Digital Garage, Inc.
FYE 2010 Financial ReportAugust 16, 2010

Contents

Mission & Business Model・・・・・・・

2

Group Financial Performance Review

・・・・・・・

5

FYE 2010 Segment Performance Review

・・・・・・・ 12

Mid-Term Management Plan （5/13）

・・・・・・・ 36

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Mission & Business Model

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

DG’s Mission
context company

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

Real &
Local &
Marketing &Present &
-3-

Cyber
International
Technology
FutureCopyright © 2010 Digital Garage, Inc. All Rights Reserved

DG’s Business Modelcontext company

Produce and incubate Japan’s Internet businesses

with optimal use of our three core strengths: IT, MT and FT★ Information Technology

IT★ Marketing Technology

MT

FT★ Financial Technology-4-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Group Financial Performance Review

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Executive Summary
context company

From Hybrid Solution Partner
to Social Media Incubator
Start of Monetization of Twitter-related Businesses

I

Hybrid Solution business restructuring- Resources for commissioned system development reassigned
from DG&Ibex Company to Media Incubation businesses- Approximately 50% (1.4 billion yen) of DG&Ibex Company’s goodwill impaired

II

Start of monetization of Twitter-related businesses- Advertising solicitation for official Twitter site launched- Third-party businesses initiated(e.g., smartphones, affiliates, management tools, etc.)

III

Development of new mid-term management plant- Media Incubation businesses positioned as key growth driver- FYE 2013 target for consolidated ordinary income: exceeding 5 billion yen-6-

Copyright © 2010 Digital Garage, Inc. All Rights ReservedPerformance Summary for FYE 2010: Profit and Loss Statement (Consolidated)
context company

ActualForecast (May 13)

ActualCompared to
Forecast (May 13)
Amount34,499

8,180

8,346

+166

-26,152

Operating income

981

-970

-960

+10

-1,941

Ordinary income

537

-470

-457

+13

-994

5,450

-2,210-2,207+3-7,657(¥ million)

FYE 2010

FYE 2009

Net sales

Net income-9,495-16,160
-495
-659
337
-173

Total

-26,152- Kakaku.com excluded

Extraordinary loss details (FYE 2010)- DG&Ibex-related impairment loss on goodwill:- Loss on revaluation of investments in securities:- Other losses:
Total

AmountOperating income performance analysis(year-on-year)

Net sales performance analysis (year-on-year)- Kakaku.com excluded- DGC excluded- Going concern basis
Hybrid Solution
Media Incubation
Venture Incubation

Year-on-Year

1,435
332
6

-3,724- DGC excluded

865- Going concern basis

918

Hybrid Solution-187

Media Incubation

74

Venture Incubation

739

Group-wide cost

291

Total

-1,941

1,775-7-Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Financial Summary for FYE 2010: Balance Sheet (Consolidated)
context company(¥ million)

FYE 2009
ActualFYE 2010
ActualYear-on-Year(amount)

24,00014,208-9,792

13,133

4,799-8,333Current assets
Incl. cash and deposits
Fixed assets
Total assets

Current debt
Fixed debt
Incl. interest-bearing debt

6,274
30,275

5,497
19,706-776-10,569

9,941-7,419

925

935

+10

5,833

3,479

-2,35317,360Net assets

11,9898,829-3,159Debt/net asset total

30,275

19,706-10,569

Balance sheet improvements◆ Capital-to-asset ratio
FYE 2009

FYE 2010

39%

44%◆ Percentage of interest-bearing debt

FYE 2009

FYE 2010

19%

17%

Contributing factors to
key performance figures- Loan/bond repayment:
2,353 million yen- Payment of outstanding
corporate tax:
3,733 million yen- Payment of outstanding
dividends from previous year:
923 million yen

Financial ratios are calculated based on year-end figures.
-8-

Copyright © 2010 Digital Garage, Inc. All Rights ReservedPerformance Forecast for FYE 2011
context company(¥ million)

FYE 2010
ActualFYE 2011
Plan

Year-on-Year(Amount)

