Overview of Rakuten Group

March 2009 Rakuten, Inc.

This presentation includes forward-looking statements relating to our future plans, targets, objectives, expectations and intentions. The forward-looking statements reflect managements current assumptions and expectations of future events, and accordingly, they are inherently susceptible to uncertainties and changes in circumstances and are not guarantees of future performance. Actual results may differ materially, for a wide range of possible reasons, including general industry and market conditions and general international economic conditions. In light of the many risks and uncertainties, you are advised not to put undue reliance on these statements. The management targets included in this presentation are not projections, and do not represent managements current estimates of future performance. Rather, they represent targets that management strive to achieve through the successful implementation of the Companys business strategies. The Company may be unsuccessful in implementing its business strategies, and management may fail to achieve its targets. The Company is under no obligation and expressly disclaims any such obligation to update or alter its forward-looking statements.

Contents

1 Company Profile 2 Business Model of Rakuten Ichiba 3 Growth Strategy of Rakuten Eco-System 4 Snapshot of Major Non-financial Services 5 Expansion into Financial Businesses 6 Overview of Consolidated Financial Results in 2008
Appendix
Balance sheets and other financial data Japanese Internet service market and Rakutens market share

1 Company Profile

Company Profile

Founded: IPO: Chairman & CEO:

February 7, 1997 April 19, 2000 (Jasdaq Stock Exchange) Hiroshi Mikitani

The First Office: Atago in Tokyo, Japan Employees : 5 (at the establishment) Business: Rakuten Ichiba (online mall)

Company Profile (Continued)

New Office: Rakuten Tower (Tokyo, Japan) Employees: 4,874 (as of Dec. 2008) Market Cap: 662 Billion yen or US$6.8 Billion (JASDAQ, as of Feb 27, 2009) Businesses: Rakuten Ichiba, Rakuten Travel, Rakuten Securities, Rakuten Credit, Rakuten KC, etc.

2 Business Model of Rakuten Ichiba

Unique Business Model - Rakuten Ichiba

C to C Marketplace

B to B (merchant) to C Marketplace UGC

User (merchant) Generated Content

B to C Inventory Model

Ultimate long tail

Snapshot of Rakuten Ichiba

Rakuten Ichiba: The Largest Online Shopping Mall in Japan
Proprietary search engine by Number of Customer Reviews Price Payment methods My Rakuten Customized personal page

A Large Variety of Merchandise More than 29 million products from over 26,000 merchants Link to Other Rakuten Services Securities Credit Card (KC) Credit New Revenue Sources Credit card processing services Advertising Travel Books Infoseek (Portal)

* As of December, 2008

Consumer Benefits at Rakuten Ichiba

Consumer Benefits

Large Variety of Product Line-up Price Competitiveness & Price Transparency Reward Program (Rakuten Super Point) Solid Security
8

GMS (Rakuten Ichiba and Rakuten Books)

GMS for Rakuten Ichiba & Books maintains growth by +21.4% (YoY)
GMS (Billion Yen)
# of orders (Million)

250

Number of orders
21.98 21.74

25.41 25

200

GMS*
15.79 15.43 12.51 12.53 120.15 129.40 127.41

19.97 20.26

194.22 20
158.79

17.08 16.87 159.97 152.02

158.76

150

130.52

100
8.23 70.54 8.26 71.14

10.49 10.90 99.88 101.54 95.66 91.51

4% 21. + MS G % 7.3 2 rs + e ord of

15

10

50

0
05/Q2 05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4 07/Q1 07/Q2 07/Q3 07/Q4 08/Q1 08/Q2 08/Q3 08/Q4
* GMS Mall(Fixed-price, Group Buy), Mobile (Fixed-price, Group Buy)and Rakuten Books

Rakuten Ichiba Buyer Metrics

Growth continues for the unique buyers (+21.0% YoY)
As a result of an increasing number of consumers buying everyday household products (e.g. kitchenware, beverages, cosmetics), price per transaction is pushed down while average number of transactions per buyer increased
2007/Q1 2007/Q2 Unique buyers (000)* # of Transactions (000) Average # of Transactions per Buyer Average Price per Transaction (yen) Quarterly GMS Per Buyer (yen) 4,730 5,140 2007/Q3 5,180 2007/Q4 5,810 2008/Q1 5,950 2008/Q2 6,330 2008/Q3 6,370 2008/Q4

7,030
24,190

14,410

16,140

15,800

18,690

18,850

20,780

20,650

3.05

3.14

3.05

3.22

3.17

3.28

3.24

3.44 7,844

8,092 24,649

7,814 24,527

7,822 23,827

8,298 26,687

7,804 24,726

7,443 24,413

7,506 24,327

26,969

* Unique Buyers: Number of buyers sorted by email address with purchasing records during the listed 3 month period.

