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Adevinta ASA
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Hello, and welcome to the Adevinta Q4 results call. [Operator Instructions] I will now hand you over to your host, Rolv Erik Ryssdal, CEO, to begin today's conference.
Thank you very much, operator. Hello, and good morning, everyone. Welcome, and thank you for joining today's presentation of our Q4 results. First of all, I hope that wherever you are located, you and your close ones are healthy and safe.We still have to comply with strict travel and gathering policies, so the management team of Adevinta are connecting from different places. Uvashni, Gianpa, Renaud and Jose are in Barcelona. I would like to introduce Jose Lezcano, who is responsible for Global Markets in the absence of Ovidiu, who is on paternity leave. Antoine is in Paris, and Nicki is in London. We also have the pleasure today to welcome on this call, Andries Oudshoorn, the CEO of OLX Brazil.Although we cannot travel, we continue to run the business in a very close and collaborative manner, and I'm pleased that we're all here today to discuss the last quarter's developments and performance. I will not go through the disclaimer on Page 2, which I invite you to read, and I will start with an overview of the key highlights of the quarter before going into the details of the business review and financials. Furthermore, Andries Oudshoorn, CEO of OLX Brazil, will do a deep dive on the Brazilian opportunity following the acquisition of Grupo ZAP in late October.So then please go to Slide #4 for the highlights. This quarter, we delivered a solid performance despite the increasing restrictions that we saw in our key markets, continued to develop and launch new products with a strong attention to our users and customer needs. We progressed towards the closing of the acquisition of eBay Classifieds and completed the acquisition of Grupo ZAP in Brazil. Further, assets disposals in our Global Markets portfolio will allow for increased focus and reduced complexity. Overall, this was a very encouraging quarter, and we remain confident in the mid- to long-term growth trends, while managing the business through the short-term uncertainty that the COVID-19 crisis implies.Turning then to Slide 5 and starting with the quarterly performance. As I mentioned before, it was a solid performance despite the growing constraints in our key markets, especially with France facing a new lockdown in November through to mid-December. Overall, operational KPIs have continued to improve with traffic increases and records in some markets. In Spain, we saw traffic negatively impacted by jobs, which is highly cyclical. Revenues on a proportionate basis were flat year-on-year in total but with encouraging positive organic growth in France, Brazil, Ireland and Austria. Classifieds revenues were up 4%, while display advertising remains under pressure. Proportionate EBITDA was down 2% year-on-year as we ramped up on resources and marketing investments in line with the level of activity. As expected, EBITDA margins was down quarter-on-quarter due to phasing of investments that it is close to last year's Q4 level at 25.6%.Then turning to Slide #6. We emphasize that customers' needs drive our products and tech investments. Despite the unusual business environment, 2020 was not an exception in that. Among the various transversal initiatives, the acceleration of the transactional rollout is key to offer a frictionless end-to-end digital experience. France is our most advanced market with respect to this, and Antoine will run you through the great progress leboncoin has made last year a bit later in the presentation. Other generalist sites in our portfolio are accelerating as well with encouraging deployments in Italy, Brazil, Austria, U.K. and Spain, for example.As described, to provide more tailored solutions and ads, machine learning applications are becoming even more efficient. Out of the 89 machine learning use cases that were developed in 2020, 70% were in the areas of ad insertion, personalization or moderation. For example, automatic car plate offers [indiscernible] in leboncoin, automatic identification acquires from the picture in [indiscernible] or personalized measures in templates in chat systems in Willhaben.Now I'd like to turn to Slide #7. Coming back to the eCG acquisition, I'm very excited about this coming together of 2 great classifieds companies. We have already achieved significant milestones ahead of the completion of the deal. On the regulatory front, the EGM approved details of the transaction on October 29. Share listing prospectus was filed end of 2020. We received all required foreign direct investment approvals as well as clearance from the German antitrust authorities. Our approval process continues in both the U.K. and Austria. We expect the U.K. regulator to give its phase 1 decision by February 16 and the Austrian phase 1 decision in March. We have also progressed in our integration planning process, starting with our organization and governance. We are mobilizing the integration teams across functions to be ready for legal day 1, for example, regarding IT projects and their prioritization.Now on Slide 8, let's move on to the business review now. Uvashni will come back to the financial performance in more detail later, but I