The ¥1.45bn raise and the TV-CM blitz: front-loading mass advertising (2014)

The merits and costs of buying scale in advance

The heart of this decision lies not in financial soundness or near-term profitability, but in moving early — with time as an ally — to lock down the very structure of a market whose winner was not yet decided. For a young company not yet recording revenue to pour much of its raised capital at once into television commercials was a bet that, had it failed, would only have burned the cash. Even so, in a flea-market app where network effects work strongly, getting ahead in awareness and scale is what decides the gap with later entrants. Pricing in losses on purpose to take the market before rivals moved in earnest — there the character of this judgment can be seen.

Yet a strategy of seizing scale in advance also embedded high advertising dependence and fixed costs into the business. Once the gap between growth expectations and actual profit and loss came into focus after the IPO, the share price corrected sharply, and the capital-policy question of how to bridge the time lag between investment and recovery was posed again and again. Still, it is also certain that capturing mass awareness at a stroke in 2014 supported the effective domestic top position that followed. Take scale first, or take profitability first — this decision is instructive in showing, early and clearly, the choice a startup cannot avoid when it takes on a near-winner-take-all market.