Japanese startup Yappli on the rise as off-the-shelf apps prove to be a hit
Shares have almost doubled since listing at end-December, giving it a market cap of about $700m
“There’s an app for that,” so the old iPhone slogan goes. But in a country such as Japan that is struggling to find enough engineers and programmers, locating someone who can create an app is easier said than done.
That glaring need has fuelled investor expectations for local start-up Yappli, which designs off-the-shelf apps that clients can manage locally without needing to hire programmers. Its shares have almost doubled since its Tokyo listing at end-December, giving it a market cap of about $700m.
CEO Yasubumi Ihara and chief technology officer Masafumi Sano, both Yahoo Japan alums, started the company after an arduous attempt at creating their own app just as smartphones started to boom in Japan in the aftermath of the earthquake and tsunami in 2011.
“We realised there’s a huge gap to fill,” Ihara said. “We knew everyone would be using apps in the future — but that there would be a limit on how many people could actually make them.”
While still unprofitable, the company’s software-as-a-service business model aims for a steadily increasing revenue stream. Yappli has created Japanese language apps for international clients including Under Armour as well as domestic giants such as Toyota Motor, though its bread-and-butter is small, local firms that lack in-house tech resources.
The firm creates, designs and launches customer-facing apps on Apple and Google’s stores, then hands them off to clients to run using Yappli’s content-management system. This model makes it tricky for a company to switch to a different platform.
Yappli has also attracted attention as it attempts to ride on the coattails of the “digital transformation” being pushed by the administration of Prime Minister Yoshihide Suga, pressuring Japan’s ageing companies to enter the modern age. The company is pushing apps to be used internally by firms to replace clunky intranets and other early digital detritus.
“It’s a firm that matches the needs of companies going through digital transformation, so one where we can anticipate growth,” said Tatsunori Kawai, a market strategist at Au Kabucom Securities in Tokyo. “But investors are on the cautious side because it’s a stock that was just listed.”
Yappli’s shares have fallen about 13% from their peak on January 20. Mio Kato, a LightStream Research analyst who publishes on Smartkarma, wrote in a note in December that while Yappli’s model is “aptly suited to Japan’s market needs for SMEs”, its growth rate has declined over the past five years and its stock is less attractive than those of software-as-a-service (SaaS) peers Money Forward and Freee KK.
Still, there is a great need for tech know-how in Japan, the start-up scene of which is competing globally for programmers with Silicon Valley and China’s Greater Bay Area tech hub. While Yappli so far has focused on clients targeting the Japanese market, Ihara is eyeing expansion abroad in the next three to five years.
“In the near term, there’s still a whole lot to do in the domestic market and we’ll make effort to capture local market share,” he said. “But, using apps is a global thing and looking ahead, we want to try take our service overseas.”
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