Schibsted ASA SCH NO
August 21, 2014 - 2:50pm EST by
humkae848
2014 2015
Price: 315.00 EPS $0.00 $0.00
Shares Out. (in M): 107 P/E 0.0x 0.0x
Market Cap (in $M): 33,830 P/FCF 0.0x 0.0x
Net Debt (in $M): 2,200 EBIT 0 0
TEV ($): 35,480 TEV/EBIT 0.0x 0.0x

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  • Norway
  • Internet

Description

Schibsted is a Norwegian company (ticker: SCH.NO) operating print newspapers in Scandinavia and online classifieds in over 20 countries.  Not surprisingly, Schibsted’s print business is in structural decline.  However, the stock is interesting today because of their large and growing online classified businesses. They own a more sophisticated version of craigslist in Norway, Sweden and France, which are all very profitable (50-70% margins) and together grow revenue in the mid-teens %.  In addition, over the past five years, they've launched similar businesses in ~20 other countries (including Italy, Brazil, Spain, Ireland, Finland, Austria, Malaysia, Indonesia, Chile, Romania, etc).  Some have grown to be moderately profitable and others are burdened by heavy investment spending and big losses.

 

Online classifieds are attractive business models.  Once a site becomes dominant in a local market, the network effect creates huge barriers to entry.  This allows established markets to gradually introduce pricing across verticals to professional sellers and for premium services to consumers.  The strategy in each market is to initially lead with free consumer-to-consumer (“C2C”) listings in order to drive a lot of traffic to their site.  Once a critical mass of traffic has been established, they begin charging targeted verticals for access to those consumers.  For example, the site can start charging professional sellers (e.g. used car dealerships, real estate agents) for placing ads on the site.  The basic service is always free to the consumer.  Over time, established sites can start monetizing from consumers for premium services (bumping the ad to the top of the list for a certain period of time or allowing the consumer to post additional photos). Established sites also earn revenue through banner ads, given the high traffic flow.  Lastly, these sites require very little capital and they generate high margins and strong cash flows. 

 

There are four major verticals in online classifieds: jobs, autos, real estate, and C2C (e.g., selling a used baby crib).  In Norway (finn.no), Schibsted utterly dominates all four.  In Sweden (blocket.se), they have a presence in all four but are only monetizing the two where their traffic is truly dominant (C2C and autos).  In France (leboncoin.fr), they dominate all four but are in the early stages of monetizing this traffic.  Leboncoin is the most interesting asset within online classifieds given their dominance and long runway for monetization.  Leboncoin is the 8th most popular web site in the country and the 2nd most searched for term on Google France.  For those interested, I’ve attached at the back of this writeup a translated version of an article from Le Monde (Jan 2013) discussing how Leboncoin has become a social phenomenon in France.   

SCH - PPT.png

In the other countries, they have a shot at somewhere between one and four of the verticals.  In their three biggest early stage countries (Spain, Italy and Brazil), they seem to have a chance to win 3-4 verticals in each market).  Because these verticals tend to be big ticket items, there's a very strong value proposition to having much higher traffic than any competitor.  As a result, Schibsted charges businesses anywhere from $20 to many multiples of that for listings in the auto, real estate and job categories.  In Norway and Sweden, they charge a few dollars to sell items via their C2C listings.  However, in most other countries that is and will remain free.  It's worth noting that they studied virtually every country and have only attempted to enter new markets where there is not an already dominant player.  The barriers to entry are so high that once a web site "wins" a local market, it doesn't make sense to attempt competing there.

SCH - PPT 2.png

 

 

In Norway they generate revenues of US$52 per internet user annually, in Sweden they do US$17 per user, and in France they do US$3.50 per user.  Comparing rev/internet user across different countries is admittedly a blunt tool, but the significant difference highlights France’s long monetization runway, especially considering Leboncoin’s dominance.  France was a greenfield new business in 2006 and lost money until 2010.  In 2014, they'll do revenues of over €155 mm and EBITDA of €106 mm (68% margin).  The management team is careful about not being too aggressive with pricing in any one year, but, between implementing fees in multiple new areas and raising price marginally in existing verticals (off of low, absolute dollar amounts -- i.e. 1 or 2 euros), they should realize 5-10% annual pricing. This provides a long runway for future revenue growth in their already profitable countries. Regarding the long-term opportunity in France, the CFO has publicly stated on several occasions that there was no structural reason why France should not converge over time to Swedish-type levels, given similar GDP/capita and internet penetration characteristics.  If Leboncoin gets to the same level of monetization that Blocket currently enjoys in Sweden, Leboncoin alone would be worth more than the current market cap of Schibsted.