Net sales

10,600-250+2,254

Operating income

8,346
-960

Ordinary income

-457

500

+957

-2,207310+2,517Hybrid Solution

7,527

8,850

+1,323

Media Incubation

812

1,700

+888

7

50

+43

Hybrid Solution

150

400

+250

Media Incubation

-107

400

+507

Venture Incubation

-143

-50

+93

Net income+710

Net sales by segment

Venture Incubation
Operating income by segment-9-

Copyright © 2010 Digital Garage, Inc. All Rights ReservedQuarterly Comparisons of Consolidated Segment Net Sales and Operating Income
context company

Hybrid Solution Segment
Net sales(¥ million)

Operating income(¥ million)

2,500

90

2,187
1,836

2,000

1,738

68

70

1,765

51
50

1,500

32
1,000

30

500

10

0

-10

Q1

Q2

Q3

-2
Q1

Q4

FYE 2010

Q2

Q3

Q4

FYE 2010

Performance Review- Year-on-year loss showing recovery trend in second half
- Business restructuring in third quarter; transition to media development solutions- Relief on goodwill amortization in fourth quarter-10-

Copyright © 2010 Digital Garage, Inc. All Rights ReservedQuarterly Comparisons of Consolidated Segment Net Sales and Operating Income
context company

Media Incubation Segment
Net sales

Operating income(¥ million)(¥ million)

237

250

230
-5

188

200

155

-15

-13

150

-19
-25

100

-35

50

-35
-39
-45

0

Q1

Q2

Q3

Q4

Q1

FYE 2010

Q2

Q3

Q4

FYE 2010

Performance Review- Monetization of Twitter businesses started in third quarter- CGM Marketing posting monthly profits (since March 2010)- Mobile content businesses showing steady growth (DG Mobile)-11-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

FYE 2010 Segment Performance Review

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Business Segment
context company

Ⅰ

Venture Incubation Segment- Silicon Valley-type hands-on incubation (import)

VentureIncubation- Support of Japanese startups targeting at overseas market (export)

Ⅱ

Media Incubation Segment
Media Incubation- Develop new next-generation social media

Ⅲ

Hybrid Solution Segment

Settlement- Departure from existing commissionedtype Integration and Settlement business-13-

HybridSolution

Solution

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Venture
Incubation

Media Incubation

Settlement

I

Venture Incubation Segment➤ DG Incubation, Inc.
Venture business incubation through investment and development➤ Open Network Lab
Internet-based business accelerator program for aspiring engineers

HybridSolution

Solutions

Business Overview: Venture Incubation Segment Performancecontext company

I

Venture Incubation Segment
Net sales

Operating income

FYE 2009 Actual

180 million yen-883 million yen

FYE 2010 Actual

7 million yen-143 million yen

FYE 2011 Forecast

50 million yen-50 million yen

DiscoverDiscoverandandcultivate
cultivatecutting-edge
cutting-edgeInternet
Internetbusinesses
businessesthat
thatreflectreflectDG's
DG'scorporate
corporatephilosophy
philosophy◆◆OpenOpenNetwork
NetworkLab
Lab(office:(office:Daikanyama)
Daikanyama)promotes
promotesthe
theDG
DGGroup's
Group'snew
newbusinessbusinessdevelopment
developmentthroughthroughearlyearlystage
VC
investmentincollaboration
withinternational
businessangel
networks
includingentrepreneurs
stage VC investment in collaboration with international business angel networks including entrepreneurs
participating
participatingininnew
newSingapore-based
Singapore-basedfund
fund◆◆Innovative
Innovativebusinessbusinessmodel
modelincludes
includesdomestic
domesticinvestment,
investment,while
whileaamajority
majorityofofinvestments
investmentsfocus
focuson
onSilicon
SiliconValleyValleyandandSanSanFrancisco-area
Francisco-areabusinesses
businesses◆◆Investment
Investmenttargets
targetsinclude
includeventure
venturecompanies
companiesfor
forclientclientapplications
applicationsand
andservices
servicesusing
usingTwitter
TwitterAPIAPI◆◆One-stopOne-stopsolutions
solutionsproviding
providingvarious
variousJapaneseJapanesemarket
marketdeployment
deploymentservices
servicesare
areofferedofferedtotointernational
internationalearlyearlystage
investment
businesses(e.g.,
Japanese-version
systemdevelopment,
initialmarketingandsales
stage investment businesses (e.g., Japanese-version system development, initial marketing and sales
campaigns,
campaigns,userusersupport
supportassistance,
assistance,etc.)
etc.)

