Digital Garage, Inc.
Second Quarter FYE 2009
Financial ReportFebruary 13, 20091
1
1

Contents

Mission and Business Model・・・・・・・

3

Group Financial Performance Review

・・・・・・・

7

Business Merger Review

・・・・・・・ 11

Second Quarter FYE 2009 Segment Performance Review ・・・・・・・ 14

FYE 2009 Business Plan

・・・・・・・ 37

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Mission & Business Model

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

DG’s Mission
context company

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

Real &
Local &
Marketing &Present &
-4-

Cyber
International
Technology
FutureCopyright © 2009 Digital Garage, Inc. All Rights Reserved

DG’s Business Modelcontext company

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

IT★ Marketing Technology

MT

FT★ Financial Technology-5-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

DG Group Comprehensive Mid-term Strategy
context company

Operating Holding Company system starting 27/10/2008- 2nd stage of Group management in ever-changing business environment -◆Consolidate 17 Group subsidiaries into 10 and restructure them into 3 groups(i.e., To B / To C / Future)<Solutions><Portal/B> <Incubation>◆5 companies in "To B Solutions" to be consolidated into DG, which will evolve
into a next-generation "Hybrid Solution Partner"◆In addition, prevent profit slide for minority shareholders and promote internalmanagement cost reduction and tax efficiency

Further focus on:

Centrifugal force

Centripetal force

Move to 2nd phase of federation management
Functional restructuring within Group/optimal allocation of management resources-6-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Group Financial Performance Review*About business segments
With the Finance segment being absorbed, the group business now consists of three segments as of FYE 2009.
In the interest of comparability, however, this report was prepared using the four previous segments.

Copyright © 2009 Digital Garage, Inc. All Rights ReservedCumulative Period Performance Summary for Second Quarter FYE 2009 (Consolidated)
context company

Interim period
FYE 2008 (Actual)

Cumulative Q2 FYE 2009
(Plan)(Actual)

Net sales

19,093

19,350 18,051

Operatingincome

-181

1,500

Ordinary
income

-287

1,360

Net income-884(¥ million)

Compared to Plan Year-on-Year(Reference)FYE 2008-1,298-1,04239,582

691

-808

+872

-172

563

-796

+850

-375

-300 -1,255

-955

- 371

-2,430- Loss from securities write-down included in extraordinary loss (DGI): 320 million yen- Loss on operating investment securities: 150 million yen- Loss from securities write-down included in extraordinary loss (DGC): 50 million yen- Loan loss included in selling, general and administrative
expenses (DGC): 90 million yen◆Sales down 5.5% year-on-year, operating income up 872 million yen(Q2 FYE 2009 691 million yen vs. Q2 FYE 2008 -181 million yen)
◆Quarterly net income down 371 million yen year-on-year due to extraordinary loss totaling 490 million yen(including loss from securities write-down of 389 million yen).
Key factors for second quarter performance forecast revision
Sales - DG Communications (formerly Sogei): Sales target unattained (profit target was met)
Profit - Incubation segment: sale of investment shares expected in Q2 has been delayed- Loan losses incurred by real estate clients- Business merger-related expenses temporarily incurred-8-

Copyright © 2009 Digital Garage, Inc. All Rights ReservedCumulative Period Operating Income Analysis for Second Quarter FYE 2009 (Year-on-Year)
context company

Operating income by segment(¥ million) (Interim FYE 2008 vs. Cumulative Q2 FYE 2009)

2,000+1,005 million yen (year-on-year)

Incubation

Positive impact from strong
performance of Kakaku.com group

Portal/Weblog
1,500

Finance■Finance

Solutions

1,391

1,000

0

■Solutions

252-517 million yen (year-on-year)

290

243
-452

-500

-274

Deterioration of real estate market;
loan losses incurred-183■Incubation

Q2 FYE
期
2009

InterimFYE 2008→+269 million yen (year-on-year)
Scheduled sale delayed

Operating income by segment
429 million yen+38 million yen (year-on-year)
Despite business merger expenses

386
500

■Portal/Weblog

1,224 million yen(up 795 million yen year-on-year)-9-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Semi-annual Comparison of Consolidated Segment Sales and Operating Income
context company

Net sales(¥ million)(¥ million)

