International Business / Organizational Strategy / Technology

The Online Classifieds Space Just Got a Bit More Crowded

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Online classified advertising is nothing new; in fact, it’s quite popular. Despite this, since 1995, the online-classified market in the United States has been dominated by only one website, Craigslist. One of the first companies to introduce classified advertising to the online world, it is now the twelfth-most-visited website in the US with around 20 billion page views a month according to Forbes. Classified advertising, for those unfamiliar with the term, is a form of advertising that may be sold or distributed free of charge. While this form of advertising was first used in newspapers, Craigslist is considered to be the company that introduced classified ads to the internet. Now, a new company is trying to provide a favorable alternative to the online-classified giant: the same company that invested in mobile app Letgo last year.

Bob van Dijk, chief executive of a company most people in the US have never heard of told the Wall Street Journal, “[Craigslist] is actually executed in quite a sub-optimal way… A mobile-oriented generation doesn’t really want to interact with a clunky ‘90s website… The market I think is ripe for disruption.” Van Dijk’s company, Naspers, is a $76.5-billion-dollar company that was formed in Cape Town, South Africa in 1915. It is the largest company in Africa and the seventh-largest internet company in the world.

Naspers owes much of its success to another country – China. Naspers holds a 34% stake in China’s largest and most popular internet-service portal, Tencent Holdings Ltd. Tencent has nearly a billion instant-messenger active users monthly and a market capitalization of $256.7 billion. Because of this, Naspers’ stake is actually worth more than Naspers itself. Other notable businesses overseen by Naspers include Mail.ru Group, the Russian internet company that runs two of the country’s three largest social-networking sites. Van Dijk’s company owns a 29% stake in this as well. In fact, Naspers oversees more than forty businesses spread across 130 countries.

Until this past May, Naspers has never been involved in the US market. Despite undeniable successes investing in other companies outside of Africa, he has never ventured into the US market. Van Dijk believes that his company “Can utilize our deep knowledge of consumer internet and international markets to identify companies with business models that can scale internationally.” The company has now set up a business in San Francisco, a city that the company sees as vital to internet-related startups. Additionally, it changed its presentation currency for their financial statements to the US dollar, a departure from the South African rand. The San Francisco based company is known as Naspers Ventures, and its start in America is significant as it invested $100 million in the mobile-classified app called Letgo last year. Van Dijk knows the US market is very crowded, but nonetheless feels confident his company can replicate successes in other large countries, most notably China and Russia.

Even though Naspers is very large, its investment in the US’ online classified market is seen by some analysts as a move to prove itself. Critics of the African company would tell you that its successes are only because of a couple lucky investments, like Tencent. In fact, 27.9% of the company’s revenue comes from video entertainment, a segment that lost 288,000 customers last year. Because of this, Naspers’ net profit in the last fiscal year dropped 21% to $994 million. Even though it has not been growing at the rate it used to, it is still undervalued, as its market capitalization, or the total dollar market value of a company’s outstanding shares, is less that the value of its Tencent stake, despite its other profitable businesses.
Regardless of what you think of the company as of late, its entrance into the US market is significant, especially with its sights set on taking down the previously undisputed kings of online classified advertising. Craigslist has not commented yet on Naspers, and to be honest, it does not have to. Craigslist, for 21 years now, has thrived without much change in design or philosophy. While Bob van Dijk thinks its older website is “sub-optimal”, users keep returning to Craigslist regardless. In order to take down, or even just compete with Craigslist, Naspers, through Letgo, will need to effectively demonstrate how today’s mobile-oriented generation needs a simpler and more modern user interface for classified advertising. Van Dijk has made it clear he thinks his company can disrupt the market, and while this seems like an impossible task given the current dominance of Craigslist, it will be fun to watch and see if the African giant can make a name for itself in the US market.

Sources:

http://www.wsj.com/articles/africas-naspers-takes-aim-at-craigslist-1474228159?mod=trending_now_4

http://businesstech.co.za/news/internet/137255/naspers-is-going-after-craigslist-report/

http://businesstech.co.za/news/internet/123275/naspers-sets-up-shop-in-the-united-states/

http://www.alexa.com/topsites/countries/US

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