-15-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Venture Incubation Segment’s Business Strategy
context company

Create Japan origin global standard while investing in overseas VCs primarily based in Silicon Valley
Import & export of Internet businesses
New venture incubation in the era of real time WEB
U.S. origin WEB 2.0 - real time WEB- From Silicon Valley -Japan origin global standard- From Tokyo, JAPAN - Enhance business-type investment primarily in
Silicon Valley companies

 Support domestic venture creation by opening OpenNetwork Lab site Investment in overseas companies andlocalization in Japan Collaborate with Singaporean government and funds

Import model

Export model

IPO

Overseas startup’s(primarily in Silicon Valley)

+
early

later

http://onlab.jp/

Singapore- Cooperation with government- Fund investment

seed

Support new domestic ventures and their entry to other countries

Invest mainly in U.S.-based VCs and support their entry to Japan-16-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: Venture Incubation Segment
context company

FYE 2010 Highlights- Additional investment made in U.S. Twitter and ongoing support for business expansion in Japan provided
Fifth investment in U.S. Twitter made in May 2010
- Limited partner (LP) investment made in Singapore-based Neoteny Startup Fund 1
In June 2010, DGI made LP investment in Neoteny Startup Fund 1, an advantageous fund participated in
by internationally-renowned angel investors with the Singapore government offering up to 85%
matching grants

Discover and invest in next-generation social website business seeds
Current
Current Forecasts
Forecasts◆ Demand for social network-related services remains strong despite ongoing global recession;
continuous efforts to discover new investment projects and businesses to support are required

FYE 2010 Highlights- First-phase programs initiatedOn June 30, seven teams passed primary screening for Seed Accelerator, an entrepreneurial engineer
incubation program

Final review to be conducted during DG Conference in late September
Current
Current Forecasts
Forecasts◆ Invite Co-fuunden of U.S. Twitter and leading mentors to DG Conference◆ Establish business success model for future pilot projects-17-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Venture
Incubation

Media Incubation

Settlement

II

HybridSolution

SolutionsMedia Incubation <ToC Solution businesses>➤ Twitter Company
Operational support and business development for Twitter in Japan

company➤ CGM Marketing, Inc.
Twitter- and CGM-based ad product development, twinavi operation and Twitter business support➤ DG Mobile, Inc.
Distribution of fee-based official mobile contents, marketing and distribution of smartphone contents
and twitvideo operation

Business Overview: Media Incubation Segment Performancecontext company

II

Media Incubation <ToC Solution businesses>
Net sales

Operating income

FYE 2009 Actual

9,969 million yen

3,542 million yen

FYE 2010 Actual

812 million yen-107 million yen

FYE 2011 Forecast

1,700 million yen

400 million yen

Incubate
Incubatenew
newsocialsocialmedia
mediaservices
services
Form
FormDG
DGGroup
Groupstructure
structurecenteredcenteredonon◆◆Twitter
TwitterCompany:
Company:establishedestablishedas
asTwitter
Twittermedia
mediaoperator
operator- -Steadygrowthin
Twitterusage;
PC-based
Twitter
Steady growth in Twitter usage; PC-based TwitterUUs
UUsexceedingexceedingmixi
mixi- -Japanplacedsecond
after
U.S.
in
all
TwitterJapan placed second after U.S. in all Twitter◆◆CGM
CGMMarketing:Marketing:provide
providemarketing
marketingsupport
supportfor
forad
adsolicitation
solicitationfor
forofficial
officialTwitter
Twittersite
siteandandTwitter-based
promotional
activities
designedforenterprises
Twitter-based promotional activities designed for enterprises- -PC-based
PC-basedadadspacespacemaintains
maintainsfull
fullstatus
statuswhile
whiletraffic
trafficmakes
makesmonth-to-month
month-to-monthincrease
increaseofof115%
115%
Mobile-based
advertising
startedinAugustMobile-based advertising started in August◆◆DG
DGMobile:
Mobile:makemakepreparation
preparationfor
forfee-based
fee-basedTwitter
Twittercontent
contentservices
serviceslinked
linkedwith
withmajor
majormobile
mobilecarriers
carriers◆◆Kakaku.com:
Kakaku.com:continuously
continuouslysupport
supportgrowth
growthas
astop
topshareholder
shareholderandandaccelerate
acceleratealliancealliancewith
withnewstrategic
businesses
new strategic businesses-19-

