Afrikaans Annual Financial Statements
Naspers
 

PERFORMANCE REVIEW

IN THIS SECTION

INTERNET

OPERATIONAL REVIEW

Naspers operates platforms that offer customers fast, intuitive and secure environments where they can communicate, participate, entertain and shop. The group’s ecommerce services include marketplaces, general and vertical etail, classifieds, online pricecomparison services and specialised services such as travel, real estate and payments.

+65%
+16%
+8%
 
 
* Including associates and joint ventures on a proportional basis

Tencent

WeChatTencent performed well in a dynamic and competitive Chinese market, under the excellent management of Pony Ma, Martin Lau and the team. A shift in user traffic from PC to mobile devices is driving substantial changes across different sectors of the Chinese internet industry, including communications, social networking, online games, media and ecommerce. Market competition intensified as competitors aligned their strategies with emerging mobile opportunities and made aggressive organic and acquisitive investments across the value chain.

Tencent continued to solidify its leading position in communication and games in China, while strengthening its stance in ecommerce. Revenue for the year was RMB60bn, up 38%, while non-GAAP (non-generally accepted accounting practice) profit attributable to shareholders was 19% higher at RMB17,1bn.

Core platforms QQ instant messaging (QQ IM), Qzone (the leading social networking service platform in China) and Weixin (a next-generation communications service for smartphones) recorded solid growth. At 31 March 2014, QQ IM had 848m monthly active user accounts and 200m peak concurrent user accounts; Qzone had 644m monthly user accounts; Weixin, known as WeChat internationally, had a combined 396m monthly users and enjoys an excellent market position in China, evolving from a pure communications service into a multifunctional platform.

In the PC gaming market, Tencent published six of the top 10 games in China, while Riot Games’ League of Legends enjoyed growth in international markets. Revenue from online games and social networks also benefited from smartphone mobile games integrated into the mobile QQ and Weixin platforms.

Two transactions will augment Tencent’s search and ecommerce businesses:

In a strategic partnership with Sohu, Tencent invested in and merged its SoSo search business and certain other assets with Sogou in return for a 36,5% interest.
JD..comIn March 2014 Tencent merged the Paipai C2C and Wanggou B2C marketplace businesses into JD.com in return for a 15% interest. Under a strategic cooperation agreement, Tencent will further support the growth of JD.com. In May 2014 JD.com listed on the Nasdaq. As part of the initial public offering (IPO) process, Tencent acquired a further 5% interest in JD.com in a concurrent private placement for US$1,3bn.

Tencent’s online advertising business benefited from significant growth in performance-based social advertising and online video advertising. The new partnership with Sogou should, in time, position the company to grow its share of the PC and mobile search advertising market. Tencent is listed on the Hong Kong Stock Exchange and further information is available on its website www.tencent.com.

Mail.ru

mail.ru

Mail.ru Group, one of the largest internet companies in the high-growth Russian-speaking market, recorded another good year with growth across all major segments. Revenue for 2013 was RUB27bn, up 30% year on year, while group aggregate net profit rose 36% to RUB11,4bn.

Mail.ru expanded contextual advertising revenue as it continued to replace general display ads with targeted advertising. Overall advertising revenues grew 24% in 2013.

Online games and internet value-added services (IVAS) performed well. Revenue for massively multiplayer online (MMO) games grew 41% year on year to RUB6,7bn, with Warface gaining traction in users and revenues. IVAS grew 29% year on year to RUB8,7bn.Monthly paying users reached 7,6m. In 2013 numerous products were updated and new products launched, including cloud-based services.In March 2014 Mail.ru increased its stake in VKontakte from 40% to 52%.VKontakte is a leading Russian social network, also known as VK.com.

Mail.ru’s depository receipts are listed on the London Stock Exchange. Further information is available at www.corp.mail.ru.

Ecommerce

Revenues from our ecommerce activities increased 64% to R20,3bn in the review period. Ecommerce is an area of expansion and we incurred development spend of some R5,6bn. As a result, the trading loss for this segment widened to R5,3bn.

A number of our ecommerce businesses are still in the early stage of development. The Allegro marketplace business and some classified and price-comparison businesses delivered improved profitability. Given the different timelines to monetisation of the various ecommerce models, etail (general and fashion) and marketplaces currently generate the bulk of revenues.

www.fixeAds.comSubstantial investments were made during the period, most notably a significantly increased development spend in our etail businesses as we drive growth in Central and Eastern Europe and expand our footprint in Africa, the Middle East and India.