would like to go through the operational development in each of our segments.So then let's turn to Slide #9 in France. In France, we had to face a new lockdown in Q4, started early November until mid-December and a nationwide curfew between 6 p.m. and 6 a.m. is now in place. Nevertheless, the lockdown impact on our business was less significant than in Q2, demonstrating that both individuals and professionals were able to adapt better to this new normal. We continued to see impressive growth in traffic in all categories with record numbers reached in consumer goods, real estate and also professional equipment. When it comes to the used car market, it showed resilience with an increase in car dealers inventories. In real estate, 2020 achieved the third best year ever in numbers of transactions. We also continued to see strong acceleration in transactional services. Antoine will come back to that in a minute. As one would expect, hospitality, travel and jobs were the most impacted by the restrictions.In terms of operations, we implemented a new organization based on business lines and verticals that allows us to fully integrate subsidiaries. We launched some new products, such as price simulator in real estate; and new offerings, such as smart bumps and lead generation in real estate or the Argus and leboncoin bundle in cars.So now I will hand over to Antoine for an update on the transactional model, which is a key pillar of our development strategy. So please, Antoine, go ahead.
Good morning, everybody. I'm very glad to present to you an update on the transaction today. As you know, it's a big stake and a big opportunity for France and for the rest of Adevinta. As you know, that 2020, last year, it was a tough year for everybody, and lockdown were pushing new way of consuming e-commerce [indiscernible] a lot. Users are claiming now a full transactional services payment with shipping as a basic, especially on consumer goods categories like clothes, furniture. For leboncoin, last year has accelerated a lot. As you know, we have started our transition on the transaction path on e-commerce experience 2 years ago. And last year, we have prioritized a lot and strongly our road map to deliver all the features needed to deliver a good, secured and amazing full e-commerce experience. So now we have dedicated teams to work every day to deliver the best user experience and best second half e-commerce journey in France. For example, now we have half of our ads that are eligible for payment and shipping, 20 million of ads.So if I can explain to you the funnel and the example of the features we have developed on this transactional experience. As you can see on this slide, you see the automatic ad insertion funnel. This is an example of our innovation because now you can choose title, upload the picture and all the order criteria will be prefilled based on machine learning. The second step is now you can have multiple delivery services, and you can go up to 30 kilos. And now you have a door-to-door service which is very important when you have a lockdown. The third step is the click and buy. Now with one click, it can be shipped. We will have your card, your credit card, and it's easy to buy and to sell. Of course, you have a delivery tracking system and customer support, which is mandatory when you have e-commerce solution. And then you have ratings and comments, which is a basic, if you want to have a strong experience. So as you can see, now we have a 360 experience on e-commerce.Next slide, please. Regarding the business model, so as you can know, the business model is based on a buyer fee. The buyer fee, you have a 4% fees on each ad with a minimum of EUR 0.99. Delivery costs are paid by the buyer on top. And of course, this business has a lower margin. In terms of user experience, the identity of the profile of our users using this e-commerce solution is 60% for men, 40% for women, mainly because it has a lot on electronics, furniture from home. The age is between 25 years old and 50 years old, so with a power of purchase. We have solid traction on this business. As I said, it's already 50% of our ads with a very good rating, so the user expense is well appreciated. And most of our users, when they are trying and they are testing the service, are coming back and reusing the -- this service.So next slide, please. Next, what's next now, of course, this year, we will continue to accelerate on the peer-to-peer experience on consumer goods to continue to improve the payment, the shipping and globally, the user experience. That will be one of our major stake for this year. But In addition of that, we'll expand on other categories like holiday rentals or motors. On holiday rentals, we have already 70% of our ads eligible to a booking system. Same on the motor, we are accelerating now, and you can buy and you can pay your, when you are private, your car using our transactional experience.So conclude this part, as you can see, the transactional experience is a strong opportunity for France. Now we are accelerating a lot. This is a year of -- this is the year of birthday. We have 15 years old. We continue to get the strong ambition to continue to grow, of course, in our verticals. But transaction is a very successful position, and we'll continue to accelerate on that.Back to you, Rolv Erik, for the next countries.
