58.com, the Chinese classified service, went public on the NYSE yesterday. The IPO price finally is $17 per ADS, higher than the price range set before and jumped 42% on the first trading day.

It seems China’s XXX works again.

Renren, referred to as China’s Facebook, raised $743 million in its debut on the NYSE in 2011. Now investors know it’s no more than a Facebook clone that hasn’t evolved much these years and failed to compete with big players like Tencent or latecomers like Sina Weibo. Today Renren shares are traded at less than one quarter of the IPO price. And it is rumored that Renren is looking to sell all businesses excluding online gaming.

I’m not saying 58.com will become another Renren in terms of future market share or profitability. But it is different from Craigslist in a lot of ways, or say, with Chinese characteristics.

  • Like Craigslist, 58.com allows for posting listings, jobs, housing, second-hand goods, local services, etc., and started monetization through advertising.

Later 58 came up with a package of services for merchant customers to subscribe to. The package includes tools, premium services and advertising offerings. The contribution from the paid subscription has increased from 32% of the total revenues in 2010 to 60% in the first half of 2013.

Riding the wave of group-buying, 58 rolled out one too and invested considerably in 2011 and 2012. As most Chinese group-buying services shut down, 58’s didn’t work out well, either. In the first half of 2013, group-buying accounted for less than 1.6% in the total revenues.

Earlier this year 58 introduced Taobao’s escrow payment solution that thus can take transaction-based commissions.

  • 58 never turned a profit until the first half of 2013. The profit rate is 4.8% while that with Craigslist was as high as 81.7% in 2012.
  • Craigslist has 30-some employees while 58 has more than 5000 with reportedly three quarters working on marketing. The human capital cost drives down 58’s profit rate.

Like Baidu, some Chinese Internet companies, from classified sites, online travel services to group-buying services, have huge numbers of marketing staff. Their job is to invite merchants to sign up with them and teach them how to user their services.

  • Unlike Craigslist that it’s the biggest player in this sector in the US, 58 has a handful of competitors in China. Ganji.com is 58’s direct competitor and as big as 58. 58 had 38.1% market share in 2012, according to iResearch, a third-party Chinese research organization. Baixing.com is another worth-mentioning player.
  • Thanks to competitions, 58 and its competitors spent hundreds of millions yuan in marketing in the past years — another cause of low profit margin.
  • Craigslist has presence in 70 countries. 58, however, is faced with problems expanding in local markets. Multiple reports say that organic traffic on all those Chinese classified sites decelerated.

Tracey Xiang is Beijing, China-based tech writer. Reach her at traceyxiang@gmail.com

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