Rakuten’s Goal

To be the world’s
No.1 Internet Service Company
Rakuten’s Five Concepts of Success

1. Get Things Done
2. Complete Professionalism
3. Hypothesize, Execute, Verify and Incorporate
4. Customer Satisfaction Maximization
5. Speed!! Speed!! Speed!!
Contents
Consolidated Financial Highlights
To Our Shareholders
Who we are
What we doBusiness Overview
E-Commerce Business Segment
Travel Business Segment
Credit and Payment Business Segment
Securities Business Segment
Portal and Media Business Segment
Telecommunications Business Segment
Professional Sports Business Segment

1
2
4

Investing in the Future
Global Expansion Strategy
The Rakuten Group’s Strategy

18
18

Rakuten Travel’s Global Strategy and

6
8
10
12
14
15
16
17

   LinkShare Corporation
Rakuten Ichiba Taiwan
Rakuten Europe and other Regional Expansion
Organization and Human Resources
Technology
Social Contribution Program

19
20
21
22
24
26

Company Information
Corporate GovernanceConsolidated Balance Sheets
Consolidated Statements of Income
Consolidated Subsidiaries and Affiliated Companies
Corporate Data

28
30
31
32
34

Cautionary Statement
In this annual report, unless the context indicates otherwise, reference to “Rakuten”, “Rakuten Group,” “we,” “our, ” and “us,” are to Rakuten, Inc. and its consolidated subsidiaries and affiliates. The statements in this report with respect to current plans, strategies, beliefs and other statements that are not historical facts of
the Rakuten Group are forward-looking statements.
Such forward-looking statements are based on management’s assumptions and beliefs in light of the information currently available to it. These forward-looking
statements involve risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore
you should not place undue reliance on them. We do not intend to update these forward-looking statements, whether as a result of new information, future eventsor otherwise, except as maybe required by applicable law.
“Rakuten”,     and      are the registered trademarks of Rakuten, Inc. in Japan.

34

Consolidated Financial Highlights
Rakuten, Inc. and Consolidated Subsidiaries
Years Ended December 31

Thousands of
U.S. dollars

Millions of yen

2005

2006

2007

2007

Fiscal YearNet Sales
Gross Profit
Operating Income
Net Income¥   129,775
115,553
34,885
19,450¥ 203,272
175,970
29,1492,703¥   213,938
174,458
119
36,899$1,765,168
1,439,422
982
304,446

For period ended December 31
Total Assets
Total Shareholders’ Equity
Total Net Assets

1,657,709
76,550–1,296,063–
203,197

1,158,923–
193,823

9,562,072–
1,599,204¥   6,464.6¥ 14,492.2¥ 14,212.7$   1,170.3

1,642.5
1,626.2

212.0
193.1

2,826.0
2,813.3

23.3
23.2

Per Share (in yen and U.S. dollars)
Total Net Assets
Net Income:   Basic   Diluted

Note: U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥121.20 to U.S.$1, the approximate rate of exchange at
December 31, 2007.

Net Sales Billions of yen

Group Gross Transaction Value Billions of yen

250

1,000

213.9

203.3

200

981.0
836.4

800

563.1

600

150

129.8
400

100

45.6

50

329.1

200
0

0

04

05

07

06

04
TravelLinkshare05
Other EC

07

06
Books

Growth in Number of Rakuten Members Millions of members

Number of Merchants Stores

50

25,000Ichiba22,39643.9
20,000
Number of Rakuten Group Members

35.9

30
20
Number of Rakuten Members

10

Merchants total

40

15,00010,000
5,000
0

0

04

05

06

07

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

05

06

07

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

1

To Our Shareholders

Today, the Rakuten Group is growing alongside its
To Our Shareholders

employees to further create shareholder value under
the concept of “More than a Company.”
By clearly defining and stating our corporate culture;“Rakuten-ism” will be a concept widely implemented
throughout the Group companies in Japan and overseas.
Each and every employee will share a common Mission,
Values and Practices, and take part in creating a highly
motivated “Winning Team.”

Who We Are

In Fiscal year 2007, Rakuten marked its 10th anniversary. And I’m pleased to report that the Group’s grosstransaction value exceeded 980 billion yen, and issteadily approaching 1 trillion yen. Now, focusing on thenext decade, we are working intently to lay the foundation for growth.
The Internet industry has entered an era of majorchange. In response, we will strengthen our Internet

What We Do

shopping mall business, “Rakuten Ichiba” and otherexisting businesses, as well as launch new offerings.
The Rakuten Group will expand and once again emphasize the “Rakuten Eco-system” concept: the mosthighly utilized Internet-based economic zone. We will

Investing in the Future

strive to provide attractive and further customized services for our customers. We will also aim to become theworld’s leading Internet services company, and as ourCompany Information

The Group is a highly
built upon common

Hiroshi Mikitani
Chairman and CEO

2

Rakuten Eco-system
Payment Platform
Credit Card, Banking (alliance)

To Our Shareholders

Customer
Flow-Shopping Mall
-Auction

E-Commerce
Credit-Credit-Consumer Loanand

TravelPayment

RakutenMembership
Database
Portaland

Securities-Stocks-Bonds-Trust Funds-FX-Insurance-Mortgage

Who We Are-Content Streaming-Downloads-Advertising-Hotels and Facilities-Air Tickets-Long Distance Bus Tickets-Dynamic Packages-Car Rental

Media
Telecommunications-IP Telephony

Rakuten Super Point

but also off-line services designed to maximize the use

which will be soon followed by full-scale entries intoof the Rakuten Group’s businesses.

other overseas markets starting in 2008.

We are committed to value-added innovation, andmost importantly, we promise our long-term sharehold-Rakuten membership database, is the largest of its kinders that we will promote sustainable growth and share-in Japan with 43.9 million members. We will continuously

holder value.

offer new services to engage this “mega-market” andenable our customers to receive not only online services,

I would like to express my appreciation for yourcontinuous support.

33

Company Information

motivated “Winning Team”“Values,”“Mission,”and“Practices.”

Investing in the Future

One of our most valuable business assets, theWhat We Do

first step, we are launching “Rakuten Ichiba” in Taiwan,

Who We Are
who we are

Rakuten Group”The Rakuten Group’s goal is to become the No. 1 Internet Service Company in the world.”
To Our Shareholders

In 2007, Rakuten celebrated its milestone of 10 years of growth.

that no single product nor a single person can deliver the great

Today, it is recognized as Japan’s leading company in the

results deriving from synergies and collaborations, the “Rakuten

Internet business.

Eco-system,” an economic cycle of complete integration and

The business portfolio is built upon leading businesses:

combination of goods and services of the Rakuten Group, is a

e-commerce, online travel reservation, portal sites, online content,

uniquely distinct advantage.

credit card, consumer loan, online brokerage, and IP telephony

The “Rakuten Eco-system” fulfills various needs and touchpoints

services. In addition, we also have a professional baseball team forof everyday life; consequently, it attracts customers, and even moremarketing purposes to help increase our corporate brand aware-

so by adding value and delivering efficient and synergistic benefits

ness. These different businesses give us a unique capability to servethrough intra-Group transactions.

Who We Are

our customers with a diverse lineup of personalized services.

For example, the “Rakuten Super Point Program,” a membership

The Rakuten Group enjoys a premier position in Japan among

loyalty program designed to encourage the use of Rakuten Group

its competitors in Internet businesses. It rates No. 1 in e-commerce

services, allows consumers to migrate between services to gain

and online travel reservations businesses. It is also No. 6 among

more points, thereby maximizing the Rakuten Group’s gross transac-

total retail travel agencies. Online securities business rates No. 2,tion value. The “Rakuten Card” is an house brand card that canand portal website, blog and auction businesses rate No. 3.

earn these points through each transaction. It not only is a growing

As each segment works to expand its scope of business, andrevenue source, but it also functions as a beneficial business

improve the quality of its member services, the Group’s performance

application to link online business to conventional business. Morein total is also a major consideration.

precisely, the cardholder’s transaction gives great insight into

Since performance has always been traced back to the idea

consumer behavior outside the Internet, which can be fed back andWhat We Do

analyzed to benefit the Group’s other businesses.

Key Business Developments

1997

2007

Over the past 10 years Rakuten has built a portfoliothat will support “Everything Rakuten”

IP Telephony

Investing in the Future

Personal Finance

Credit Card

Online Securities

Mortgage

Online Hotel Reservation

Company Information

Portal Site

Internet Shopping Mall

4

Insurance

Dynamic Package

Community (Blog)

Online Bookstore

Bank (alliance)

Internet Research

Performance Marketing

Mobile Auction

Online DVD/CD Rental

More importantly, the Group utilizes the “Rakuten Super Datanication through the maximization of the “Rakuten Eco-system.”

The Rakuten Group’s goal shares “Values,” “Mission,”and “Practices” across a highly-motivated“Winning Team.”

In order to profitably manage the Group’s diverse businesses,
resources are carefully managed to control the profitability and

We are a company that shares common “Values”

growth of each business. However, investments into new businesses

These Values are:are also necessary for medium-to-long term growth.

(1) To stretch one’s ability to deliver performance which con-

At Rakuten, the key drivers of growth are believed to be the spiritof entrepreneurship and the encouragement shared across thetributes to the innovation and revolution of society andcreates a better world

Rakuten Group companies. It is a passion for learning, the will to(2) To embrace the Group Brand Concept

challenge, the courage to change the unchanged, and the ability to(3) To commit to empower business partners and colleagues withcreate new values and services.

To Our Shareholders

base,” the largest of its kind in Japan, to create dynamic commu-

a strong belief in personal possibility

The Group is built upon common goals; to deliver innovative

We have determined the “Group Brand Concept”:

and to collaborate and spread success within and across the

1. We work to empower a fair society

Rakuten Group.

2. We maintain our integrity with a profound sense of pride

Rakuten Group Ethics

3. We stand ready to execute decisions for success

Under the brand concept, Rakuten aims to become the No.1

4. We are completely committed to our mission

Internet services company in the world. Determination to con-

5. We foster teamwork. Teamwork brings success

Who We Are

services, to perform in the medium-to-long term, to gain profit

when engaging in businesstribute to society and enhance the corporate goals of the Rakuten
Group to align with the common sense interests of our customers
are emphasized.

We are also a company that shares a common“Mission.”
To enrich and innovate our society through the accomplishmentsof goals of individuals, and to embrace the potential for growththat the Internet offers to people and society; in other words weWhat We Do

Our Mission is:“empower the world” through the Internet.

We are a company that shares common “Practices.”

Values

These Practices are:(1) To accomplish the “Five Concepts of Success”, and proactively become a role-model of success(2) To promote a sense of ownership within everyone on adaily basis

MissionPractices(3) To become the source of the Group’s strength: “thorough”
and “innovative”

Company Information

The “Five Concepts of Success” can be stated as:
1. Get Things Done
2. Complete Professionalism
Rakuten is a highly motivated “Winning Team” built upon
common “Values,” “Mission” and “Practices.”

Investing in the Future

The Group’s goal is to become the No.1 Internet
Service Company

3. Hypothesize, Execute, Verify, Incorporate
4. Customer Satisfaction Maximization
5. Speed!! Speed!! Speed!!

5What We Do -Business Review-

Rakuten Group’s Business Overview
To Our Shareholders“We continuously invest in new businesses and services essential to the medium-term growth ofcorporate value, carefully evaluating their growth potential and profitability.”

Industry Overview

throughout 2007. To culminate these efforts, we strengthened our

By the end of 2007, the number of Internet users in Japan surpassed

business base by adopting a provision for the allowance of losses

88.1 million, comprising 69% of the population. Over 90% of therelated to interest repayment claims. We now expect a significant

population aged 20 to 50 now accesses the Internet using mobile

reduction of costs relating to interest repayment claims from 2008.

devices such as mobile phones, and in 2007 the total number ofmobile Internet users reached 72.9 million.

