Internet Ad Business

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Growth Strategy

The internet advertising business now accounts for roughly half of CyberAgent's total consolidated sales. CyberAgent has been providing services since its inception in 1998, and today, it drives the market as the leading company in internet advertising based on leveraging its operational and technical advantages, including AI, to maximize advertising effectiveness for its clients.

Continuing to grow faster than the market

The internet advertising market has grown rapidly in tandem with the rise of programmatic advertising, which includes search advertising and targeted advertising on social media. To better handle the programmatic advertising, we have worked to improve our organizational structure and technological capabilities, resulting in a revenue rate that continues to grow faster than the market.

▎CyberAgent vs. Internet advertising market growth rate

* Growth rates: Growth rates with the 2012 rate represented as 100 * Internet advertising market: "2023 Advertising Expenditures in Japan," Dentsu Inc.

Operational and Technological Capabilities that Achieve Highly Effective Advertising

With a staff of over 4,383*, our internet advertising business has become one of the largest in Japan.
Based on the knowledge and expertise we have accumulated over the years, CyberAgent now has designated subsidiaries in Japan and overseas for advertising operations, realizing a system that achieves both effectiveness and efficiency.
Approximately 24% of our internet advertising business staff are engineers, with 14% specializing in AI technology. At our AI Lab, an AI-driven R&D organization established in 2016, they are engaged in the research and development of advertising products to increase our technological capabilities.
CyberAgent's proprietary "Kiwami Prediction Series" of generative AI ad products has proven to outperform existing creative products in advertising effectiveness by predicting and automatically generating effective ad copy and images. While updating our automated generation methods, we are also improving ad effectiveness by developing and implementing an in-house Japanese large-scale language model (LLM) that leverages the vast amount of data we possess.

* Advertising business employees, including fixed-term employees (as of September 30, 2024)

▎"Kiwami Prediction Series," Our Generative AI-driven Advertising Product

Organizational Diversity and Comprehensive Training Programs

Our internet advertising business values organizational diversity. Its female employee ratio reaches 37%*1 and female managers ratio is 27%*1, significantly higher than the Japanese average of 13%*2, reflecting our focus on women's empowerment and leadership development.
Our concept is "understanding our advertisers to help their businesses grow" and is also the top priority in all training programs we have created to meet the skill levels of our staff. These programs cover every stage of employment, from those that help new hires get up to speed as quickly as possible to those that take management and executives to the next level, and we work to improve them on a regular basis.

▎Internet Ad Business

▎Female Managers Ratio

*1 As of September 30, 2024 *2 Percentage of women in managerial positions in Japan is based on the "FY2023 Basic Survey of Gender Equality in Employment Management," published by MHLW in July 2024.

Addressing Challenges and Creating Opportunities in Advertising

In the internet advertising industry, where market sentiment and environments change quickly, we have continued to grow our business through flexible strategic planning. Major global media providers have recently emerged as important ad media, but regulations on the use of third-party data have made it more difficult to obtain cookies (recorded data from websites visited) and IDFAs (identifiers for advertisers used on iOS devices) that can be used to serve ads. This has led to increased attention on new advertising businesses that use "company-owned data" unrelated to cookies.
For example, in the U.S., which is leading the way in this regard, Walmart's ad sales have grown rapidly to $3.4 billion*, raising expectations for new advertising businesses.

* Walmart advertising sales for FY2024

Progressing from the DX Investment to Monetization Stage

Given this background, we have been working to implement DX by applying our knowledge and technological capabilities in the digital domain. We are working to create new advertising business value by rapidly partnering with major Japanese companies, not only in the retail industry, which has a large amount of first-party data, but also in the financial, mobility, and telecommunications industries. We entered the retail media space, particularly through the digitalization of paper flyers and the utilization of signage. With the 2021 revision of the Banking Act, we are working to generate revenue through commercialization with banks that are expected to step into the advertising business.

▎Example of DX Partnerships

FEATURE STORY
Using Generative AI to Gain a Competitive Edge

Generative AI is rapidly evolving, and being deployed across industries and businesses. CyberAgent views the evolution of generative AI as a business opportunity comparable to the beginnings of the internet, and we are working to fully utilize generative AI to maximize advertising effectiveness and operational optimization.

"AI Lab," Our Source of Competitiveness

In our advertising business, the need to reinvent the ad creative process and create new value led us to focus on AI's potential, even before the generative AI boom. Then, in 2016, we founded the AI Lab, an organization dedicated to AI research and development. From the outset, we have worked to increase industry-academia collaboration with the goal of balancing research and social implementation and are currently conducting joint research with approximately 45 academic institutions.

▎Industry-Academia Collaboration with Academic Institutions

AI Lab employs over 89*1 researchers with diverse backgrounds, an unprecedented number in the advertising industry, with over 64%*1 holding doctoral degrees.

