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Last week emerging markets media and internet giant Naspers sold its award-winning South African price comparison site PriceCheck back to original founder Kevin Tucker and Silvertree Internet Holdings.
Launched in 2006, the price comparison website was quickly snapped up by Naspers four years down the line. Under the leadership of renowned entrepreneur and ecommerce expert Andre de Wet, the platform has grown to become Africa’s largest sites of its kind. It’s grown its staff to over 40 members, expanded to Nigeria and is clocking in 25 million unique annual visitors.
But why would Naspers let go of such a fast-growing company? In short, it’s too small a profit for too small a market.
“Naspers is a multi-billion dollar company. [PriceCheck] is not even a multi-million dollar company,” former PriceCheck CEO Andre de Wet told Ventureburn. “Naspers is looking at billion dollar assets. From a bird’s-eye view, it makes all the sense in the world.”
The longer answer however is a bit more interesting.
If you’re unfamiliar with the revenue model of comparison sites, they either charge online merchants a flat fee for the right to be listed on its SEO-friendly platform, or it implements a cost-per-click model which charges clients every time a customer is referred to the seller’s website.
De Wet said that while the click-through business model of the price comparison site is very solid, it purely addresses the online market. In South Africa, that market is estimated to be merely one percent of the country’s total retail. This means that while PriceCheck, as an online player, could have been profitable three to four years ago, it has reached everyone in that market. It plateaued.
In 2013, de Wet realised that if PriceCheck were to create something sustainable, scalable and powerful it would have to move to mobile and they would have to go after the offline market — the bricks and mortar stores:
One of the main reasons we moved to mobile and the offline market, is that even though around 1% of retail is done online, as much as 40% to 60% of the buying decision and research is done in an online space — and the future of online in Africa is mobile.
Naspers initially backed de Wet’s vision of marrying mobile discovery with the untapped offline world. PriceCheck’s budget was doubled and its staff tripled. The online company then went on to be recognised as the International App of the Year at BlackBerry Live, shining out among 100 000 competitors.
“We were really good at what we were doing, and it was because of everyone contributing and pulling their weight — buying into the vision of where we were going. Everybody was thinking mobile,” de Wet added.
While it seemed that the South African tech company was poised to pivot towards mobile ecommerce, it was too little to late for the JSE-listed group’s overarching vision.
Around the globe, Naspers is pulling out investments from some of its many price comparison sites. In March this year, it sold its majority stake in Italy’s leading price comparison site Trovaprezzi.it. In October, Czech Republic’s price comparison site Heureka — along with local ecommerce shop Netretail — were sold in a similar fashion for US$201-million. Other reports suggest that Brazil’s Buscapé is up for sale.
Naspers is instead focusing its resources on online classifieds and ecommerce. In South Africa, the story was much the same. “Over the last three to four months, I knew that something was coming,” de Wet said, adding that PriceCheck’s total budget was cut by about 60% at the beginning of this fiscal year.
We could do very little with what we had. We carried on making some interesting progress, but with one hand tied behind our backs. The phenomenal growth and development we’ve shown, we couldn’t continue with. We were in the middle of our development process and we were hamstrung.
In August this year, PriceCheck introduced its offline discovery proof-of-concept feature. The feature would enable shoppers to browse for products from bricks and mortar retailers on PriceCheck’s mobile-optimised catalogues. The user can then pay using mobile payments app SnapScan, and order using ecommerce delivery outfit Pargo. This feature was in testing phase with two local retailers.
“I was constrained by the corporate thinking,” de Wet added, noting that he’s eager to jump back onto the entrepreneurship horse. “Now I can go after what I believe is the future of shopping and mobile discovery. If we answer the question correctly with this offline-to-online play, we’ll be the first in the world to do so.”
De Wet said that he’s really keen to get involved with something that he can eventually spin out. “There are a couple of potentially mobile-centric plays which cover the offline market that, if correctly approached, could be US$100-billion or US$300-billion companies.”