10

Merchant Benefits at Rakuten Ichiba

Merchant Benefits
Easy-to-use System Huge Buyer Traffic (47 million members) Expertise for Internet Business (consultation capability) Solid Security
11

Number of Merchants
Constant growth, surpassing 26,000 shops during 08/Q4
(Shops)
30,000

Total number of merchants

24,273 23,176 22,396 21,333 20,574 18,637 17,910 16,472 19,539

26,223
25,410

25,000

20,000 15,781 15,157 13,833 12,409 11,312

15,000

10,000

5,000
1 2 3 4 1 1 2 4 3 4 3 2 3 /Q 08 08 /Q /Q /Q /Q /Q /Q /Q /Q /Q /Q /Q /Q /Q 1 2 05 05 05 05 06 06 06 07 07 07 06 07 08 08 /Q /Q 4

12

Consultation Capability
Rakuten University Offline seminars providing know-how based on real cases Monthly publication for merchants

Average Monthly Sales per Merchant

4
Rakuten University Effect

DREAM Monthly Publication for Merchants Interviews with shop owners

3.1

2 1.0 1

0 Rakuten Merchants not taking courses Rakuten Merchants taking courses

13

Merchant Sales Growth

(Million Yen)

Sales per merchant

26.2 27.3

30 25
20.9 25.1 23.4

20 15 10 5 0
2004 2004 2005 2005 2006 2006 2007 2007 2008 2008

*Sales of per merchant = GMS of Rakuten Ichiba, Rakuten Books / # of merchants

14

Rakuten Ichiba Quarterly Financial Results

Sales Growth +26.7% (YoY), OP +51.1% (YoY)
25,000
Sales (Conventional base) OP OP Margin (Conventional base)

55.4% 47.9% 48.1% 44.9% 41.0% 15,047 46.4% 40.4% 14,240

*2

60% 50% 40%

20,000

44.5% 15,404
*2 *2

19,060 15,877

*2

(Million Yen)

15,000

11,508
10,000

12,414 12,372 6,985 10553 30% 6,857 7,643

20% 10% 0%

5,508
5,000

5,551

5,090

5,748

0 07/Q1 07/Q2 07/Q3 07/Q4 08/Q1 08/Q2 08/Q3 08/Q4

*1 Sales adjusted to original base due to internal bookings change for Group Ads *2 Less contribution due to the integration of Rakuten Books (08/Q1 -140M, 08/Q2 -130M, 08/Q3 110M) *3 Fine Wine Business, Stuffed Animal Business and Greeting Card Business integrated into Rakuten Ichiba in 08/Q1

15

Expansion of Rakuten Ichiba into Asia

International Shipping from Rakuten Ichiba (Japan) Service available at Hong Kong, U.S, Taiwan, China, Australia, Singapore, U.K, Canada, Korea, New Zealand, Thailand, and Germany Foods, fashion and hobby items are popular among Asian consumers
61.0

Rakuten Ichiba Taiwan GMS of Rakuten Ichiba Taiwan has shown rapid growth compared to Rakuten Ichiba in Japan during start-up
Comparison of GMS during start-up
Taiwan Japan

41.0

21.0

1.0 1st 2nd 3rd 4th 5th 6th 7th 8th (month)

*1:Start-up: Japan in 1997 May, Taiwan in 2008 May *2:GMS in Japan in 1997 May is 1.0

16

3 Growth Strategy of Rakuten Eco-System

17

Core Strategy Membership Business on the Internet

The objective of Rakuten Group is to converge the Internet Services and the Membership Business

Internet Service

+
Membership Business
18

Core Strategy Maximizing Lifetime Value of Members

Maximizing Lifetime Value of Members

Main income source: fees and commission from services

Majority of Internet Companies

Focus on Conversion of Traffic into Revenue

Main income source: advertising fee, etc.