In fiscal year 2007, the Rakuten Group posted consolidated net
sales of 213,938 million yen, an increase of 5.2% year on year, and

Who We Are

E-commerce is continuing to grow rapidly thanks to its ability

operating income of 119 million yen, a decrease of 99.6%. While

to overcome the limitations of time and space, offer a wide range

Rakuten Ichiba, Rakuten Travel and other businesses continued toof products, and allow customers to compare prices and services

achieve high growth, operating income was negatively impacted

available on the Internet. At the end of fiscal year 2007, the B2Cby the effect of Rakuten KC’s lump-sum provision to the allowance

e-commerce market was about 2.2 trillion yen, comprising approxi-

for interest repayment losses. However, a gain from the sale ofmately 2% of total retail market in Japan.

shares of Ctrip.com International, Ltd. resulted in net income ofIf we compare the penetration rate of e-commerce to the general

36,899 million yen, an increase of 1,265.3%. In a separate develop-

retail business in the United States, which stands at approximately

ment, Fusion Communications Corp. and its subsidiaries, which

9%, Japan still has room to grow. Significantly, we have greater

provides voice communications services focused on IP telephony,growth potential as we enter the global market.

were consolidated at the end of the third quarter and now form the

Further growth is also expected in the mobile-commerce market.

What We Do

This will be driven by improved operability of mobile devices due torapid technology developments: 3G and 4G mobile phones, offering

Rakuten Group’s new Telecommunications Business segment.
The performance breakdowns per the main businesses are as
follows;

faster data transmission and larger, higher-definition displays.

E-Commerce Business

Investing in the Future

Financial Results for Fiscal Year 2007

Gross merchandise sales of our Internet shopping mall businesses

In 2007, Rakuten celebrated its milestone of 10 years of growth.

including Rakuten Ichiba and Rakuten Books was 537.0 billion yen,

Today, it is recognized as the leader of the e-commerce market in

an increase of 26.8% compared with last year, due primarily to ourJapan. Through the key phrase “More than Web,” the Rakuten

continued efforts to support merchants and improve usability. Net

Group has built a range of business applications to connect online

sales of E-Commerce Business increased by 30.9% year on year

business to conventional business, for example the “Rakuten

to 75,512 million yen, with operating income up by 10.7% to 19,542

Card.” We have also aggressively expanded and strengthened themillion yen.

“Rakuten Eco-system.”
The Rakuten Group works to expand its scope of business andCredit and Payment Business

improve the quality of its member services in a variety of ways. It also

Net sales in this segment declined by 11.7% year on year to 70,196

continues to invest in new businesses essential to the medium-term

million yen, mainly due to the business transfer at Rakuten KC Co.,

growth of corporate value. Careful evaluation of profit potential andLtd. Operating loss increased to 25,175 million yen (compared witha focus on high-growth opportunities is a top priority.

operating loss of 6,150 million yen for the previous fiscal year)

A variety of measures have also been taken to improve profitability.

Company Information

One of these is the introduction of the “Rakuten Super Point Program.”because we posted a provisional allowance for losses related tointerest repayment claims.

This is a membership loyalty program designed to encourage theuse of Rakuten Group services, allowing consumers to migrate

Portal and Media Businessbetween services to gain more points; thereby maximizing the

Net sales of this segment declined 11.7% year on year to 7,510

Rakuten Group’s gross transaction value.

million yen, mainly due to a decrease in advertisement sales that,At Rakuten KC Co., Ltd., we implemented a series of businessin addition to development cost increases, resulted in an operating

restructuring measures by conducting the transfer of the auto loan

loss for this segment of 363 million yen (compared with operating

business in 2006 and reducing personnel, credit and general costs

income of 394 million yen for the previous fiscal year.)6

Travel Business

Share of Net Sales

year to 220.0 billion yen due to the increase of travelers for leisure

Telecommunications

purposes and the expansion of dynamic package tours and overseas travel reservations. Net sales for the Travel Business rose

ProfessionalSports

23.4% year on year, to 12,910 million yen with operating income

Securities

E-Commerceincreasing 28.9% to 6,004 million yen.
TravelSecurities Business

To Our Shareholders

Gross booking value at Rakuten Travel increased by 22.6% year on

Due to negative impact from the slowdown of emerging markets in
the Japanese stock market, net sales (revenues) of the Securities

Portal and Media

Credit and Payment

Business declined 24.6% to 30,556 million yen, resulting in a 62.6%
decrease in operating income of 5,746 million yen.

Thanks to the increase in number of spectators attending games
at the stadium, sales of tickets and team goods performed well infiscal year 2007. Net sales for the Professional Sports Businessrose 15.4% year on year to 7,553 million yen, while the operating
loss was reduced by 40% to 837 million yen (compared with 1,396
million yen of operating loss for the previous fiscal year.)

E-Commerce Business		

35.30%

Business Units: Rakuten Ichiba; Auction; Books &Media; Golf; Fine Wine; Automobiles; Delivery; Dining;
Tickets; E-Cards; Business Service; PerformanceMarketing, Stuffed Animal Cards

Credit and Payment Business32.81%

Business Units: Personal Finance; KC, Banking (Alliance)

The Rakuten Group acquired Fusion Communications Corporation
munications and its subsidiaries as of September 30, 2007. Net salesof the Telecommunications Business were 9,700 million yen andoperating loss was 394 million yen for the fiscal year 2007.

Forecast for Fiscal Year 2008 and Seasonality

Portal and Media Business

3.51%

Business Units: Infoseek; Advertising; Target;
Research; Career Service; Blog; Downloads; Satellite
Broadcasting; Internet Television; Cross Media

Travel Businessand the Travel Business. Meanwhile, costs in the Credit and Payment

Business Units: Travel

6.04%

Business related to interest repayment claims are expected to besignificantly reduced in the coming year. The Rakuten Group also
expects a positive impact from newly implemented measures suchas stricter budgetary controls and cost-cutting. We therefore expect
continued improvement in financial results.
Historically we have experienced strong growth in the second

Securities Business14.28%

Business Units: Securities; Capital Investments; AssetManagement; Insurance

half of the year (July to December). This is due primarily to theInvesting in the Future

We forecast continued strong growth in the E-Commerce Business

What We Do

Telecommunications Businessa provider of IP telephony business, and consolidated Fusion Com-

Who We Are

Professional Sports Businessincreased third-quarter demand in the Travel Business during thesummer vacation period and strong fourth-quarter demand in theProfessional Sports Business

3.53%

Business Units: Professional Sports

Telecommunications Business

4.53%

Business Units: IP Telephony

7

Company Information

E-Commerce Business related to the year-end gift-giving season.

What We Do -Business Review-

E-Commerce Business Segment
Rakuten Ichiba
To Our Shareholders“Rakuten Ichiba’s focus is to deliver innovative ideas and initiatives based on the concept of“empowering the world,” and to become the No. 1 Internet shopping mall.”“Rakuten Ichiba” is an Internet shopping mall run on a platform that allows close interaction among all market participants. It isa B2B2C business which fulfills both the needs of the merchant and the user under the same business model.

Who We Are

Launched in 1997, before the Internet was widely popular, “Rakuten

According to Nikkei BP Marketing Inc.’s Brand Japan 2008

Ichiba” took the advantage against its competitors to lower thesurvey, Rakuten Ichiba was the top general retailer brand, and 14th

hurdle of business entry by setting a low-price contract fee andoverall, up from 22nd place in 2006. Market share in domestic B2C

introducing a unique and easy-to-use system known as the “RMS

e-commerce for 2007 was 24.5%, accounting for 537 billion yen of(Rakuten Merchant Server).”the 2.2 trillion yen gross sales merchandise market.

The initial target was to gain brand recognition and to increase

What We Do

the number of merchants which is the driver of transaction growth.

What is Unique About “Rakuten Ichiba?”

Thanks to Internet expansion, the number of merchants increased

Rakuten Ichiba offers equally diversified and customized benefits

dramatically. However, the transaction volume expanded to theto both the merchant and user. Merchants have access to (1) thesystem’s full capacity. Consequently, reinvesting in the business to“RMS,” (2) massive traffic consisting of 35.9 million Rakuten Ichiba

secure a stabilized system became essential. In 2002, merchantmembers, (3) consulting services provided by Rakuten’s ECC

contracts were reconsidered, and a new contract was introduced to(“E-Commerce Consultants”): supervisors with expertise to support

secure capital expenditure. This decision was an important turning

boost performance and efficiently of shop management, and (4) the

point for Rakuten, since a pay-per-transaction fee was added to the“Rakuten University,” an offline educational academy providing

original fixed fee base contract. The direct impact on merchants wasshop management courses.

Investing in the Future

criticized by the media; however, the number of merchants not only

As for users, they have access to (1) a wide range of products — 20

was sustained, but increased after the new contract was introduced;

million items, (2) a user-friendly interface, (3) the “Rakuten Super Pointa true proof of how Rakuten Ichiba’s business model is strongly tied

Program,” introduced in 2002, and (4) the “Safe Shopping Service,” ato the performance of its merchants.

reliable service to ensure safe Internet transactions.

Rakuten Ichiba Quarterly Results“Rakuten Ichiba” Site Top Page
Operating Profit

Sales(Billions of yen)
16

15.0

2

12

1

*1

8

6.9

Company Information

3

4

0

05

06

07

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4*1 Start of charge to Standard-contract merchants with 1 million yen orless monthly sales: introduced FY06 Q1

1 Diverse variety of
2 “My Rakuten”
customized page
20 million items
22,396 merchants

3 Links to other
Rakuten services* This site is for illustration purpose only, and services are available in Japanese only
* Access: http://event.rakuten.co.jp/en/* As of December 31, 2007

8

campaigns which yield significant contribution. Through thesemeasures, we have, and continuously will drive GMS growth,

Japan, which stores records of transaction patterns, customer

diversify our main sources of income (contract fees and commis-

behavior analysis, as well as specific customer information by age,sions from diversified services), and deliver a profitable business.

gender, etc.
rate; however, we see further room to grow our top line and boost

What are Some Examples of Measures Taken
During 2007?

the profitability of the business. Why? Because close observations

Among the various measures introduced, the “Rakuten Web service”

are taken of the growing mobile market, the diversification of pay-

disseminated the Application Program Interface (API) to the public,

ment methods, the changing trends of advertising and consumer

thereby contributing to innovative development capability throughbehavior, etc., and our strategic measures are adapted to each andthe implementation of expert external utilization. We launched theevery new development.

DVD/CD rental service “Rakuten Rental.”

Rakuten Ichiba is expected to continue to grow at a double-digit

We launched the “Safe Shopping Service” to provide highas lead generation to reach out to business partners outside of­reliability of Internet transactions. Though we are confident of the“Rakuten Ichiba” and thereby maximize our profitability and power

reliability of our services and actual cases are very limited, theas an advertising medium. We have also added new functions such

prevalent fear of Internet fraud is one of the reasons for the low

as “Reviews and “Ranking” to enhance ease-of-use. And to enforce

e-commerce penetration rate factors in Japan. In order to addressinternal operations, we have categorized product ranges into smaller

these fears, “Rakuten Safe Shopping Service” was introduced,

units to facilitate even closer analysis and keep marketing

guaranteeing a 100% refund of purchase (one item per year, up to

approaches up-to-date. We have also opened new offices to

500 thousand yen) when a product is not delivered.