Through close collaboration with the business community, the AI Lab actively develops practical applications of CyberAgent services, with about 150 projects annually.
In parallel, the AI Lab publishes around 140 papers each year. In 2024, 75 papers*2 were accepted at some of the world's most prestigious international conferences in various disciplines and research areas related to advertising research.

As a result, we are the only Japanese advertising agency to be ranked among the world's top 100 AI research companies in a survey conducted by an international company.

We are working on our Japanese LLM for some time to integrate in our products. At the same time, in May 2023 we released "CyberAgentLM" to the public. After the release of Version 2 in November of the same year, Version 3 was released in July 2024, which received the highest rating*3 among Japanese companies in terms of the performance score of major models available in Japanese. With only 22.5 billion parameters, this model performs on par with Meta's 70 billion parameters, making it a top-tier model as an open Japanese LLM developed from scratch.
Furthermore, the Japanese visual language model (VLM) developed and publicly released in June 2024 received the highest performance rating*4, confirming the validity of our advanced research and technical capabilities.
We continue to focus efforts on the research and development of natural language processing (NLP) technology and VLM.

▎Number of AI Lab staff and Papers Accepted* (peer-reviewed)

*1 Number of AI Lab staff: as of April 2024 *2 Number of peer-reviewed papers accepted: January to October 2024 *3 Highest rating among Japanese companies: Joint research by NIKKEI Digital Governance and U.S. Weights & Biases as of July 2024. *4 Highest performance rating: Results compared to open models of similar size in the Heron VLM benchmark as of June 2024.

Unique Advertising Products that are Over Twice as Effective

We were among the first to promote the use of AI, particularly in the Japan’s advertising industry, and we have integrated it into our Kiwami Prediction AI and other services.

Programmatic advertising, which is used for the majority of internet advertising, requires the production of a wide spectrum of advertising creatives in a short timeframe and the implementation of creative work rapidly to maintain advertising effectiveness. The "Kiwami Prediction Series," a product that uses our proprietary generative AI, is able to predict the effectiveness of ads and automatically generate ad materials. Using this product, the top advertising designers are able to increase production volume by up to 15 times.
We currently have seven products deployed, and compared to existing creatives, Kiwami Prediction AI achieved 2.6 times*1 the advertising effectiveness, while Kiwami Prediction TD achieved 2.3 times*2 the advertising effectiveness.
Since their launch in 2020, they have been successful in helping advertisers maximize ad effectiveness, and over 80% of the advertisers*3 we work with have adopted the system.

In September 2023, we opened the “Kiwami AI Odaiba Studio,” a production studio with the most advanced facilities in Japan, including the largest LED wall, 4D scanning and other various scanning systems, and motion control camera BOLT. In the studio, utilizing AI and computer graphics technology, various location shooting can be done without having to travel to overseas or other distant locations while combining AI-based advertising effectiveness forecasting, enabling more efficient and effective advertising creative production and delivery in one integrated process.

*1 2.6 times：Comparing the odds of winning between the ads created by the normal production process and the ads created by KIWAMI Prediction AI." *2 2.3 times：Comparison of the rate of increase in Quality Score (QS) for search keywords between the normal production process and the production process using KIWAMI Prediction TD." *3 Advertisers: Advertisers who run display ads and search ads and can implement AI-driven products.

▎Kiwami AI Odaiba Studio

Reducing Ad-Related Work

Maximizing ad effectiveness requires a significant amount of work, including detailed ad distribution settings, effectiveness-based operational improvements, and report preparation. In response, we are focusing on building a system and framework that uses generative AI to reduce the time and effort involved.
In addition to establishing a department dedicated to improving efficiency, we have also developed our own in-house application, "CA Assistant," which uses AI to assist with various tasks related to advertising work.
Our aim is to reduce the total time spent on ad-related work by 24,000 hours and increase productivity and quality at the same time.

Company-Wide Use of Generative AI

We are applying the technology we have developed in our advertising business across the company, and, together with the strengthening of our AI talent development, we are creating an environment in which everyone can use generative AI in their work.

In October 2023, we launched the AI Operations Office, a team dedicated to advancing the use of generative AI, to promote operational efficiency through the use of generative AI, building new development and production workflows, etc.

We held a "Generative AI Innovation Contest" in November 2023, which drew approximately 2,200 applications across the company. We are currently developing and implementing more than 40 proposals that were deemed highly effective.

Also in April 2023, we established the "Animation AI Lab" and "Game AI Lab" for our media and game businesses. In collaboration with the engineers of the AI Lab, they will incorporate AI into the production of entertainment, such as video programming and games, and be a driver of our company-wide competitive advantage.