The Group's growth and business strategies as Explained by Masatoshi Kumagai
As of June 2024,
GMO Internet Group Growth Strategy
Our common value foundation of GMO-ism
The foundation of our group management strategy is GMO-ism. This is the common value foundation, which is the collective name for our GMO Internet Group's corporate motto, that we have cultivated since our establishment. We have grown through the sharing and thorough implementation of this "GMO-ism." As you can see, it is comprised of various management know-how in addition to our 'unchanging goals.
We have been repeating and practicing this 'GMOism' since we started our internet business in 1995. As you can see, 7,800 partners from both domestic and international locations regularly gather to recite it.
The common value foundation of GMO-ism has allowed all group companies to continue to grow in the same direction. GMO-isms are updated every year. We believe that our ability to survive in the internet industry is due to our continuous reading, updating, sharing, and thorough implementation of GMO-ism across all our group companies. Part of this, the Spirit Venture Declaration, is available to the public, so please take a look at it.
Quantitative Target "55-years plan"
GMO-ism has an unchanging super-long-term goal "the 55-Year Plan". In 1998, we set a goal of becoming a corporate group with sales of 10 trillion yen and ordinary income of 1 trillion yen by 2051. This is not so much a promise to investors as an internal commitment goal to achieve high growth as a group. Here is a graphical representation of the 55-year plan.
The Spirit Venture Declaration also includes the statement, 'All quantitative goals in the GMO Internet Group are based on the 55-year plan.' This concept has become a common language among the group's partners and serves as a premise for formulating internal annual goals. The year 2023 comes at the midpoint of 55-year plan, and the Internet revolution we are aiming for is in its second half. To achieve our 55-year plan, we will need to grow at least 15% each fiscal year. We will continue to aim to achieve this goal through sustained growth.
In the latter half of the Internet revolution, AI takes center stage
Here is a graph of the cycles of past industrial revolutions and the technological innovations that triggered them. We can see that the world economy repeats business cycles of 50 years each. It is now known as the Fourth Industrial Revolution, and it has been 29 years since Windows 95 became the starting point of the Internet Revolution. In the latter half of the Internet Revolution, we are confident that AI will lead the way in making our world even more convenient.
In the latter half of the Internet revolution, transition to a holding company structure to further strengthen of foundation, resulting in a corporate group that can continue to operate for 100 years.
In June of this year, notice regarding transition to a holding company structure in preparation for the latter half of the Internet revolution. I would like to explain again its purpose.
Achieve super-long-term goal "the 55-Year Plan"
As I mentioned earlier, the GMO Internet Group has come together to achieve an unchanging goal "the 55-year plan". By transitioning to a holding company structure, we will establish a more aggressive management system, accelerate growth, and work towards achieving our 55-year plan.
Promote AI and Robotics Revolution
The AI robotics revolution is a fusion of AI and robotics that will enable robots to learn and perform complex tasks autonomously. It is said to be a technological revolution that will bring dramatic changes to all aspects of society, the economy, and our lives.
June 2024, establishment of GMO AI & Robotics Trading Corporation in anticipation of the rapid development of AI and Robotics Revolution evolves at an accelerated pace. Transition to the holding company structure, will organize the commercial distribution channels for the AI robotics revolution and enable smoother synergy creation by bringing our various group companies side by side.
Strengthen group management functions
As the GMO Internet Group's scale expanded, the group management and administrative functions were facing challenges under the business holding company structure. Transition to the holding company structure, we will specialize in management functions and further strengthen its structure to achieve sustainable growth as a whole group.
The scheme of the intra-group reorganization is shown here. On January 1, 2025, the effective date of the merger, the infrastructure business operated by GMO Internet Group, Inc. will be merged with GMO AD Partners Inc. through an absorption-type company split. GMO-AP is going to change its name to "GMO Internet, Inc." at the same time, the company will be shifted to top-tier Prime market of Tokyo Stock Exchange. GMO-AP, operates online advertising and media business, and provide online infrastructure businesses (domains, cloud hosting, and access, etc.), will help for more speedy business development that leverages our strengthens.
The reorganization will move the infrastructure and advertising media businesses operated by GMO Internet Group Inc. There is no change in the position of each listed and unlisted group company in which we hold shares. As a holding company specializing in group management functions, we will continue to meet the expectations of our shareholders as a Tokyo Stock Exchange.
Through these corporate actions, we are going to further strengthen the foundation of our corporate group, achievement of the 55-Years Plan, accelerate our growth, then, will last for 100 years company.
Strengths of GMO internet Group
We have three strengths
- 1. Operations and development of our own technology
- 2. Solid recurring revenues
- 3. Risk diversification and independent management
1. Operations and development of our own technology
In order to keep winning in the fast-changing Internet industry, we believe it is more important to do everything. Therefore, we are carefully paying attention to ratio of engineers, creators, and directors who engage in manufacturing. Currently, they are accounting for approximately 50% of total employees of 7500, but we are planning to raise to 60%.
2. Solid recurring revenues
We believe our sustainable growth since our inception of business has achieved by our revenue model which calls "Stock revenue." It is broadly known as subscription or recurring revenue, but these models are slightly different from our essential revenue model. We refer to solid recurring revenues which mean We refer to solid recurring revenues which mean "indispensable products that will not disappear" as long as the Internet industry continues and come from "recurring revenue business model."
3. Risk dispersion and independent management
As we mentioned our basic strategy is for each group companies to select specific area where they excel and focus its management resources on there to become No.1. Entire our business is not dependent on specific commercial products, external partners, or internal partners (employees), as a result, risks are diversified. In other words, because we are not business structure of "flamingo-style batting", we could not suddenly lose or tilt its performance.