Thank you very much, Antoine. As you understand, we are very excited about the progress we're seeing in France. This bodes well for the future, both in France and also in other countries.Now let me turn to Slide 13, please. That's about Spain. Now in Spain, of course, the macro environment remained muted at the end of the year, and some further restrictions, especially during the weekends, were imposed once again. We saw mixed KPI performance between markets, with real estate and motors growing, while unsurprisingly, jobs were down year-on-year. According to official sources, the number of job contracts signed in Q4 was down 24%, and the number of transactions decreased mid-single digits in both cars and real estate year-on-year. We continued to be very active on the product development front, with a strong focus on user experience optimization and personalization in real estate, new screening tools and search engine in jobs, price recommenders in cars, for example.Now going to Slide #14. We'll hear more from Brazil very soon. And there, the macroeconomic picture and outlook have been improving, although there is some uncertainty in the short term. Lower car production and higher demand for used cars contributed to lack of stock and reduction in dealers size. Interest rates are at an all-time low, and they will drive demand for home construction and financing. In that context, traffic and liquidity remained high, growing double digits. We are improving our solution with new group products launched, and we're accelerating our expansion with the acquisition of Grupo ZAP. I'm especially happy about the completion of that acquisition and integration. It was closed last October, and we are already integrating the 2 companies. Now Andries will talk much more about Brazil after Uvashni.So then if we go to Slide #15 about the Global Markets. In the Global Markets segment, we see encouraging developments across major markets. In Italy, traffic and contents are growing. We're strengthening our market position in cars. We've successfully launched also the transactional offering there in December. In Austria, traffic and contents grew in the quarter. Buyer protection service was introduced in our paylivery solution. In Austria, display advertising recovered well and reached record levels despite the new restrictions imposed in the country. In Ireland, we saw positive trends in supply and demand. We increased our position in motor dealers and so promising first results of mortgage investments in real estate. In Hungary, delivery service figures' evolution throughout the quarters were positive. The job markets remain challenging. In Shpock, we continued to make progress as the shift towards the full end-to-end transactional model. As expected, we ramped up marketing investments to maintain momentum and scale the model.All right. That's for the operations so far. I will now hand over to Uvashni for the financial section.