19

Rakuten Eco-system Strategy

The diverse business portfolio supports Rakutens continuous growth in todays volatile economy
Customer Flow -Shopping mall -Auction

E-Commerce Application Application

Business Business Credit & Application Application Payment Business Business Travel Application Application
-Hotels and Facilities -Air Tickets -Long Distance Bus -Dynamic Packages

Business Business

-Credit -Consumer Loan

-Online

Bank (new)

Rakuten Membership Database

Business Business Portal/ Application Application Content Business Business Telecom Application Application
-IP Telephony

-Content Streaming -Downloads

Securities Application Application

Business Business

-Stocks -Bonds -Trust Funds -FX

20

Expanding Business Portfolio

Over the past 10 years Rakuten has built a portfolio that will support Everything Rakuten to serve a wide array of user needs
IP Telephony

Communication
Personal Loan Credit Card Online Bank

Credit and Payment

Online Security Brokerage

Securities

Online Hotel Reservation

Dynamic Package

Travel
Portal Site Blog Internet Research Marriage Information

Portal and Media

Internet Shopping Mall Online Book Store Mobile Auction

BT Ad network Lead gen Taiwan Rakuten

E-Commerce

1997

2008

21

Rakutens Competitive Position in Japan

E-Commerce1
1 2 3 4 5 Rakuten Ichiba Amazon Yahoo! Shopping -

Online Hotel Reservation2

1 2 3 4 5 Rakuten Travel Jalan.net JTB Ikyu.com 1 2 3 4 5

Online Securities3
SBI Securities Rakuten Securities Matsui Securities Kabu.com MBH

Portal4
1 2 3 4 5 Yahoo! goo Infoseek Livedoor OCN 1 2 3 4 5

Blog5
Yahoo! blog Ameba blog Rakuten blog Livedoor blog Excite blog 1 2 3 4 5

Online Auction6
Yahoo! Auction Bidders Rakuten Auction -

Online Greeting Card7

1 2 3 Rakuten Greeting Yahoo! Greeting 1 2 3

Online Golf Reservation8

Rakuten (GORA) GDO E*GOLF
5 6 7 8

Online Books & Media Store9

1 2 3 Amazon Rakuten Books / Ichiba 7 and Y

1 By gross transaction volume in 2008, B-C business Source: Fuji Keizai 2 By gross transaction volume in 2007, domestic accommodation, Source: Nikkei MJ (Oct 15th, 2008) 3 By trading value of domestic equities for three months ended Sept 2008 Source: company releases 4 Portal sites by page views, domain, home panel for Sept. 2008. Source: Nielsen / Net Ratings

By page views, site, home panel in Sept. 2008 By gross transaction volume in 2008 Source: company releases By Sales. Source: Company Release, company data. (partly estimated) By gross transaction volume for 3 months ended Dec. 31, 2008. Source: Company Release 9 By gross transaction volume for 2008. Source: Fuji Keizai 2008

22

Growth in Number of Rakuten Members

Rakuten members surpassed 47 million members
60 55 50 45 40 55.8 51.0 48.0 47.0 46.3 43.9 42.5 39.9 40.2 38.2 38.7 37.336.9 35.9

# of Rakuten Group members

35 30 25 20 15 10 5 0

33.433.8 32.5 31.8 31.332.5 30.8 30.0 28.128.328.829.2 27.3 25.6 25.9 23.9 23.8 22.4 22.0 20.4 18.8 19.1 17.3 16.2 15.9 14.6 # of Rakuten 14.0 12.8

(million members)

members

6.8 7.8 5.5 5.1 5.8 4.6 3.0 3.5 4.0 1.7 2.0 2.3 2.6

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

2002

2003

2004

2005

2006

2007

2008

* Rakuten Members : Members who have integrated IDs (e.g Rakuten Ichiba, Rakuten Travel, Infoseek, Rakuten greeting, etc) * Rakuten Group members:Rakuten members and members who have either un-integrated IDs with Rakuten securities, Rakuten KC, Rakuten Credit and etc, or un-integrated IDs for former-My trip.net service members etc.