Copyright © 2010 Digital Garage, Inc. All Rights ReservedOverall Relationship Surrounding Twitter Business
context company

Managed by 2 wings: official Twitter site/official navigation site and third party- Execute “Establishment of ECO SYSTEM for Twitter Business in Japan” Adding on mobile carrier traffic to smoothly grow PC gateway
I -1 Increase use of official Twitter site
Twitter, Inc.

Strategic Partner

 Gain more users through PR and corporate usage support
 Shift focus from capital region to throughout Japan
 Increase users and strengthen ties with mobile carriers in
addition to PC version

TwitterCompany

Increased use of Twitter

I -2 Enhance official navigation site
 Offer supplemental functions to make Twitter more useful forusers and user companies

 Manage and support
official Twitter site

 Strengthen media promotion leveraged by Twitter“To be continued”

 Monetize advertising
on both PC and mobile
wings

Increased income of DG

IITwitter-based third party business Offer services that Twitter itself does not and earn profit
as a third party that supports promotion of Twitter use.

Third Party Enhance services other than existing advertising models
and increase opportunities to earn profit.

-20-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Promotion of Group's Twitter-focused Platforms
context company

Investment (DG Incubation)company

Ad/Enterprise billing

Consumer billing

CGM Marketing, Inc.

DG Mobile, Inc.

Official navigator

Photo/video sharing

Promotion

Settlement

Recommendation /Affiliate Service

EC Potal site

Internet media

Business operators

Twitter, Inc.

Mass media

Business collaboration

Advertisers

Digital Garage, Inc.

Operational support toolfor enterprises-21-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Monetization of Twitter-related Businesses
context company

Business creation

User acquisition

Monetization

Jan. 7Mar. 26

Jan. 26

Capital/business alliance with
U.S. Twitter

Additional investment inTwitter

Additional investment in Twitter

Apr.23

Sep. 16

Japanese-version Twitter
released

Official navigator site
releasedJun. 26

Sep. 16

May 13
Additional investment in Twitter

May 18Hello Kitty on Tappit launched

Additional investment inTwitterManagement Tool
released

May 24Oct. 8

July

Twitter video sharing sitelaunched

Enterprise-version released

TsubuReco launched

Jul. 1
Oct. 14

Okaimono Now launched

Twitter-linked banner ads
released

Augusttwinavi mobile-version ad solicitation
started

Oct. 15
Twitter Japan official mobile sitelaunched

December
Twitter PC-version ad solicitation
started2008

AugustTwitter mobile-version ad solicitation started

・
・
・

2010

2009
-22-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: Twitter Company
context company(Digital Garage Twitter Company)
Improved mobile site functions

Bridging of the gap achieved with increase in number of users
accelerated in January 2010
Mission: Support growth and management of Twitter in Japan- Media PR campaigns to promote Twitter use in Japan- Support in implementing Twitter profit model in JapanFYE 2010 Highlights- Mail Tweet◆ Twitter as social phenomenon- Featured as theme in mass media coverage and popular TV
dramas; recognized as Internet media collaboration partner- Received numerous annual trend awards◆ User base expansion- Reach rate of 15.1% of internet users; tenfold growth from
1.5% in last year alone- Reach rate of 18.6% of mobile users◆ Activity improvement
World record-breaking 3,283 tweets per second during World Cup- Photo posting

Further expand Twitter usage and improve profit
MidMid- andand longlongterm
term strategy
strategy◆ Shift from marketing and expansion phase to full-fledged monetization phase;
support marketing of U.S. advertising products in Japan and development support ofproducts unique to Japanese market-23-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Co-hosting of Twitter Event
context company

Tweetup Japan 2010 Summer event

Evan Williams, Co-founder and CEO of Twitter, together with Twitter users, celebrated reaching the 10
million unique user mark in Japan. The event was covered by three TV stations and other media outlets.

