58.com had approximately 4.3 million active local merchants out of an estimated 53 million small medium businesses in China. 58.com is the leader in online classifieds with 38% market share by revenue and 86 million monthly unique visitors. Its rivals include Ganji and Baixing though 58.com has 2x and 9x more revenue respectively than these competitors (see chart below).
Big partners
58.com introduced Alipay (owned by Alibaba) services earlier in the year. Alipay is similar to Paypal but differs in that is more like an escrow service. So just like Taobao customers 58.com consumers can decide to release payment after having enjoyed a service or bought a second hand item. This was the first time that Alipay had developed a custom solution for a third party and helps overcome the lack of trust in buying online in China. A survey conducted by 58.com shows that 90% of its users trust Alipay and 75% have Alipay accounts.
58.com has also begun to use Baidu (Google of China) new light app feature. So users will be able to search through the app without having to physically download the application on the mobile. Around 40% of 58.com page views were on mobile applications.
Show me the money!
Like most internet companies 58.com earns its revenue through advertising. Though the majority 60% is subscription based. A membership gets merchants an online storefront, preferential listing benefits and a higher quota for daily listings. These contracts typically last from one month to a year. Approximately 273,000 merchants subscribe to the service. Renting, jobs and their yellow pages services are the most popular.
58.com has begun focusing on advertising to drive more growth. Only 18% of 58.com's paying merchant members used online marketing services. 58.com have also rolled out realtime bidding similar to Google adwords this allows merchants to bid real time on certain keywords to improve the chances of their listings being seen and sold.
China has 45 cities with a population greater than 2 million this compares to only 4 cities in the US. Given the low monetisation compared to peers the stock is one to watch. 58.com's IPO will price at the end of the month.
Jason
Disclosure: Decisive has no long position in 58.com (WUBA) stock
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