Thanks, Rolv Erik, and good morning, everyone. On Slide 17, we go to revenues. Proportionate revenues, including joint ventures, were flat in Q4 compared to Q4 last year or up 1.4%, excluding the impact of disposals, acquisitions and ForEx, demonstrating further sequential improvement of the performance despite the challenging environment and increased restriction in our key markets in Q4.Online classifieds revenues improved 4% in the quarter, while display advertising revenues decreased 6% year-on-year. Changes in scope of the consolidation, which includes the disposal in Global Markets and the Grupo ZAP acquisition, had a 1-point positive impact on revenue growth; whilst changes in exchange rate contributed negatively with 2.4 points. EBITDA, including joint ventures, decreased by 2% year-on-year. As expected, the negative impact of COVID-19 in our main markets, the ramp-up of investment in marketing and talent and the acceleration of transactional services led to a slight year-on-year contraction in EBITDA margin.Now let me run you through the financial performance by segment. On Slide 18, despite a difficult context with COVID-19 second wave and the enforcement of a new lockdown, revenues in France increased by 8% in the fourth quarter, in line with the previous quarter that also grew 8%, excluding Argus. Total classified revenues were up 14% compared to last year, driven by the acceleration of the transactional and the recurring revenues in motors and real estate verticals. Advertising revenues remained down year-on-year due to the current environment and market dynamics. EBITDA margin decreased 70 basis points, impacted by the acceleration of transactional revenue. The promotional campaigns on delivery services and the increase in personnel costs due to hirings in line with recovery and activity levels. These were partially offset by strict cost control measures, such as limited use of third-party services and restrictions on travel and events.Moving on to Slide 19. Revenues in Spain decreased 7% in the quarter compared to Q4 2019 impact by the increased restriction in all regions and is consistent with the performance in Q3. Classified revenues were down 8% compared to Q4 2019, although recovering from the previous quarter. We saw a decrease in transactions in real estate market in Q4 after the uplift we observed in Q3. The jobs market contracted further as a consequence of the macroeconomic downturn and the drop in the number of company and job posting. On the other hand, we continued to see growth in the motors led by high ARPU, thanks to the successful migration of customers to new product offerings. Display advertising was flat year-on-year, as the optimization in programmatic campaigns were offset by lower direct sales due to the uncertainty in the market. The EBITDA margin in Q4 down 4 points compared to last year was driven by the decline in revenues and the reactivation of talent acquisition and marketing campaigns after 2 quarters of hiring freeze and significant cost savings. Typically, Q4 has a lower margin due to seasonally higher spend. Q4, however, saw an exceptionally high margin due to the phasing of marketing investment.On Slide 20, operational revenue in the Brazil segment increased by 48% in local currency, driven by the acquisition of Grupo ZAP effective from October 30. On a comparable basis, OLX Brazil revenue grew 4%, driven by display advertising that was up 20% compared to Q4 2019 as a result of the solid performance in indirect advertising, fueled by new format and traffic growth. Classified revenues were down 1%. The strong growth in real estate and consumer goods was offset by lower conversion in the private segment in motors. In addition, we saw great development in volumes in small and medium businesses in our main verticals. Cumulative EBITDA decreased by EUR 2.7 million when compared to Q4 2019. Both OLX and InfoJobs contributed negatively. OLX Brazil, however, was positively impacted by the acquisition of Grupo ZAP. On a comparable basis, EBITDA margin decreased compared to Q4 2019 as a result of the phasing of marketing expenses and the continued investment in product and tech resources, which exceeded the revenue increase.On Slide 21, the Global Markets portfolio decreased revenue by 6% or minus 1%, excluding disposals, showing strong signs of recovery throughout the quarter led by Ireland and Willhaben. Classified revenues were down 7%, corresponding to a 2% drop, excluding disposals. Revenue in advertising was also down by minus 3%, but up 4%, excluding the disposals. Q4 2020 EBITDA was down 6 percentage -- 6 points year-on-year, landing at negative EUR 1.3 million. This was done by additional year-on-year marketing investment in Shpock as part of the transformation to a full-end transactional mark. Ireland and Willhaben, both significantly increased EBITDA when compared to Q4 2019 as revenues recovered. And investment in personnel and marketing remain conservative on the back of the COVID-19 context. Moving on to other P&L items on Slide 22. We saw headquarter and other costs were down circa EUR 3 million year-on-year to EUR 14 million due to the reduction in strict cost control in administrative costs, as well as some one-off effects in personnel costs. Below EBITDA, other items included EUR 10 million due to acquisition-related costs. We also booked a EUR 43 million impairment charge related to Yapo assets written down in Chile.Now I'd like to conclude this section with our financial position on Slide 23. At the end of the year, we had cash and cash equivalents of EUR 131 million and had drawn down EUR 65 million of the EUR 400 million RCF to partly fund the Grupo ZAP acquisition. Net debt to EBITDA was 2x at the end of the year. The new refinancing that we raised in October will become effective at the closing of the eCG acquisition. Of course, our leverage will increase as a result of the acquisition. But given the high cash generative profile of our business, our target is to get back to 2 to 3x range in the medium term.Now I will hand over to Andries for an update on OLX Brazil.