23

User Retention and Acceleration of Cross-Use

The Collaboration with the Rakuten Super Point Program has contributed in not only retaining users but also increasing the cross-usage rate of Rakuten services Retention by Rakuten Super Point Program Rakuten Eco-System
Rakuten Super Point promotes repeated use

Cross-Usage Rate
40%

36.5%
35%

33.3% 28.7%

30%

Purchase

User

Merchant,
Rakuten services

25%

20%
Grant Rakuten Super Point

15% 2006 Dec 2007 Dec 2008 Dec

* Ratio of buyers at Rakuten Ichiba on given months who have utilized other Rakuten services during the past 12 months * Applicable services are limited to those which can earn Rakuten Super Points (Excluding certain services, e.g. Securities Business)

24

4 Snapshot of Major Non-financial Services

25

4 -1. Snapshot of Major Non-financial

Services
Rakuten Travel

26

Rakuten Travel
Number one online hotel reservation service in Japan*
# of hotels and facilities: 20,000 in Japan and 20,000 overseas as of December 2008 Joint Venture with ANA in domestic dynamic package tour Services provided also in English, Mandarin, Taiwanese and Korean

By gross transaction volume in 2007, domestic accommodation Source: Nikkei MJ (15th Oct 2008)

27

Rakuten Travel Gross Booking Transaction Values

80 75 70 65
GTV (Billion Yen)

7,227 6,635 6,332 5,952 5,631 5,705 5,455 6,352 6,783 6,888

7,500 7,000 6,500

71.41 64.28

64.53 59.65 60.23 57.67

6,000
(1000 nights)

60 55 50 45 40 35 30 25
50.07

53.71 46.83 48.99

5,500 5,000

+ TV G

YoY % 11.5

4,500 4,000 3,500 3,000 2,500

06/Q3 06/Q4 07/Q1 07/Q2 07/Q3 07/Q4 08/Q1 08/Q2 08/Q3 08/Q4
GTV* Room Nights Booked
* Travel GTV = Booking base = Domestic / International hotel room booking, International ticketsDomestic/ International DPDomestic Bus, Rental car service

28

Rakuten Travel Quarterly Financial Results

Significant OP margin improvement marking 51.3%
(Million Yen) 6,000 49.6% 5,000 4,000 3,000 2,000 1,291 1,000 2,885 3,116 44.8% 45.7% 3,786 39.4% 3,573
* *

60% 51.1% 4,770

*

51.3% 4,431
*

50% 40% 30%

3,775 3,744 37.7% 35.8%

Sales
1,879 1,423 1,409 1,327

oY) 0% (Y 2,439 +24.

1,421

2,273 20% 10% 0%

OP
0 07/Q1 07/Q2 07/Q3 07/Q4 08/Q1

YoY) .3% ( +61

08/2Q

08/3Q

08/4Q

Sales *Sales adjusted to conventional base

Operating profit

OP Margin

29

4 -2. Snapshot of Major Non-financial

Services
Advertising Business

30

Trend of Advertising Sales

Online Ad Sales in E-Commerce and other sites grew by +23%(YoY)
(Billion Yen) 10 9.0 9 8 7 6 5 4 3 2 1 0 07/Q1 07/Q2 07/Q3 07/Q4 08/Q1 08/Q2 08/Q3 08/Q4 5.7 5.2 5.7
Portal & Media (Ads) E-Commerce (Ichiba ads)

7.3 6.9 6.3

7.2

Y) % (Yo +23 ales Ad S nline O

31

Advertising Business : Our Challenge in 2009

Focusing on advertising business utilizing Rakuten database

Utilizing purchase history in addition to behavior and attributes of Rakuten Members

Expanding client base

National clients Rakuten merchants

Enhancing product line-up

Ad Platform Behavioral Targeting (BT) Ad E-marketing solution (check out service, CRM, etc.)
32

5 Expansion into Financial Businesses

33

Outlook of Financial Related Services in Rakuten Rakuten Securities

Online security brokerage business No.2 in Japan in trading volume Number of accounts: 810 thousands Credit card business Number of total card holders: 3.2 million (Rakuten Card 1.7million) Shopping revolving balance: 39 billion yen Cash advances balance: 99 billion yen Loan card balance:80 billion yen Consumer loan business for upper-tiers Loan assets: 101 billion yen Interest rate : 6.9% ~17.8% To be merged into eBANK on April 1, 2009 Internet banking business Number of accounts : 3.0 million (No.1 in Japanese online bank) Deposit balance : 772 billion yen Succeeding accounts from alliance with Tokyo Tomin Bank 34

