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Asia300

Rakuten profit jumps 64%, helped by ride-sharing investment

But Japanese e-commerce company's nine-month gross sales fall below Alibaba's one-day record

Rakuten CEO Hiroshi Mikitani speaking at an earnings briefing in Tokyo on Nov. 13. (Photo by Wataru Ito)

TOKYO -- Japanese e-commerce company Rakuten on Monday logged a net profit of 72.6 billion yen ($640 million) for the nine months ended September, up 64% on the year, backed by valuation gains on its investment in the ride-sharing business.

The announcement came after its Chinese peer Alibaba Group Holding on Saturday recorded a gross merchandise volume of 168.2 billion yuan ($25.3 billion)  on Singles' Day which fell on Nov. 11, about 40% above levels reached a year earlier. Rakuten's gross online merchandise sales in Japan for the nine months fell short of Alibaba's one-day sales, at 2.44 trillion yen.

According to the financial report, Rakuten's revenue for the nine months rose 21% to 676 billion yen, due to increased marketplace sales and transaction fees in its credit card unit. Beside these, valuation gains of 22.8 billion yen from American ride-sharing service operator Lyft, in which Rakuten made its first investment of $300 million in 2015, pushed up profit.

At a press conference in Tokyo, Chairman and CEO Hiroshi Mikitani said his company was transforming its business model, from a marketplace operator to a data-driven company. He said: "We will make big profits through data-based, selective investments."

Rakuten has invested in other ride-sharing services such as Careem of the Middle East. Mikitani said he saw great potential in the market: "On mileage basis, ride-sharing accounts for only 1% [of total traveled distance by cars]. But I believe it will expand 10-fold and 20-fold in the future."

As a part of the company's transformation, Mikitani also said that Rakuten will provide services globally through partnerships, with a target of having 2 billion users by 2020, a 67% jump from September.

Last year, 80% of Rakuten's revenue came from the Japanese market. It did not disclose revenues in Asia, but the markets excluding Japan, the U.S. and Europe, accounted for less than 2% of the total.

In Asia, Alibaba is growing rapidly in the Chinese market and expanding beyond borders. Amazon.com has entered Southeast Asia, where Rakuten withdrew its e-commerce business last year.

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