Who We Are

For example, we are launching new advertising products such

To Our Shareholders

On top of this, Rakuten Ichiba strategically utilizes the “Rakuten
Super Database,” the largest-of-its-kind centralized database inenhance regional operation capabilities and launch region-specific

What We Do

Rakuten University“Rakuten University” is an offline educational academy which wasestablished in 2000 to provide shop management expertise to
Rakuten merchants. Courses have been developed and customized for “Rakuten Ichiba,” based on logical thinking methods.
Since we believe the communication and networking that

Investing in the Future

develops among the participants during the courses is oneof the most important achievements of schooling, courses
are mainly conducted in classroom group discussions. In
fact, one of the key factors that contributes to rapid performance improvement is the community spread all over Japan
created by participants who willingly share knowledge tosupport one another.
Data shows that more than 80% of shop owners who earnmore than 10 million yen on a monthly basis have alreadyattended a course at the University, and more than half of theregistered merchants have participated in at least one of theCompany Information

offered courses.
For merchants who face commuting restrictions, we plan tostart a new e-learning program. We have also introduced new
programs such as team-building and corporate philosophy
management courses to meet requirements beyond shop
management courses.

9What We Do -Business Review-

Travel Business Segment
Rakuten Travel
To Our Shareholders“As we expand our local presence we also aim to become Asia’s No. 1
online travel agency through service enhancements.”
The Travel Business segment consists of Rakuten Travel, Inc. and its subsidiaries, mainly providing online hotel booking reservations and travel-related services such as the “ANA Raku Pack”
dynamic packages.

Masashi Okatake
Executive Officer,
President of Rakuten Travel, Inc.

Who We Are

Transition of Business

Thanks to the rapidly growing online business, in fiscal year

In March 2001, with the launch of the Rakuten Travel Website,

2007, the number of Rakuten Travel’s domestic traveler bookings

Rakuten entered the online travel reservation business in August

grew to roughly 25 million, reaching the same level as the number

2002; Rakuten Travel, Inc. The following year, Rakuten furtherof bookings through Japan’s largest travel agency.

expanded its business scale through the acquisition of “MyTrip.

Rakuten Travel proudly ranks as the No. 1 online travel site innet,” Japan’s largest online travel booking service website “TabiJapan by gross transaction volume, recording 22.0 trillion yen, an

no Madoguchi”.

increase of 22.6% compared to the previous year.

What We Do

In 2006, Rakuten ANA Travel Online Co., Ltd., a joint venture by

When we look at the domestic market transaction volume,

All Nippon Airways Co., Ltd. (ANA) and Rakuten Travel, was(including hotel, transportation, and insurance of offline agencies)

established. A new service was launched, called dynamic package

Rakuten Travel ranks No. 6 (counting only hotel reservations)tours, which allowed customers to flexibly combine airline tickets

marking 145 billion yen.

and hotel reservations through one-stop, online reservations at their

The 2006 total travel expenditure in Japan was 26.6 trillion yen,convenience. This easy-to-use system contributed to the increasedof which online domestic hotel reservations accounted for only

use of online reservation services, and although most reservations

around 1%. There is clearly immense potential left for growth inare still made through agencies, a significant channel shift is now

this business.

under way.

GTV*

Rakuten Travel Quarterly Results

Room Nights Booked(Thousand nights)
8,000(Billions of yen)
80

Sales

(Millions of yen)

Operating Profit

4,000

3,573
6,352

60

3,000

Company Information

Reservation

6,000

57.67
GTV

Investing in the Future

Travel Business Gross Booking Value Trends

2,000

40

4,000

20

2,000

1,000

0

0

0

05

06

07

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4* Gross Transaction Value at time of reservation (before cancellation, tax calculated)* From 05/Q1, Overseas hotels gross bookings, overseas air travel gross bookings,
and overseas hotel reservations included* From 05/Q4, Rakuten Bus Services Inc. included* From 06/Q1, international dynamic packaging included* From 06/Q4, domestic dynamic packaging included* From 07/Q4, domestic car rental included

10

1,409

05

06

07

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

The “Rental Car Pre-reservation” was the first ever service

The main services we provide domestically are:launched in Japan to track real-time inventory and reserve online• Dynamic package (DP) – a booking combination of flights

for all major rental car companies.

and hotels• Highway bus ticket reservations

Ongoing Initiatives:• Rental car reservations

Rakuten Travel is focused on expanding its businesses in three

And for international services, we provide;areas, referred to as the “Three Dimensional Growth Strategy,”• International flight reservations

determined by category, geographic area, and service.

• Hotel bookings• By category, it will expand booking arrangement services fromTo Our Shareholders• Hotel bookingsbusiness use, to leisure use, and to group traveling, extending• Overseas dynamic package

its services beyond today’s main booking purposes.

Other unique services we provide are:• By geographic area, it will extend its business field to the rest

• Pet hotel reservationsof Asia and the global market. In the mid-to-long term we will

• Lottery site

dedicate more resources to Asia with the goal of becoming “theNo. 1 online travel agency in Asia”• Auction site for hotel reservations• By service, it will enrich the lineup of services from hotel bookings
An interesting trend is that the ratio of gross booking transactions

to air ticket reservations, rental car arrangements, and optional

through mobile phones against total gross bookings has grown toservices including additional flexible dynamic packages, in order

over 10%, clearly indicating that mobiles have become a key area

to address a wider range of customer requirements.

Who We Are• Exclusive website for business class bookings

to emphasize for further growth.
In line with these strategies, Rakuten Travel is reinforcing its
marketing operations to further support the needs of contract hotels

expanded travel options for customers where travellers canand business partners. System improvements are ongoing, andchoose different outbound and return destination cities, andregional offices are being opened and enhanced to promote “tie-make local reservations separately.

ups” for marketing campaigns. The enrichment of local information

The “ANA@desk” which is mainly for corporate-use customers,

and reinforcement of call centers play a greater role as the “realnow allows seamless flight and hotel reservations processing, andchannel” interfaces and have increased the number of leisure-seat pre-reservation services.

purpose travelers.

What We Do

During fiscal year 2007, major action plans were implemented
to enrich our portfolio of services. The “ANA Raku Pack”

The ultimate goal is to expand and focus beyond the domestic
and business-travel subsectors, to become a full-service online

Investing in the Futureinternational travel service provider.

Three Dimensional Growth Strategy
Expand beyond the domestic and business-travel
subsectors to become a full-service online travel provider
Services

Company Information

Dynamic Package
products(travel × hotel × options)

Travel products

Areas(flights, car rental)

Hotel reservation
products

Categories

Outside Japan

Worldwide
Asia

InternationalJapan
Non-travel
PurposesGroup traveling

Leisure-use

Business-use

Individual travelers

11What We Do -Business Review-

Credit and Payment Business Segment
Rakuten Credit, Rakuten KC and Rakuten Bank (Alliance)
To Our Shareholders“The Credit and Payment Business segment has established a concrete
position as an online financing company through the maximization of
the Group’s synergies.”
The Credit and Payment Business segment consists mainly of Rakuten KC Co., Ltd., Rakuten
Credit, Inc., and Rakuten Financial Solution, Inc. The business is primarily concerned with thecredit card and consumer loan businesses, as well as a banking service tie-up with Tokyo Tomin
Bank, Limited. The business provides a wide range of settlement services within the “Rakuten
Masayuki Hosaka

Eco-system.”

Executive Officer
President of Rakuten KC Co., Ltd.
Director of Rakuten Credit, Inc. (as of June 2008)

Who We Are

Transition of Business

Rakuten Credit (Personal Finance)

To further accelerate its E-Commerce Business, Rakuten needed

Rakuten’s credit business was launched in 2004 with the acquisition

to encourage the use of credit cards, the major payment methodof Aozora Card. For the personal loan card “My One Card,” Rakuten

for online shopping. Therefore in 2004, Rakuten chose to enter into

implemented measures using a point campaign for new card

the full-scale personal finance business.

applicants through Rakuten Ichiba, Rakuten Travel, Infoseek andWhat We Do

Among the distinguishing features of the Rakuten Card, the houseother Group channels, and consistently offered special promotions

brand card for the Rakuten Group is that once users acquire the card,

to Rakuten Group users. As a result, the number of applications forthe value of their shopping transactions on Rakuten Ichiba increases

cardholder contracts received through Rakuten Group services

by around 50%. Analyses also show that cardholders frequently use

increased substantially. The balance of operating receivables, which

the Rakuten Card for purchases outside of Rakuten’s services in

was around 25.6 billion yen at the time of acquisition, rose to 103.6

order to gain Rakuten Super Points. The personal finance businessbillion yen. The customer base consists primarily of well-off busi-

plays an important role, particularly considering the overall effect it

nessmen in their 40s, of which 45% are Rakuten members. The

has upon the Group’s businesses. Through the financial business,credit worthiness of Rakuten’s customers is first tier and the average

Rakuten not only gains the transaction from card use, but it alsointerest rate stands at a low level.

obtains offline transaction data of its card holder which can be fed
back and analyzed to benefit the Group’s other businesses.

Rakuten KC: Credit Card Shopping Transaction Volume
Loan BalanceMembers(Billions of yen)(Billions of yen)

103,843
100

102.2

100.0

100,000

Company Information

50

50,000

0

0
04
05
06
07
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

12

Members

103.6
Loan Balance

Investing in the Future

Loans Receivable Balance

75.5

78.7

06/Q4

07/Q1

84.9

89.3

07/Q2

07/Q3

50.0

0.0

07/Q4

of personnel, constriction of bad-debt related costs through tighter

At first, the Rakuten Card was issued through a tie-up with Mitsui

credit risk controls, and various other efforts. The final measure of

Sumitomo Card in 2004, but the tie-up benefits were very limited.

this business restructuring was a 25.0 billion yen capital injection

In order to perform more flexible business operations, in June 2005

from Rakuten, Inc. for additional provisioning to the allowances

Rakuten Group acquired Kokunai Shinpan Co., Ltd., (renamed as

related to interest repayment claims by the revision of the estimation

Rakuten KC Co., Ltd.). With the issuance of the house-card,

method of the future risks from the end of December 2007, and“Rakuten Card” by Rakuten KC, the credit card service became a

Rakuten KC has recorded an operating cost for the 25.1 billion yen

new source of revenue for Rakuten and, moreover, accelerated thedifference from the previous method.

frequency of settlement by credit cards.
At the end of fiscal 2007, Rakuten KC’s credit card shoppingtransaction volume rose 53.3% from the previous fiscal year to

Rakuten KC has renovated its primary business strategies and

To Our Shareholders

Rakuten KC

operations from a local auto loan and installment business to acredit card business tied with Internet services.

355.1 billion yen. The effect of double point offerings through the

Rakuten Bank (Tie-up with Tokyo Tomin Bank)

through various services within the Rakuten Group, was that theTokyo Tomin Bank opened “Rakuten Bank@TTB” in July 2007,

number of cardholders also rose steadily; Rakuten KC has 3.0 million

taking advantage of the strengths of both firms. The tie-up allows

credit card holders as of December 2007, and the customer base

Rakuten to offer a wide range of convenient Internet-based

consist of middle-tier consumers.

financial services to Rakuten members, while Tokyo Tomin Bank

In 2006, Rakuten KC implemented a restructuring plan that
included transfer of the auto loan business to Orient Corporation.

is able to utilize the Rakuten brand and our expertise in Internet-

Who We Are

Rakuten Super Point Program and actively advertising strategies

based marketing.

It cut general expenses through consolidation of offices, reduction

What We Do

Financial Related Services Outlook* As of December 31, 2007

Loan business for upper-tier consumers-Loan assets: 104 billion yen

Rakuten KC“MY ONE Card”(financing card - loan)

Credit card business-Number of total card holders: 3.0 million
Loan business for middle-tier consumers“Rakuten Card”(mainly card shopping
usage)“Money Card”(financing card - loan)

Company Information-Loan assets:116 billion yen (credit card)-Loan assets: 99 billon yen (finance card)

Rakuten Bank@TTB

Investing in the Future

Rakuten Credit

Rakuten Branch of Tokyo Tomin Bank (alliance)-Accessible 24 hours 7 days a week through the Internet and mobile phones-Convenient settlement services for Rakuten members-E-money “Rakuten Cash” operation

13

What We Do -Business Review-

Securities Business Segment
Rakuten Securities
To Our Shareholders“We will acquire and approach new customers through maximization of the
Rakuten Eco-system, and by changing personal asset management.”
The Securities Business segment mainly consists of Rakuten Securities Holdings, Inc. and its
subsidiaries, including Rakuten Securities, Inc. The business provides online securities brokerage and other services. Believing that participation in the finance industry would create greatersynergies and allow the Rakuten Group to expand its extensive offerings, Rakuten decided to enter
the securities brokerage business in 2003 by acquiring the major online broker, DLJdirect SFG
Securities (currently Rakuten Securities, Inc.). Today, one-third of all new Rakuten Securities
Atsushi Kunishige

accounts are opened through Rakuten Ichiba users, an excellent example of the Rakuten Group’s

Executive Deputy President,

synergistic benefits.

