Swedish investment company Vostok Nafta Investment called Avito.ru, its online-classified-ads affiliate company in Russia, the “real romance” of its portfolio in 2011.
Vostok Nafta, which owns 25.8% of Avito, claims in its annual report that the site established itself as “the number one online classifieds operator in Russia” following the “explosion” of its traffic since last summer.
“There is only room for one online classifieds operator per market,” says the Swedish company. “Once this position is achieved, barriers to entry are high[,] as are returns, resulting in high valuations. Avito is set to take this place for the markets in Russia and Ukraine.”
The company also claims that “no market is similar, but recent transactions and listed comparables would put Avito at $1 billion with plenty of upside remaining.”
Founded in October 2007, Avito.ru has indeed become the leading classifieds website in Russia, ahead of its main competitors Irr.ru, Slando.ru, and Olx.ru. Benefitting from exceptional brand awareness, it claims over 3 million offers and 70,000 new ones per day.
A $1 bn potential valuation which remains to be proven
TNS last February estimated Avito.ru’s monthly traffic at 9.12 million unique users aged 12–54 and from Russia, plus 3.83 million of the same age from other countries, for a total of nearly 15 million unique users of all ages and all countries—a threefold increase in one year, says the company.
The $1 billion potential valuation, however, remains to be proven. During 2010, “goods for over 25 billion Swedish crowns” ($3.95 billion) were sold on the site,” reports Vostok Nafta, and “the company could generate 50 million Swedish crowns in 2011” ($7.9 million), should it not reinvest its cash flow in future growth and expansion.
To date, Avito is officially valued through a transaction completed in November 2010, in which Northzone Ventures and Investment AB Kinnevik contributed with a total sum of 185.25 million Swedish crowns (approx. $25 million at a fixed SEK/USD exchange rate of 7.41), reports Vostok Nafta. The transaction has resulted in a post-money valuation total of 489.06 million crowns ($66 million) for 100% of share capital, which still represents a small fraction of the alleged future valuation.
The Swedish company notes “investors’ enthusiasm” about Russia’s Internet companies, recalling Mail.ru Group’s successful IPO on LSE in October 2010 and Yandex’s expected IPO on the NASDAQ in Summer 2011.
Experts interviewed by Kommersant, a Russian business daily, do not share this optimism. Analyst Anna Lepetukhina, of investment bank Troika Dialog, told the business daily in reference to Avito, “It is not correct to compare the valuation of such companies as Mail.ru Group and Yandex to small, even though successful, startups.”
