Kakaku.com,Inc.

The spread of generative AI is changing user information-gathering behavior, creating a risk that site traffic via conventional search engines will decline. Combined with search algorithm changes and competitors' enhanced SEO efforts, customer acquisition efficiency may decrease. The Group is working to reduce excessive dependence on specific acquisition channels, but if its response is insufficient, this could affect business performance.

Cyberattacks are becoming more sophisticated and elaborate due to the misuse of AI technology, increasing the risk of unauthorized external access, information leaks by employees, and information leakage via outsourcing partners. If personal information is leaked, loss of trust among users, business partners, and advertisers could reduce the number of users and registered stores, adversely affecting business performance. The Group implements security measures such as firewalls and management based on its personal information protection policy, but these do not guarantee complete protection.

If natural disasters such as earthquakes or tsunamis, fires or power outages, unauthorized external access (such as ransomware), or operational errors cause network failures, the Group may become unable to provide services to users, and traffic referrals to partner stores and advertising placements would also stop. The Group implements measures such as system reinforcement for stable operation, security countermeasures, and distributed server placement, but in the event of a failure, business performance and social credibility could be affected.

Legal regulation of the internet and e-commerce in Japan continues to develop. In addition to industry-specific regulations such as the Employment Security Act, the Insurance Business Act, and the Travel Agency Act, there is a growing need for new AI-related laws and guidelines against the backdrop of the rapid spread of generative AI. If laws and regulations are enacted or revised, this could affect how the Group conducts its business and services, and could increase compliance costs. The Group complies with various industry laws and the guidance of supervisory authorities, but responding to regulatory changes could adversely affect business performance and financial condition.

Technological innovation and business model changes in internet services are progressing rapidly, with new technologies such as generative AI in particular accelerating service development and the sophistication of user experience. If the Group fails to introduce and utilize necessary technology and expertise in a timely manner, or if doing so requires significant time and expense, this could lead to a decline in competitiveness and materially affect business performance. Legal risks related to personal information and copyright arising from the use of generative AI could also affect business performance and social credibility.

The Group's operated sites provide word-of-mouth review functions that allow anyone to post evaluations of products, stores, and other subjects, creating a risk of defamatory remarks or inappropriate postings by fraudulent operators. If the discovery of inappropriate postings is delayed, this could lead to a decline in user support and a decrease in the number of users, as well as legal liability as the site operator, adversely affecting business performance and social credibility. The Group strives to remove inappropriate postings, but this does not guarantee immediate detection and response to all such postings.

The Group is actively pursuing expansion of existing businesses and development of new businesses, but if user and client needs fall short of expectations, if entry costs or personnel acquisition costs increase more than expected, or if measures to strengthen appeal prove insufficient, the Group may not obtain returns commensurate with its investment. The Group is working to build a business portfolio that is not overly concentrated in specific areas, but the success or failure of individual measures could materially affect business performance.

While the Group believes it has secured a competitive advantage in each of its business areas, there is a possibility of new entrants in any of these areas, creating a risk that the emergence of competitors could reduce earnings. The internet services market has relatively low barriers to entry, and technological innovation could give rise to competitors with new business models. Intensifying competition could materially affect business performance.

If the Group is unable to secure and develop, in a timely manner, the personnel necessary for core operations such as system development and content planning as well as for corporate management, this could hinder the smooth conduct of business operations and adversely affect business performance. Amid the continuing tight supply-demand balance for IT personnel, the effectiveness of the Group's human resource strategy for further growth is being tested.

The employment placement business operated under Kyujin Box, the travel agency business of Time Design Co., Ltd., and the insurance agency business of Kakaku.com Insurance Co., Ltd. each require permits or registration based on industry laws such as the Employment Security Act, the Travel Agency Act, and the Insurance Business Act, as well as the guidance of supervisory authorities. If, for any reason, such permits or registrations are revoked, or if a business suspension order is issued, continuation of the relevant business would become impossible, potentially affecting the Group's reputation, business results, and financial condition.