Representative Director

Who We Are

Building a New Business Portfolio(2) Global investment opportunities, such as foreign bonds with

Rakuten Securities is focused on reforming its business portfolio
to avoid risks from the domestic stock market by expanding income

varied currencies and ETFs, have become widely available
through the offering of the global product portfolio.

sources with the following product lineup of Nikkei 225 mini, BRICs(3) Margin trading services have been strengthened to secure theand EFTs, South African bonds, and other investment trust funds

environment for the trading products portfolio. FX services andin 2007.

derivative products are scheduled to be updated.

Also, domestic stock services will continue to improve throughWhat We Do

a number of initiatives, including: (1) “Market Speed” real-time

Rakuten Securities aims to change the way customers

trading software; (2) “iSPEED” mobile trading software; and (3)approach personal asset management by offering its diversified“Raku Raku Support,” a PC support service with remote access.

product portfolio at a lower fee with an easy-to-use website. Unlike

Despite the sluggish domestic market, the total number of accounts

the existing 750,000 Rakuten Securities members who are more

steadily increased, reaching 750,000, and the total number ofexperienced investors, the 35.9 million Rakuten members are

iSPEED downloads was 300,000.

investment beginners. Through the expansion of beginner-targeted

In order to gain profitability, business restructuring has been

services, such as trust funds and asset management services,

introduced into Rakuten Securities. The Business Unit (BU) manage-

low-cost, easy-to-use financial products will be created. And ament system has been introduced to monitor, analyze and execute

diversified portfolio of offerings will support customers as theycycles per BU to improve operations in the following three areas;build wealth.

Investing in the Future(1) The website was redesigned to enhance the matching efficiency

In line with this, cost reductions through integrating datacentersof the asset products, known as Japan’s broadest investment

and main databases, as well as disposing of non-operating software

trust fund lineup. Various offline seminars and e-learningand servers to enhance profitability will be introduced.

courses have also been introduced to help customers meettheir needs.

Rakuten Securities Holdings, Inc. Quarterly Results
Empowering Personal Asset Management of
Rakuten Members

Sales

Ordinary Profit(Billions of yen)
12.0

Company Information

Trading
products

Rakuten Security
0.75 million
members

10.0
8.0

6.9

(Frequent Traders / Users)

RakutenMembers
35.9 million

Asset Investment
Beginners

6.0

Asset
based
products

Globalinvestment
products

4.0
2.0

2.1

0

Unlike Rakuten Securities’ more traditional experienced investors, most
Rakuten members are just beginners at personal asset investment. Rakuten
Securities’ focus is to offer industry-leading personal asset investment.

14

05
06
07
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Portal and Media Business Segment
Infoseek, Advertising and Others

The Portal and Media Business segment consists mainly of Infoseek, Advertising, Rakuten Research, Inc., Rakuten TV, Co., Ltd.
and College Students’ Portal Community, Inc. (Minna-no-Shushoku). It focuses on the operation of Internet portal sites andadvertising, as well as staffing services, online research, and distribution of broadband content.

• Rakuten Women, offering content specifically tailored to women

Infoseek’s revenue derives mostly from advertising and functions as• Rakuten Blog, an Internet blog service

a “marketing solution” for clients who wish to promote their products• Rakuten Map, a map with review sites which creates virtual local

and services through Rakuten, and assists to market products acrosscommunities

multiple Group sites. To expand the business into a new phase to
implement measures designed to generate profit from external clients

What is the Positioning of Infoseek?

through personalization and lead generation technology based on

Infoseek is the gateway by which the Rakuten Group’s Internet

individual behavioral histories, and demographic and other dataservices attract new users and media.

stored in the “Rakuten Super Database,” we will approach newcustomers and extend the source of revenues.

It has expanded its content and grown as a result of the diversification of user lifestyles and hobbies and has become a hub
Infoseek is approaching the largest potential customers, theIn December 2000, Rakuten acquired the Internet portal site opera-

Rakuten Group members, with comprehensive and prompt services

tor “Infoseek Japan K.K.” from the Walt Disney Company with thein order to position Infoseek as their primary portal site. Beta testing

objective of shifting from an Internet shopping mall concept to aof the new website is currently under way. And the behavioral target-

more broad-based general media corporation. It gained exclusive

ing advertising service as well as the new lead-generation businessrights to the company’s technologies and brand to begin to offer

model have also been launched.

What We Do

linking various Group services.

About Infoseek

Who We Are

About Advertising

To Our Shareholders“The Portal and Media Business segment has contributed to the Group by acting as a gateway to
attract immense traffic to the Rakuten Group’s services. Through launching diverse advertisingproducts, the Rakuten Group’s Membership database and strong brand recognition will serve toaccelerate the monetization model.”numerous types of content and services.

Other Businesses• A search engine to match the needs of users looking for various

We also operate “Minna-no-Shushoku (Jobs for Everyone)” known

goods and services• Infoseek Money, offering financial news and information

as one of the most popular Internet websites for new graduates
seeking post-graduation employment.
Rakuten Research, Inc., an online research business was also

Infoseek Site Top Page Renewal
Improve usability and experience, and increase ability to customize
based on user needs

acquired in 2005, which provides online surveys and targeted e-maillists for use in promotional activities.

Infoseek and Advertising Businesses Quarterly Results
Sales

Operating Profit

Company Information(Millions of yen)
2,000
1,600
1,200

1,276

800
400
0
–400

Investing in the Future

Today, our main services are:

–118

05
06
07
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4* Including multiple BUs: Infoseek BU, Advertising BU and Human
Resource-related businesses

15What We Do -Business Review-

Telecommunications Business Segment
IP Telephony (Fusion Communications)
To Our Shareholders“Joining the Rakuten Group has contributed greatly to the improvement of Fusion Communications’ performance under the ongoing business restructuring plan.”
The Telecommunications Business segment consists of Fusion Communications Corporation, which recently became a consolidated subsidiary of Rakuten, Inc. The primary business is the provision of telecommunications services such as IP network andIP telephony services.

Who We Are

Transition of Business

Ongoing Initiatives

Fusion Communications and its affiliated companies were acquired

To achieve further growth, we are focused on the following

on August 7, 2007. We are developing a business model that

activities:

combines the technological prowess and stable operations of IP

1) Delivery of profitability through the comprehensive and rapid

telephony pioneered by Fusion Communications with the wide

implementation of restructuring plans

range of Internet-based services delivered by Rakuten. New

2) Introduction of measures to improve the revenue of existing

business opportunities outside the Internet, such as adding a voice

businesses in order to grow the top line (e.g. further support totelecommunications service are being considered.
Since joining the Rakuten Group, rapid performance improvement has been realized due primarily to effective cost restructuring

distributors)
3) Development and launch of new businesses that leverage synergies with the Group’s services

What We Do

measures and enhancements to operating efficiency.
Fusion Network Service, a subsidiary of Fusion Communications

Business Updates

plans to introduce an Internet service provider (ISP) business called

To achieve growth through existing products and services, wethe “Rakuten Broadband ADSL 10M” in 2008. It will actively promoteplan to:

ISP services by approaching the 43.9 million Rakuten Group

1) Formulate business restructuring plans to renovate existing

members, a zone that would drive further potential growth.

businesses under the new management
2) Thoroughly analyze each business’ profitability and cost struc-

Investing in the Future

ture by utilizing the business unit management system introducedin December 2007
3) Strategically review the terms of service mostly with thoselarge-scale contractors
4) Significantly cut fixed costs by integrating the existing networkof TTNet

Company Information

16

Professional Sports Business Segment
Rakuten Eagles

The Professional Sports Business segment consists of Rakuten Baseball, Inc. and its subsidiaries. It manages the Tohoku Rakuten Golden Eagles (“Rakuten Eagles”) professional baseballteam, as well as the planning and selling of goods related to the team.

To Our Shareholders“Since its inception, Rakuten Baseball, Inc.
has continued to grow and evolve.”

Toru Shimada
Senior Executive Officer and Director
President of Rakuten Baseball, Inc.

changing the image of the baseball business.

In November 2004, the Tohoku Rakuten Golden Eagles was acceptedTechnical and scientific approaches were introduced into training

as the first new Japanese professional baseball team in 50 years.

programs, and a more business-like approach was utilized in theIt has successfully attracted fans from day one, and in the threeformation of the team.

years since its remarkable entry into the professional league, it has

The exciting games and accompanying entertainment activities

become one of the most popular, well-known baseball teams amongat the new “Ball Park” attracted the local fans and most notability

fans. Today, marketing metrics show that the annual marketing

those who were not traditionally baseball fans.

effectiveness of the team amounts to 6 trillion yen.

Recently the expectations of winning more games and the great
performances of many of the young star players have attracted

deliver inspiration and dreams through baseball: it is a “Baseballeven more fans that are still increasing steadily. The sales of goods,

Entertainment Company.”

food and beverages at the stadium are also increasing.

Taking advantage of its role as being the newcomer, the Rakuten

On the financial side, operating loss is still expected for a certain

Eagles team has been keen to promote Japan’s national sport asperiod due to the initial investment in the start-up and renovation

a true entertainment business. It has brought new ideas into theof the stadium, though brand recognition continues to positively

industry, and its boldness has been recognized as unique andcontribute to the Group’s business.
The significant economic benefit the team has brought to theimportantly, the Rakuten Eagles team has contributed to the

local region is a notable factor which has been given frequent

acceleration of the Group’s overall business objectives.

attention in the papers.

What is the Team’s Vision?

to attract local fans. They take part in developing education pro-1) To build a strong teamgrams for local children, visiting schools, hosting baseball work-2) To develop a close relationship with the local region

shops, and participating in social activities outside the ballpark.

Today, players put great effort into strengthening regional ties

We are proud that our locally rooted business model has been

In order to ensure the team’s continual growth and desire torecognized with the admiration that comes with a great successbecome a stronger, more greatly admired team; Rakuten Eagles

story, and even more so, that our initiatives have brought newhas heavily invested in a variety of initiatives to achieve its goals.

inspiration to change the industry’s old customs.
Enhancing the brand value of the Group is just one goal of themodel by emulating the Major League style. This not only attracted

professional sports business segment. Rakuten Eagles’s goal is tothe fans who came to enjoy the game, but it also contributed todeliver profitability through our professional sports activities.

Company Information

To change the image of baseball games, it enhanced its business

Investing in the Future

innovative, contributing to a major boost in brand recognition. More

What We Do

The philosophy of the “Tohoku Rakuten Golden Eagles” is to3) To maintain a well-balanced management style

Who We Are

Transition of Business17

Investing in the Future

Global Expansion Strategy
The Rakuten Group’s Strategy
To Our Shareholders“We will continue to empower the markets we enter, and become theNo. 1 Internet service company”

Kentaro Hyakuno
Executive Officer
Head of Global Ichiba Business Unit

Who We Are

Overseas Expansion: Objectives and Strategy

unique system which supports immense transaction volume and a

Rakuten has seen broad and significant progress in the 10 years

decade of experience operating a successful e-commerce business.

since its entry into the e-commerce business.

