SoftBank's internet unit plans NFT investments to expand global reach

Z Holdings is keen on launching NFT marketplace in 180 countries this spring

An NFT, or non-fungible token, is displayed on a billboard in Times Square, New York. SoftBank's internet arm Z Holdings will be among the early adopters of NFT trading in Japan. AP

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 enlarged firm, Z Holdings, now plans to launch an NFT marketplace in 180 countries this spring and is spending large sums of money to double FinTech unit PayPay’s 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, decentralised finance and the trading of NFTs. It has taken off in popularity with the support of celebrity endorsers and venture capital players like Andreessen Horowitz.

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

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

“It’s possible Web3 will 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 Kawabe, co-chief executive of Z Holdings.

“We won’t hesitate to do merger and acquisition deals to boost our presence.”

The company will be among the early adopters of NFT trading in Japan, following Rakuten Group’s February launch of an NFT market 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 smartphone payment service based on QR codes, has been one of SoftBank’s more successful investments, built in collaboration with India’s Paytm.

Initially fuelled by heavy spending on consumer enticements, PayPay is expected to serve as another pillar of growth for Z Holdings.

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

The company's thinking on taking the PayPay business public is “very flexible”, the executive said. There is no current plan for an initial public offering and Z Holdings could opt to keep the unit private, depending on business conditions.

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

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

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

Z Holdings may be on track to deliver its midterm goal of 2 trillion yen in sales by financial year 2024, as the Line merger helps drive advertising monetisation, Bloomberg Intelligence analyst Ian Ma wrote in a note.

That could further the company’s goal of becoming the top Japanese e-commerce platform by transaction value in coming years.

“While ZHD’s aim of becoming Japan’s e-commerce leader in the early 2020s seems tough, it could benefit from untapped online demand as offline purchases are still the majority.”

To date, 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 that ourselves”, Mr Kawabe said.