We have deliberately shifted away from a geographic model by reorganising our global operations into functional segments. This focus has made us more agile, allowing us to move faster and build scale more rapidly. In addition, the businesses are able to share knowledge, technology and expertise more easily and effectively.



Consumer-to-consumer (C2C)

Classifieds

Classifieds sites in 40 countriesThe Naspers classifieds group, now structured as a global organisation, owns and operates general online classifieds sites in some 40 countries in Eastern Europe, Asia, Africa, Latin America and the Middle East. We have leading positions in over 20 markets, collectively serving more than 2bn people worldwide. These markets range in size and maturity, with many in the early phases of development.

In building a global structure, we are focused on developing our sites and platforms through internal capabilities, and investing in three key areas:

  • technology platforms – especially mobile
  • local marketing to build and grow market share, and
  • building the world’s deepest pool of classifieds business talent, augmented by strong local company cultures.

Our organisational model ensures we operate globally as a cohesive unit under a lean centralised leadership group. This group provides strategic and operational support to local teams able to work quickly and flexibly, while driving local innovation. We have over 1 000 staff members with local expertise operating in 40 markets around the world. Our model is also structured to deliver technical efficiencies at scale across markets wherever we can, in areas such as business analytics, brand performance measurement, and systems and tools.

+148%
+215%
 
* Select criteria as measured for the month of March 2014, not adjusted for acquisitions and disposals, and reflecting associates on a proportionate basis.

Classified business

One of the clearest examples of our local-global orientation is the shift from a portfolio of disparate and local brand names to global brand alignment by transforming OLX into the world’s largest brand for C2C trade. We have already successfully migrated local brands to OLX in Switzerland, Thailand, the Philippines and Eastern Europe, with more planned for the new financial year.

Our classifieds businesses are in different stages of maturity, and the number of markets where we have the sustained ability to monetise is gradually increasing.

Business-to-consumer (B2C)

B2C combines our activities in etail, marketplaces, price-comparison shopping and travel. These businesses are giving customers an improved experience compared to their offline counterparts, and are rapidly taking market share in many categories through better pricing, selection and, increasingly, convenience.

Our etail business accelerated its organic growth over the past year. We have concentrated on giving our customers a worldclass online buying experience using the three main drivers of both etail and offline retail – strong selection, pricing and convenience. We deliver a wide selection of competitively priced new products from our warehouses to our customers’ doors. In future, automated pricing technology, dramatically higher selection (driven by the lack of a costly store network), combined with the convenience of mobile access and efficient delivery, will significantly favour etail. Although etail requires us to hold inventory and operate at low margins, it should produce free cash flows once scaled. We will therefore invest further to achieve this scale as fast as possible.

Marketplaces

This business continues to deliver solid profits across our main markets. They are focused on building a B2C model that is robust and has growth potential. We have seen strong growth across the board, delivering more new products to our customers with increasing quality in the shopping experience. Additional growth-focused investments are also being made in the search business.

Online comparison shopping

Our online comparison shopping businesses performed well in terms of revenue growth. All our major businesses outperformed competitors and the market. The core businesses have shown stable profitability, and we continue to invest in the rapid and growing transition to mobile price comparison.

New areas of opportunities

Travel has primarily been an Indian-focused initiative by the ibibo Group and TravelBoutiqueOnline. The ibibo Group increased market share significantly in the Indian online travel agents (OTA) market, and acquired redBus, the leading bus vertical site. On the business-to-business-to- consumer (B2B2C) side, TravelBoutiqueOnline successfully defended its market-leading position in India.

Payments

Payments is a fast-growing segment of ecommerce. Our payment solutions are available to consumers on our own ecommerce platforms and on third-party operated ecommerce platforms. Over the year we have started to focus on building a trusted global consumer-payments brand to drive increased consumer conversion and uptake from merchants. In line with this approach we have consolidated all our payments businesses under one brand and in one unit – PayU. A new leadership team was appointed. We differentiate our payments solution by offering a broad range of local payment options to our customers and good conversion of interest to sales for our merchants.