We are proud to be the largest online shopping site in Japan, marking

Today, Rakuten embarks on a new path to build new bridges

continuous growth year over year. The business portfolio which has

into the global market. Each step will help Rakuten pursue andgrown into a wider range of offerings now allows Rakuten to leverageachieve fundamental, sustainable and long-term growth.

these diverse services among our different segments. We will take

Entry into the market began when steps were taken with thetravel business back in the early years.

full advantage of our leading position in Japan and build upon ourstrengths to grow on a global scale.

Following that, in 2005, Rakuten acquired LinkShare Corpora-

What We Do

tion, an affiliate-marketing services company in the U.S. as a way

How Will We Realize More Growth and Opportunity?

to enter the global market. And in November 2007, “Rakuten Ichiba”

We differentiate ourselves from our competitors through our key

marked its first ever global expansion of the shopping mall modelbusiness assets by;into the Taiwan market.

• The professional expertise of efficiently operating online shops,

Though Internet service businesses in Japan still see greater

leveraging the know-how of the ECC (E-Commerce Consultant)capacity and further growth opportunity for the mid-long term, the• “RMS,” a unique, easy-to-operate shop-management system

population remains stable at 130 million, whereas the global popula-• “Rakuten University,” an offline educational academy coursetion is 6 billion. To achieve further growth, we are committed tomore fully compete in the global market.

Investing in the Future

As we enter different regions of the world and open our services
to other markets we will face new challenges. We have built a strong
brand in Japan, however, which is supported by industry-leading
assets, such as the largest-of-its-kind membership database, aCompany Information

18

available to merchants• “Rakuten Super Point Program,” a loyalty program, designed tosustain the largest scale membership database in Japan• The synergy of our diverse range of businesses, the “Rakuten
Eco-system,” etc.

Global Expansion Strategy
Rakuten Travel’s Global Strategy and LinkShare Corporation
Encouraged by strong growth in domestic operations, Rakuten’sname of “Tabi no Madoguchi,” run by My Trip.Net.

What Are the Goals for Globalization of
Rakuten Travel?

In 2002, My Trip entered the Chinese market, establishing a local

Highly qualified services will continue to be launched as the qua-branch in Shanghai, to take a step ahead to capture the increasing

druple language websites attract even more users. We will boost

flow of inbound and outbound travelers.

transaction volume in Asia to become the leading travel agency

Following that, after My Trip joined the Rakuten Group and was
renamed as “Rakuten Travel,” it entered Seoul, South Korea in 2004

within the area, and then take further steps toward becoming theworld’s leading travel agency.

and Guam in 2007. These overseas branches play a key role in the

LinkShare Corporation (U.S.)

management training and consulting services for local contractors,

In September 2005, Rakuten acquired LinkShare Corporation,

and as local points of contact to facilitate favorable agreements.

a U.S. based affiliate-marketing services company which

Asian countries have unique features that require deep under-­provides leading full-service online marketing solutions special-standing. Thus, establishing a presence in select regions will help

izing in the areas of affiliate marketing and search (SEM) andfacilitate significant growth potential within Asia.

lead generation.

How Are We Doing Today in the Asian Market?

sands of publishers (affiliates) and over 600 of the world’s leading

According to the Japan Association of Travel Agent in 2006, thecompanies and brands. Its patented unique tracking method is also

market for outbound international travel (Japanese people travelinga key asset that helps drive the growth of the business.

The LinkShare network facilitates transactions between thou-abroad) was worth 6.2 trillion yen, and the inbound international

LinkShare continues to grow operations in North America, thetravel market (foreign visitors traveling to Japan) was worth 1.4

United Kingdom, Japan, and other areas of Asia and Europe,

trillion yen. A vast potential for market share gains can clearly bediversifying its service offerings in ways that provide additional value

seen in these figures.

for advertisers, publishers and consumers.

Who We Are

development of new hotel contracts, local travel research, website

To Our Shareholders

overseas hotel reservation service started in March 2000, under the

What We Do

To attract overseas travelers, we have redesigned our English
language website and now offer booking services for accommodations in China, South Korea, and other Asian countries in addition
to Japan. We will have an office in Thailand in 2008 to support those
locally-based services.

Investing in the Future

Real-time online booking on travel websites designed in different languages

Korean website

http://travel.rakuten.co.jp/en/

http://kr-travel.rakuten.com/

Chinese website(simplified characters)

Chinese website(traditional characters)

http://tabimado.net.cn/

http://tabimado.net.cn/

Company Information

English website

19

Investing in the Future

Global Expansion Strategy
Rakuten Ichiba Taiwan“Rakuten Ichiba’s arrival in the global market has been marked by the entry into the Taiwan market.”
To Our Shareholders

In November 2007, an agreement was reached with Taiwan-based President Chain Store Corporation to establish Rakuten
Ichiba Taiwan, a joint venture company. President Chain Store is a leading retail distributor with 30 years of history, whose
flagship “7-Eleven” business dominates the Taiwanese market. The capital and paid-in capital of “Rakuten Ichiba Taiwan”
is approximately 600 million yen, 51% for Rakuten and 49% for President Chain Store. Great synergies deriving from thestrengths of each entity are expected to be seen with the launch of service in May 2008.

Who We Are

Taiwan’s E-commerce Market

President Chain Store recognizes the advantages of partnership

The number of Internet users in Taiwan has reached 15.5 million, with

with Rakuten in areas such as the systems and skills of Internet

68.5% of the total Internet population of users over the age of 12, an

shopping that Rakuten Ichiba has acquired through its leading

increase of 0.7% over the previous year, and 90% plus of those lessposition in Japan, and the combination of its logistical andthan 35 years old. Though Internet penetration is higher in the younger

network strengths. Rakuten also presents an opportunity to gain

generation, online shopping penetration is only 2.3% of the total retaila stronger online presence and to cement its leading status within

business. Therefore, a tremendous opportunity for rapid growth in

the retail distribution industry.

Internet shopping is yet to be realized.
“Rakuten Ichiba Taiwan” will provide the same comprehensive

Medium-to-Long Term Management Strategy

What We Do

support systems that Rakuten provides to its Japanese merchants,

Looking ahead, Rakuten Ichiba Taiwan’s policy calls for it to popular-

in order to support Taiwanese merchants and to facilitate a suc-ize a new Internet-based lifestyle among consumers in Taiwan andcessful online shopping experience. Services include the EC con-extend the services provided by Rakuten to a broader range ofsultation service, Rakuten University courses, and the RMS, theusers, in other words, to expand the “Rakuten Eco-system.”

unique shop-management system engineered by Rakuten.
The aim of the “Ichiba model” is to empower the market’s retailindustry (including small and medium-sized enterprises) and to help
regional economies grow. It also aims to provide a wide range of
products to Internet users to make online shopping an enjoyable

Investing in the Future

experience for them.

“Rakuten Ichiba Taiwan” Site Top Page

Rakuten Ichiba Taiwan
RakutenPresident Chain Store• Expertise in shopping mall
operations• Taiwan’s largest retailer• Outstanding logistics• History of alliances withJapanese companies

Company Information

51%

49%

Rakuten Ichiba Taiwan
Capital and paid-in capital: 174 million Taiwan dollars (NT$)

Taiwanese E-commerce Market
Active Internet users: approx. 10 million
Taiwan EC market scale (2007): 108.0 billion Taiwan dollars (NT$)

Access: http://www.rakuten.com.tw* NT$1 = US$0.03, JPY 3.74 as of December 31, 200720

Global Expansion Strategy
Rakuten Europe and other Regional Expansion
Rakuten’s global expansion primarily aims to support SMEs

other markets in Europe, Asia, and other countries. In 2008,

around the world in two ways: first, create and open new markets

Rakuten established a regional hub in Luxemburg, “Rakuten

in which they can sell their products within their local area and then,Europe S.à r.l,” which will play a key role as the central

make such products available across country borders. We will bridge

coordination entity. It will hold corporate functions such as stra-

one country to another, creating links enabling people to obtain ategic planning, and HR training, and will serve as a logistics base.

variety of products without boundaries.

Rakuten will also seek opportunities to introduce other businesses

The entry into the global market may mean Rakuten will facebesides “Rakuten Ichiba” into Europe and thus utilize the functions

more severe competition. However, we believe that this will reinforceof the central coordination entity.

the Group’s strength of becoming more sophisticated and even

As we plan to start the Rakuten Ichiba service in countries inside

more competitive by learning to adapt to the specific needs ofand outside of the European Union and other regions, we will bedifferent marketplaces. Our ultimate goal is to become the No. 1

offering opportunities to those that wish to take advantage of theInternet service company in the world.

To Our Shareholders

Following “Rakuten Ichiba Taiwan,” Rakuten will continue to enter

benefits and strengths of the Rakuten Group.

Who We Are

What is Our Ultimate Goal?
We provide services to support local small and medium-sizedenterprises (SMEs) to increase their economic scale and enhance
the community by expanding their reach of exposure to theirproducts and services. This again contributes to regional economic
growth keeping more transactions within the country. And mostimportantly, it will allow more diverse services and products to enrich
the lives of the local population.

What We Do

Globalization of Rakuten

Rakuten head office

LinkShare U.K.

(Tokyo, Japan)(Boston, U.S.)(China)Traveling services company

Rakuten Ichiba
TaiwanRakuten Europe S.à r.l

Rakuten USA, Inc.

Tabi Mado(Taiwan)E-commerce business(Luxemburg)
European Central
Coordination Entity

Rakuten Travel Korea(Seoul, South Korea)
Traveling services company

LinkShare U.S.
(New York, U.S.)
Affiliate-marketing services company

Company Information

Rakuten Travel Guam

Investing in the Future(London, U.K.)
Affiliate-marketing services
company(Guam)
Traveling services company

Rakuten Travel Thailand(Bangkok, Thailand)
Traveling services company

21

Investing in the Future

Organization and Human Resources

To Our Shareholders“Our people and Rakuten are progressively growing. The foundation of sustainable growth isorganization and human resource management.”

Management Policy

The new GMP system allows us to establish a monitoring pro-Investment in organization and in people is the foundation forcess of all the BUs’ performance, helping to outline strategy plans

Rakuten’s future growth. We believe it is essential for any corporate

to ensure the Group’s sustained growth and profitability over thegroup aiming for further innovation to realize efficient operations.

medium to long term. The GMP is also introduced when considering

Who we are

At Rakuten, three types of growth are being pursued: 1) Businesslatent earning potential, allocating management resources into eachexpansion—centered on the Internet shopping mall business model,

BU, establishing a basic business framework, identifying less-“Rakuten Ichiba;” 2) Service expansion—the diversification of

profitable businesses, and considering business withdrawal.

service offerings; and 3) Geographic expansion—reaching through-Through the GMP, we have significantly improved the quality ofout Japan and beyond, towards the global market. Going forward,

business portfolio management.

we recognize that strengthening the Rakuten Group Organizationis the key to achieve our goal: To be a company that delivers profit-

Accelerated PDCA Cycle and Operational Excellenceable and sustainable growth.

“Kaizen” is a daily activity at Rakuten. It is a key indicator to improve
productivity and performance. Especially, we emphasize speediness

What we do

Growth Management Programin order to realize operational excellence with our “Hypothesize,

Rakuten introduced the Growth Management Program (GMP) in

Execute, Verify and Incorporate” cycle, which is similar to the2006 aiming to enhance the growth and profitability of its diversified“Plan-Do-Check-Action” cycle. Efforts are made to reduce the PDCA

businesses. Earlier, businesses were organized within five segments

cycle from a monthly to a weekly basis, helping to identify problems

called the “in-house companies system” which was introduced in

before they cause serious loss and to take immediate and necessary

2003. These segments were further subdivided into more than 30

measures toward improvement. During the development process“business units” (BUs), which were categorized and scored againstof new businesses, this cycle is accelerated to make small changes,

GMP metrics; by business scale and profitability.

monitoring results, and rapidly adapting new improvements throughGrowth Management Program (GMP)
Investing in the future

A business portfolio management system to(1) Monitor growth and profitability(2) Allocate resources effectively

Rakuten Group Employees

Profitability

S (Super)2

3

4Priority fields

J (Jumbo)
G (Growth)

3,751
3,709
3,430

3,000
Employees

Companiy Information

Business scale1(persons)
4,000

2,000

809 958

1,000

Potential fields
B (Baby)

0

4

12

46

258 304

481’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07

I (Incubation)

New businesses vital for the Group* Employees excluding directors, auditors and part time workers

22continual aligned trials. This is the concept of “start small, and earn

To Our Shareholders

large results.” At Rakuten, operational quality and efficiency is also
important. Precise operation eliminates waste in business processes
and improves efficiency. We believe this is an essential element forsustainable growth.