Thank you very much, Uvashni. Slide 25, please. So to give a quick update on the macro situation, after a 4% downturn in 2020 driven by COVID, there's a recovery expected in 2021, expected get back to pre-COVID levels by the end of Q3. Inflation is under target and expected to remain controllable, though there is some risk of fiscal slippage. Interest rates are at all-time lows with negative real interest rates, which is leading to a boost in construction and home financing which is great for our new real estate acquisition. And COVID is really accelerating the digitalization in all our segments towards a more end-to-end digital experience. The COVID lockdown in Brazil is now largely lifted, and all our business activities can act as normal. There is, however, an impact on car production, which is low, and liquidity is extremely high. So we are facing low car stocks in the market, which is affecting us because our monetization is largely driven by listings and not by sales. There is a new open banking regulation coming into place, which will drive a shift of a lot of financial service activities from traditional banks to fintechs and then marketplaces, which is a big opportunity for us.Going to the next slide, a quick update on our competitive position. In motors, we continued to be the clear leader with the largest consumer audience and also the strongest professional dealer basis.If you go to the next slide, in real estate, we have an even stronger position, looking at the 3 largest real estate sites in Brazil with OLX, Viva Real and ZAP. We have a leading position in audience and also in real estate agents. We're, at the moment, implementing a bundle strategy. So in the near future, you'll see all our 3 sites in a leading position.If you then go to the next page, we're in a very interesting position because we have this leading market position, but monetization is still very underdeveloped. So if you look at the benchmarks within our group and beyond, you can see that we're capturing a very small part of the commission pool in our segments. And we believe that over time, it should be possible to increase this.So that basically shows, on the next slide, this potential to grow the traditional listing model, which has a potential to grow 10x in the long term. And that really is about consolidating our market leadership position, expanding our product offering to that also of the international benchmarks and really transitioning the industry to digital. So the car dealers and real estate agents leverage the Internet more. But beyond that, there are a lot of other opportunities. We see the whole transactional opportunity as something that is developing very quickly. We see that in all our verticals. In goods, we see pay and ship as a very interesting opportunity, which is increasing our take rate of the GMV by 40x. In cars, we're also shifting towards an end-to-end digital experience for purchasing cars where we take care of the entire journey, and the same in real estate.We very conservatively quantified this as BRL 3.5 billion because it's less proven opportunity than the listing model. But in the long term, we'll see our business shifting towards that model. And beyond that, there's also the bigger financial service opportunities. As we get closer to the transaction and process payments for our users, we'll be very well placed to offer them other financial services, mainly credit. And because Brazil has the largest banking spreads in the world after Madagascar, we think there's -- it's a market that's really open for disruption. And now the regulators are a bit implementing regulation to allow more players to compete in this market. So that's the long-term upside for OLX Brazil.Moving to the next slide. Here are just some examples of the developments we did in 2020. Similarly, too, in France, we've basically implemented full e-commerce experience for paying and shipping with purchase points in the chat and on the ad page and with payments, financing, delivery with order tracking and dispute resolution and the guarantee also for the buyer and the seller, giving a much more convenient and safe experience for our users and, like I said, increasing our take rate fortyfold. We also did many improvements in the user experience of the traditional model, allowing people to exchange images in the chat in a safe way and optimizing the ad insertion. And we made a lot of progress with our online financing solution, both for cars and for real estate. We were the first to launch a fully digital real estate financing flow, and we've been working very closely with the banks to optimize the whole flow in cars.Moving to the next slide. And we're very excited about the synergy opportunities with Grupo ZAP. We see a very little overlap in our customer base, so there's a huge cross-selling opportunity. We've already started to do that. So in Q1, we're already capturing some of those cross-selling synergies. And in Q2 and beyond, we'll be launching a full triple bundle with a fully integrated experience for our professionals, which should further help capture this synergy.If you go to the next