• Gumtree.com, Motors.co.uk sold to O3 Industries and Novum Capital
  • Adevinta aims to double its automotive revenue by 2026
  • Big focus on enhancing transactional capability in general goods

It’s been a busy month for global marketplace operator Adevinta. It recently unveiled a new five-year growth strategy, coinciding with its capital markets day on the same date. The next day, the company announced the sale of its U.K.-based classified businesses — Gumtree.com and Motors.co.uk.

Investors purchase U.K.-based classified sites

Adevinta has completed the sale of horizontal Gumtree.com and automotive vertical Motors.co.uk, it’s U.K.-based classified sites, to a consortium of investors. The buyers consist of O3 Industries, a U.S.-based family investment fund, and Novum Capital, a Germany-based private equity firm. The financial details behind the deal have not been disclosed.

The sale itself is no surprise. It was part of a previous agreement with the U.K.’s Competition and Market Authority (CMA) for approval of Adevinta’s acquisition of EBay Classifieds Group.

“There was a high level of interest throughout the sale process, reflecting the quality of the Gumtree U.K. business and management team. We are confident that both O3 and Novum Capital are well placed to continue growing Gumtree U.K. and Motors.co.uk as they focus on providing leading classified advertising services to the U.K. market,” Rolv Erik Ryssdal, Adevinta CEO, stated in the transaction announcement.

“Gumtree U.K.’s value proposition is more vital than ever, enabling consumers to participate more in the circular economy by buying and selling secondhand. Likewise, Motors.co.uk supports car dealers in satisfying the growing demand from consumers for a great online car buying experience. We are excited to put our expertise and passion to work in order to seize the opportunities this presents,” Felix Homann, partner at Novum Capital, added.

Both O3 and Novum Capital have experience in media and entertainment, but classifieds is a new segment for the companies. They are expected to leverage their marketing and multi-media capabilities to further build the Gumtree / Motors brands in the U.K., before likely looking for a profitable exit.

Both investment companies are fairly small. Novum’s two capital funds have 225 million euros of assets under management, while O3 only has three portfolio companies listed on its site and is essentially a family fund. It appears as though none of the major marketplace operators or private equity funds with a history in classifieds were willing to spend significantly on the two sites.

Gumtree.com is the No. 1 horizontal in the U.K. by visits, with 32.7 million total monthly visits in October, according to SimilarWeb.

Motors.co.uk is a Top 5 automotive marketplace by visits, with 4.2 million.

However, Gumtree.com is one of the weakest leading horizontals in Western Europe, with no transactional capability, while Motors.co.uk is dominated by rival AutoTrader.co.uk.

Combined profit for the two businesses amounted to £16 million ($20.5 million U.S.) in 2019, pre-Covid. Combined revenue stood at £84.6 million.

Automotive leads growth vision

With Adevinta now essentially exiting the U.K. market, the company is set to focus on five core territories: the Benelux (Belgium and the Netherlands), France, Germany, Italy and Spain.

Under its newly released “Growing at Scale” growth strategy, the Oslo-listed company will focus on these markets in order to double its automotive revenue by 2026, build out real estate products, and develop transactions-led initiatives in general goods.

The question now is what happens to the non-core territories? Adevinta is likely looking for buyers for its businesses in Canada, Mexico, Hungary, South Africa and elsewhere if the offers appeal. JVs, particularly Adevinta’s lucrative venture with Prosus in OLX-Brazil, will be kept on and allowed to grow.

As for the 2026 vision, automotive will be the big growth driver, understandable since it represents 40% of Adevinta’s total revenue from its core markets.

Not to boast, but the AIM Group did predict this strategy when we said we expected the company to “set a revenue target, five years out, of maybe doubling what these [auto] products generate today.”

The focus on the core markets is intended to reduce complexity and help scale product and commercial solutions through cross- border opportunities.

“Our new strategy builds on our unparalleled scale, leadership positions and technology to accelerate sustainable growth. We have created a clear set of priorities that will allow Adevinta to benefit from emerging opportunities and trends in consumer behaviour,” said Ryssdal.

“We will also invest in product and development to stay agile and evolve our business model to reflect changing demands, such as becoming fully transactional in consumer goods. This will only be possible if we continue to provide opportunities for our talented employees, whose dedication and hard work is central to our past and future achievements.”

Improving ARPA in real estate

Real estate is Adevinta’s second highest revenue-generating vertical after autos, amounting to 16% of the company’s total revenue. Adevinta believes it has a compelling opportunity to increase revenues in this segment, largely by improving average revenue per agent (ARPA) through optimized pricing and packaging strategies.

France-based horizontal LeBonCoin is a key example in making this happen. Adevinta released its real estate ARPA for the first time: it has climbed steadily from €315 in 2018 to €475 nine months into 2021.

M-and-a is likely to be key in real estate as Adevinta looks to build a more dominant position across its core markets. At present, it does not have a truly leading position in real estate in none of its core territories. Rollouts in financing and a greater focus on the new-build market will be significant drivers for its real estate business.

Transactions in general goods

Adevinta is also planning to add €400 million in gross revenues by 2026 through adopting a fully transactional model in its consumer goods segment.

The company is shooting for around 15% average annual revenue growth and a 40- 45% EBITDA margin over the mid-to-long term, an ambitious target given the investments required in products, technology and marketing to drive user adoption on the journey to being fully transactional, and the likely lower margin levels in transactional businesses versus classifieds. The figure is a big step up from the 36% in Q3 2021.

At maturity, the transactional model will represent a material top- and bottom-line growth driver, said the company.

Outlining its strategy, Adevinta noted that it already offers on-platform trading across Europe with varying levels of maturity. While Marktplaats in the Netherlands and France-based LeBonCoin saw adoption in the region of 5%, elsewhere — from Milanuncios in Spain to Germany-based EBay Kleinanzeigen — the figure did not exceed 1%. (Figures, from this year, were for consumer-goods transactions with payments enabled, as a percentage of new ads inserted on the sites.)

LeBonCoin is Adevinta’s poster child for transactions. C-to-c transactions in LeBonCoin’s general goods category jumped sevenfold from Q3 2019 to Q3 2020, and then again by twofold through to Q3 2021.

Transactions in general goods is a nice addition but, as shipping is included in the revenue target, it’s a relatively small addition compared to the company’s forecast grow in autos revenue and margin.

The big loser in Adevinta’s strategic reshuffle? Revenue from display advertising. The company expects this revenue stream to decline from 25% currently to just 15% in 2026. The company understands the landscape of declining adspend and, probably correctly, understands the need to diversify and move away from risks associated with economic shocks that can hit display ad revenue.

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