-24-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: CGM Marketing (1/2)
context company

FYE 2010 Highlights- Launch of Twitter ad banner solicitation in third quarter and full-fledged twinavi monetization in fourth quarter
contributed to exceeding break-even point in fourth quarter and posting ongoing growth- Corporate and celebrity accounts in Twitter official navigator twinavi increased steadily, exceeding 5,000 accounts(as of July 23, 2010); twinavi mobile launched; PC/mobile cross-advertising products scheduled to be marketed- Operation and marketing support ASP tool, Tweetmanager Enterprise, launched in July 2010

Twitter/PC banner ads

Twitter/mobile- Approx. 700 million imp/month (June 2010)
Number of impressions posts 115% increase monthly
while advertising needs show ongoing growth;
100% sell-through maintained- Approx. 250 million imp/month (July 2010)
amidst rapid increase in mobile access;mobile ad solicitation launched in August 2010
Mobile SNS/community reach rate ranking

Number of advertisers (January-June 2010)(i-mode users: June 2010)

41

50

1
2
3
4
5
6
7
8
9
10
11

40

30

20

10

0

Jan

Feb

Mar

Apr

May

Domaingree.jpgoo.ne.jp
ameba.jp
fc2.commixi.jpmbga.jphatena.ne.jp
ameblo.jp
livedoor.jp
nifty.com
twtr.jpWebsite name
GREE Mobile
goo Mobile
Ameba Mobile
FC2 Mobile
Mixi Mobile
Mobage Town
Pocket Hatena
Ameba Mobile
Keitai livedoor
Mobile@nifty
Twitter

Reach rate %
36.9
35.7
30.2
29.1
26.9
25.9
22.5
21.7
20.3
19.2
17.2

Source: Video Research Interactive

Jun

-25-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: CGM Marketing (2/2)
context company

Tweetmanager Enterprise

twinavi (official Twitter navigator)

Revision made to beta version launched in September
2009; Tweetmanager Enterprise released in July 2010

- Steady PV growth with approximately 10 million imp/month(June 2010)

Fee-based services currently offered to 21 companies
following test marketing phase- Extensive Twitter use by corporations; rapid increase of
corporate accounts

Target increased demand for Twitter-based flash
marketing by adding more capabilities

Number of accounts (up to July 23, 2010)
6000

5,060

5000
4000
3000

1. Effectiveness evaluation

ki

2000

④
4. One-to-one
marketing

1000
02. Brand research

10
/1
/0
10
9
/2
9/
09
11
/2
6/
09
12
/2
4/
09
1/
21
/1
0
2/
18
/1
0
3/
18
/1
0
4/
15
/1
0
5/
13
/1
0
6/
10
/1
0
7/
8/
10

3. Operational streamlining

twinavi/mobile

Major corporate accounts- Mobile access almost surpasses PC access due todrastic increase in mobile users; approximately 6 million
imp/month (June 2010)

21 corporate accounts including Tokyu Hands,
Burberry International, FamilyMart and Unilever Japan- Ad solicitation started in August 2010

Current
Current Forecasts
Forecasts◆ Position twinavi as social platform by adding community functions◆ Create profit model based on PC/mobile cross-communication by linking Twitter and twinavi-26-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: DG Mobile
context company

FYE 2010 Highlights- Number of members and downloads in content distribution increased steadily, securing Group's earnings base- Tappit (Twitter client for iPhone) and Twitvideo (digital image/video posting site) launched as part of
new Twitter-related businesses
More business models scheduled for launch
Twitter-based new business development

Mobile content distribution business- Steady growth in number of sites mainly
due to addition of e-book sites- Multiple value-added services offering various digitalcontents and EC services developed for mobile Twitter users- Mobile platforms