25,000Operating income

2,000■ Incubation■ Finance
20,000■ Solutions

1,500

385

■ Portal/Weblog
0
1,556
3,019

1,654
3,687

323
242

128

1,000

1,797

521
23

15,000

500

4,167

309
452

406
193

252

454

386

5,000

2,593

1,391
1,119

-274

-236

1,354
1,456

243

0

556

10,000290-452
14,517

14,762■ Incubation

11,957

1,363

-183

-500

2,254

-1,000

5,233
2,527

-1,142■ Finance■ Portal/Weblog■ Solutions-1,5000
1st half

2nd half

FYE 2007

1st half

2nd half

FYE 2008

1st half

1st half

FYE 2009-10-

2nd half

FYE 2007

1st half

2nd half

FYE 2008

1st half

FYE 2009

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Business Merger Review

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

DG Group Restructuringcontext company

FinanceFinance

Portal/Weblog
Portal/Weblog

Incubation
Incubation

““To
To B
”
B”

Operating Holding Company/Solutions

Solutions
Solutions

Since October 27, 2008

Solutions
Solutions Segment
Segment

OperatingHolding Company

DG Communications(formerly Sogei)
Sogei)

Portal/Weblog

Pure
Pure Holding
Holding Company
Company

Incubation

Up to October 26, 2008

Transition

Joi Ito’s Lab
““To
To C
”
C”

““Future”
Future”

Portal/Weblog
Weblog Segment
Portal/Portal/Weblog
Segment

Incubation
Incubation Segment
Segment-12-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Business Merger Highlights
context company

Preparation-scale promotion
Hybrid Solution” completed
Preparation forfor fullfull-scale
promotion efforts
efforts forfor ““Hybrid
Solution”
completed
Establishment-merger ““Hybrid
Hybrid Solution” promotion
Establishmentofofpost
post-merger
Solution”
promotionframework
frameworkclose
closetotocompletion
completion
Furthereffortstoreflect“
HybridSolution”
activities
intangibleresults
tobeaccelerated
Further efforts to reflect “Hybrid Solution” activities in tangible results to be accelerated◆Systemic restructuring for facilitating groupcollaboration completed

Acceleration ofgroup collaboration◆Collaboration projects partially commenced
MS Store: e-context Company/Ibex Company (/Kakaku.com)
YOSHIMOTO TOMONOKAI: e-context Company/Ibex Company
IKKO Style: CGMM/Ibex Company (/e-context Company)◆Further collaboration projects being pursued

Reduction ofinternal management
cost◆System transition implemented (e.g., management
consolidation of group subsidiaries)(Temporary merger-related expenses incurred in first half;
expected to decrease in second half)◆Operational standardization completed(Acquisition of privacy mark and standardization in compliance with JSOX already implemented)

Optimalreallocation of
resources◆Resource reallocation among groupsubsidiaries implemented(e.g., functional consolidation for sales enhancement)◆Group-wide measures applied to complex
issues for individual subsidiaries-13-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Second Quarter FYE 2009
Segment Performance Review

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Group Business Segments
context company

Ⅰ

Solutions segment

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

Ⅱ

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

Ⅲ

Incubation segment ＜新設＞
Investment promotion for Internet enterprises (business incubation)

Ⅳ

＜新設＞

Finance segment

Internet financial services for settlement, currency exchange and insurance, etc.
-15-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Business Overview
context company

Ⅰ Solutions Segment <To B Solution Businesses>◆◆Offering
Offeringone-stop
one-stopsolution
solutionas
as“Hybrid“HybridSolution
SolutionPartner”
Partner”since
sincebusinessbusinessmerger
mergeron
onOctober
October27,
27,2008
2008◆◆Engages
Engagesinincommissioned
commissionedbusinesses
businesses(To
(ToB)
B)for
forITITsolutions
solutionsand
andmarketing
marketingsolutions
solutions◆Integratesreal
realmedia
mediaand
andwebwebmedia,
media,including
includingadvertising
advertisingsolicitation
solicitationgateway
gatewayoperation
operationfor
forthethe◆Integrates
Group'sGroup'smedia
mediabusinessbusiness
Launches
ROI-oriented
Launches ROI-orientednext-generation
next-generationmarketing
marketingsolution
solutionbusinessbusiness◆◆Sogei
Sogeitotobe
becalled
called"DG"DGCommunications"
Communications"(November(November1,1,2008)
2008)
Consolidated companies