 

Leboncoin’s ability to close that gap lies in its early stage of monetizing its dominant traffic and its untapped opportunity in real estate classifieds.  Leboncoin is the already the largest player in real estate classifieds in France, with 2.5x the number of unique visitors of competitor, Seloger.com, and 8x the monthly page views.  However, Leboncoin’s real estate vertical only accounts for about €10-15 mm of revenue, or less than 15% of the annual revenue of Seloger, which earned revenue of €116 mm in 2013.  The reason for the discrepancy stems from a cooperation agreement with Spir Communications dating back to 2010.  Spir Communications was Schibsted’s former 50% partner in Leboncoin, and in 2010, Schibsted acquired Spir’s 50% stake.  As part of the deal, Leboncoin was required to enter into a cooperation agreement for real estate classifieds, which bundled the real estate offering from 3 sites: Leboncoin, Spir’s own real estate site called Logicimmo, and a smaller general classified site called TopAnnonces.  The agreement restricted Leboncoin from independently selling subscription packages to agents.  Agents negotiated directly with Spir, but as part of the deal, were able to list their properties on Leboncoin. Spir handled all contact with the agents and collected all the money.  And even though Leboncoin provided the vast majority of the traffic, Leboncoin received a disproportionately small fraction of the total revenues.  However, this agreement expires at the end of 2014, at which time Leboncoin is free to independently execute their own approach, selling directly to agents and collecting all the value.  Leboncoin has already started to recruit sales headcount to manage this transition and plans to sign direct subscriptions with agents at the beginning of 2015.  

Spir’s real estate package is estimated to have revenue of €50 mm.  Given that subscribers see most if not all of the package’s value in Leboncoin, I expect the existing Spir package subscribers will transition to Leboncoin-direct subscriptions.  This could be as much as a €40 mm lift to revenue (26% of my total 2014 Leboncoin revenue).  More importantly, Leboncoin will be able, for the first time, to market and further grow its agent subscriber base.  The biggest opportunity will be the Paris region, where Logicimmo has been notoriously weaker than Seloger.  Over time, I think it is reasonable to assume they can approach €100 mm in revenue, similar to levels enjoyed by Seloger (€116 mm).  The total online real estate advertising market in France is estimated to be  €250 mm per year.  That would imply getting to a 40% share in a duopoly market.

I believe the main reason why the stock has been weak this year is the heightened level of investment spend in emerging online classified markets.  In the early stages of growth they spend a lot on marketing to drive traffic to their sites even though they don't charge anything for listings initially. They'll lose approx US$220 mm in the unprofitable countries in 2014.  As a frame of reference, consolidated EBITDA (before the investment spend) will be US$420 mm in 2014.  The vast majority of the spend is related to their emerging Brazilian online classified site, bomnegocio.com, which is competing neck and neck with OLX, owned by Naspers.  Management gives no guidance on the level of investment spend, other than to say they expect it to remain elevated this year.  They point to very impressive growth in traffic (new ads per day), which they believe is the primary determinant of winning a market.  But other than that, they provide little insight into the timing and magnitude of spend.  In a worst case scenario, at some point they'll stop investing in those countries if they do not see a path to profitability.  They certainly won't win all 20 of the other countries they're investing in, but the stock also doesn't seem to be pricing in any kind of success in those markets.  It’s also my opinion that essentially all the battlegrounds for market dominance across the globe have been established, meaning we are truly at a temporary, heightened level of investment spend.  My feeling is that investment spend will be dramatically lower in a couple of years.

 

At 4x EBITDA, the legacy print business plus corporate overhead expense is roughly equal in value to Schibsted's net debt. Then, looking at only the currently profitable countries within online classifieds, the stock is trading at 13x 2015 EBITDA (18x FCF). These countries should grow top line in the mid teens % over the medium term, and probably more in the near term as Leboncoin launches their real estate offering in 2015.  However, even in the established countries, there could be several quarters where profitability gets pressured because of increased investment expense, as has been the case recently in Norway and Spain.  Management is not afraid to slow a good growth trend if they are excited about further attacking a specific vertical or introducing a new product offering.  This valuation framework obviously strips out the current investment spend in emerging online classifieds markets.  As mentioned above, I view these elevated losses as temporary.  They are all funded out of FCF as opposed to incremental debt/equity raises, and some are likely to inflect into meaningful profitable properties for which I’m giving zero credit.  It's hard to predict when the market will recognize the earnings power of all of Schibsted's assets, but I believe the countries that are already profitable are likely to grow EBITDA at 15%+ for a long time, and then you have free options on their portfolio of investment countries (Brazil is by far the most interesting, as well as Chile and Mexico).  I think 13x 2015 EBITDA / 18x FCF is a good price for a great business, and some of the newer countries will likely become major contributors along the way (Spain and Italy are two countries to watch).

 

There are a handful of publicly traded companies with pure play online classified operations.  These are publicly traded stocks in the UK, New Zealand and Australia, with strong positions in 1-4 verticals in each country.  Schibsted’s valuation compares favorably, particularly in light of the fact that Schibsted’s collection of assets, namely France and emerging profit generators like Spain and Italy, are at much earlier stages of monetization than these peers.

