The Swedish co-founder of Russia's biggest classifieds website Avito expects it to more than double revenues this year, proving smaller players can take a lead in an industry dominated by heavyweights like eBay and Craigslist. Jonas Nordlander's latest start-up, launched in 2007, ranks with Craigslist in the United States and China's 58.com with its 40 million unique monthly visitors, and its rapid rise has already attracted investor interest.
"I would think they have extremely good prospects," said Peter M Zollman, an analyst at Advanced Interactive Media Group. "I would certainly say that Avito has created a strong opportunity, but I wouldn't say their future is guaranteed yet. It's a very, very early stage market."
Avito generated $30 million in revenues in 2012. Craigslist - the world's most popular classifieds site - is projected to have had around $126 million in revenues last year, according to a report by AIM. Avito is not yet profitable and its reach is nowhere near as widespread as eBay, Norway's Schibsted or South Africa's Naspers - each of which own dozens of online classified brands around the globe.
But it may be the start of an expansion into new markets like Iran, Bangladesh or Pakistan. It recently launched in Egypt and Morocco. Last month, Naspers snapped up a near 20 percent stake in the firm and is folding its Russian sites into Avito's. Other investors include Sweden's Kinnevik and Vostok Nafta, as well as venture capital firms Accel and Northzone - one of Spotify's earliest backers.
Accel partner Sonali de Rycker saw more than 90 percent of Russia's online growth coming from the regions, where she said more people are coming online in search of goods and services. "Because of the lack of retail infrastructure, it is often a local listings marketplace that best caters to this opportunity," she said. Avito's site serves as a meeting point for buyers and sellers of everything from real estate to pets and jobs, with one in five used cars sold in Russia traded on the site.
"I would be very disappointed if we did not more than double last year's revenues," said Nordlander, who sold a Swedish classifieds site to eBay in 2006 and pledged to stay off most its turf for two years. Rapid growth outside St. Petersburg and Moscow, new revenues from small and medium enterprises and advertising sales will all drive growth this year. There is plenty of room to grow. Only 60 percent of Russia's 140 million population has access to the Internet.
Nordlander, who together with co-founder Filip Engelbert own 15 percent of Avito, reckons the company could be a take-over candidate but has not yet been approached. A listing in London or New York might be the more likely alternative, even though it's still early days. "I think this company's geared for an IPO because it's going to be too big," he said.
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