120

Unofficial sites
100

Client websites (development assisted by DG)
77

DG websites
80

6
7

60

40

9

2
9

25

25

07.12

08.6

6
7

81
54

7
10

- Development of optimized services for accelerating
smartphone market- Development of services designed to match existing
mobile devices and Japanese users

Match value-added services
and target markets

85

Communication carriers
portal market

65

20

Existing mobile
phone users

0

Current
Current Strategy
Strategy

08.12

09.6

09.12

10.6

Open market

Smartphoneusers◆ Mobile content distribution market in transitional phase due to introduction of smartphones andoverseas services; develop distinctive Twitter-based services◆ Operation under new management structure effective August 1 in line with DG three-year plan
-27-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Venture
Incubation

Media Incubation

Settlement

III Hybrid Solution: B2B Solution businesses➤ DG&Ibex Company
Marketing promotion support, media development and web solutions➤ e-context Company
E-commerce settlement platforms

HybridSolution

Solutions

Business Overview: Hybrid Solution Segment Performancecontext company

III Hybrid Solution: B2B Solution businesses
Net sales

Operating income

FYE 2009 Actual

24,348 million yen-526 million yen

FYE 2010 Actual

7,527 million yen

150 million yen

FYE 2011 Forecast

8,850 million yen

400 million yen

Offering
Offeringone-stop
one-stopsolutions
solutionsas
as“Hybrid“HybridSolution
SolutionPartner”
Partner”◆ Develops increasing return media solutions while engaging in commissioned businesses(B2B) such as IT and MT solutions as stable earnings base of DG Group“Strengthening of B2B2C business solutions using Twitter”◆ Engages in new Group-wide escrow settlement business based on existing settlement business“Launching of Kakaku.com settlement assurance service as co-project with Kakaku.com”-29-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: e-context Company
context company(Digital Garage e-context Company)
FYE 2010 Actual

Number of affiliated websites

Number of transactions

Total amount of transactions

34,686134% (year-on-year)

13.37 million
102% (year-on-year)

101.8 billion yen
100% (year-on-year)
Market overview

FYE 2010 Highlights

Â Number of affiliated websites
steadily increased as
e-commerce market grew

September 2009:

Launched Japan's first PayPal settlement services
Provides easy online settlement solutions for
e-commerce business operators

December 2009:

Complied with international information security standard for
payment card industry
Fully-conformed to the latest PCIDSS Ver.1.2

December 2009:

Provided a settlement system to Square Enix Crysta
Crysta can be used for all services linked to Square Enix accounts

June 2010:

Founded NEXDG, joint venture with Nippon Express
Supports fulfillment businesses for e-commerce clients

July 2010:

Launched Twitter-based EC sales promotion portal site Okaimono Now
Offers Twitter-based flash marketing support services to affiliate sites

November 2010:service launched
Kakaku.com settlement assurance-30-

Â Slowdown in major ticket
businesses and delayed launchof new websites contributed toreduction in transactions

Future focus areas
Â B2C value-added businesspromotion through launching of
Kakaku.com settlement
assurance service as co-projectwith Kakaku.com
Â Promotion of real/Internet
business integration throughTwitter-related and fulfillment
projects
Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Kakaku.com Settlement Assurance Service
context company

Kakaku.com settlement assurance service co-launching with Kakaku.com
A new value-added service that offers buyer protection for Internet purchases
in case of undelivered products or e-commerce vendor going out of business; available this fallUserÂPeace of mind
The vendor receives
payment upon delivery of
product to the user; when
the product is notdelivered, the user’s
payment is reimbursed

Pay with Peace of mind,
Convenience andVendorÂSavings
Settlement service fee islower with the newservice

SavingsÂConvenience
Advantageous accountterms for vendors
improves turnover offunds(up to six times permonth/quick settlementin eight days)ÂConvenience
Various payment options
are offered: credit
card/convenience store
payment/bank paymentÂSavings
Processing fee is lower
than popular COD
methods

Kakaku.com settlement assurance service-31-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Kakaku.com Settlement Assurance Service: Potential Estimates
context company