SCH comps.png

 

I think this opportunity exists because the earnings potential of the online classified businesses is somewhat hidden within a larger company and further obfuscated by high, temporary investment spend.  The consolidated company trades at an EV/EBITDA multiple of 19x, so on the surface it does not appear cheap at all.  I think the company's management team is strong. They make long-term investments that depress current earnings but have created a lot of value over time. Most sell-side analysts don’t like the limited disclosure on the trajectory of investment expense in emerging markets (reduces overall EBITDA) and are reluctant to assign any value to the currently unprofitable countries. Also, analysts seem overly concerned by the bleak outlook for Schibsted's newspaper businesses, even though it contributes negligible value to the overall company.

 

There are 3 key value drivers that will ultimately be appreciated.  First, their dominant French site is in the very early stages of monetization. There is a huge delta in terms of revenue/user in France vs. Sweden and Norway, and I believe that will converge over time.  The near-term real estate opportunity will meaningfully close that gap.  Second, the most mature businesses in Sweden and Norway will continue to compound at high single/double digit growth rates.  In addition, the “other” established classified sites (e.g. Spain and Italy) may be at the cusp of inflecting into major profitable operations.  Lastly, significant option value exists with their emerging market investments, where a handful of countries (e.g. Brazil, Mexico, Chile, Indonesia) could become meaningful contributors. 

I think the stock could be close to a double in 2-3 years, and that’s not assigning any value to the current loss-making countries.  In 3 years, I assume France has made significant progress in increasing their rev/user, from $3.50 to $10 (closing its gap with Sweden by 50%).  Assigning a 15x EBITDA multiple would generate a value roughly equal to the current market cap.  I assume the remaining established classified sites continue to compound EBITDA at 15% per annum over the next 3 years, valued at 15x EBITDA.  Lastly, I assume that Newspapers + Corporate OH cover the value of the net debt outstanding, which represents an EBITDA multiple of 4x.  With those assumptions, I get to an equity value per share of 552 NOK, almost a double from here.  And any success in their investments in Brazil, Malaysia, Indonesia, Chile, etc. would be additional value on top of that.

SCH - Finn and LBC.png

SCH OC Breakout.jpg

SCH - PF Val.png

SCH - LT Value.png

Catalysts

  • Accelerated growth in Leboncoin in 2015 from offering a standalone real estate product

    • offer investors further proof that Lebancoin is still in its infancy relating to monetizing its traffic

    • may provide added comfort that the elevated investment spend in countries like Brazil is attractive risk/reward

  • Possible consolidation in Brazil with competitor, OLX

  • Potential spin-off of Leboncoin to further illuminate the value of the online classifieds

 

No reliance, no update and use of information. You may not rely on the information set forth in the above write-up as the basis upon which you make an investment decision. To the extent that you rely on such information, you do so at your own risk. The write-up does not purport to be complete on the topic addressed, and we do not intend to update the information contained therein, even in the event that the information becomes materially inaccurate. Certain information contained in the write-up includes calculations or projections that been prepared internally; use of a different method for preparing such calculations or projections may lead to different results and such differences may be material. We now own the security discussed above, and may decide to buy or sell such securities at any time of our choosing without providing an update.

 

 

 
Appendix:  Translated version of article from Le Monde (Jan 5, 2013)

 

Front page: Leboncoin.fr: a social phenomenon

The classified ads online service has grown into the second website the French spend the most time on.

Le Monde asked a committee of experts to analyze this new social reality. Including inputs by Jacques Le Goff, historian, and Patrice Maniglier, philosopher.

Front page: Cartoon

François Hollande: “Final clearance: first-hand promises for sale...”

Ayrault: “Huge dead stock...”

Boxes: “Change is now”, “Foreign voting rights”, “EU”, “75 percent tax rate”, “Multiple public offices”

Page 1: Foreword

Proving resourceful in a crisis context, rejecting intermediaries, distancing from consumer society: Leboncoin.fr is a very French phenomenon. “Le Monde” gathered a committee of “experts” so as to understand the website’s success.

Their full commitment was required: we first met to discuss global digital issues, then they immersed in the website for several days, then we had a final meeting to share views.

The medievalist Jacques Le Goff – who is no Internet user –, the economist Michèle Debonneuil, the philosopher Patrice Maniglier, the historian Laurence Fontaine and the sociologist Alain Caillé agreed on taking a singular look at the website.

Page 1-2: “Le Bon Coin”: France In The Mirror

(Page 1)

Leboncoin.fr is not just another insanely successful classified advertisements website. It reflects a new, major social reality.

This is a one-of-a-kind social and generational melting pot, only seen on the beach, in public transports or possibly in places of worship. A mere 6 years after launching, Leboncoin.fr became France’s second most popular website in terms of time spent by users: 2:15 per person per month (Mediamétrie figures, October 2012). This is far behind Facebook (5:26), which teenagers keep browsing compulsively, however way ahead of Google (1:48), MSN-Windows Live Messenger (1:41), YouTube (1:24) and Ebay (49 minutes). The website attracts more than 17 million unique visitors a month and more than 3.6 million French visitors check it out on a daily basis. That is 800,000 more than Wikipedia.