Establishment/Subsidiary dates➤ Digital Garage

95.8/

Investment
ratio

-

83.9/08.10 merged with DG-➤ Creative Garage Headquarters

03.2/08.10 merged with DG-➤ DG Media Marketing Headquarters

06.3/08.10 merged with DG-➤ DG＆Ibex Company➤ DG Communications, Inc.
(formerly Sogei)

Descriptions

62.11/07.4

100%

-16-

Next-generation solutions provider
for sales-focused businessComprehensive media services(graphics, video, etc.)
Group's media business operationand comprehensive web advertising solicitation
Comprehensive advertising agency for realestate and general consumer products

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Business Overview: Solutions Segment Performancecontext company

Net sales

Operating income

EBITDAFYE 2007 Actual

7,761 million yen

430 million yen

643 million yen

FYE 2008 Actual

29,279 million yen

566 million yen

861 million yen(277% increase year-on-year)(32% increase year-on-year)(34% increase year-on-year)

28,000 million yen

415 million yen

720 million yen(4% decrease year-on-year)(27% decrease year-on-year)(16% decrease year-on-year)

FYE 2009 Forecast(¥ million)

Sales for Solutions segment(¥ million)

30,000600

25,000500

20,000400

15,00029,279300

28,000200

10,0005,000

Operating income for Solutions segment

566
430

415

100

7,761

0

0

FYE 2007FYE 2008

FYE 2007FYE 2009-17-

FYE 2008

FYE 2009

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts of Subsidiaries in Solutions Segment
context company(Digital Garage DG&Ibex Company)
Real media

FYE 2009 First Half Highlights- Launched MS Store, online shopping platform forMicrosoft products, as group-wide collaboration
project- Increased profit of digital media business

Creative
production area

- Maintained stable level of orders for ongoingprojects from major telecommunications carriers- Started sales activities for newly-opened, innovative
e-shop, @cosme store- Expanded range of internal operation for creative
media business as a result of merger- Awarded gold prize for fifth straight year at J-POP
Exhibition

SP areaWebsolution areaWebmarketingarea
Web media

Evolve into business entity that offers multidirectional client support by integrating MM(formerly DG Media Marketing) and CRG(formerly Creative Garage) headquarters

Establish new business direction as Hybrid Solution Partner
MidMid- andand longlongterm
term strategy
strategy

Aim to become “solutions company for advanced consumer
experience” through introduction of innovative business solutions◆ Further expand consolidation synergy and enhance solution
offerings that integrate IT and real media-18-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts of Subsidiaries in Solutions Segment
context company(DG&Ibex Company Media Marketing Headquarters)

FYE 2009 First Half Highlights- Achieved first half-year profit since
beginning of operation in March 2006
(also expected to post full-year profit)- Significantly expanded ROI-type advertisingand listing of affiliate program services-

Maintained stable growth of group media business
MidMid- andand longlongterm
term strategy
strategy

Focus on ROI-type services and enhance service contents by utilizing group resources(DG&Ibex Company Creative Garage Headquarters)

FYE 2009 First Half Highlights-

Made solid progress on graphic-related projects-

Increased orders for cross-media projects

MidMid- andand longlongterm
term strategy
strategy

Enhance cross-media solutions ＞ increase orders for Web-and-graphic interlocking promotion business-19-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts of Subsidiaries in Solutions Segment
context company

DG Communications (formerly Sogei)
FYE 2009 First Half Highlights-

Offset negative impact of ongoing decline in condominium market
with achievement of cost reductions and high gross margin ratio(New listings in Tokyo area:
61,000 units in 2007 → 43,000 units in 2008 (72% of previous year))-

Posted overall profit due to healthy turnaround achieved by last
year's loss-making branch offices-

Incurred loss due to collapses of some second-tier developers
Performed ongoing full credit inquiries by filtering advertisement
placements for Mansion DB-

Capably managed profit and credit
exposure thanks to re-engineering
efforts made well ahead ofcompetitors since acquisition by DG

Increasing number of exclusive
contracts with major businessenterprises

Expanded new unique services for Mansion DB and SADM

MidMid- andand longlongterm
term strategy
strategy

Firm positioning as communication partner across industry

All companies in search of new business in light of current recession
Goal: optimize DG group’s assets in becoming comprehensive
communication partner for continuously-restructuring real estate industry◆ Further enhance lean business structure in advertising areaand develop innovative solutions that satisfy industry needs-20-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Business Overview: Portal/Weblog Segment
context company

