GMO Media,Inc.

The internet advertising market, which is the primary source of revenue for the Group, is highly susceptible to economic conditions, and there is a possibility that advertisers may reduce advertising expenditures or that advertising rates may decline. As a decrease in advertising volume directly squeezes business performance, the impact on the business foundation is significant. The Group is working to diversify its revenue structure while closely monitoring market changes.

As the internet advertising and media market is a growth market, new entrants continue to emerge one after another, intensifying the competitive environment. Since the Group's main source of revenue is advertising income from its own media platforms, if the superiority of its services relative to competitors declines, this could lead to user attrition and a decrease in advertising revenue. The Group is pursuing differentiation through service development and strengthening of technological capabilities, but the risk of a sudden change in the competitive environment persists.

Rapid technological innovation is progressing in the Group's business domains, and user needs are also changing quickly. If technological innovation occurs that renders past experience inapplicable and the Group fails to respond in a timely manner, users and advertising clients may leave, potentially having a material impact on business performance. The Group continues to actively pursue technology development, but there is a risk that its response could lag behind depending on the speed of technological change.

The Group is promoting the utilization of generative AI with the aim of strengthening competitiveness and improving operational efficiency; however, if regulations and guidelines related to AI are tightened, constraints may arise on content operations. In addition, if a failure or information leak originating from a generative AI service occurs, there is a risk of adverse effects on business activities and performance. Continuous response is required to address both changes in the regulatory environment and technical failures.

The Group's policy is to actively pursue investments, business acquisitions, and capital alliances in anticipation of the growth of investee companies and business synergies; however, if the investee's business does not progress as planned or the anticipated synergy effects are not achieved, this could affect the Group's business performance and financial condition. Deterioration in the management of an acquired company or delays or failures in the integration process are also financial risk factors. The Group addresses these risks through thorough market research and risk analysis at the time of investment decisions and by strengthening the management framework after investment.

The Group holds personal information for a large number of users, and there is a possibility that malicious third parties could intrude on servers or carry out cyberattacks, resulting in the leakage or falsification of user information or service suspension. If a leakage of personal information occurs, there is a risk of a material impact on business performance due to damage claims and loss of social trust. The Group has implemented measures such as firewalls and countermeasure equipment, the assignment of specialist engineers, and employee training and internal audits, but these risks cannot be completely eliminated.

The Group positions itself as a manufacturer-like entity that builds and operates internet services in-house, and securing specialized personnel is essential to maintaining and improving service quality. If sufficient human resources are not secured, services may become obsolete or outdated, potentially leading to a loss of user support and a decline in competitiveness. The Group is working on human resource development through the utilization of generative AI and internal training and reskilling initiatives.

The Group conducts regular performance monitoring and governance enhancement measures for its subsidiaries; however, there is a risk that appropriate management could become difficult due to changes in the business environment, changes in laws and regulations, and challenges in securing human resources. If a subsidiary's performance falls short of expectations or business restructuring becomes necessary, additional costs associated with reorganization or consolidation may arise, potentially affecting the Group's overall financial condition and business performance. The Group addresses this through thorough governance and the advancement of risk management processes.

The parent company, GMO Internet Group, Inc., holds 63.0% of the Company's shares, and if a change in the Group's policy results in a competing service being created by another company within the Group, this could affect the Group's business and performance. In addition, a significant change in the terms of transactions with GMO Internet Group, or delays in securing alternative business partners, could also affect business performance. The Company strives to protect minority shareholders and ensure independence through the appointment of independent officers and periodic review of transaction terms.

In the aesthetic medical-related business operated by the Group, there is a risk that the services provided could lose competitiveness due to rapid changes in market needs driven by advances in AI and digital technology. In addition, if regulatory changes occur, such as the tightening of personal information protection regulations, stricter advertising regulations, or changes to guidelines related to medical practice, the provision of services may be restricted. The Group strives to reduce these risks by closely monitoring market trends, strengthening technology development, and implementing flexible business strategies, but it may be difficult to respond to sudden changes in the regulatory environment.