Leboncoin.fr brings in more “AB+” users than average – Mediamétrie states it is “overrepresented” amongst business leaders, executives, craftsmen and retailers. Blame it on Christmas disappointment? On Tuesday, December 25th 2012, at midnight, 45,000 new toys and 10,000 cell phones went on sale on the website, which racked up 4 million visitors that day. This is a massive social phenomenon and no one saw it coming.

Jean-Marie, 69, grew tired of being alone: he used Leboncoin.fr to find roommates his own age. He now lives in the Hautes Pyrénées, sharing a house and a kitchen garden with two retired fellows. A former 30-years-old truck driver, Eric is thrilled at how he switched careers: he started looking up the website in June 2012 and needed just one month to get a permanent contract as a window salesman in northern France.

Jean-Pierre, a wealth manager from Marseilles, is hoping to sell his € 835,000 house online, just as he did with both his mountain and seaside flats. In the midst of the economic crisis, Parisian Patricia sells all her useless clothes and objects: she already reaped profits of € 2,300 in just two months. Denis has been a baker in Vendée for 30 years. He has got more of a prosaic problem: he hopes to get a few bucks from chicken wire leftovers he’s getting rid of; there are plenty of these in the area due to the recent henhouse frenzy. A building restorer from Hérault, Franck just moved out and is willing to trade his “gas New Beetle v5” with 54,000 km for a diesel touring car, so as to save fuel money.

Leboncoin.fr has not just turned into the first French website for selling goods. Neither is it a new Caigslist.org nor Olx.com, which are the top classifieds websites across the Atlantic. It is a tool citizens have now taken over so as to invent new ways of consuming and trading. Back in 2011, as the French started selling second-hand shoes in the “clothes” section, the website’s managers created a dedicated tab in order to facilitate browsing. As a result, more than 705,000 pairs of shoes are now on sale!

(Page 2)

The users unknowingly contribute to shape the digital platform. The Parisian managing team monitors the trending ads and adapts to the aspirations. Since 2009, they have added a “Wine & Cooking” tab (31,000 ads ranging from a Petrus 1955 bottle to crates of organic apples), a “Bike” tab (170,000 ads) and an “Events” tab, as more and more clients use the website to publicize a book club session or a local handball game. Marketing Manager Antoine Jouteau announces they shall soon create “Carpool” and “Nannies” tabs by popular demand.

In recent years, Le Bon Coin has already revolutionized several domestic markets, such as real estate (1,000,000 ads), second-hand cars (900,000), jobs (50,000) and holiday rentals (85,000), leaving behind historical websites including Particuliers à particuliers, La Centrale, L’Argus, but also Abritel, Homelidays, Monster, Keljob... and even eBay.

Le Bon Coin will remain free for private individuals – “this is our DNA”, Antoine Jouteau says – however they are gradually taking to charging professionals. They post 7 new ads a second, adding up to the 21 million existing ones. They have a presence in 31 countries, however France is their most successful market.

For, in spite of a very French name that may well suit for a typical, local café, Leboncoin.fr was originally Swedish, which its millions of users are not aware of, as they are admittedly misguided by the clever “.fr” extension and by the indispensable France map on the homepage. A 44-year-old computer engineer from the remotest part of Scania (Sweden), Henrik Nordström designed the original website in 1996, naming it blocket.se (“notebook” in Swedish) before eventually selling it to Schibsted, a Norwegian group, in 2003.

Ever since, they have been developing the concept worldwide: France, Italy, Spain, Hungary, India, Vietnam, Philippines, Argentina, Brazil... Whereas eBay is highly centralized, each of the 31 websites is run by independent, local branches and has its very own name. They only share the same search engine allowing users to find goods in just two clicks. Actually, 400 French users helped picking up “Le Bon Coin” as the name of the website through an online survey. Other countries used the same, smart marketing approach: the website’s name is subito.it (“fast”) in Italy, segundamano.es (“second-hand”) in Spain, mudah.my (“easy”) in Malaysia.

The website designer aimed for a tool as simple as possible: no registration required neither to sell nor purchase goods, minimal browsing, and a map on the homepage allowing users to click on the geographical area of their choice and scroll through the ad hoc ads. Whereas eBay basically states that “wherever your item is, we will help you get it”, which was a suitable slogan for the 2000s conception of Internet as a global village, Le Bon Coin has more of a “right next to you, right for you” philosophy. They thoroughly nurture a more practical, local and humble approach: when visiting the group’s various sites worldwide, one realizes how blank their design is. This is no surprise, since the top managers did not call on any graphic designers for the layouts.

The users praise this state of mind. According to a study by the Sorgem Group, they “sell and buy objects rather than products” and “are not looking to make profits but rather to reach out to each other while cashing in some money”. This is the opposite positioning than the “eBayers’”: the American website’s bidding system may allow a more profitable rise in prices. In a perfectly schizophrenic fashion, some French actually use both websites depending on the items, and most importantly on the brands they are willing to sell.