Rakuten KC

Rakuten Credit

eBANK

* As of Dec.31 2008

5 -1. Expansion into Financial Businesses

Consolidation of eBANK

35

eBANK Top-class Online Bank

No. 1 ranking in the number of accounts No. 2 in the balance of deposits

Accounts
(Thousand)

Deposit balance
( Billion Yen)

eBANK
Japan Net Bank Sony Bank SBI Sumishin Net Bank
Source :Company data as of 2008 December

3,005
1,940 711 333

772.6
448.4 1,315.6 551.9

36

Reduction of Risk Assets at eBANK

The volume of risk assets at eBANK has been reduced prior to the consolidation
B/S as of Mar.31st 2008 B/S as of Dec.31st 2008 (Billion yen)

JGB 577.1

Deposits 758.9

JGB 609.1

Deposits 771.8

Non-JGB 158.1 Other fixed assets

Total assets 810.1 Net assets 16.3

Non-JGB 94.5
Total assets 813.5 Net assets 10.1

Reduction of Risk Assets

80

Risk Assets
CDO (collateralized debt obligation) FOF (fund of funds)

(Billion Yen)

60 2.0 40
Allowances

51.0 10.1

20
Real estate based assets

38.9 1.9

13.0

Mar.31st 2008

Dec.31st 2008

37

eBANK Joins Rakuten group

Date February 10, 2009

Event

Ownership 46.4%

Became Rakutens subsidiary after Major Shareholder Approval by FSA

Preferred shares subscribed in Sep. 2008 at 19.9billion yen converted into common stocks Consolidation into Rakuten Group started from January 1, 2009

March 19, 2009 (scheduled)

Additional capital injection

Total 9.99 billion yen

56.5%

April 1, 2009 (scheduled)

Integration with personal loan business of Rakuten Credit

67.2%

38

eBANK: Strategy at Rakuten Group

Entry into personal loans

Reduce funding costs by replacing Rakuten Credit borrowings into eBANK customer deposits Utilize capabilities of personal loans from Rakuten Credit Access to 3 million account holders

Provide user-friendly payment services to Rakuten

Rakuten Ichiba (automatic debit service at Rakuten merchants) Electrical money Mail money Rakuten Securities (real time settlement)

Succeed accounts from alliance with Tokyo Tomin Bank

Terminate non-performing alliance business

39

5 -2 Expansion into Financial Businesses

Rakuten KC

40

Strengths of Rakuten Card

Rakuten Card driving Rakuten KCs growth Value to Consumers
Grant double points (2%) for shopping at Rakuten Ichiba Grant 1% point for usage outside of Rakuten Ichiba Fullguarantee of undelivered items for Rakuten Ichiba items Free annual fee (white card)

Strengths of Rakuten Card

Accelerates the shopping amount at Rakuten Ichiba Allows lower customer acquisition cost through group synergies High quality of credit High active ratio
Rakuten Card Rakuten Premium Card

41

Rakuten KC Credit Card Shopping Transaction Volume

(Billion Yen)

139.2 123.7 115.3 102.1 104.2 84.9 89.3

130

110

90

78.6

YoY 36.3% +

70

50 07/Q1 07/Q2 07/Q3 07/Q4 08/Q1 08/Q2 08/Q3 08/Q4

42

Rakuten KC Shopping Revolving Balance

(Billion Yen) 45

40 35 30 25 20 15 10 07/Q1 07/Q2 07/Q3

YoY 8.7% +8
27.2 18.6 20.6 22.6

38.9 32.7

15.9

17.1

07/Q4

08/Q1

08/Q2

08/Q3

08/Q4
43

Rakuten KC Quarterly Results

Operating profit recovered remarkably due to decrease in costs relating to interest repayment claims and doubtful accounts
(Million Yen)

18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 -2,000 -604 07/Q1 46 07/Q2 217 07/Q3 498 07/Q4 3,254 3,816 2,798 2,538 14,707 15,216 15,478 15,040 14,098 13,944 14,147 14,627

*
08/Q1 08/Q2 08/Q3 08/Q4

Sales

Operating profit

*Excluding cost related to interest repayment of lump sum allowance (24,520 million yen) in 2007/ Q4

44

Allowance for Loss on Interest Repayments Kabarai Claims

Allowance is equivalent to 3.2 times*1 of recent annualized actual interest repayment kabarai losses, well reserved compared to the other consumer finance companies in the range of 0.9 - 2.4 times
(Billion Yen)