New Management System for Human Resources
While Rakuten has a strong organizational structure, we decided
to prioritize investment in our people. We introduced a new management system for human resources and reinvested in personnel
development. The new management system aims to foster employees who are willing to take actions and initiatives voluntarily to solve

Rakuten Library:
Facility for learning opportunities offered to employees.

problems. It is also establishing a scheme to further enhance ability

Who We Are

to evaluate and award individual business efforts. It is also designed
to embody a management structure based on Rakuten’s “Conceptsof Success”: Hypothesize, Execute, Verify and Incorporate. A
management system based not simply on evaluating results, butalso firmly rooted in the work process.
Rakuten offers a diversified training program to provide
employees with opportunities for greater professionalism andcareer advancement.
“Rakuten Boarding School”: a comprehensive education program designed to aid in understanding and realizing in everyday-life,“Rakuten College”: available for those willing to take advanced

Cafeteria:
Breakfast and lunch with a variety of menus are served free toall employees.

What We Do

the concepts and philosophy embraced at Rakuten.
IT training courses.
“Management Program”: intensive job management courses forManagers to improve management skills.

“Rakuten Tower”
Investing in the Future

Rakuten’s offices have been consolidated in the new head officebuilding, “Rakuten Tower,” built on the waterfront of the Shinagawa
Seaside area of Shinagawa, Tokyo. The new headquarters offer various features to help motivate personnel. The facility is not only
equipped with functional hardware, but is also equipped with software
designed to develop employees’ skills to their full potential.
Rakuten Tower has dedicated areas for an internal all staff
meeting every Monday morning, called the “Asa-kai” (morning

All Staff Meeting Space:
All staff gather to share strategic and operational plans every
Monday morning.

session). It functions as the source to share Rakuten’s strategicand operational updates. “Rakuten Library,” a library to foster
learning willingness, and “Rakuten University,” a classroom dedi-Company Informationcated to courses for merchants. A fitness gym exclusively for
employees, and a cafeteria serving breakfast and lunch free ofcharge have also been provided in order to assist physical andmental wellness of the employees. The “Rakuten Tower” is asymbol of the growth of our people and Rakuten, creating the next
steps towards further growth.
Rakuten Tower Main Entrance

23

Investing in the Future

Technology

To Our Shareholders“Rakuten’s Development secures safe and highly-guaranteed transactions
and services to make the world an even better and more efficient place.”

Akio Sugihara
Chief Produce Officer, Senior Executive
Officer and Director

Who We Are

About Rakuten’s Development Division

reduced development costs versus gross merchandise sales while

Rakuten essentially handles everything from application develop-

maintaining safety in commercial transactions, which ultimately andment to building of server networks and data center wiring andconsequently has gained the trust of users.

rack design in-house, without depending on outside vendors. This

What We Do

enables us to create products suited to rapidly changing user

Key Initiatives in 2007

needs quickly and efficiently while maintaining high quality. It also

“Rakuten Web Service” – The Application ­Program Interface (API)enables us to make improvements ourselves, thereby accumulating

for various services was opened to engineers around the world

know-how. The Development Division consists of about 1,000

incrementally from January 2007, enabling Rakuten’s technology toengineers, and their capabilities are shared horizontally amongbe used more widely for its unique content. Combined with affiliates,

the various businesses.

this has led to an inflow of users to the “Rakuten Eco-system” andan increase in gross transaction value.

What is the Strength of Rakuten’s Development?

Investing in the Future

The initial development environment for Rakuten Ichiba, which

Searching Technology

started with 13 merchants in May 1997, was no more than one small

Rakuten maintains a database varying from store information toserver on a large desk. However, the IPO in 2000 enabled us toblogs, product reviews, etc. To develop an engine that effectively

invest in human resources and systems. As a result, toward 2001,

displays the products or information that users want is thus crucial.

new businesses such as Rakuten Books and Rakuten Travel were

We are focusing on R&D technology that processes an enormous

started and a succession of new initiatives was undertaken, suchamount of data by language, analyzes it numerically, and displays

as Rakuten Ichiba’s mobile service and expansion of advertising

the results at high speed and low cost.

sales. From 2004, we integrated member IDs and passwords for all• Provision of Rakuten Dynamic Ads which automatically display

Rakuten Group services. In 2002, the Rakuten Super Point Program
was introduced, and development to enable each service to award
points started to create the “Rakuten Eco-system”—a system
whereby users can migrate freely among various services. Suchstandardization covers the member ID—enabling members to sign

products related to the content of the web site
• Personalizing of Rakuten Ichiba’s top page and strengtheningof product searches• Introduction of in-house-developed recommendation technologythat brings out the potential of the membership databasein only once—as well as the membership database, mail, andadvertising distribution.

Community Service

Company Information

What has differentiated Rakuten technologically to date has been

The map platform was renewed and standardized within the Rakuten

its identification of cost/gross transaction value as a Key PerformanceGroup. A function for bookmarking favorite spots such as storesIndicator, and the balance of quality and cost with regard to theand hotels was added, and services aimed at the formation of local

large-scale infrastructure that it has found in working to lower thiscommunities were also released. The community service “uttera”

figure. This is the result of responding to user needs and repeating

was developed, which utilizes the GPS functions of mobile phones,

trial-and-error so that services would operate stably, as well as creat-shares user location information calculated from map coordinates

ing a hybrid of a high-quality transaction system for commercial

and enables users to enjoy one-line comments.

purposes and a low-cost open source. At Rakuten Ichiba, we have24Research on Programming Language and RIA

To Our Shareholders

The Rakuten Institute of Technology released services utilizing Ruby,a global programming language developed in Japan, and studied
new possibilities for desktop applications as a new initiative in Rich
Internet Applications (RIA). The Chief Designer of the Ruby programming language, Yukihiro “Matz” Matsumoto, became a Fellow at the
Rakuten Institute of Technology on June 1, 2007. Mr. Matsumoto has
in-depth knowledge and experience in technological developments
related to programming language and the development/utilization of
open-source software, and has started joint technological researchat the Rakuten Institute of Technology, utilizing Rakuten’s experience

Rakuten Technology Conference Reception

and environment in large-scale service development.

Who We Are

Multi-device Internet Access
Amidst ongoing diversification in equipment other than PCs andmobile phones that can access the Internet, the Rakuten Ichiba
service was released in October 2007 on acTVila, the common
Internet TV platform for major TV manufacturers. In the same month
it became possible to search Rakuten Travel for accommodation
and book over the phone via car navigation systems. This is one ofa number of ways in which Rakuten has been responding aggressively to the move to multi-devices.

We hosted a technology conference in November 2007 on the theme

Rakuten Technology Conference Panel Discussion
Rakuten’s Chairman and CEO, Hiroshi Mikitani and Mr.
Yukihiro “Matz” Matsumoto with other panelists discuss
future technology

What We Do

Rakuten Technology Conferenceof “Constructing a Technology Brand,” believing that having people
both inside and outside the company who understand Rakuten’sdevelopment capability as an organization, as well as its initiatives
to develop cutting-edge technology, would contribute to Rakuten’s
further growth.

Investing in the Future

What is the Strategy of Rakuten’s Technology?
Rakuten has created applications with a high potential for expansion
and availability, as well as superior quality and cost efficiency. Goingforward, we will form a technological base that supports scale
expansion for the Rakuten Group, development of various services,
and internationalization, while building a database that realizes

Server Roomaccurate and effective marketing and recommendations.
Over the past decade, Japan’s Internet technology has progressed in response to the rapidly changing needs of users. On topof that, Rakuten will also provide the Internet industry over the next

Company Information

decade with something that is completely new and not an extensionof user needs seen today. By further extending R&D activities into
cutting-edge technologies at the Rakuten Institute of Technology,
we aim to provide new proposal-oriented Internet services that are
one step ahead of users.

25

Investing in the Future

Social Contribution ­ProgramTo Our Shareholders“Approaching social responsibility from volunteering of our people, and our responsibility as a
Corporate Citizen.”

Origin of the Program

The Project Team’s Activities

Rakuten believes that the grand design of this universe is inextricably

The project team was divided into four categories to focus on

linked to corporate activities and that corporate activities themselves

specific areas: the Rakuten IT School Team, the Eco-packaging andwill come to exert an influence on the overall happiness of the human

Recycling Team, the Natural Disaster Recovery Support Team, andrace. That is why, as a “corporate citizen,” we are seriously consider-

the Eco-programs Promotion Team.

ing how we can contribute to the society.
At Rakuten, we believe that the sustainability of business can

Who We Are

be restated as a social activity, which has significance and is

In February 2008, in order to communicate our philosophy andactual activities around social contribution, we launched a dedicated website.

appreciated as a necessity.
We also believe that it is our duty to inspire our stakeholders by

Rakuten’s Social Contribution Projects

opening the innovative and potential power of the Internet to indi-

Rakuten IT School teamviduals and to small to mid-sized enterprises. Our aim is to

We are promoting activities to broaden the“empower” people.

power and potentiality of the Internet. We

Technological progress will cause the ties between people,

have conducted workshops for children at

What We Do

goods, and information throughout the world to continue getting

Rakuten headquarters. Courses werecloser in future; the very concepts of borders and nation states will

designed with lectures and application of practical skills, by an

become vague and the world will become increasingly borderless.

actual online shop owner who shares his expertise with the small

As competition among companies intensifies, the Internet will cause

next generation leaders. Junior high and high school visits are also

vested interests to be steadily eroded, and once the World Wideconducted to lecture on the possibilities of net business and the

Web has truly encompassed the entire globe, it will actually besafe usage of the internet.

impossible to monopolize information. That is why we valuetransparency and social contribution in order to be recognized as

Eco-programs Promotion teama valuable and sustainable entity. Last year, in line with the marking

We are promoting activities to prevent globalof the tenth anniversary of our founding, a project team of volunteer

warming that involve improvements we canmembers with initiative ideas gathered to start up the “Social

make on a day-to-day basis; sorting waste forInvesting in the Future

Contribution Project.” The project is run with the concept of ensuring

recycling at each floor, reducing consumption

Rakuten is an admirable company delivering valuable services toof office-supplies. Our employees and their families have participatedusers over the next decade.

in a volunteer clean-up program of the local office area.

Company Information

Voluntary activities: Rakuten IT School for children

26

Rakuten World Heritage Theater

We are promoting activities to reduce the

To commemorate our 10th anniversary, we started to sponsor thewaste of limited natural resources.

“Rakuten World Heritage Theater,” organized by an implementation

We are planning to replace our packaging

committee under the auspices of the Asahi Shimbun and SAP.

materials with recyclable and reusable materi-Through the sponsorship, we have emphasized to express ourals which we provide to Rakuten Books and Rakuten Ichiba regis-“gratitude” towards the support we have received over the past

tered merchants.

decade, to promote the heritage and conservation of the precious
social and local contribution programs which work to conserve andpreserve the cultural and environmental treasures.

We are promoting the use of the Rakuten Blog

Around the key message “Empowering Japan,” we are sponsor-

to local governments, as an easy-to access,ing various performances which take place at Japan’s world heritage

speedy way to provide crisis managementsites with artists representing

information to the public and local residents after a natural disaster.

their areas of expertise.