Above three strengths are supported by our organizational strength, which market analysts positively described such as "ironclad organization". The source of our strength is based on the sharing and thoroughness of "GMO-ism," which is the collective name for our company motto and corporate philosophy.
Internet Infrastructure Business
Aggregation of overwhelming No. 1 services
Our Business is by far the Number one business domain in terms of total strength. With a strong customer base of more than 14 million of them and "economic scale," then, our profitability is continually increasing year by year.
Domain Registry & Registrar Business
We are the overwhelming leader in the domain registrar business in Japan, with over 80% market share in both the domain registry business, which is the wholesaler of domains, the gateway to the Internet, and the domain registrar business, which conducts sales. This means we are responsible for 80% of the Japanese websites that appear on search engines such as Google Japan and Yahoo! Japan.
Cloud and Hosting Business
One-half of all corporations and offices in Japan use our services. Actually, every day, 58% of the people who visit Google Japan or Yahoo! JAPAN are customers in our data centers. For example, one out of every two business cards exchanged, or one out of every two stores in town, is already our customers. As well as we are the largest cloud hosting company in Japan.
EC Support Business (EC Platform Business)
We provide a way that makes it easy for anyone to open an online store, and help customers set up their "head office or official store" instead of participating in a mall-type store.
Security Business
In anticipation of the ever-accelerating need for security in the future, we are now especially focusing our efforts on this security business, consist of three areas.
- •SSL and other "cryptographic security" using authentication technology
- •Cyber Security by the world's most powerful group of White Hackers
- •Brand Security by domain and trademark professionals
1. Cryptographic Security
Our strength is that we are the only one in Japan who run own globally operating certification authority. There are only five root certification authorities in the world with a global market share. Our digital certificates are included in your smartphones, and we have the largest market share in Japan.
Based on the technology of this certification authority, we expand our business since then Covid-19 period with "Electronic Seal GMO SIGN." Currently, the company has the No.1 market share in Japan in terms of the number of subscriptions and transmissions. Although these services are free of charges, we are also seeing more fee-based services, which we see as a positive factor for stock revenue.
2. Cyber Security
It is hard to find an official data of number of white hackers who are technicians who use their knowledge of cyber security for socially correct purposes, but we believe 40% of the domestic workforce is employed by us. We have excellent partners (employees) who win international hacker contests. In cyber security, not only we have large corporate clients, but also provide training to improve the skills of the Cyber Defense Force in the Self Defense Forces in Japan, and support the Metropolitan Police Department which they called Cyber Investigations. Therefore, we have received several certificates of appreciation and awards.
3. Brand Security
The Internet is full of counterfeit products and spoof sites. We monitor, report, and deal with such counterfeits, and our services are mainly used by companies that take care of their brands. We monitor, report, and deal with such counterfeits, and our services are mainly used by companies that value their brands.
In our security business, our slogan is "Safe and Secure Internet for All." We will contribute to the realization of a safe and secure Internet society.
Payment and Settlement Business
GMO Payment Gateway, one of our group companies, conducts over one trillion yen in payments per month. You can see "GMO" or "GMO-FG (one of our group companies)" logo on the rolls of receipts. As the leading company in the payment processing business, the largest in Japan in both value and number of payments processed, we expect to continue to grow in the future.
Access Business
Our Internet connection service has launched since the company's establishment in 1995, for more than 20 years. We provide optical fiber access services such as "GMO Hikari Access" and "docomo Hikari", and mobile access services such as "WiMAX" at the best prices available anywhere to satisfy more customers.
The group listed companies that develop internet infrastructure businesses are as follows. Please see the IR sites of each company for more information.
Internet Advertising and Media business
We are attracting broad customers by advertising agency, provision of ad platforms, and operation of its own media. This businesses will accelerate growth due to integration with our Internet infrastructure business.
The group companies listed below are involved in the Internet advertising and media business. For more information, please visit the IR sites of each company.
Internet Finance Business
We have entered this business field in 2005 because of the strong affinity between the existing Internet infrastructure business, Internet advertising and media business, and various synergistic effects that could be expected.
With our strength of "in-house development and operation", we have become one of the top-ranked brokers in Japan in terms of trading volume for both FX and CFDs by providing our customers with more free and open next-generation financial trading services that are easy and convenient to use.
The group's listed companies that operate internet financial businesses are as follows.
Crypto Assets Business
We have been able to leverage our expertise in the online financial business, and number of accounts and assets under custody are expanding steadily.
The group's listed companies that are developing Crypto Assets businesses are as follows. Please see the IR site for more details.
GMO Aozora Net Bank
On July 17, 2018, GMO Aozora Net Bank has launched as next-generation Internet banking business by joint venture agreement with Aozora Bank.
With its management philosophy of "Everything we do is for our customers, Becoming the No. 1 technology bank," we have combined our cutting-edge technology with Aozora Bank's expertise in bank and risk management to provide a unique, smart, next-generation service at a low price. It is an online bank with utilizing APIs, but no branches at all.
We have recently seen a rapid increase number of corporate accounts, and mostly newly established corporations are using the services. There are approximately 10,000 of corporations established in Japan each months, and we open new accounts with over 4,000 companies of them, which should be a tremendous share.
Global Operations
As described "Internet Infrastructure Business" section, our business is centered on the Internet infrastructure, which is the Number one records in Japan, with focusing on Asia region. Our overseas business channels are divided into wholesale (".shop" domain and SSL) and direct selling. The direct selling is not under the "GMO" brand, but served by unified overseas brand "Z.com." We will continue to contribute to the further spread of our internet services around the world by providing innovative services through direct selling by "Z.com" with "the world's No.1 service and the world's easiest-to-remember domain name".