Items in B/S
Allowance for loss on interest repayments

Notes
Cash-Out amount by interest repayments Write-offs of principal by interest repayment claims

Dec.31, 2007

Mar.31, 2008

Jun.30, 2008

Sep.30, 2008

Dec.31, 2008

20.0

18.9

17.8

16.5

15.3 3.2X *1

18.0 26.8

17.0 25.9

16.1 25.1

15.1 24.4

14.0 22.0

Allowance for doubtful accounts

(ordinary) allowance for doubtful accounts

(Billion Yen)

Actual losses
Cash-Out amount by interest repayments Write-offs of principal by interest repayment claims

07/ Oct-Dec 1.1 0.8

08/ Jan-Mar 1.2 1.0

08/ Apr-Jun 1.2 1.0

08/ Jul-Sep 1.2 1.0

08/ Oct-Dec 1.2 1.1

*1: Allowances (15.3+14.0) / Annualized actual losses((1.2+1.1)x4) = 3.2

45

6 Overview of Consolidated
Financial Results in 2008

46

FY2008 Financial Results

Operating profit and ordinary profit recorded high
(Billion Yen)

FY07
(Jan-Dec 07)

FY08
(Jan-Dec 08)

Comparison

YoY

Sales Operating Profit Ordinary Profit EBITDA*

213.93 24.63*1 26.89*1 44.14*1

249.88 47.15 44.53 66.79

+16.8% +91.4% +65.6% +51.3%

*1 Excluding cost regarding to interest repayment of lump sum allowance (24.52 billion yen) in 2007/ Q4 *2 EBITDA=(Ordinary Profit) + (Interest expenses) + (Depreciation) + (Amortization of goodwill) (Effect of securitized loans receivables)

47

FY2008 Financial Results by Major Businesses

(Billion Yen) FY2007 (January December) Core Businesses Sales 51.3 60.4 13.3 29.9 OP 23.1 -24.3 6.0 6.1 OPM 45.1% -40.3% 44.9% 20.4% Sales 63.0 56.8 16.5 24.6 FY2008 (January December)
YoY +22.8%

OP 30.8 12.4 7.4 4.9

YoY +33.1%

OPM 48.9% 21.8% 45.1% 19.1%

Rakuten Ichiba Rakuten KC Rakuten Travel Rakuten Securities Holdings Consolidated

-6.0%

+23.9%

+24.3%

-17.5%

-19.6%

213.9

0.1

0.1%

249.8

+16.8%

47.4

18.9%

*Sales of Rakuten Ichiba and Rakuten travel are indicated as gross figures based on the original accounting base *Rakuten Travel includes consolidated subsidiaries

48

OP / OP Margin Improvement
Outstanding OP margin improvement
25

24.9%

25%

(OP Margin)

20.1%
20

17.7% 16.3 14.4% 12.7% 12.0%

*1

20%

Operating Profit (Billion Yen)

0.5 2.3 15%

15

12.1% 11.1
1.6

12.5
1.5 2.4 2.2 10.0 5.6 6.4 5% 3.5 10%

Operating Profit
*2 Others

10

6.2
5 0.8 1.3 4.5 0 -0.3

7.3
0.5 1.4 0.0 5.3

6.3
0.8 1.9

7.8% 4.9*1
1.4

Travel Credit & Payment E-commerce OP Margin(%)

7.2
1.3 2.5

1.4 2.5

6.0 3.8 -0.2 -0.1 -2.4 4.0 -0.7

0%

-5

-5%

2007/Q1

2007/Q2

2007/Q3

2007/Q4

2008/Q1

2008/Q2

2008/Q3

2008/Q4

*1:Excluding cost regarding to interest repayment of lump sum allowance (24.52 billion yen) in 2007/ Q4 *2:Others include Securities, Portal and Media, Telecommunications, Professional Sports and Internal Eliminations.

