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 its PayPay service 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 tech leaders.

The expanded company, Z Holdings, now plans to launch an NFT marketplace in 180 countries this spring and is spending significant sums to double the number of FinTech PayPay unit users to 90 million, the company’s top executive said.

Web3 has become an umbrella term for a growing list of blockchain-based applications such as cryptocurrencies and exchanges, decentralized finance, and NFT trading. It gained popularity with the endorsement of celebrities and venture capitalists like Andreessen Horowitz.

Z Holdings, which makes the bulk of its revenue from ads and mobile spending, wants to expand by leveraging a five-year budget of around 500 billion yen ($4.3 billion) for growth initiatives.

Its shares jumped as much as 7.8% on Thursday in Tokyo, their biggest intraday gain since November. Naver, which owns part of Z Holdings, jumped 9.4% while SoftBank climbed more than 4% amid a broader market recovery.

“Web3 may herald a world where life is completely different and we don’t want the company to miss the huge opportunity for growth,” said Kentaro Kawabe, co-CEO of Z Holdings.

“We will not hesitate to make mergers and acquisitions to strengthen our presence.”

The company will be an early adopter of NFT trading in Japan, following Rakuten Group’s February launch of an NFT marketplace focused on music and anime content.

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

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

Initially fueled by heavy spending to attract consumers, PayPay is expected to serve as another pillar of growth for Z Holdings.

While the focus for now remains on increasing the number of users, Mr. Kawabe said he hopes to make the company profitable in the next few years.

The company’s idea of ​​going public with the PayPay business is “very flexible,” the executive said. There are no current plans for an initial public offering and Z Holdings may choose to keep the unit private, depending on commercial terms.

Kawabe’s remarks echo those previously made by Junichi Miyakawa, chief executive of SoftBank, which owns 25% of PayPay. SoftBank Group owns 50% of PayPay, while the remaining 25% is owned by Yahoo Japan.

SoftBank sees potential for growth beyond the current 45 million PayPay users, which already cover more than half of all smartphone users in Japan, Miyakawa said on an earnings call in February.

The number of payments is the “most important” performance metric for the company, he said.

Z Holdings could be on track to hit its mid-term goal of 2 trillion yen in sales by FY2024 as the Line merger helps boost ad monetization, wrote analyst Ian Ma. Bloomberg Intelligence, in a note.

This could contribute to the company’s goal of becoming Japan’s top e-commerce platform by transaction value in the coming years.

“Although ZHD’s goal of becoming Japan’s e-commerce leader in the early 2020s looks challenging, it could benefit from untapped online demand as offline shopping is still in the majority.”

The biggest changes on the web to date have come mostly from American heavyweights, but “we’d like to find a way to do it ourselves,” Kawabe said.