Le Bon Coin is rolling out in conjunction with Facebook, which is now the most important social network in the world. It is a testimony to how digital relationships reached their full development in France. It relies on trust: sellers may register using a pseudonym or their first name only, and so far, the French have been taking the risk to do business with a dishonest person. In fact, practical users just get in touch for a quick check: every day, more than a million users either phone each other or meet so as to complete a transaction; most of the time, they are close to home.

As the world grows ever more digital, the community appreciates such connections, no matter how transient, the Sorgem study says. The website admittedly gets a dozen judicial requisitions a day so as to settle various litigations (bouncing checks, stolen goods on sale...), however this is the average statistical proportion one may expect when putting millions of ads online.

In the same way that Mac Donald’s Big Mac’s different prices from one capital city to another are used to measure the purchasing power parities, Le Bon Coin is now being diverted from its primary use. For the first time in France, you are just a few clicks away from a € 25,000 house (there are 1,500 of these!). One more click and you’ll know how much a single stere of wood, a haystack or a chimney cowl are worth.

In a world where supermarkets sell “made in China” goods as expensive as Europeans’ and offer countless discounts and sales right from the beginning of the season, making “fair price” a doubtful notion, Le Bon Coin has become a digital consumption “Argus”, reassuring to the consumers and helping them to get a sense of the actual value of things. Mid-December, Maxime, a 42-year-old Parisian, asked to a Burgundian scrap merchant how much his damaged car was worth. He was told to check the market price of this type of cars on the website.

Laure Belot, journalist

(Insert: Le Bon Coin has already revolutionized several domestic markets, leaving behind historical websites)

Page 1: Charts: Leboncoin.fr Frenzy

Chart 1: Traffic evolution, France, millions of unique visitors per month

Multiplied by 4 in just 4 years

July 2008: 4

June 2010: 10.7: Leboncoin.fr overtakes eBay (10.5)

August 2012*

October 2012: 17.2

*count mode change

Chart 2: Le Bon Coin Users

Le Bon Coin Users vs. French Internet Users

25-34

35-49

AB+*

*Business leaders, craftsmen and retailers, executives, intellectual and liberal professions, intermediate professions

Chart 3: Top 5 Classified Ads Websites*, millions of unique visitors, November 2012

OLX (84 countries): 53.3

Craigslist (70 countries): 50.2

Schibsted** (31 countries) (including Leboncoin.fr): 42

58.com (China): 40.2

Ganji.com (China): 26.8

*Excluding auction websites

**Consolidated data based on Comscore figures

Chart 4: Top 5 Sections, millions of page views, September 2012

Real estate: 5.18

Cars: 4.85

Furniture: 4.38

Rentals: 3.71

DIY: 3.18

About 500,000 new ads a day

18 % of the visitors log in from a smartphone

Le Bon Coin App:

3 million iPhone downloads (since December 2011)

500,000 Android downloads (since November 2012)

Chart 5: The 31 countries where the Norwegian Schibsted Group located classified ads websites (including Le Bon Coin)

Segundamano.com.mx: Mexico

Compramelo.co.cr: Costa Rica

Roloeganga.com: Venezuela

Vende.pe: Peru

Bomnegocio.com: Brazil

Yapo.cl: Chile

Buenacuerdo.com.ar: Argentina

Todoaca.com.uy: Uruguay

Tutti.ch: Switzerland

Kapaza.be: Belgium

Donedeal.ie: Ireland

Leboncoin.fr: France

Segundamano.es: Spain

Custojusto.pt: Portugal

Blocket.se: Sweden

Tori.fi: Finland

Soov.ee: Estonia

Subito.it: Italy

Aggeliopolis.gr: Greece

1. Kufar.by: Belorussia

2. Willhaben.at: Austria

3. Jofogas.hu: Hungary

4. Tocmai.ro: Romania

Bikhir.ma: Morocco

Tradestable.com.ng: Nigeria

Sahipasand.com: India

Chotot.vn: Vietnam

Ayosdito.ph: Philippines

Mudah.my: Malaysia

Berniaga.com: Indonesia

Dinkos.com.au: Australia

Page 1: “A ritual preventing us from throwing our history and our memories away”

“Le Bon Coin is like an inn from the Ancien Regime: you just drop by to say that you lost your cat or that you are looking for a job for the summer or even just for a few hours or days. You may also sell stuff or just socialize.

Such a success reminds me of the pre-industrial society: in the 16th, 17th and 18th centuries, everyone was a merchant. This was a way to accommodate everyday life. Single, penniless women made new children clothes out of worn outs garments. Parisians sold unique items at the bottom of the Pont Neuf or at the street corner, and servants put the clothes their masters gave them on the market. There was nothing wrong with that. Having a free access to the market was an integral part of survival strategies at the time.

