Company history

In February 1997 Hiroshi Mikitani, a former banker at the Industrial Bank of Japan, set up a company called M.D.M. in Minato, Tokyo, and that May opened Rakuten Ichiba with just thirteen shops. Where the department-store-backed virtual malls of the day charged rents on the order of $8,263 (¥1m) a month, Rakuten asked a flat $413 (¥50,000) — and paired it with RMS, an editing tool simple enough that a shopkeeper with no feel for the internet could open a store. Its target customers were not big retailers but the owners of small neighbourhood shops, and the first year’s stores were won by salespeople walking from merchant to merchant, one door at a time.

That pricing pulled shops in fast — from 320 at the end of 1998 to some 6,150 by early 2003 — and in 2000 Rakuten listed over-the-counter, raising about $459.4M (¥50bn). When Yahoo! Shopping overtook it in a 2000 traffic survey, Mikitani spent the IPO cash to buy the portal Infoseek for $83.5M (¥9bn), chasing the traffic gap with the aim, in his words, of “a comprehensive media company built around shopping.” Even through the consumer slump of 2001–2002, when Japan’s retail sales fell year on year every month, Rakuten’s gross merchandise sales grew by roughly 40 percent — a store-less mall rising while department stores and general merchandisers shrank.

The founding fee, though, had a ceiling: revenue could grow only with the number of shops. In 2002 Rakuten scrapped the flat fee for merchants clearing $7,982 (¥1m) a month, moving from a “landlord” to a franchise model in which its own revenue rose with its merchants’ sales — a change Mikitani was prepared to push through “even if the number of merchants halved.” The cash it threw off funded a rapid diversification: the travel site Tabi-no-Mado in 2003 and the securities firm that became Rakuten Securities that November, so that within a short span, and for a little over $517.6M (¥60bn), shopping, travel and finance stood as three pillars.

Absorbing finance transformed Rakuten’s balance sheet. Taking credit, payments, securities and banking in-house, consolidated total assets leapt from $2.8B (¥308bn) at the end of 2004 to $15.0B (¥1.66tn) a year later, as financial assets and liabilities piled up on both sides, and revenue climbed sixfold across the decade. But the model of gathering customers through goods and monetizing them through finance had a cost: impairments on acquired businesses such as Lycos Japan drove a net loss of $531.3M (¥55bn) in the year ended December 2008 — the first in Rakuten’s history — which only pushed it deeper into finance, adding the bank that became Rakuten Bank in 2009 and the Edy e-money business in 2010.

Early in the 2010s Rakuten pushed hard overseas, buying France’s PriceMinister, the e-book firm Kobo, the messaging app Viber for roughly $850.3M (¥90bn) and the North American cash-back service Ebates for about $944.8M (¥100bn). In 2010 Mikitani declared English the company’s official in-house language — “Englishnization” — and set out to become a global company. The overseas returns were tested at once: impairments on foreign e-commerce produced another net loss in 2011, and much of what was bought disappointed — PriceMinister’s brand was retired by 2021, Viber’s hoped-for platform synergy stayed thin — leaving behind goodwill that would hang over the balance sheet as impairment risk. Ebates, rebranded Rakuten Rewards, was the exception that carried the points economy abroad.

Running through it all was Mikitani’s preference for a “no-touch model” — travel and securities without logistics, a mall without inventory, book stock left to a distributor — a way to grow while diversifying risk without swelling the balance sheet, the mirror image of an Amazon that competed through warehouses and direct sales. From the Super Points launched in 2002, that instinct crystallized into the phrase “Rakuten Ecosystem”: points earned in the mall could be spent across travel, securities, cards and banking, binding members to a single ID. Record results followed — revenue of $8.4B (¥944bn) in 2017 — and with the 2018 addition of the business that became Rakuten Insurance, the group held a full financial suite. Interest-bearing debt had meanwhile tripled to $11.2B (¥1.23tn); that heavy balance sheet was the ground on which Mikitani would next fight in telecommunications.

In December 2017 Rakuten applied to become Japan’s fourth mobile carrier, breaking into a market held by NTT Docomo, KDDI and SoftBank. Renting other carriers’ lines as an MVNO had left its monthly point of contact with customers in another company’s grip; building its own base stations would, in time, let it control the cost of connectivity and pull the telecom contract into the ecosystem’s ID. Mikitani cast cheap mobile fees as a cause and the smartphone as “a social human right.” The second bet was a fully virtualized Open RAN, running network software on general-purpose servers to compress capital spending — and, if the technology could be sold on, to grow into the global vendor business of Rakuten Symphony. But building an unprecedented network alone, and launching without the 700 MHz “platinum band,” left it weak indoors and underground against the incumbents.

From the October 2019 launch the losses mounted — net losses every year, deepening to a record $2.8B (¥373bn) in 2022 as the mobile segment alone lost $3.6B (¥479bn) at the operating line. Cumulative net losses from 2019 through 2023 exceeded $6.4B (¥840bn), interest-bearing debt swelled from $11.2B (¥1.23tn) to $31.0B (¥3.4tn) by 2021, and total assets ballooned from $66.5B (¥7.34tn) to $155.3B (¥20.4tn) as fintech deposits and telecom investment expanded together. Bond-refinancing risk drew the ratings agencies’ concern, and Rakuten carved off assets to raise cash — renaming itself Rakuten Group in 2021, listing Rakuten Bank on its own in 2023 — a tightrope walk of funding the network while selling pieces of the group.

The turn came when Rakuten loosened its insistence on going it alone. The “Rakuten Saikyo Plan” of June 2023 used interconnection with KDDI’s lines to patch the indoor and underground gaps, and that October it won the platinum 700 MHz band. It swung from an independent course to alliance — Rakuten Securities and Rakuten Card each tied up with the Mizuho group for a steadier funding base. Fintech’s steady profit, an operating profit of $1.0B (¥153bn) in 2024, absorbed the mobile losses, which narrowed as subscribers grew. In 2025 the mobile business reached EBITDA profitability, crossed 10 million lines, and the group posted a second straight year of operating profit — the first evidence that an inventory-shy net company might, after all, carry the heaviest of businesses to the point of return.