Pakistan’s online classifieds turn out star performers for foreign investors

KARACHI: Pakistan’s online classifieds are creating revenue wonders for their foreign investors, manifesting in a fact that property buying and selling platform Zameen.com and automotive portal Pakwheels.com make up for more than half of earnings racked up by their venture capital firm Kuala Lumpur-based Frontier Digital Ventures (FDV).

FDV recorded seven million dollars in revenue during its March quarter from its 15 portfolio ventures of property, auto and general classifieds in Asia and central America and Zameen and Pakwheels contributed four million dollars and $336,000 to the total revenue stream, respectively.

“Due to additions to the portfolio, and the outstanding performance of Zameen, Asia continues to dominate the revenue mix and the growth contribution (of FDV),” Ivor Ries, a senior analyst at Morgans Financial Limited, said in a report. The site’s commission-based transactional income surged to new heights and grew faster than advertising based revenues.

The venture capital firm earns revenue against 30 percent equity holding in Zameen and 35 percent stake in Pakwheels. Emerging Markets Property Group, launched in 2006, owns and operates Zameen.com in Pakistan and Bayut.com in UAE. The group has so far raised at least $31 million from Bermuda-registered Vostok New Ventures, FDV and other investors.

Ammar Hassan, customer operations at Naspers-owned OLX Pakistan said real estate sector has been growing year-over-year in the past more than a decade.

“In the last five years alone, the growth has been in double digits,” Hassan added. “Real estate growth has ripple-effects across the board.”

Consumer-to-consumer classifieds site Olx started monetisation after six years of its operation only last year and property is the prime focus of its revenue-generating drive. The site registers at least 3,000 unique property ads on a daily basis. Comparatively, the tally is low as compared to 5,000 used-cars listings and 9,000 mobile phones ads the platform receives in a day, but “property unit value is high and so ad fee doesn’t make a difference on the listers,” Hassan remarked. Though Zameen.com’s business model was originally focused on consumer-to-consumer property trading, the portal mainly draws juice from marketing of real estate projects.

Industry analysts said the site gives an opportunity to realtors to get online presence. “Especially, small-scale projects with limited marketing budget have inexpensive digital advertising option,” a head of ecommerce site said on condition of anonymity.

Annual ad spends in Pakistan surpassed $750 million and digital advertising accounts for less than 10 percent of the market size. Online classifieds, such as used-cars auction portal CarFirst.com, jobs site RigthJobs.pk and others entered the market to give consumers substitutes to traditional classifieds sections in print media, but they are battling with the dominant and trustworthy ad vehicles through offering free of cost listings.

Ali Zain Sheikh, head of E-Commerce and Digital at Metro Cash and Carry Pakistan said digital ads platforms provide consumers with ubiquitously available options of second-hand cars. “Due to high margins, bottom-of-the-pyramid customers are not benefiting from auto boom,” Sheikh said. “Used cars sites are preferred as they are available beyond geographical constraint.”

Venture capital firms are gravitating towards the emerging marketplaces in Pakistan, which is seeing growth in internet subscribers and people interest in online shopping that reached Rs9.8 billion as of June-end last year, according to the central bank. Online classifieds are growing to the size of manufacturing or any other well-heeled organisations. For example, Zameen is valued up to $210 million, while valuation of Pakwheels is around $52 million.

Chinese e-retailer behemoth Alibaba’s entry into Pakistan through acquisition of Germany’s Rocket Internet-owned e-retailer Daraz is seen as a prologue to arrival of Taobao that facilitates consumer-to-consumer retail and others of the group’s ecommerce businesses.

Umair Mohsin, program manager at National Incubation Centre, Karachi hoped that more players would come in the digital classifieds space. “As competition grows, consumers would get benefits.”