However, in the 19th century, the State started demanding that merchants pay taxes. The bourgeoisie took the opportunity to have a better control over trade. Patronesses labelled the garments they were giving away to charities, so that they couldn’t be sold.

Le Bon Coin succeeds in allowing people to reclaim local markets. There is something political about it: this is the outcome of the industrialised world’s moral crisis and the global loss of interest in frantic consumption and waste – both human and ecological. This also shows that people want to be active in the field they live in, the same reason why there are more and more car boot sales. Second-hand goods dealers failed to prevent people from imposing this custom a few years ago.

As a matter of fact, Le Bon Coin allows us to renew the way we look at and value things, which again reminds me of the pre-industrial period: objects convey something about us, they have a history which is also ours. Selling these for a few bucks to an individual is a way to lengthen their existence: they start a new life while carrying us along; this is like a ritual preventing us from throwing our history and our memories away.

The website illustrates how we need to connect together, rekindling the ancient sense of the French word “commerce” (“trade”) as social relationships and friendships. Some people offer goods for € 1 and link to online chatting websites in the same ad. They use the website as a place for imagination where selling is just a starting point opening endless possibilities: the promise for entertainment proves to be as essential as the sale itself.

The ads on Le Bon Coin are also a place for free speech and asserting your identity and values. You make your skin colour public so as to spare yourself racist rejections. “Martinique man looking for rentals”, one may read. However, staging yourself as such may create communities and even lead to communal segregation. People want bespoke connections: some rather look for a professional artist as a roommate, others require “a young Muslim, working woman”; homosexual couples will let you know that “anyone gay friendly is welcome”. And so on.

Being active in the local field implies turning your back on intermediaries: merchants are the first victims of the renewed individual grip over the market, even though users are quite pleased to do without their services.

Merchants do gatecrash on the website through professional ads and pop-ups, however they will have to renew their business model. Just as in the Ancien Regime, they will probably need to agree on trading in second-hand goods and to reassert themselves as guarantors of products quality, since the website’s major weakness is that it remains unable to control trespassers.”

Laurence Fontaine, historian, 18th century expert, Director of Research at CNRS

(Insert: “Le Bon Coin’s success is the outcome of the industrialised world’s moral crisis”)

Page 2: “This website is an illustration of collective creativity”

“Just like Amazon or Facebook, or even Google, Le Bon Coin is able to assimilate any kind of relationships and to pursue any invitation to connect. These kinds of websites are universal connectors. They are competing and distinguishable even though they have no specific content, since theoretically anything may go through their platform. Facebook is becoming a distribution network and Le Bon Coin may well turn into a social network.

Like the others, Le Bon Coin invented a specific way to connect: first and foremost, they are using a map, wagering on location, which is a very unique way to characterize a relationship without defining its nature in advance. Then they also wagered on collective creativity. The website is neutral and does not interfere: it rather relies on the users’ feedback – “This is your website...” – so as to create tabs based on significant transaction volumes. Location, endorsement, sobriety: these seemingly little technicalities are essential and build Le Bon Coin’s peculiar identity in the universal connectors’ competitive market.

The connectors actually design relationships, giving substance to the abstract, intangible ability we have to bond. They are fascinating to a philosopher. They may seem insignificant, however they simply are reinventing the world’s cosmology: the world is the whole of things, it includes us all and has us coexisting. However, as Kant pointed out two centuries ago, such an entity is sheer abstraction: we are not able to consider the whole, since that would require us to consider it from the outside... Thus it takes a lot of talent to create a working universal connector. It seems quite normal that there are several connectors of the kind, since it is impossible to capture the whole. Le Bon Coin or Facebook or Google are like maps you could ride along – they are railway maps and networks combined.

This is the novelty of the digital world: nowadays, inventing new ways to picture the world boils down to inventing actual new ways to build it. Such websites are a testimony to how we may shape the world together, even though, I insist, they will always be numerous.

Naturally, each connector tries and stands out from its competitors through dramatic choices: Le Bon Coin opts for location and free access whereas eBay goes global and requires upstream control. Truth be told, they only favour one or the other unsolvable contradictions: they have to be local and global at the same time, open and controlled, free and profitable.

Apparently, developing universal connectors is the best way to make a spectacular fortune nowadays. Connecting people is the top yield ever. This is quite a fascinating historical fact. Back in the days, you had to invest in production, distribution or even finance itself. Now you basically don’t need to do anything anymore: you are not even an intermediary (as in, merchants are intermediaries between producers and consumers). The websites’ users do everything, including the transaction.

These websites are somewhat of parasites, as they thrive on the users’ activity. Certainly, creating these websites is making something, however one must admit that Le Bon Coin provides us with a service we did not need before – namely, it allows us to experience our local surroundings. This is a marketplace, although it differs from the village green where people used to gather and set their stall in. We now meet in a place that was not pre-designed by the site’s developer. Nothing is more profitable than creating collective space now that we are both isolated by and connected through our computer screens.

