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iStyle Has Successful IPO

Cosmetics review website goes public with IPO

Tokyo-based Internet company Istyle Inc. announced on Feb. 3 its intention to list itself on the Tokyo Stock Exchange Mothers Market (Tosho Mothers). The planned date of the IPO is March 8, 2012.

Istyle’s flagship service @Cosme (pronounced “atto kosume,” — is the country’s largest cosmetic and beauty product community website. And as far as I can tell, it also seems to be the world’s largest website of its kind — probably due to the huge love Japanese women have for makeup.

As @Cosme’s tag line, “Everyone’s word-of-mouth site,” suggests, the main content of the site is made up of user-generated reviews of more than 200,000 cosmetic products — such as lip gloss, moisturizer, foundation, mascara and so on — from around 23,000 brands. Two million members write some 9.4 million reviews monthly, while approximately 5.5 million visitors go to the site to check the reviews. The total website traffic is a staggering 300 million page views per month.

@Cosme was founded in 1999 by Tetsuro Yoshimatsu and Meyumi Yamada, who quit their jobs (Yoshimatsu at Anderson Consulting, Yamada at a cosmetic company) and used the money they had been saving for their wedding and honeymoon to make the website.

At the time, there were other websites by cosmetic vendor companies but there was the need for a place where people could exchange honest reviews of the products. As an independent review service, @Cosme quickly grew in popularity. In an interview on the Yahoo! Chiebukuro site, Yoshimatsu recalled that during the first two years the company operated in the red, but as more and more users signed up the company saw increased advertising sales.

Since the early days of @Cosme, Yoshimatsu has been telling the media that his company’s core business is the website’s user database. Information on cross-selling, chronological purchases and the usage-history of users are stored in the database, and this information is then sold as marketing data to product vendors, who are themselves unable to trace their own consumers’ purchase history of competing vendors’ products. Selling this marketing data is now a main source of income for Istyle — and it is very profitable.

Here’s why: There are very few Web services that have as many female users as @Cosme. The recipe site Cookpad is the other notable example of a listed company that shares this female-skewed demographic, and the huge number of women using these sites is massively appealing to advertisers who want to run effective marketing campaigns by targeting female consumers. Current stakeholders in @Cosme’s parent company Istyle include large Web companies such as the nation’s largest portal, Yahoo! Japan; blog and community company Cyber Agent; and the huge social gaming network Gree.

However, any review-based service is always going to have problems with false reviews. And there are often claims by users that specific products have unnaturally positive ratings and reviews. As a result, some serious users actively seek out suspicious activity, such as products that have a bunch of positive “cookie-cutter” reviews churned out by users who have never reviewed any other brands.

With sites like @Cosme gaining more and more influence over purchasers’ decisions, it is no surprise that sellers who are poor at marketing are tempted by easy solutions such as bribing reviewers or writing fake reviews. This year opened with news of stealth-marketing in the Japanese Web scene, as the restaurant-review site Tabelog was tainted by the discovery of manipulated reviews by paid reviewers.

A few weeks later, likely inspired by the Tabelog incident (as the value of stealth-marketing related news soared), it was reported in the Asahi newspaper that Navit, a PR agency, had manipulated user reviews on @Cosme. With the Facebook IPO overseas, the buzz of an Internet-based company going public here has been growing, and it was unfortunate for Istyle that the news of the fake reviews happened just before their IPO.

There are already several companies listed on the Japanese stock market that offer services particularly popular in Japan. These include Cookpad (recipes), Ekitan (train transfer info) and Zappalas (fortune telling). @Cosme will be another example of a listed company that has a definitely Japanese flavor. It is hard to tell whether this kind of company only succeeds in Japan simply because of a certain cultural peculiarity, or whether future Web trends will see such companies do well overseas — much like Web-browsing on cellphones, which was once thought of as a uniquely Japanese phenomenon.