07/10 08/4

11 11

73

27

12 11 16

76

2012

62

82

0

20

40

60

80

100

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

Balance of deposit assets(April 05 – June 08)

08/605/7 07/4 08/606/4 08/4

(¥ million) Sales

(July 05 – June 08)(¥ million)

Sales(July 05 – June 08)(¥ million)


FYE 2009 Full-year Forecast


context company

-37-

Net sales

FYE 2008

+6%+2,418

Year-on-YearFYE 2009 (forecast)

39,582 42,000Operating income +3,672-172 3,500

Consolidated

Net sales Operating income


IncubationNet sales +16%+65385 450Operating income -+1,054-1,594 70

Ordinary incomeNet income

+3,575

+2,530

EBITDA

+1,704 +4%

-375

-2,430

39,196

3,200

100

40,900

-

1,803

EBITDA

EBITDA

+1,479 +58%2,566 4,045

Operating income and EBITDA for segments are based on figures prior to elimination or Group deduction

Financial Performance Forecast for FY 2009 (Consolidated)

3,397

-1594 70

5,510 +2,113 +62%

+1,054 -

5,580 +3,777 +209%

(¥ million)

-

-


context company

-38-

Segment Forecasts for Next 3 Years

Net sales EBITDA

Total net sales 39,582 42,000 1,803Total

EBITDA 5,580

* Operating income and EBITDA for segments are based on figures prior to elimination or Group deduction

28,000

9,300

3,600

450385

2,012

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

720

3,880

910

70

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

■ Incubation

■ Finance

■ Portal/Weblog

■ Solutions

■ Incubation

■ Finance

■ Portal/Weblog

■ Solutions

FYE 2007 (Consolidated)

2,91117,338

7,761

4,847

2,718 29,279

6,706

3,210

644

1,348

635

285

861

1,885

651

-1,594


FYE 2009 (forecast)

(Consolidated)



FYE 2009 (forecast)

(Consolidated)


context company

-39-

Group Strategy and Interim Business Plan

Grand design for Group's context offerings with focus on new economic tideGrand design for Group's context offerings with focus on new ecoGrand design for Group's context offerings with focus on new economic tidenomic tide

Current Focus

Identify challenges and positioning for each segment and promote businesses that are beneficial to society Identify challenges and positioning for each segment and promote businesses that are beneficial to society

Current FYE Plan

Achieve FYE 2009 net sales of 42 billion yen and EBITDA of 5.6 billion yenAchieve FYE 2009 net sales of 42 billion yen and EBITDA of 5.6 billion yen

New mid-term plan currently under developmentNew mid-term plan currently under development

* refer to related documents

DG Group Mid-Term Management Plan dated August 28th, 2008


context company

-40-

Segment Positioning

Growth potential

Web2.0

Kakaku.com- 4Travel, Inc.-- Technorati Japan, Inc.- DG Mobile, Inc.- CGM Marketing, Inc.

Kakaku.com- 4Travel, Inc.-- Technorati Japan, Inc.- DG Mobile, Inc.- CGM Marketing, Inc.

ECONTEXT, Inc.- Kakaku.com Insurance, Inc. - Kakaku.com Financial, Inc

ECONTEXT, Inc.- Kakaku.com Insurance, Inc. - Kakaku.com Financial, Inc

Sogei/DG&Ibex/ DG Solutions- Creative Garage, Inc.- DG Media Marketing, Inc.

Sogei/DG&Ibex/ DG Solutions- Creative Garage, Inc.- DG Media Marketing, Inc.

Solution

Portal&Blog

Finance

Incubation

Increasing returns

DG Incubation, Inc.- DG&Partners, Inc.

(DG new context fund) - Joi Ito’s Lab

DG Incubation, Inc.- DG&Partners, Inc.

(DG new context fund)- Joi Ito’s Lab

Segment Core Businesses

Orga

nic gr

owth

mode

lInc

reas

ing re

turns

mod

el

Please note that the business forecasts and strategies covered in today’s presentation are based on our current evaluation and future results may vary significantly depending on unforeseeable events or circumstances.

Operating Reaults for Fiscal Year Ended June 2008 · Investment promotion for Internet enterprises...

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