Logically, these websites have a hegemonic nature: they probably are empires, granted that any empire is a State with a dream of becoming universal. Admittedly, they are private empires, however they may not remain so. Considering the transaction volumes they generate, we may wonder how the State will act on it.

Writing was invented three millenniums before Christ for accounting purposes, so as to keep track of transactions. It has never been easier to control human exchanges than on the new digital market. The problem is now political: what use are we going to make of our universal connectors?”

Patrice Maniglier, philosopher, senior lecturer at Paris X Nanterre University

(Insert: “Facebook is becoming a distribution network and Le Bon Coin may well turn into a social network.”)

Page 2: Cartoon

Santa: “I can’t believe all these second-hand gifts on the Internet! We lost the magic of Christmas!”

Goblin: “Nonsense. “Christmas Magic”. Good condition. € 5. Shipping to Niort and surrounding area.”

Page 3: “This website is an anti-system”

“In a way, Le Bon Coin is like a 21st century medieval fair. There were not as many shops at the time, neither in town nor in the country. Fairs were like a great mall where people could get anything they wanted. As such, Leboncoin.fr is a very interesting phenomenon, a historical milestone.

Nonetheless this is less of an innovation and more of a return to a certain homogeneity and to warmer exchanges in a limited area, which originated in the Middle Ages. Cities were born in the 11th century, when serfs gathered around churches and cemeteries, becoming relatively emancipated from the lords for the first time in history. Districts then became the reference social units. Leboncoin.fr is all about proximity, allowing to build de facto local societies. In that sense, this website is a return to Middle Ages.

However, there is something fundamentally novel about it, as it gets rid of the intermediaries, which is quite a recent development. In the Middle Ages, except for occasional trades, swapping was extremely rare. As far as I know, there was no swapping in the 12th and 13th centuries aside from Westerners in need for gold to mint coins and heading to southern Sahara so as to trade cheap junk for nuggets and bars. Individuals barely resorted to trade either, since people used to produce their own goods. Main goods on the market were metal pieces since gothic churches were made of iron as much as stones.

Emancipating from intermediaries is an important aspect. From a historical perspective, one may deem it as close to anti-feudalism. As far as I am concerned, I don’t see it as a new found freedom nor as a political act.

For the purposes of comparison, there was way more violence involved when citizens distanced themselves from the lords and the bourgeoisie in the Middle Ages. Inhabitants of the new medieval districts gathered to found communes as Le Mans in 1076 or Laon in 1112 whose bishop was hunted down and executed in the very barrel he was hiding in.

I rather think that Le Bon Coin’s rise shows how makeshift economy is a tradition in France. This was the very same mind-set that attracted countless people to Paris in early ages. Whereas most of the greatest European cities (Florence, Milan, Antwerp, Bruges...) only accounted for 70,000 to 80,000 inhabitants at the end of the 13th century, Paris already had 200,000! This was a city where people thought resourcefulness was the key.

There are two ways to understand Le Bon Coin’s success. It makes products whose price broadly relies on intermediaries more accessible. It offers a return to a medieval quality of life, based on conviviality and mutual assistance. It also proves to be especially efficient on real estate, automotive and employment markets, which is fundamental nowadays.

However Leboncoin.fr also implies a certain submissiveness to the group, making its users quite dependant on their surroundings. This lies in opposition to individualism, which is one of the most important evolutions in mankind history. There might be quite a divide between those who are very outgoing, therefore prompt to use the website... and the more individualist ones.

From an economic point of view, I am also sceptical. Le Bon Coin is supposed to weaken the mass consumption society. Yet, I am in favour of a reasonable consumption society that would still foster economic growth. Selling second-hand objects and cars limit the production profits we need to fund innovation. Le Bon Coin is an anti-system creating a new system.”

Jacques Le Goff, medievalist

(Insert: “Le Bon Coin shows how makeshift economy is a tradition in France”)

Page 3: “Every citizen must not be merchants nor producers”

“I find it extremely interesting that people use Leboncoin.fr to make arrangements among themselves, yearning for new ways to consume and lending a hand to set prices that seem fair and reasonable to them... They create temporary bonds, either digital or real, that are less narrow than family ties and less loose than market linkages.

However one may ask a legitimate question: how did we get there? In the 1970s, automation has allowed an unprecedented diversification of available products. The offer was so plethoric it needed to be presented by intermediary distributors who fitted in between producers and consumers. The distributors grew ever more powerful. The balance of powers they established allowed them to capture most of the value. When production started relocating in countries with cheaper wages, they naturally stocked up from the same countries, at lower prices.

This led (and is still leading) to shutting down industries and cutting jobs in the developed countries. Local consumers grow unable to afford all available products. Even though manufacturing costs are cheaper, commercial margins are perceived as excessive.

Besides, Le Bon Coin’s success echoes the emergence of local currencies demonstrating the deterioration of the image of international finance. Global finance system and markets have certainly gone too far. The massive consumption society has been offering too many various products. The price to pay is too high. Consumers intuitively feel that we created a lethal system.