slide, we've developed now a new branding architecture, where if you look at the bottom, we have our individual consumer brands, which we plan to maintain active in the market with complementary offering for consumers. But if you then look at the next level, we've created business units that are refocused on targeting the professionals in the market. So we've launched a new brand called ZAP+ or [Foreign Language] in Portuguese. That is basically offering a very complete solution in real estate, including those 3 consumer sites and a whole bunch of professional tools and data solutions that basically will be the complete solution in real estate and basically offering everything that a real estate agent or a construction company needs. And then on top of that, we've created a new corporate brand, which is mainly focused on employer branding and really positioning ourselves as the biggest tech company in Brazil and the best place to work.Moving to the next slide. There's a lot of other synergies that we are capturing. So we've seen very strong growth in organic traffic and leads. So we're really shifting away from the dependence on Google for our lead generation, which was a problem in the verticals. And we've already implemented some pricing quick wins. The cross-selling pilot is ongoing, and we're rolling that out during Q1. And the triple bundle is under development, and we'll start the first pilot by the end of Q1. And we've also launched our end-to-end rental solution with guarantee, and we have now got that running with 15 real estate agents in different regions. In tech, we've integrated most of our corporate solutions, and we've got plans in place to integrate all the ERP and CRM and data platforms. And also in facilities and organization, we're well ahead of capturing synergies by consolidating offices, consolidating departments and optimizing our headcount.Moving to the next slide. We expect to see an acceleration in revenue growth. Over the past years, we've had an average growth of 18% on a consolidated basis, and we expect that to accelerate as we capture these synergies. And also, we expect to see a very big improvement in profitability as we also capture the cost synergies that exist in this deal.So now I hand back over to Rolv Erik.
Thank you very much, Andries. As you understand, we're very excited about the opportunity in Brazil, I think, especially now that with the ZAP acquisition is completed and the integration is already started. So we can get more back to Andries also in the Q&A, which we'll open for shortly.Let me just first have some closing remarks on the outlook, which is on then Slide 36. Consequence of the current crisis is that we see an acceleration of the trends that support the development of the digital economy. There's a strong shift to online behavior, and change in assumption patterns are driving expectations for more convenient user digital journeys. And you've seen several examples of that today.Professionals are rethinking their operating models and were in demand for more efficient and digital advertising solutions. In that context, we believe online classified marketplaces will play a more important role going forward. And we remain confident in the resilience of our business and in our sustainable growth profile. There's inherent operational leverage in our geographies and markets, while we continue to invest in product and technology and expand our service offering. There is, of course, some economic uncertainty in the shorter term. We hope the vaccines will be rolled out, but medium to long term, the effects of the crisis is strengthening our business model.Now following the acquisition of eBay Classifieds Group, We will become the world's leading online classifieds pure player with unprecedented scale. We will benefit from leading positions in 17 countries, covering 1 billion people. And as the largest player in the sector, we will be uniquely positioned to accelerate growth. We will leverage our complementary expertise and know-how across geographies and verticals to ensure best-in-class product offering and user experience for our customers. As mentioned previously, we expect the combination of the 2 companies to drive substantial and sustainable revenue and cost synergies with an estimated run rate EBITDA impact of EUR 130 million to EUR 165 million by year 3. At completion of the transaction, we will enter integration phase. This will include a global exploration of market opportunities and definition of long-term strategic plan for the combined businesses. Our combined group's strategic and financial objectives will be communicated in the Capital Markets Day, which we anticipate holding in the second half of this year. In the meantime, we will continue to update you with developments and results, as we have always done.So that concludes our presentation. I will now open the Q&A session. My colleagues from the executive committee and myself, including Andries, are available to answer your questions. So operator, please go ahead.
[Operator Instructions] The first question is coming from the line of William Packer from Exane BNP Paribas.