Target: User-vendor direct transactions (i.e., Kakaku.com's main
business areas such as appliances, computers and cameras)

Vendor implementation rate: Percentage of vendors using Kakaku.com settlement
assurance service
User implementation rate:
Percentage of customers using the service at e-shops
offering Kakaku.com settlement assurance service

FYE
2013

Vendor implementation rate:

10%

30%

50%

User implementation rate:

30%

35%

40%

Total amount of transactions

45

580

1,100

Settlement gross margin:
0.93 billion yen

New service: clear potential
for further growth

3 billion yen

2 billion yen

Kakaku.com total transactions(¥100 million)
1.5

18

35

DG gross margin(¥100 million)

0.3

4

8
FYE
2011

FYE
2012

Usage in three years no more than 20 percent of target;
two to three-fold potential still remaining
-32-

FYE
2013

Market size

Total amount of sales(¥100 million)

Target areas

1 billion yen

Settlement
usage size
Vendorimplementation
rate :

User implementation rate

FYE
FYE
2011 2012

Total amount of transactions:101.8 billion yen

Achieve settlement businessfor new service equivalent tothat of existing service inthree years

3-year target: total amount of transactions of 110 billion yen
and sales of 3.5 billion yen
Potential

FYE 2010 e-context
Company performance:

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: DG&Ibex Company
context company(Digital Garage DG&Ibex Company)

FYE 2010 Highlights- Business restructuring implemented with strategic move of technology resources to Media Incubation- Four existing headquarters consolidated into two in order to focus on comprehensive promotion services
and Internet media businesses- Web marketing area posted steady 130% sales growth year-on-year- Point mall business achieved significant transaction increase to 7.509 billion yen (294% year-on-year)
Amount of mall transactions and number of vendor contracts(semi-annual data since 2007)
Number of

Digital/analog three-year gross margin comparisonsvendors(¥ million)
6000

10
9

5000

FYE 2008

8

FYE 2009

FYE 2010

7

4000

6
5

3000

4
2000

Gross
margin

3
2

1000

1
0
07/12

08/6

08/12

09/6

0
09/12 10/06 10/12 (Plan)

Entering into full-fledged operational phase as Hybrid Solution Partner
Mid- andand longlongMidterm
strategyterm strategy◆ Accelerate development of Twitter-based solution packages for enterprises◆ Strengthen earnings base by adding media-based businesses to existing commissioned businesses-33-

Copyright © 2010 Digital Garage, Inc. All Rights ReservedForecasts of Media Businesses
context company◆ Point Mall
Development of affiliate malls linked with point programs offered bybusiness with customer information database
Mall card memberships increased from approximately 14.7 million to
54.65 million
Number of mall affiliates increased from 2 to 6; expected to growto 9 companies during current term

Companies withMallcustomer database development/operation(e.g., credit card
(DG)
companies)

E-commercesites(advertisers)

2. Customer

1. Customer①顧客誘導
solicitation②顧客送客
channeling

Purchase
購入

Point Mall
ポイントモール

1. Contingent fee①成果報酬費system
2.②広告費
Advertising fees

3. Managing

③運営費
fees

Points added based on purchase amount◆ TsubuReco (launched on May 24, 2010 http://tbrc.jp)
Third-party platform service that matches user tweets and productinformation and allows affiliate information to be added with asimple operation
Product information currently offered at Amazon Japan and Yahoo
Fee

Information service also started for Kakaku.com

Product
information

Other
sites
その他
(ongoing)(
随時 )Purchase

Purchase
購買
購買TweetsFollowers◆ BirdFish (test marketed since July 2010 http://birdfish.jp)
ASP service optimized for intra-firm information sharing using
Twitter-style microblog
Collaborative business with groupware developer, scheduled to be
fully available in first half of FYE 2011
Approximately 10 corporations including IIJ currently expected toparticipate in test marketing-34-

Copyright © 2010 Digital Garage, Inc. All Rights ReservedHybrid Solution Segment Business Overview
context company

Promotion of new media development solutions supported by B2B business expertise
Entering into business restructuring/operation base expansion phase
Create new earnings structure with shift from B2B to B2B2C
Engage in new media-building alliance businesses＝