49

Project V: Review of Cost Structure

Growth in sales and success of Project V

Operating expense down by 2.95 billion yen (-5.6%) (4Q vs. 1Q)
UnitMillion Yen

70,000
62,291 59,522 62,370

65,697

Sales +10.4%
*1

60,000 52,309 50,000 40,000 30,000 20,000 10,000 0 08/Q1 08/Q2 08/Q3 08/Q4 51,238 49,822 49,362

Operating expenses -5.6%

*1:OP expense for new consolidated subsidiaries approx. 2.0 billion yen Decrease of costs for doubtful accounts by approx. 0.6 billion yen regarding sales of loan at Rakuten KC

50

FY 2008 Rakuten Group: Profit and Loss

Operating profit 47.1 Ordinary profit 44.5
Special profit

(Unit : Billion Yen)

Securities, etc Travel C&P

Non operating profit

write down of securities

EC
TBS,etc

Loss before Taxes

Net Loss

-34.9
Reserve for business restructuring
Banking KC Other

-54.9

Impairment Loss

Special loss

Corporate tax etc

Special loss 80.9

Rakuten, Inc. Tax effect Travel KC, etc Securities etc Minority shareholders

51

Rakuten Eco-system Strategy

The diverse business portfolio supports Rakutens continuous growth in todays volatile economy
Customer Flow -Shopping mall -Auction

E-Commerce Application Application

Business Business Credit & Application Application Payment Business Business Travel Application Application
-Hotels and Facilities -Air Tickets -Long Distance Bus -Dynamic Packages

Business Business

-Credit -Consumer Loan

-Online

Bank (new)

Rakuten Membership Database

Business Business Portal/ Application Application Content Business Business Telecom Application Application
-IP Telephony

-Content Streaming -Downloads

Securities Application Application

Business Business

-Stocks -Bonds -Trust Funds -FX

52

Appendix

53

Rakuten Group : Balance Sheet

(As of the end of December 2008)
Rakuten Group (Consolidated)

(Billion Yen)

Interest-bearing Debt 483.4

Rakuten, Inc. (Non-Consolidated)

Total Assets 1,086.9

Other Liabilities 444.8 448.1

167.9

Rakuten Securities Holdings

39.2

Rakuten KC

55.7 363.3 389.8 299.0

283.0

Total Net Assets 158.7

Rakuten Credit
222.5 78.3 25.1 90.0 79.1 2.4 8.5

*Rakuten Securities, Rakuten KC, Rakuten Credit and Rakuten (non-consolidated) 28.5 also including internal elimination. *Interest-bearing debt : Corporate bonds + CP + Short-term borrowings + Long-tem borrowings

54

OP and Ordinary Profit Trends

Million Yen

50,000

OP (Million Yen)

47,151
Ordinary Profit (Million Yen)

44,531

40,000

35,826 34,885 30,406 *26,896 29,148 24,638

*

30,000

20,000

15,05915,474

10,000

1,046 968
0

2,550 1,605 2,241 1,408

4,750

4,438 2,376 118

2000

2001

2002

2003

2004

2005

2006

2007

2008

*Excluding one time cost for allowance for losses on interest repayment claims ( 24.52 billion Yen) at Rakuten KC in 2007

55

Rakuten Ichiba Sales Breakdown

The Advertising segment continues to dominate and expand
20,000 18,000 16,000 14,000 12,322 12,000 9,714 10,000 8,000 6,000 4,000 2,000 2,098 0 2006/Q1 2006/Q2 2006/Q3 2006/Q4 2007/Q1 2007/Q2 2007/Q3 2007/Q4 2008/Q1 2008/Q2 2008/Q3 2008/Q4 2,181 2,237 2,244 2,238 2,265 2,311 2,351 2,382 2,419 2,490 2,527 9,097 3,278 1,141 3,113 3,195 1,559 1,261 3,161 4,005 3,807 4,103 4,087 4,996 4,741 5,091 5,119 1,659 1,704 1,794 6,243 9,855 4,512 3,802 11,508 4,299 4,219 2,004 12,372 12,414 5,695 15,047 14,240
*2 *2

16,060
15,877
*2 (new base)

19,060

*2

13,890 (Million Yen)

4,722

(new base)

15,460 15,111 (new base)

7,410
*2

15,404

Advertising

(new base)
*2

5,447

*2

5,648 6,924

5,154

5,232

(new base)

4,372
(new base)

(new base)

(new base)