II

Portal/Weblog Segment <To C Solution Businesses>◆◆Anticipate
Anticipatefurther
furthergrowth
growthof
ofrobust
robustKakaku.com
Kakaku.comgroup
group◆◆Swiftly
Swiftlyestablish
establishnext-generation
next-generationCGM
CGM(Consumer(ConsumerGenerated
GeneratedMedia)
Media)businessbusiness◆◆Achieve
Achievebusinessbusinessexpansion
expansionfor
forDG
DGMobile
Mobilethroughthroughboosting
boostinge-booke-bookmarket
marketshare
shareand
and
providing
video
advertising
services
providing video advertising services◆◆Acquired
AcquiredJapaneseJapaneseIP
IPfromfromU.S.-based
U.S.-basedTechnorati
Technoratiand
andmoved
movedinto
into7:3
7:3(DG:TRUS)(DG:TRUS)joint
jointventure
venturestage
stage
Consolidated companies

Establishment/Subsidiarydates

Investment ratio

Descriptions➤ Kakaku.com, Inc.

97.12/02.6

40%

Price comparison website "Kakaku.com"[Kakaku.com's investment ratio]➤ 4Travel, Inc.

73%

Word-of-mouth travel information website "4Travel"➤ Technorati Japan, Inc. 05.1/05.1

70%

Blog search engine "Technorati Japan"➤ DG Mobile, Inc.

04.2/04.2

80%

Mobile e-book distribution platforms and content➤ CGM Marketing, Inc.

06.8/06.8

51%

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

03.10/03.10-21-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Business Overview: Portal/Weblog Segment Performancecontext company

Operating income

Net sales

EBITDAFYE 2007 Actual

4,847 million yen

907 million yen

1,348 million yen

FYE 2008 Actual

6,706 million yen

1,505 million yen

1,885 million yen(38% increase year-on-year)(66% increase year-on-year)(40% increase year-on-year)

9,650 million yen

3,350 million yen

3,880 million yen(43% increase year-on-year)(122% increase year-on-year)(106% increase year-on-year)

FYE 2009 Forecast

Sales for Portal/Weblog segment(¥ million)

Operating income for Portal/Weblog segment(¥ million)

10,000

3,500
3,000

8,000

2,500
6,000

2,000

9,650

3,350
1,500

4,000

6,706
2,000

1,000

4,847

1,505
500

907

0

0

FYE 2007FYE 2008

FYE 2007FYE 2009-22-

FYE 2008

FYE 2009

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts of Subsidiaries in Portal/Weblog Segment
context company

Kakaku.com, Inc.

Kakaku.com's capability as media vehicle rapidly strengthening due to boosted website traffic for affiliated businesses(millions of PV)
900
850
800
750
700
650
600
550
500
450
400
350
300
250
200
150
100
50

Monthly access data

(in tens of thousands of people)(April 2002 to December 2008)

3,000
2,800

PV

2,600

U s e rs

2,400
2,200
1,800
1,600
1,400
1,200

Affiliated websites
Monthly PV *869,920,000

1,000
800
600
400
200

Website history
Oct 04: succeeded

Apr 07: acquired

29,180,000

2,000

0 2 / 4 0 2 / 1 0 0 3 / 4 0 3 / 1 0 0 4 / 4 0 4 / 1 0 0 5 / 4 0 5 / 1 0 0 6 / 4 0 6 / 1 0 0 7 / 4 0 7 / 1 0 0 8 / 4 0 8 / 1 0 08/12
May 97: launched

Affiliated websites
Monthly users *Jan 05: acquired

Apr 07: launched

Mar 05: launched

May 07: launched

Apr 05: begansales activities

Feb 08: launched

Nov 06: launched

May 08: launched-23-

Sep 08: launched(As of December 2008)* Monthly unique users per website
Calculation: kakaku.com, yoyaq.com,
e.yoyaq.com, 4travel.jp, tabelog.com,
mansion-db.com, eiga.com, tv.eiga.com,
photohito.com, okyuu.com, sumaity.com arebrowser-based and fx-rashinban.com,
kakakufx.com are IP-based.
* Calculation methods have been revised:
4travel.jp since April 2007 and kakaku.com,
yoyaq.com and e.yoyaq.com since October
2007.