We also are promoting the use of blogs which can benefit andThrough this, we are proud toimprove living conditions for the public.

offer the opportunity for many

Who We Are

Japanese culture, both tangible and intangible; and to promote

Natural Disaster Recovery
Support teamTo Our Shareholders

Eco-packaging and Recycling teampeople to experience our rich

What We Do

heritage.

Investing in the Future

World Heritage Theater

Voluntary activities: Rakuten Rental’s new packaging materials

Company Information

Voluntary activities: Rakuten head office area cleanup

World Heritage Theater27Company      Information

Corporate Governance

To Our Shareholders(1) Basic Approach Regarding Corporate Governance

The Board of Directors holds regular monthly meetings and

The Rakuten Group gives the highest priority to strict corporate

extraordinary meetings as necessary. At these meetings, the direc-

governance through Group-wide risk management, while maximiz-

tors reach decisions concerning important matters involving

ing corporate value.

management and supervise the performance of directors andSpecific governance measures include improving the Board of

Executive Officers responsible for business activities. The Rakuten

Directors’ capacity to supervise business execution through theGroup also has an Executive Strategic Meeting, made up of execu-

appointment of outside directors; the establishment of an auditors’

tives at the Senior Executive Officer level and above, which dis-

office as a means of bolstering audit functions; and enhancing

cusses important matters pertaining to the Rakuten Group

internal checking functions by increasing personnel assigned to

strategies, such as mid-to-long term management plans and basic

the Internal Audit Department, an independent body under thepolicies. This framework helps to ensure proper decision-making

direct authority of the CEO.

by the Board of Directors.

Who We Are

Furthermore, the Rakuten Group has adopted a business unit

Once made, decisions by the Board of Directors are delegatedsystem in an ongoing commitment to achieve faster decision-to the Executive Officers’ Meeting, comprised of Executive

making in each business operation, and has developed a system

Officers. Board decisions then serve as a basis for the manage-

for internal controls across the Rakuten Group through the establish-

ment and administrative duties carried out by each Executive

ment of Functional Teams with broad control powers that cut across

Officer. Where the implementation and administration of eachall Rakuten Group businesses.

business is concerned, Business Unit management meetings
held at each Business Unit, as well as management meetings of(2) Implementation of Corporate Governance
Measures (as of December 31, 2007)

committees convened by the Functional Teams work to ensurethat each business is conducted in a proper and efficient manner,and that administrative control that spans the entire Rakuten

What We Do

 Status of management control organization regarding
decision-making, execution and supervision, and othercorporate governance systems

Group is enacted.

Rakuten, Inc. supervises management by using a Corporate Auditor

Auditors. Of the Corporate Auditors, two serve on a full-time basis.

System. In March 2003, Rakuten, Inc. adopted the Executive Officer

The Corporate Auditors are assisted in their duties by the Corporate

System to separate the roles of management supervision and busi-

Auditors’ Office, a body established under the Board of Auditors.

ness execution. Functions that were until then performed by the

The Board of Auditors holds regular meetings and extraordinary

Board of Directors were divided, making directors responsible formeetings as necessary.

Corporate Auditors and the Board of Auditors
There are four Corporate Auditors, three of whom are outside

Investing in the Future

management decision-making and supervision and Executive Officers

The Corporate Auditors attend meetings of the Board of Direc-

responsible for the execution of business activities. A business unit

tors and other important meetings, receive reports on the perfor-

system has also been introduced to promote faster business execu-

mance of duties by directors, the Internal Audit Department andtion by Executive Officers and to strengthen the supervisory functions

other sources, check operations at the head office and otherof the Board of Directors and the Corporate Auditors.

important business sites, and check subsidiary operations. These
activities are performed in line with audit policies, plans and other

Directors, Board of Directors and Executive Officers
The Board of Directors has 13 members, including 2 outside directors, with the maximum number of directors allowed under the
Articles of Incorporation set at 14 members. Resolutions to appoint
directors must be approved by a majority of the shareholders with

Company Information

voting rights at meetings at which at least one-third of the shareholders eligible to exercise voting rights are in attendance.

28

parameters established by the Board of Corporate Auditors. In
addition, the Corporate Auditors receive auditing reports from theindependent accountant and examine the financial statements andrelated documents. The Corporate Auditors also hold meetings with
the Chairman and CEO to discuss various matters.

Financial Audits
Nihon to perform financial audits as prescribed by Japan’s cor-

In accordance with Article 309 Paragraph 2 of the Corporate Law ofporate law and the Financial Instruments and Exchange Law.

Japan, the Articles of Incorporation prescribe that a special resolution

Internal Audits
The Internal Audit Department, established as an independent
body under the direct authority of the CEO, performs audits
based on an annual internal audit plan for the purpose ofchecking the status of operational execution at each department. These audits cover internal controls, including items suchas the legality, suitability and efficiency of activities, andrequires approval at a general meeting of shareholders where
shareholders with one third or more of voting rights are present andwhen shareholders with two thirds or more of voting rights approves
the special resolution at the meeting.
This relaxes the number of required votes for special resolutions

To Our Shareholders

Rakuten, Inc. has an auditing contract with Ernst & Young Shin- Special Resolution Requirement for General Meeting of
Shareholders

at any General Meeting of Shareholders, enabling shareholder meetings to progress smoothly.

progress with regard to audits and compliance programs. By

Who We Are

bolstering ties with the Internal Audit departments at eachsubsidiary, it works to ensure that operations are properly
conducted through the implementation of an ongoing processof Internal Audit across the Rakuten Group.
Results of Internal Audits are reported to the CEO and theCompliance Committee, as well as all Executive Officers involved
and the Executive Officer Meeting. Results are also reported to theBoard of Auditors as a means of linking these findings to the audits
performed by Corporate Auditors.

What We Do

 Implementation of measures to enhance corporate
governance enacted during the past year
During fiscal 2007, one new outside Corporate Auditor was elected
to further enhance auditing functions. In addition, Rakuten, Inc.
established a dedicated department to make preparations for
putting in place an internal control reporting system based on the
Financial Instruments and Exchange Law. At the same time,

Investing in the Futurea cross-Group governance project led by the CEO is being advanced
to this end.

 Resolutions the Board of Directors is authorized to decideWith respect to the distribution of retained earnings and other matterspursuant to Article 459-1 of Japan’s Corporate Law, and excluding
cases specifically referred to by other laws, Rakuten, Inc.’s Board of
Directors, in accordance with the Articles of Incorporation, may enact
an earnings distribution policy by its own resolution without a resolution from the Annual General Shareholders’ Meeting, in order tomaintain a flexible earnings distribution policy.

Company Information

29

Company Information

Consolidated Balance Sheets
Rakuten, Inc. and Consolidated Subsidiaries
December 31, 2007 and 2006

Thousands of
U.S. Dollars

Millions of Yen

To Our Shareholders

ASSETS
CURRENT ASSETS

2007

2006

2007

¥  903,201¥  964,898$7,452,153

FIXED ASSETS:
Net property, plant and equipment

24,027

48,940198,244

Total intangible assets

93,41083,089770,713

Who We Are

Total investments assets and other assets

138,285

199,136

1,140,962

Total fixed assets

255,722331,165

2,109,919¥1,158,923¥1,296,063$9,562,072

TOTAL ASSETS

Thousands of
U.S. Dollars

Millions of Yen

LIABILITIES AND NET ASSETS

What We Do

2007

2006

2007

CURRENT LIABILITIES¥  750,442¥  806,820$6,191,763

LONG TERM LIABILITIES

210,738

282,904

1,738,759

3,920

3,142

32,346965,100

1,092,866

7,962,868

Shareholders’ equity

206,804

167,027

1,706,308

Valuation, translation adjustments and others(20,969)

21,552(173,008)

128

11

1,054

STATUTORY RESERVE FOR SECURITY BROKERAGE BUSINESS

Investing in the Future

TOTAL LIABILITIESNET ASSETS:

Stock acquisition rights

Company Information

Minority Interests

7,860

14,60764,850Total net assets

193,823

203,197

1,599,204–––¥1,158,923¥1,296,063$9,562,072

COMMITMENTS AND CONTINGENCIESTOTAL LIABILITIES AND NET ASSETS

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been
made at the rate of ¥121.20 to $1, the approximate rate of exchange at December 31, 2007.

30

Consolidated Statements of Income
Rakuten, Inc. and Consolidated Subsidiaries
Years Ended December 31, 2007 and 2006

NET SALES

2007

2006

2007

¥213,938¥203,272$1,765,168

COST OF SALES

39,48027,302

325,746    Gross profit

174,458

175,970

1,439,422

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

174,339

146,821

1,438,440

119

29,149982    Operating income
OTHER INCOME (EXPENSES):Interest and dividend income

1,981

1,324

16,346

Gain on sales of securities

1,764

11,314

14,558

259

244

2,140

Foreign exchange gain

1,047

854

8,639

53,873–444,498

Gain on sales of subsidiary securities

1,038

–

8,560

598

1,495

4,935

(1,505)(1,616)(12,419)

Gain on changes in equity interests of subsidiaries and affiliates
Interest expenses(670)(1,216)(5,528)(412)(20,766)(3,399)Provision for allowance for doubtful accounts–(6,465)–

Provision for allowance for interest repayments–(3,005)–(1,980)Special retirement benefits(240)(4,332)

Loss on sales or disposal of fixed assets

(340)

(663)

(2,809)Provision for statutory reserve for security brokerage business

(778)

(830)

(6,421)(2,276)(50,011)50,554(25,938)

417,109

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

50,673

3,211

418,091

20,942

10,610172,788(5,971)(6,154)(49,264)

14,971

4,456

123,524

Other—net

INCOME TAXES
Current
Deferred    Total income taxes
MINORITY INTERESTS IN NET LOSSNET INCOME(1,197)(3,948)(9,879)¥ 36,899¥   2,703$  304,446

The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been
made at the rate of ¥121.20 to $1, the approximate rate of exchange at December 31, 2007.

Investing in the Future(6,061)    Other income (expenses)—net

What We Do

Commission expenses
Loss on restructuring business

Who We Are

Equity in earnings of affiliates
Gain on sales of affiliates securities

To Our Shareholders

Thousands of
U.S. Dollars

Millions of Yen

Company Information

31Company Information

Consolidated Subsidiaries andAffiliated Companies		

To Our Shareholders

Name
Location		

Capital or		
investment
Type of business(¥ million)		

Voting rights
or ownership
(%)

Note

Consolidated Subsidiaries

Who We Are
What We Do
Investing in the Future
Company Information

Rakuten Auction, Inc.

Shinagawa-ku, Tokyo

1,650

E-Commerce Business

60.0

Rakuten Enterprise Inc.

Shinagawa-ku, Tokyo

10

E-Commerce Business

100.0

Signature Japan Co., Ltd.

Shinagawa-ku, Tokyo

80

E-Commerce Business

100.0

Fine Wine Co., Ltd.

Shinagawa-ku, Tokyo

205

E-Commerce Business

100.0

LinkShare Corporation

U.S.A.

E-Commerce Business

U.S.A.

LinkShare Ltd.

U.K.

E-Commerce Business

Rakuten USA, Inc.

U.S.A.

Trafficstrategies.com, LLC

U.S.A.

1
U.K. pounds
182
U.S. dollars–

100.0(100.0)100.0(100.0)100.0(100.0)100.0

5LinkShare International, LLC

1
U.S. dollars–

2, 5CauseLoyalty, LLC

U.S.A.

–

E-Commerce Business

Keiba Mall, Inc.

Shinagawa-ku, Tokyo

499

E-Commerce Business

100.0(100.0)100.0(100.0)
100.0

Rakuten Credit, Inc.

Shinagawa-ku, Tokyo

4,450

Credit and Payment Business

96.5

Rakuten KC Co., Ltd.