II. Business area expansion in collaboration with strategic partners＝

III. Active promotion of new services

Existing
business area

Entering into business restructuring/operation base
expansion phase

BtoB
Offer system
platform×- Affiliates- ECs- Contents

×Integration ofoperating resources

Low

Growth potential
MediumHybrid Solution area

BtoBtoC/
BtoC

High

I. Business expansion through social media development and utilization

I. Multifaceted approach to diverse settlement business

Solutions
II. Engineering resources reassigned to media business development

Businessplatform-35-

Copyright © 2010 Digital Garage, Inc. All Rights Reservedcontext company

Mid-Term Business Plan（5/13）-36-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Business Targets in Mid-Term 3-Year Plancontext company

Target figures(Target year: FYE 2013)◆ Consolidated ordinary income:◆ Consolidated ROE:
◆ Operating income provided by
Media Incubation business:over 5 billion yen
over 25 %over 50 %Hands-on Internet businesses to follow Twitter
Investment in Twitter
Company/bridge to
profitable incubation business stage- Silicon Valley-type hands-on incubation (import)

VentureIncubation- Support of Japanese startups targeting at overseas market (export)
Open Network Lab http://onlab.jp/

Human resources
including 12 key
engineers shiftedto Twitter business

Develop
Develop Twitter
Twitter andand next-generation
next-generation socialsocial media
media- Official site management and proprietary third-party strategy

Media Incubation- Develop new next-generation social media

Evolution of Hybrid Solution

Settlement

HybridSolution

Solution- Departure from existing commissionedtype system development- BtoBtoC-type media development alliance-37-

Copyright © 2010 Digital Garage, Inc. All Rights ReservedTarget Figures in Mid-Term 3-Year Plancontext company

New planFYE 2009

FYE 2010

FYE 2011

FYE 2012

FYE 2013

34,4998,346

10,60014,50020,000Operating income

981

-970

-350

1,350

4,300

Ordinary income

537

-457

400

2,500

5,800

5,450

-2,207

220

1,800

3,700

FYE 2010

FYE 2011

FYE 2012

FYE 2013

Net sales

Net income

Net sales by segment
FYE 2009◆Hybrid Solution

24,348

7,527

9,000

10,80013,000◆Media Incubation

9,969

812

1,550

3,200

5,500

◆ Venture Incubation

180

7

50

500

1,500

34,497

8,346

10,60014,50020,000FYE 2010

FYE 2011

FYE 2012

FYE 2013

Total
Operating income by segment

FYE 2009◆ Hybrid Solution

-526

150

350

750

1,200

◆ Media Incubation

3,542

-107

350

1,400

2,800

◆ Venture Incubation

-883

-143

-100

200

1,200

2,133

-100

600

2,350

5,200

Total

-38-

Copyright © 2010 Digital Garage, Inc. All Rights ReservedConsolidated Net Sales/Operating Income by Segment
context company

Consolidated operating income (Prior to Group tax deduction)

Consolidated net sales
40,000

6,000

Plan

Plan
35,00030,000

180

5,000
1,200

◆ Hybrid Solution◆ Media Incubation◆ Venture Incubation

9,969

4,000

25,0003,000
200

20,000

2,000

1,500

2,800

3,542
1,400

500

15,00024,34810,000

50
7
812

5,000
7,527

5,500

1,000

3,200
0

1,550

9,000

350
350

150
-526

10,800-143

13,000-1,000

0

750

1,200

-107 -100-883-2,000FYE 2009

FYE 2010

FYE 2011

FYE 2012

FYE 2013

FYE 2009

Sales provided by Media Incubation business

FYE 2010

FYE 2011

FYE 2012

FYE 2013

Operating income provided by Media Incubation business

10%
27%

54%

FYE 2013 (plan)
FYE 2010 (plan)

FYE 2013 (plan)-39-

Copyright © 2010 Digital Garage, Inc. All Rights Reserved

Please note that the business forecasts and strategies covered in this material are based on our current evaluationand future results may vary significantly depending on unforeseeable events or circumstances.