Will here. Three for me, please. Firstly, could you give us sort of color on the performance of the French property segment during Q4? It's notable that France delivered 8% organic revenue growth, but looking at the inventory tracking, property listings were down double digits. And I suppose there's a bit of caution in the underlying market, so it'd be interesting to see how property performs.Secondly, more widely for the group, could we have some qualitative commentary around the classified price rise cycle that you've recently been through? How are dealers and agents responding to your efforts to improve yield at a time of lockdown and tough economic context?And then finally, thank you for the useful details -- initial details around the pipe -- the progress on the transactional part of the generalist business. We went through it quite quickly. Could you just confirm the percentage of French adverts that offer payments and shipping? Is it right to think of the 4% average take rate as a target? Or is that what you're achieving? And how many consumers are taking those products? So sorry, quite a long question, but just those 3 areas would be helpful to get some more color.
Thank you, Will. I think when it comes to the transactions, we were pretty clear that it's 4% take rate but not in fashion, but otherwise, it's general 4% transaction. It's with a minimum charge of EUR 0.99. Then as you see, this is very popular among our users and is very well received.Now I think that Antoine, I would like you to -- if you want to comment on the France property segment and perhaps also something on the second question of Will about how the -- whether -- how the price development has been for the big professional customers.
Will, so first, on the property market, 2020 has been a [ change ] year, but at the end, the number of transaction is the first best performance ever. The market was minus 4%, minus 10% in comparison with 2019. So globally, it was at the end in terms of number of transactions on this market was good.The Q4, we had the lockdown. So real estate agent that did -- they were not able to work during November. But globally, we made the quarter growing on this market, especially because we have launched new real estate offer, lead generation offer. We have launched the smart bump offer that we have already launched on the car market. So we have continued to work normally with our real estate agent, mainly because we are delivering leads. And we continue to see strong leads, and the growth of the audience is stronger. So we continue to work and to try to deliver the best service we can.And regarding the global approach of the price, we continue to generate value on our market, especially on real estate and cars. So we continue to increase our ARPU, increase our prices linked to strong new services we are bringing to our customers like performance dashboard like a smart bump offer. We are delivering a lot of added value, and at the same time, we are continuing to raise our prices. And we are...
And I think -- thank you, Antoine. I think that the new bundles has also been important with the launch of the Argus. I think, Will, for competitive reasons, we cannot go into details about those developments. I hope we were able to answer your questions on transactions in a good manner. I don't think we answered all the details you wanted about the number of ads for the transaction, but you can see -- or the portion of it. That's also something, due to competitive reasons, that we don't want to disclose. But as you can see on Slide 11, it's a big amount of transactional ads, and they are growing rapidly. So with that...
Just a quick follow-up. If we think about the price rise cycle that we've just been through, how does it compare to a typical price rise cycle? It sounds like you're growing pricing, but is it notably different because of the lockdowns?
Do you want to answer, Rolv Erik?
Yes. I think, Will, that obviously, the price increase during the last year has been somewhat different from what we normally see, and we're -- I think we have been successful in working with our customers in a good manner and develop new products. So it's been a bit different and a bit slower. But I think in the longer term, you'll see that this curve will continue to have a good development.
Rolv Erik, do you want me to give some color on Spain as well?
Yes, please. Yes.
Yes. So, Will, so I think in general, this might be reflective of what happens in most of our markets. But our price increase and ARPU development strongly depends vertical by vertical, by our competitive situation and also the development of the underlying market. So I will use Spain as an example. In Spain, the car market has been impacted, but not significantly. If you see, for example, the development in number of car dealers, et cetera, we didn't observe any significant shutdowns, et cetera. So there, actually, our position from a competitive perspective has been strengthened. And we have been able and we are being able to migrate gradually customers towards a more value creation product packaging that also implies higher ARPU for us but also higher value for them and a larger amount of leads. So that will be something that we're comfortable about.In real estate, in Spain, as you know, the situation is a bit more tense. So our ability to drive ARPU up will be a bit more localized and depending on the context in the different regions. So it might be a bit easier in some parts of Spain and a bit more difficult, for example, in Madrid, where our competitor is historically stronger. And in jobs, it's mostly driven by the macroeconomic situation. I have to say it's a bit difficult for my sales team, despite their huge effort, to increase prices at this stage while actually the hiring activity is at 3/4 of normal levels. So it changes vertical by vertical and sometimes even region by region. But whenever we see the opportunity to do it, well, we are very proactive to deliver more value and also to capture it.