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts of Subsidiaries in Portal/Weblog Segment
context company

4Travel, Inc.
Word-of-mouth travel information website "4Travel"
Monthly users *1

2,320,000 users

Monthly PV

860,000

Traveler members

62,838 users

Travel photos
Advertised businesses(2004/1-2008/12)

4,720,000(in tens of thousands of people)

350

35

20,910,000 PV

User postings *2

Monthly access data

(millions of PV)

30

PV

2005/1/28
Becamesubsidiary300

N u m be r o f
u s e rs

25

250

20

200

15

150

10

100

5

50

1,183

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

0004/1 04/4

05/4

06/4

07/4

08/4

08/12

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

1
2
3
4
5
6

Traffic ran kin gs o f
trave l in fo rmatio n
we bsite s
G lo bal Tro tte r
4 trave l
ab- ro adru ru bu .c o mTrave l.c o .jp
Trave lko - c h an

UR L

R e ac h(％ )aru kikata.c o .jp
4 trave l.jp
ab- ro ad.n e t
ru ru bu .c o m
trave l.c o .jp
to u r.n e .jp

2 .2
1 .9
1 .5
1 .4
1 .3
0 .9

(Nielsen/Netratings: excerpt from December 2008 survey)-24-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts of Subsidiaries in Portal/Weblog Segment
context company

DG Mobile, Inc.
FYE 2009 First Half Highlights- Expanded fee-based web business due to synergetic effect of growing e-book market for mobile devices(“28.3 billion yen in 2007: 200% increase from previous year” announced by Impress R&D)
- Launched video content site for widely-adopted 3G mobiles and began offering fee-based services(e.g., “Wake-up Videos” official service for three carriers)- Launched community site with CGM contents such as “Fanroad Mobile” and increased advertising revenue
MidMid- andand longlongterm
term strategy
strategy

Accommodate every type of digital content by implementing self-developed website system for 3G mobiles
Strengthen revenue-generating product lines through development of affiliate system for mobile devices
Anime/comic/game-related illustration posting site
“Fanroad Mobile” launched (December 15)<Number of e-book websites launched by DG Mobile>
81

80
70
60
50
40

131%
116%
44
2

Magazine

7

651

Fanroad Mobile

7

2
9

9

65

30
20

9

67 121%

54
33

40

10
0

December
2007

March

June

Î Steady increase in number of
websites launched
Number of media-type
websites also increased* Data: total for period between April 14-30, 2008

Most popular open-contribution
magazine
90% of contents subscriber
contributions

December
2008
Legend: DG websites* Introduced creators of popular anime
Launched as official
and manga characters Keroro Gunso
and Mushishi
service of DoCoMo: Client websites(development assisted by DG): Free websites-25-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts of Subsidiaries in Portal/Weblog Segment
context company

CGM Marketing, Inc.
FYE 2009 First Half Highlights- Promoted CGM-based media development for contents holders- Provided promotional services for blog utilization through AD-Butterfly, advertising marketplace for advertisers
and bloggers- Preparation underway for new high-profit business using blogs
MidMid- andand longlongterm
term strategy
strategy

Facilitate service contracts/business collaboration using CGM utilization expertisefor media development for mass-media content holders and monetization services<Existing CGM solution area><Upcoming focus area: Twitter & content holders>Î Existing CGM solution business to be promoted
on ongoing basis

Î Promote collaborative membership-type business
opportunities to content holders/media with userbases using Twitter
Capitalize user bases
and develop offshootbusinesses

FANCL’s “HTC Collagen” promotion
Registeredmembers

World’s largest miniblog community

Data extraction andsampling of bloggers<example>-User fees
-Advertising
revenue-EC sales
revenue

Content holders who have userbases but are unable to engage
in commercial operation

Participation monitoring
Profile aggregation

Use the “real voices of people who have experienced products” aswebsite contents in order to facilitate mindset changes in website
visitors (potential users) and to induce them to acquire products-26-

Profitsharing

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts of Subsidiaries in Portal/Weblog Segment
context company

Technorati Japan, Inc.
FYE 2009 First Half Highlights- Introduced blog advertising network in Japan as service offering for
consumers based on popular U.S. blogger model
IP licensing contract with U.S. Technorati last year enabled Japanspecific business operation
Developed advertising network in partnership with other media outlets(e.g., lateral operation of Hyobans with Impress) rather than original
network created in U.S.
Expanded service range by integrating ad-marketing activities for CGM
Marketing’s AD-Butterfly users
MidMid- andand longlongterm
term strategy
strategy

