58.com, a Chinese classified advertising website set up in 2005, targets at offering local life service with SME. It has 4 million active enterprises and 130 million monthly unique users, covering 27 major cities in the area of real estate, recruitment, automobile, housekeeping service, catering, second-hand market, etc.
It has been eight years since the foundation, it got six venture captial and filed for an IPO in Nasdaq in 2011 and an NYSE IPO in September 2013. 58.com realized USD 10.7 million revenue in 2010, USD 41.5 million in 2011 and USD 87.1 million in 2012. By the end of June 30 2013, it achieved USD 58.8 million revenue.
The reasons for going IPO in the U.S. are:
- To increase brand influence and improve brand image.
- To keep and attract more talents to work for 58.com.
- The U.S. stock has the highest standards for listed companies, and it is a kind of recognition for the company’s management and development.
- Classified ad websites have huge market potential, which means 58.com has a long term development plan.
Different from Craigslist, the hottest classified ad website in the U.S. which has been founded for 18 years, Chinese classified ad websites are merely beginners. To make profit, they still have to rely on large traffic volume to sell ads and membership tools.
Business Model Exploration
As the leader in classified ad website, 58.com can not compare with other companies and has to explore the right business model on its own.
Stage One: Advertising
In 2005, three classified ad websites were founded, 58.com, ganji and baixing. In eight years, 58 and ganji had been trying to find better business models to beat each other. In the early of 2011, they began advertising war.
Stage Two: Premium Subscriptions and Merchant-Facing Advertising
Premium subscriptions are the main source of 58.com revenue. In the first half of 2013, revenue from premium subscriptions is USD 35.46 million, and revenue from merchant-facing advertising is USD 22.43 million.
Stage Three: Group buying
In the end of 2011, 58.com and ganji both sought for business model other than the two mentioned above. They opened group buying services, but it was proved unsuccessful.
Stage Four: E-Commerce
In the beginning of 2012, 58.com started planing its e-commerce and half a year later, it gradually launched its mobile and tickets online transaction platform. This strategy made 58.com a pure classified ad website transform into a C2C platform. 58.com cooperated with Alipay in May 2013. Although 58.com e-commerce has been launched for a year, online transaction commission and other related revenue were only USD 950,000, 1.6% of total revenue in the first half of 2013.
In August 2013, 58 launched a house renting app with Baidu. As the leader in classified ad websites, it keeps developing new business model and improving information quality. China has a extremely large O2O market, and the key to success in the competition lies in mobile end.