SoftBank’s Internet unit plans NFT investments to expand global reach

SoftBank Group’s Z Holdings unit is betting on non-fungible tokens (NFTs) and PayPay to drive growth as it invests aggressively to expand its global presence.

SoftBank merged Line, one of Asia’s most popular messaging apps, and Yahoo Japan last year to create an e-commerce and social media company to compete with global technology leaders.

The company’s CEO said the expanded company Z Holdings now plans to launch the NFT market in 180 countries this spring and is spending significant amounts to double the FinTech PayPay unit’s users to 90 million.

Web3 has become an umbrella term for a growing list of blockchain-based applications such as cryptocurrencies, exchanges, decentralized finance, and NFT trading. It has been hugely popular with the support of celebrity backers and venture capitalists like Andreessen Horowitz.

Z Holdings, which generates the bulk of its revenue through mobile advertising and spending, is keen to expand by tapping into a five-year budget of about 500 billion yen ($4.3 billion) for growth initiatives.

Its shares rose 7.8 percent Thursday in Tokyo, their biggest intraday gain since November. Naver, which owns part of Z Holdings, rose 9.4 percent while SoftBank rose more than 4 percent amid a broader market rebound.

“Web3 can herald a world where life is completely different and we don’t want the company to miss out on the huge growth opportunity,” said Kentaro Kwabe, Co-CEO of Z Holdings.

“We will not hesitate to do M&A deals to strengthen our presence.”

The company will be among the first to adopt NFT trading in Japan, following Rakuten Group’s February launch of the NFT marketplace focused on music and anime content.

Web3 investor and content developer Animoca Brands said it plans to enter the Japanese market through its NFT business and open a local office in April.

PayPay, a QR code-based smartphone payment service, is one of SoftBank’s most successful investments, built in collaboration with Paytm in India.

Initially driven by massive spending on consumer lure, PayPay is expected to be another growth pillar for Z Holdings.

While the focus for now remains on increasing user numbers, Kwabe said he hopes to turn the business profitable over the next few years.

The executive said the company’s thinking about bringing the PayPay business to the public is “extremely flexible.” There is no current plan for an initial public offering and Z Holdings can choose to keep the unit private, depending on business conditions.

Kwabe’s comments mirror those made previously by Junichi Miyakawa, CEO of SoftBank, which owns 25 percent of PayPay. The SoftBank Group owns 50 percent of PayPay, while Yahoo Japan owns the remaining 25 percent.

SoftBank sees potential for growth beyond the existing 45 million PayPay users, which already covers more than half of all smartphone users in Japan, Miakawa said during an earnings call in February.

He said the number of payments is the company’s “most important” performance measure.

Z Holdings may be on track to meet its medium-term goal of sales of 2 trillion yen by fiscal year 2024, as the Line merger helps drive ad monetization, Bloomberg Intelligence analyst Ian Ma wrote in a note.

This could further enhance the company’s goal of becoming the best Japanese e-commerce platform in terms of transaction value in the coming years.

“While ZHD’s goal of becoming an e-commerce leader in Japan in early 2020 appears challenging, it may benefit from untapped online demand as offline purchases remain the majority.”

So far, the most significant changes to the web have been brought about mainly by US heavyweights, but “we’d like to find a way to do it ourselves,” said Mr. Kawabe.

Updated: March 11, 2022, 4:00 AM