Jumia House Nigeria has been acquired by ToLet.com.ng, a Nigeria-based online property classifieds portal. Jumia finds an exit as it continues to restructure its business after over-investing many years ago. Over the last few months, Jumia has streamlined its business, exiting from some web business categories. Gone were the days of the African Internet Holding (AIH) which Jumia parent company, Germany-based Rocket Internet, co-funded with MTN. The partners had expected to use the AIH vehicle to redesign Africa’s web business sectors, churning out companies that would become category-kings across many sectors. AIH made way for Jumia Group as Jumia consolidated all its properties into one brand: from Kaymu (a marketplace) to hellofood (a food delivery ecosystem).
ToLet.com.ng is the leading real estate property platform in Nigeria, focused on providing users with up-to-date information, guidance as well as the best real estate agent network, all of which are needed to make better-informed property decisions. They offer a range of services tailor made to suit the expectations of Landlords, prospective tenants, property agents and anyone involved in the real estate market. ToLet.com.ng has rapidly grown to become Nigeria’s leading online destination for property consumers to search for homes and the favoured online marketing partner for Nigeria’s landlords, estate agents, letting agents and property developers.
This is from the press announcing the acquisition:
ToLet.com.ng, Nigeria’s leading online property classifieds portal, has in conjunction with their existing investors, Frontier Digital Ventures, acquired Jumia House Nigeria, a competing property portal, for an undisclosed sum. ToLet.com.ng will now merge the two platforms over the coming months, under the new name of PropertyPro.ng, creating Nigeria’s Number 1 property listings market leader in the online Property classifieds space, with 65% share of the Nigerian online real estate market.
ToLet.com.ng currently has around 60,000 listings on its platform, whilst Jumia House Nigeria has around 22,000, the vast majority of which are property listings for sale. In 2016, the company secured Series A investment of $1.2m, led by Frontier Digital Ventures [FDV], to expand its operations. Today’s announcement also sees FDV strengthening its portfolio in Angola and Ghana.
One thing that caught my attention is the number of listings in both platforms: ToLet has 60,000 while Jumia House has 22,000. If you combine these platforms, removing duplicate listings, you may have 75,000 unique listing in Nigeria. According to the statement, that is about 65% of the market share.
Jumia House Nigeria is an online destination for the widest range of lifestyle products and services. Jumia was founded in 2012 with a strong belief that internet can improve people’s lives by helping them overcome the challenges they face every day in terms of poor infrastructures, limited choice, limited information, expensive products and services. Jumia is led by top talented leaders offering a great mix of local and international talents and is backed by global investors, namely; MTN, Millicom, Rocket Internet, Axa, Orange, Goldman Sachs & CdC.
The numbers are very consistent with any number out there: from Konga’s 200,000 (active users) to Uber less than 300,000 (active riders). If not that this information is public, I would have expected Jumia House to have more than 22,000 listed properties in its platforms, considering the investments in advertisements, agents and promotions the firm has mounted in Nigeria for years. It does seem that web business is not that easy in Nigeria.
Exiting is Good for Jumia
This is not really an “exit” for Jumia, and ideally should not be captured as one. But since the press release said “acquisition”, Jumia House has exited. Jumia is not a company that allows local companies that have raised less than $1.5 million to acquire its properties. The fact is this: Jumia has given up on this web sector, and wants to get any money it can lay hand on to cover the cost of necessary filings and disclosures, associated with the sale. My estimate is that ToLet spent $440,000 for this acquisition at premium of $20 per listing.
Now that this slow moving category has gone, Jumia can focus on areas it thinks it can find growth. It needs to find the paths to profitability.
The Property Marketplace Business
The property marketplace business looks good on paper. It has a huge scalable advantage with near-zero marginal cost. The customers generate the raw materials (the listing) and the two-sided business makes money on those materials, serving demand and supply. It is a pure platform business and one that should succeed. In the web business, nothing can be described as being better in terms of asset-light.
However, in Nigeria, there is one major challenge to most digital businesses: lack of trust. That is the main element why Jumia has seen just 22,000 listing despite all the efforts. Nigerians struggle with trusting physical space commerce. Now, take it digital and the trust issues multiply.
That distrust is destroying value across categories and will continue to make it challenging for Nigeria to have great web businesses. Only few people will be happy to close a property deal just by seeing things online. Approaching business with distrust means that most Nigerians like to feel and touch products to be sure they are for real, before committing.
The execution of this deal is what I have been preaching for startups to do in Nigeria: find a way to come together to have scale. Our markets are very challenging. So, pooling resources will provide the opportunities to survive and grow. In short, the best thing for most of the startups will be to run as monopolies as their capital bases are largely small. Coming together can help them generate more market value and attain profitability faster. Sure, Jumia Home and ToLet are not merging, but the message remains the same: better to have a unified strong front than clusters of companies which will likely fade out due to size.