DG functional competitiveness as
medium declined amid upsurge ofblog search engines

Separate technology and consumer
services and individually re-develop
stimulation plans

Envisage creation of advertising network through mashup with existing media outlets

Future focus area

Existing focus area

Digital product bloggers
Digital productmashup sites

Digital productexisting media

Other genre
Other genre-27-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Business Overview: Incubation Segment
context company

III

Incubation Segment◆◆CreateCreatenew
newInternet
Internetbusinessbusinessthat
thatreflects
reflectsDG's
DG'scorporate
corporatephilosophy
philosophy◆◆Play
Playsupportive
supportiveroleroleforforfurther
furthergrowth
growthfor
foreacheachDG
DGsegment
segmentand
andachieve
achievesteadysteadyprofit
profitcontribution
toGroup.
Investment
operations
throughinternational
businessangel
schemecontribution to Group. Investment operations through international business angel scheme
centering
centeringon
onJoi
JoiIto’s
Ito’sLab
Labarearesteadilysteadilyexpanding
expanding◆◆Actively
Activelyengaged
engagedininlocalization
localizationand
andincubation
incubationdevelopments
developmentswith
withfocus
focuson
onSilicon
SiliconValley-area
Valley-area
Internetbusinesses
Internet businesses

Consolidated companies

Establishment/Subsidiary dates

Investment ratio

Descriptions➤ DG Incubation, Inc.

05.7/05.7

100%

Venture business investment➤ DG&Partners, Inc.

05.9/05.9

80%

Investment fund management➤ DG New Context Fund05.10/05.10

62%

Stock management-28-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Business Overview: Solutions Segment Performancecontext company

Operating income

Net sales

EBITDAFYE 2007 Actual

2,012 million yen

284 million yen

284 million yen

FYE 2008 Actual

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

70 million yen

70 million yen(81% decrease year-on-year)

450 million yen

FYE 2009 Forecast(17% increase year-on-year)(¥ million)

Incubation Sales(¥ million)

Incubation Operating Income

600

2,500

200

2,000

70

284

-200
1,500
-600
1,000

-1,5942,012-1,000500-1,400385

450

FYE 2008

FYE 2009-1,8000

FYE 2007FYE 2007-29-

FYE 2008

FYE 2009

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Business Direction for Incubation Segment
context company

Further
Furthersolidify
solidifyinternationally-recognizedinternationally-recognized“DG”“DG”brandbrandandandengageengageininstrategiccollaborationandinvestment
strategic collaboration and investment
Expand
Expanddomestic
domesticinvestment
investmentwith
withemphasis
emphasison
onsynergy
synergywith
withgroupgroup
subsidiaries(businessinvestment)
subsidiaries (business investment) Investment strategy revised to reflectcurrent severe business environment
 Active business investment with focus on
Silicon Valley

Number ofinvested companies

12

28

Alc
Group
アルク

13

セルシス
CELCYS

レイター
レイター
Later

Middle
ミドル
ミドル

シード
シード
アーリー
アーリー

Assessment

Overseas○

Investment
Ⅱ balance
260 mil.

Ⅲ

Ⅱ

Ⅰ

セカンダリー
Secondary
セカンダリー DAC

Ⅲ Domestic
Fund×

Business area

Ⅲ

Ｉ ＰＯ

ｲｰｺﾝﾃｸｽﾄ
ECONTEXT
ジャストＰ
Just Planning
カカクコム
Kakaku.com
ﾀﾞｲｷｻｳﾝﾄﾞ
ザイオン
Daiki
Sound
ＤＡＣ
Zion

Company nameⅠ
5

ⅡJoi Ito’s Lab

1.87
bil.

Ⅰ
740 mil.
¾(details on next page)

860 mil.

DirectInvestment△：Overseas：Domestic direct
investment
：Fund

-30-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Developments in Incubation Segment
context company

SteadySteadyprogress
progressin
ininvestment
investmentfocused
focusedon
onSilicon
SiliconValley-area
Valley-areabusinesses
businesses

Wikipedia for photos¾ Provides user-oriented
platform for organizing,
uploading, synchronizing
and sharing of digital images¾ Follow list allows user toexpand their own networks
and build up circle of friends

260,000 users
followed President
Obama's in realtime

Flexible collaboration
with external sources¾Upload and download using
special applications available in
Windows and MacOSX versions¾Interface with many photosharing sites including popular
Flickr and Picasa