2,878 2,618

Others

2,393

2,446

3,056 1,140 2,801

*1,3 Margin

Merchant Fixed Fee

*1 Start of charge for Standard-contract merchants of 1 million and below sales (monthly): introduced in FY06 Q1 *2 Sales adjusted to original base due to internal bookings change for Group Ads *3 Less contribution due to the integration of Rakuten Books (08/Q1 -140M, 08/Q2 -130M, 08/Q3 110M) *4 Fine Wine Business, Stuffed Animal Business and Greeting Card Business integrated into Rakuten Ichiba in 08/Q1

56

Market Share: Rakuten Ichiba

Rakuten Ichiba growth (23.6%) is much higher than Japanese E-Commerce market growth (14.4%) from 2007 to 2008 Market share %

(Unit: Million Yen)

3,500 26.6% 3,000 2,500 2,000 1,500 1,000 8.5% 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E 209.3 17.8 316.9 464.8 70.7 112.4 189.9 300.9 14.4% 15.2%
Market share of Japanese BtoC EC

30.0% 24.7% 23.5% 22.4% 20.0% 16.7% 2,491.8 2,177.4 1,805.7 1,346.3 Jap 950.0 675.1 2,917.7 2,723.1

25.0%

er omm -C an E

.4% +1 4 ce

20.0%

chi en I ut Rak 663.8

423.4 536.9

.6% +23 ba

15.0%

10.0%

45.7

5.0%

BtoCEC market

Rakuten Ichiba

Rakuten share

*Source : Rakuten, Inc. Calculations based on Fuji Economic Research [GMS/ecommerce business actual and trend 2008-2009]

57

E-Commerce Penetration Rate by Product Categories in U.S. and Japan Japanese E-commerce penetration rate is lower than U.S. High growth potential is expected to be continued

10% 8% 6% 4% 2% 0%
Source : METI

Penetration Rate (%)

3.6x 4.3x 6.9x

Japan U.S.

2.9x
General 1 Retail Books, CD, 2 sports goods and toy Fashion 3 items Auto, 4 furniture and home appliances Foods 5 Medicine 6 and Cosmetics

58

Online Travel Booking in Japan

Further potential growth of online travel business is expected Japanese Travel Business Market
Total: 29.5 Trillion Yen
Online Domestic Accommodation, 0.3 trillion yen (Share: 1%)
Overseas, 6.8 trillion yen

Domestic Accommod ation, 4.3 trillion yen

Domestic Tours, 16.4 trillion yen

Source: JATA-NET (Japan Association of Travel Agents), 2006

59

Rakuten Travel No.1 Online Reservation Site for Domestic Hotels

Company Name

Name of site

Gross Transaction Value in 2007(Billion Yen)

Rakuten Travel Recruit JTB Ikyu Kinki Nippon Tourist Nippon Travel Agency

Rakuten Travel Jalan Net Rurubu Travel Ikyu.com Stay Plus Tabi Plaza

220.0 160.8 74.2 30.6 30.2 16.0

*Source: 15th Oct 2008, Nikkei MJ

60

Internet Advertising Market in Japan

Japans growing potential of advertising business
Internet Advertising Market in Japan
(Billion Yen) 800

Japanese Ad Market

755.8 689.8 620.4

Internet Advertising,

Total: 7.0 Trillion Yen

600

543.4 453.4

0.5 trillion yen 6.5%

400

363.0 280.8
TV. Radio, Newspaper, Magazine, etc., 6.6 trillion yen
2005 2006 2007 2008 2009 2010 2011

200

PC

Mobile Ad

Source : Dentsu Research Inc. April 2008 press release

61

Acquire Traffic and Customers

Rakuten is the second largest Internet media in Japan

Domain yahoo.co.jp rakuten.co.jp mixi.jp youtube.com google.co.jp amazon.co.jp

Rank by PVs 1 2 3 4 5 18

PVs (thousand) 20,144,133 2,828,420 1,600,330 1,481,370 1,458,926 428,330

Rank by UU 1 2 41 5 4 10

UU (thousand) 42,620 21,921 6,195 19,708 20,421 14,598

Source: Month of September 2008, home panel, Net ratings,

62

Behavioral Targeting (BT) Advertising

BT contributes to enhance the effectiveness and pricing of Ads

Click Through Rate (CTR)

2
(General ad effectiveness Base as 1.0)

Conversion Rate (CVR)

4
(General ad effectiveness Base as 1.0)

1.5 1.0

3.0
3

1.0
1

0 General

Rakuten ad4U

0 General

Rakuten ad4U

63

64