Japan’s Mixi prepares for IPO

Mixi_logo Mixi – a social networking site in Japan – is planning an IPO for September.  It provides an interesting insight into the financials of these sights and the implications of cross-boundry rulings on international social networks and social software. 

From Fukumimi’s analysis of Mixi’s IPO.

The Tokyo Stock Exchange announced today that Mixi will float on the TSE’s MOTHERS exchange on the 14th of September.

No word yet on the price, but it is expected that the shares will be heavily oversubscribed. Just 4,500 shares are being offered new shares are being issued, which would bring the total number of shares to 70,500. (that’s about 6.3% of issued shares I think) An additional 2,100 existing shares are also being offered as part of the IPO, comprising of shares held by CyberAgent (1,050 shares of a total holding of 6,000 shares, the balance of which will be subject to a 6 month lock-up), 350 shares owned by the founder and CEO, and a total of 750 shares controlled by Netage Capital Partners. (An additional 500 shares may be offered if the offering is oversubscribed)

Mixi’s latest financials (for the FY ending March 2006) show pre-tax profits of JPY912M (net earnings of JPY576M) on sales of approx JPY1.9B. Two-thirds of sales are related to the “FindJob!” job advertising service, which was started 4 years ago (Mixi was originally called e-Mercury, and its original service was an internet based press release service called @Press, which they sold off last year. To Netage Capital Partners, which also happens to be the 2nd largest shareholder in Mixi), the SNS appears to have brought in about JPY640M in sales, more than 80% of which is advertising related. That means just over $1M in non-advertising revenue for the SNS, the majority derived from premium service revenue (@JPY315/mth/user) and perhaps also for traffic referral to Goo, the NTT Resonant search engine which provides Mixi’s search engine functionality.

……. The filing states Mixi has received a cease and desist notice from an unnamed domestic company, relating to functionality deployed in the SNS service citing patent infringement. There is also the issue of the fundamental SNS related patent granted to Friendster. Mixi, whilst being a “Japanese” SNS, has plenty of users resident in the US, which would make Mixi potentially vulnerable to having proceedings for infringement brought in the US, home of the big ticket settlement/award. If I were lawyers advising either the unnamed firm or Friendster, obviously I’d wait until Mixi has a dazzling IPO making it extremely valuable, before attempting to sue for a lot of money.

The other issue is of SNS sites in general being a potential breeding ground for illegal behaviour (prostitution, minors being targetted and groomed by paedophiles, etc). Mixi claims that it, in contrast to for example some major US SNS sites which allow minors to use the site, only allows users aged 18 or above to register and use the site. However, a quick search on Mixi will show plenty of user profiles returned when searching for something like “high school student” and “17″ or “16″. So stricter policing definitely seems required. Again, given the accessability of this site from the US by US minors, the site may also fall foul of US laws in this area as well.

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