Fukuoka-shi, Fukuoka

3,055

Credit and Payment Business97.0

Miyazaki Marina Co., Ltd.

Miyazaki-shi, Miyazaki

45

Credit and Payment Business

Kajiyama Warehouse Co., Ltd.

Kitakyusyu-shi, Fukuoka

240

Credit and Payment Business

K2 Credit Services., Ltd.

Shinagawa-ku, Tokyo

20

Credit and Payment Business

Rakuten Financial Solution, Inc

Shinagawa-ku, Tokyo

1,500

Credit and Payment Business

100.0(100.0)100.0(100.0)100.0(100.0)
95.0

Rakuten TV Inc.

Minato-ku, Tokyo

80

Portal and Media Business

100.0

Target, Inc.

Shinagawa-ku, Tokyo

480

Portal and Media Business

100.0

College Students’ Portal
Community, Inc.
Rakuten Research, Inc.

Shinagawa-ku, Tokyo

10

Portal and Media Business

100.0

Shinagawa-ku, Tokyo

246

Portal and Media Business

100.0

Cyber Brains (Shanghai)Consulting Co., Ltd.
Rakuten Travel, Inc.

People’s Republicof China
Shinagawa-ku, Tokyo

2,763 thousand
RMB
155

Portal and Media Business

100.0(100.0)100.0

6

RAKUTEN TRAVELKOREA CO., LTD.
TABIMADO CO., LTD SHANGHAI

Republic of Korea

Travel Business

Rakuten Bus Services Inc.
SIDE B NETWORK, INC.

Shinagawa-ku, Tokyo

12

Travel Business

100.0(100.0)[100.0]96.0(96.0)
100.0

8People’s Republicof China
Shinagawa-ku, Tokyo

350 million
won
1,000 thousand
RMB
40

Rakuten Travel Guam, Inc.

U.S.A.

Travel Business

Minato-ku, Tokyo

Rakuten Securities Holdings, Inc.

Minato-ku, Tokyo

1,000

Securities Business

100.0(100.0)100.0(100.0)
100.0

2, 8

Rakuten Securities, Inc.

200
thousand U.S. dollars
7,400

Rakuten AssetManagement Co., Ltd.
Rakuten Strategic Partners, Inc.

Minato-ku, Tokyo

10

Securities Business

9

Minato-ku, Tokyo

300

Securities Business

Rakuten Realty Management Co., Ltd.

Shinagawa-ku, Tokyo

200

Securities Business

100.0(100.0)100.0(100.0)
100.0

Rakuten Investment Management, Inc.

Minato-ku, Tokyo

75

Securities Business

Rakuten Financial Frontier
Investment Limited Partnership–

280

Securities Business

32

E-Commerce Business

E-Commerce Business
E-Commerce BusinessTravel BusinessTravel BusinessTravel Business

Securities Business

100.0(100.0)
–

5
5

2, 5

18
7
7
2, 7

16

4
8

9
18

9

9

(As of December 31, 2007)		

Capital or		
investment
Type of business(¥ million)		

Securities Business

Note

MIS Investors Tokumei Kumiai–

Rakuten Baseball, Inc.

Sendai-shi, Miyagi

400

Professional Sports Business

100.0

Rakuten Sports Properties, Inc.

Sendai-shi, Miyagi

150

Professional Sports Business

12

Rakuten Messenger, Inc.

Shinagawa-ku, Tokyo

200

Telecommunication Business

51.0(51.0)
100.0

10,955

Telecommunication Business

73.5

2, 16
2, 13

FUSION COMMUNICATIONS CORPORATION Chiyoda-ku, Tokyo

0

Voting rights
or ownership
(%)

–

2

Fusion Network Services Corporation

Chiyoda-ku, Tokyo

40

Telecommunication Business

SAGA Fusion Service Corporation

Saga-shi, Saga

50

Telecommunication Business

TTNet Service Company, Incorporated

Chiyoda-ku, Tokyo

10

Telecommunication Business

Rakuten Media Investment, Inc.

Minato-ku, Tokyo

10

100.0
(100.0)100.0(100.0)100.0(100.0)
100.0

Rakuten Business Service, Inc

Shinagawa-ku, Tokyo

25

100.0

2

Rakuten Sociobusiness, Inc

Sendai-shi, Miyagi

10

100.0

2

LinkShare Japan K.K.

Chiyoda-ku, Tokyo

10

E-Commerce Business

14

OKWaveShibuya-ku, Tokyo

831

E-Commerce Business

50.0(50.0)
20.8

2, 15

CASAREAL, inc.

Chuo-ku, Tokyo146

E-Commerce Business

37.7

2

Net’s Partners Co., Ltd.

Shibuya-ku, Tokyo

425

E-Commerce Business

2, 11

SHOWTIME, Inc.

Minato-ku, Tokyo

480

Portal and Media Business

35.8(35.8)
50.0

Rakuten & Fast Mobile Search Inc.

Shinagawa-ku, Tokyo

400

Portal and Media Business

50.0

2

WORLD TRAVEL SYSTEMS INC.

Shinjuku-ku, Tokyo

110

Travel Business

20.0

Rakuten ANA Travel Online Co., Ltd.

Shinagawa-ku, Tokyo

90

Travel Business

50.0. Commodity, Inc.

Shibuya-ku, Tokyo

1,400

Securities Business

Rakuten Mortgage Co., Ltd.

Shinagawa-ku, Tokyo

500

Securities Business45.0(45.0)
50.0

TRAFFIC GATE, LTD.

Minato-ku, Tokyo

217

45.9

TECHMATRIX CORPORATION

Minato-ku, Tokyo

1,298

31.0

15

NEXT Co., Ltd.

Chuo-ku, Tokyo

1,981

16.2

15

To Our Shareholders

Name
Location
		

2, 13
2, 13

Equity-method Affiliates

Who We Are

17

What We Do

10Company Information

33

Investing in the Future

Notes:
1. Business segments are used to indicate the type of business.
2. The company became a group member during the fiscal year ended December 31, 2007.
3. Indirectly held voting rights are shown in parentheses.
4. Voting rights held by parties close to Rakuten or that support Rakuten's policies, but not included in the voting rights percentage, are shown in square brackets.
5. LinkShare Corporation and CauseLoyalty, LLC are subsidiaries of Rakuten USA, Inc.
		 In addition, LinkShare International, LLC and TrafficStrategies.com, LLC are subsidiaries of LinkShare Corporation, and LinkShare Ltd. is a subsidiary of LinkShare International, LLC.
6. Cyber Brains (Shanghai) Consulting Co., Ltd. is a subsidiary of Rakuten Research, Inc.
7. Miyazaki Marina Co., Ltd., Kajiyama Warehouse Co., Ltd., and K2 Credit Service Ltd. are subsidiaries of Rakuten KC Co., Ltd.
8. RAKUTEN TRAVEL KOREA CO., LTD., Rakuten Bus Services Inc. and Rakuten Travel Guam, Inc. are subsidiaries of Rakuten Travel, Inc.
9. Rakuten Securities, Inc., Rakuten Asset Management Co., Ltd., Rakuten Strategic Partners Co., Ltd. and Rakuten Investment Trust Co., Ltd. are subsidiaries of Rakuten Securities
		 Holdings, Inc.
10. .Commodity,lnc. is an equity-method affiliate of Rakuten Securities Holdings, Inc.
11. Net’s Partners is an equity-method affiliate of Rakuten Strategic Partners Co., Ltd.
12. Rakuten Sports Properties, Inc. is a subsidiary of Rakuten Baseball, Inc.
13. Fusion Network Services Corp., Saga Fusion Service Corp. and TTNet Service Company, Incorporated are subsidiaries of FUSION COMMUNICATIONS CORPORATION.
14. LinkShare Japan K.K. is an equity-method affiliate of LinkShare Corporation.
15. Denotes companies required to submit financial reports and securities registration statements according to Japanese securities and exchange legislation.
16. Denotes a Specified Subsidiary (“tokutei kogaisha”)
17. Rakuten Media Investment, Inc.’s liabilities exceed its assets by ¥22,039 million.
18. Net sales of Rakuten Securities, Inc. and Rakuten KC Co., Ltd. (excluding internal sales between consolidated subsidiaries) account for over 10% of consolidated net sales.

Company Information

Corporate Data
Board of Directors and Corporate Auditors (As of April 1, 2008)
To Our Shareholders

Hiroshi Mikitani

Executive Deputy President and Representative Director

Atsushi Kunishige

Senior Executive Officers and Directors

Toru Shimada
Hisashi Suzuki
Ken Takayama
Kazunori Takeda
Masatada Kobayashi
Akio Sugihara
Takao Toshishige
Hiroaki Yasutake

Executive Officer and Director

Yoshiaki Ohnishi

Directors

Kouichi Kusano
Hiroshi Fukino
Tatsumi Yoda

Corporate Auditors

Kouji Hata
Katsuichiro Masumi
Katsuyuki Yamaguchi
Takeo Hirata

Who We Are

Chairman and CEO

What We Do
Investing in the Future

Mr. Kusano, Mr. Yoda, and Mr. Fukino are outside corporate directors stipulated in Paragraph 15, Article 2 of the Corporate Law of Japan.
Mr. Hata, Mr. Yamaguchi and Mr. Hirata are outside corporate auditors stipulated in Paragraph 16, Article 2 of the Corporate Law of Japan.

Company Information

34

Company Overview (As of December 31, 2007)
To Our Shareholders

Company Name

Rakuten, Inc.

FoundedFebruary 7, 1997

Service Launched

May 1, 1997

IPO

April 19, 2000

Capital¥107,453 million

Main Office

Shinagawa Seaside Rakuten Tower		

4-12-3 Higashishinagawa, Shinagawa-ku, Tokyo 140-0002, Japan (As of March 27, 2008)

Employees

3,751 (Consolidated)		

1,772 (Non-consolidated)

Stock Code		

4755 (JASDAQ)

Fiscal Year		

January 1 to December 31

Who We Are

Stock Information (As of December 31, 2007)

Month of Annual General Shareholders’ Meeting March
December 31

Transfer Agent		

The Sumitomo Trust and Banking Co., Ltd.

Handling Office		

The Sumitomo Trust and Banking Co., Ltd.

		

Stock Transfer Agency Department		

1-10 Nikkocho, Fuchu-shi, Tokyo 183-8701, Japan

What We Do

Shareholder Record Date		Number of Shares and Shareholders
Total number of shares authorized

39,418,000 (common stock)Total number of shares issued

13,076,334 (common stock)

Number of shareholders

137,018

		

Shareholders

Number ofsharesPercentage of
total shares

Securities firms 1.04%
Others 0.02%

2,264,190

17.32

Domestic financial institutions

2,182,510

16.69

7.75%

Haruko Mikitani

1,458,750

11.16

504,910

3.86

GTS Clients Account Escrow

450,502

3.45

Japan Trustee Services Bank, Ltd. (Trust Account)362,139

2.77

Shinnosuke Honjo

228,890

1.75

The Chase Manhattan Bank,

Bank of New York GCM Client Accounts EISG

212,789

1.63

The Master Trust Bank of Japan, Ltd.
(Trust Account)

204,730

1.57

Merrill Lynch International Equity Derivatives

202,552

1.55

Inquiry

Foreign financial
institutions andindividuals

20.85%

Other domestic
corporations

Individuals

21.76%

48.58%

Investor Relations, Rakuten, Inc.
Tel. +81-3-6387-0555
URL http://www.rakuten.co.jp/info/ir/english

35

Company Information

Crimson Group, Inc
Hiroshi Mikitani
Masuda and Partners Inc.

Investing in the Future

Classification by Type of Shareholder

Major Shareholders

Rakuten, Inc. TEL: +81-3-6387-1111 URL:www.rakuten.co.jp/info/ir/english
Shinagawa Seaside Rakuten Tower, 4-12-3 Higashishinagawa, Shinagawa-ku, Tokyo 140-0002, Japan