Status¾ Began to gain wider recognition as communication tool
linking celebrities and general public since being used
for President Obama’s election campaign
Gained wider user base among artists, including
Britney Spears¾ Twitter recorded annual growth rate of 343%, biggest
traffic increase among social media over one-year
period since last fall and dramatically higher thanFacebook and MySpace (source: SNS usage report
released by Nielsen in fall 2008)

Status¾ Transition from α to β version announced at Le Web,largest Internet conference in Europe, held in
December 2008
¾ TechCrunch named fotonauts as a top 10 venturebusiness at the TechCrunch50 conference, despite
fotonauts being a “submarine project”-31-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Business Overview: Finance Segment
context company

Ⅳ

Finance Segment◆With◆WithECONTEXTECONTEXTat
atthe
thecore,core,achieve
achieveinteriminterimgrowth
growthofofinsurance/finance/securities
insurance/finance/securities
businessesbyutilizing
Kakaku.com’s
traffic
businesses by utilizing Kakaku.com’s traffic◆ECONTEXT◆ECONTEXTto
tosupport
supportGroup'sGroup'ssettlement-related
settlement-relatedsolutions
solutionsin
inorderordertotorespond
respondto
toincreasingly
increasinglycompetitivecompetitivesettlement
settlementindustry
industryand
andever-changing
ever-changingmarket
marketconditions
conditions◆Anticipate◆Anticipaterapid
rapidexpansion
expansionof
ofKakaku.com
Kakaku.comFinancial
Financial(foreign(foreignexchange
exchangemarginal
marginaltransaction
transactionservices)
services)andandKakaku.com
Kakaku.comInsurance
Insuranceachieving
achievingsurplus
surplus

Consolidated companies

Establishment/Subsidiary dates

Investment ratio

Descriptions➤ Digital Garage➤ e-context Company

00. 5/08.10 merged with DG-

Settlement/logistics platforms<Kakaku.com's investment ratio>➤ Kakaku.com Financial 05.12/05.12

100%

Foreign exchange services<Kakaku.com's investment ratio>➤ Kakaku.com Insurance 01.3/01.3

100%

-32-

Insurance brokerage

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Business Overview: Finance Segment Performancecontext company

Operating income

Net sales

EBITDAFYE 2007 Actual

2,718 million yen

503 million yen

635 million yen

FYE 2008 Actual

3,210 million yen

494 million yen

651 million yen(18% increase year-on-year)(1% decrease year-on-year)(2% increase year-on-year)

3,600 million yen

730 million yen

910 million yen(12% increase year-on-year)(47% increase year-on-year)(39% increase year-on-year)

FYE 2009 Forecast(¥ million)(¥ million)

Sales for Finance Segment

4,000

800

3,500

700

3,000

600

2,500

500
400

2,000
1,500

730

3,600
3,210

300

2,718

1,000

200

500

100

0

Operating Income for Finance Segment

FYE 2007

0

FYE 2008

FYE 2009
-33-

503

494

FYE 2007FYE 2008

FYE 2009

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts of Subsidiaries in Finance Segment
context company(Digital Garage e-context Company)<Actual (current half year)>

Number of affiliatedwebsites

Number oftransactions

Total amount oftransactions (yen)23,047

6,610,000

51.1 billion(year-on-year)(year-on-year)(year-on-year)

142.0%

106.3%

102.1%

Overview(in thousands)

Â Number of affiliatedwebsites steadily
increased as ecommerce market grew

7,000

Â Strong ticket/gamerelated transactions
gained bigger footholdÂ Move to reduce
traditionally-highdependency onuniversal e-money
progressed as planned

Number of settlements

(%)
50.0%

：Quarterly settlements* (left column)：Universal e-money ratio (right column)
6,000
40.0%

Other
5,000

Tickets/certification
exams/contents

30.0%

4,000

Merchandise
3,000

20.0%

GamingFuture focus areas
Â Development andimplementation of newservices for realbusinessÂ Stronger collaboration
with external partners

2,000
10.0%
1,000

0

Universal
e-money0.0%
1st Half FYE 2007

2nd Half FYE 2007-34-

1st Half FYE 2008

2nd Half FYE 2008

1st Half FYE 2009

Copyright © 2009 Digital Garage, Inc. All Rights ReservedMid-term Strategy and Business Direction for e-context Company
context company(Digital Garage e-context Company)