There is a far stretch between them and the intermediaries issuing prices. Exchanges between the consumers and the producers grew meaningless over the time. This is why the purchasers now want to get closer to the producers and to take part in the trades. Besides, they are now on the look-out for waste and want to give their goods a new lease of life.

To a certain extent, Le Bon Coin is just common sense! Its rise illustrates a global strive for another way to meet one’s needs – for another lifestyle. From swapping to global markets, the website’s users are looking for a compromise: they trade second-hand goods, issuing prices together upon a meeting, which allows them to give meaning to their relationship. One may even wonder whether they are on the verge of dropping owning things, and just using these. They would then be pioneers of the new economy I call “quaternary economy”.

New technologies have a great potential. Le Bon Coin is just an embryonic example of the trade possibilities opening up thanks to Internet and mobile devices. These technologies will allow to increase human mental capacity in the same way as automation has allowed to increase human physical capacity. Changes to come are beyond imagination!

Le Bon Coin’s success is a strong signal, however citizens may be getting into something way over their heads. They must not all become merchants and producers, otherwise we might go back to a barter economy, ignoring the actual benefits brought to us by the market economy.

Companies must learn from this phenomenon. They need to develop new production methods so as to meet the consumers’ new needs. This is the very definition of an alternative growth strategy, using new technologies and matching new expectations.

In the time of the previous technological revolution, Saint Simon showed that any technical revolution needs to go with, if not be preceded with cultural and political forecasting. Le Bon Coin’s rise is a sign of cultural renewal. When using this website, citizens are leading the way for politicians. This is both an economic and cultural challenge: digital technologies shall move our economy from “more” to “better”.”

Michèle Debonneuil, economist, appointed by the Prime Minister (since 2011) to develop the new digital economy

(Insert: “We might go back to a barter economy, ignoring the actual benefits brought to us by the market economy”)

Page 3: “A tool to reconnect people”

“In our digital era, it seems that Le Bon Coin’s users are keen on coming together again. The website has turned into a tool reconnecting people, even for a brief encounter. You may deem it an aspiration to get back to a lifeworld – in the German sense of the term: “Lebenswelt”, as in the field of your daily life.

History distinguished three main types of societies. “Primary” societies are small enough for everyone to know each other. Social interactions are then regulated by what the anthropologist Marcel Mauss used to call a triple obligation to giving, receiving and giving back. “Secondary” societies are larger societies gathering strangers beyond tribes and small homelands and bringing them together under the aegis of the law, either political or religious. We are now attending the rise of a “tertiary” society, a very large, worldwide society which does not rest upon giving nor abiding by the law anymore, but is rather based on the virtual reality of the Internet.

Le Bon Coin’s success shows how people long for social grouping and reconnecting with individuals. In a way, the website turns against the new tertiary sociality, repairing the bonds it tends to damage by using its very tools. Ebay is a digital tool issued by the market, making it part of both secondary and tertiary socialities, whereas Le Bon Coin appears to be a digital tool dedicated to one-to-one relationships, which is more of the primary sociality.

There is something very French about this website, which has to do with the secondary sociality. Le Bon Coin embodies the idea of a community gathering all the French, the whole of France. There is a desire for a symbolic space reincorporating the nation and its solidarity values, either on a local or global scale.

A nation is a group of people you are giving to and receiving from (water, energy, culture...). This is a broaden area of solidarity the French are deeply attached to. Our country is of great cultural and ethnic diversity. What held it all together was the central State and an emotional tie to the language, the culture, the Pivot dictation... Yet this is falling apart and we fail to replace it.

The French use Le Bon Coin to mitigate the State’s shortcomings, acting out as some sort of a substitute for public service. In France, solidarity emanates either from the family or the State, whereas in Spain or Italy, it also is local and regional. Le Bon Coin provides a compensation for the partial disintegration of national solidarity.”

Alain Caillé, sociologist, chief editor of “La Revue du Mauss” (an anti-utilitarian social science movement)

Page 3: Cartoon

Man: “You want to sell a flat-pack dolmen? ... You don’t know which section you may place your ad in? ... Did you try “Esoteric Garden Furniture”?”

Desk: “Boncoin After Sales Service”

Page 3: Chart: Google defeated

Facebook: 05:26

Le Bon Coin: 2nd website in terms of time spent: 02:15

Google: 01:48

31 % of visitors log on from home. 69 % of visitors log on from the office.

I do not hold a position of employment, directorship, or consultancy with the issuer.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

  • Accelerated growth in Leboncoin in 2015 from offering a standalone real estate product

    • offer investors further proof that Lebancoin is still in its infancy relating to monetizing its traffic

    • may provide added comfort that the elevated investment spend in countries like Brazil is attractive risk/reward

  • Possible consolidation in Brazil with competitor, OLX

  • Potential spin-off of Leboncoin to further illuminate the value of the online classifieds
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