FYE 2009 Highlights
July 2008: Provided services for new collaborative project with Yamato Financial, “Kuroneko Web Collect”
July 2008: Developed settlement platform for Microsoft’s Windows Media Center
September 2008: Provided collaborative services for ticket distribution and membership administration to
Yoshimoto Kyogo and PIA
November 2008:

Given administration contract for Microsoft’s online store “Microsoft® Store”

January 2009:card
industry

Fully-compliant with PCI DSS, international information security standards for payment

Microsoft® StoreYOSHIMOTO TOMONOKAI
Provided client data
management services anduse-specific recommend
functions for fan community
site “YOSHIMOTOTOMONOKAI”
Membership base of
YOSHIMOTOTOMONOKAI steadily
growing

Signed comprehensive
contract for Microsoft’s first
online download store forsoftware products to provide
services from site development
to administration (site opened
in November)
Number of sales anddownloads steadily increasing-35-

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Highlights & Forecasts of Kakaku.com Financial and Kakaku.com Insurance
context company

Kakaku.com Financial, Inc.
Sales
(January 06 – December 08)(¥ million)120(¥ million)

100

100
73

80

82

5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

95

76

62

60
40
20

12 11 11 12 11 16

0

Balance of deposit assets(April 05 – December 08)

05/4 05/10 06/4 06/10 07/4 07/10 08/4 08/10
08/12

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
06/1 06/4
08/12
08/4
07/4

Kakaku.com Insurance, Inc.
Sales
(January 06 – December 08)(¥ million)

70

52

50

44 43

40
30
20

1,800
1,600
1,400
1,200
1,000
800
600
400
200
0

62

60

31 31

28

Balance of deposit assets(April 06 – December 08)

50

35

23 24
16

10
0
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 4Q Q1 Q2 Q3
06/1 06/4
08/12
08/4
07/4

-36-

Nonlife insuranceLife insurance

06/4

06/10

07/4

07/10

08/4

08/10 08/12* Kakaku.com Insurance, Inc.: consolidated as of April 2006

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

FYE 2009 Business Plan

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Financial Performance Forecast for FYE 2009 (Consolidated)
context company(Consolidated)

FYE 2008

FYE 2009 (forecast)

Net sales

39,58242,350+2,768+7%

Operating income

-172

3,950

+4,122

Profit turnaround

Ordinary income

-375

3,660

+4,035

Profit turnaround-2,430500+2,930

Profit turnaroundNet income

Year-on-Year(¥ million)■ Solutions:■ Portal/Weblog:

DG&Ibex: expected to generate large portion of revenues for second half through spring
campaigns and e-business projects for domestic companies
DGC: plans to secure inventory-reducing promotion projects for condominium developers
and to improve gross margin in period ending March
Kakaku.com group: plans to increase revenues
CGM-related business: plans to achieve profit turnaround in second half

■ Incubation:

Stock sale: Originally set for first half, proceeding with plan to sell one overseas project(to external company) and three domestic projects (to IPO company)■ Finance:

e-context Company: after posting merger expenses in first year, resuming regularbusiness to meet e-commerce growth trend with aim to swiftly establish new profit baseby optimizing comprehensive solution capabilities generated by business merger-38-

Copyright © 2009 Digital Garage, Inc. All Rights ReservedConsolidated Mid-term Plan for Next 3 Years By segment
context company(¥ million)

Consolidated Sales by Segment

Consolidated Operating Income by Segment(¥ million)

60,0009,000
Incubation

Plan

2,200

P/B
50,000

Solutions

386

7,000
14,800450

Finance
6,000

6,706

9,650

3,210

3,600

5,000

5,000
4,400

4,000
3,000
2,000

20,0002,012
4,847
10,00029,27928,00030,0004,500

Solutions11,80040,00030,000

Incubation

600

Finance

Plan

P/B

8,000

33,500

1,000

2,718

0

7,761

-1,000

0

3,400

3,350
1,505

907
503
430

1,700

284

494
566

70

200 1,000

680

760

415

500

FYE 2009

FYE 2010

860-1,594-2,000FYE 2007FYE 2008

FYE 2009

FYE 2010

FYE 2011-39-

FYE 2007FYE 2008

FYE 2011

Copyright © 2009 Digital Garage, Inc. All Rights Reserved

Please note that the business forecasts and strategies covered in thispresentation are based on our current evaluation and future results mayvary significantly depending on unforeseeable events or circumstances.