And Will, I think it's fair to say also that what we're seeing is that professionals are acknowledging the importance of online classifieds. So they're rethinking their models, and they really see the value of what we're doing. So if we're able to continue to deliver high-quality leads, that's what we're working on every day, then, of course, there will be a willingness to pay for it.
The next question is coming from the line of Miriam Adisa from Morgan Stanley.
Firstly, just a follow-up to the last question on the transactional model. Perhaps if you could sort of share a target in terms of penetration of that -- those 20 million ads that you would target, or if not, if you could just talk about which categories you think the model lends itself better to. I think you mentioned a few, but any more color that you could give there would be helpful. And then in terms of the revenue model there, just wondering if you're planning to charge the seller anything. Or do you see that as a potential opportunity?Then another question on Brazil. Thanks again for the additional information there. Just wondering with the international benchmarking chart you showed, do you think that there are any structural reasons why Brazil might not reach these levels? If you could give any color on the structure of the market between professional and private and perhaps anything on the level of the professional commissions as well, particularly in real estate.
Thank you. So I think the first question goes to Antoine, the second to Andries. We're not giving targets, but perhaps we can shed some more light on the categories where we see there's potential. Antoine?
Sure, so globally, what I said is that we have 50% of our ads are eligible to our payment and shipping, so it's 20 million of ads. Among this 20 million of ads, the top categories are electronics, furniture, clothes, leisure that are covering most of the volumes of the transaction. So different categories with different average price. So we cannot give you guidelines on each category, but globally, these categories are covering most of the transaction, and they are growing quite fast.Remembering your question about the seller fee, that's not the business model. The business model is really the buyer fee. This is what our competitors are doing. And this is based on the -- it's much more acceptable for a buyer to have this fee than for the seller. What we want to get is to attract more sellers to improve the supply chain and to have more offers to our customers. That's important that the fee has to be on the buyer side for the consumer goods part.
Yes, so answering your question about the margins we can capture in Brazil. I believe that this difference internationally are not really due to structural reasons but really because of the development of the market. So it's the completeness of our offering, which is still much more simple than in some of the more mature markets and also the behavior of our clients, which are still very much offline in their operation. As they become better at leveraging the Internet in their sales process, we also expect them to increase their investment and get more value out of our services. So we think that will increase over time. Obviously, the market is changing extremely quickly, and it's shifting from the listing model to the transactional model. So it's not necessarily the case that Brazil 10 years from now will look like the more mature markets look now.
The next question is coming from the line of Lisa Yang from Goldman Sachs.
I also have 3 questions, please. Firstly, if we look at the performance in France, I mean, classifieds was really strong at plus 14% in Q4. I'm just wondering if you can maybe give us a bit more color in terms of what was the contribution from the transactional in that quarter. And is it possible as well to get a sense of where the sort of transactional margins are today? And where would you expect that to get to when you reach scale? So that's the first question.The second one is I'm wondering if you can elaborate a bit more on the margin guide. So you're saying EBITDA margin to be negatively impacted by basically transactional. Did you actually imply 2021 EBITDA margin will be down year-on-year? And if that's the case, is it fair to assume this will be mainly driven in France because that's why transactional is more advanced but Spain, Global Markets and Brazil can still be up? I think that will be really helpful. And I guess related to that question again, if transactional is all going to be so margin dilutive, that also means it's going to grow significantly. So is it possible to also get a bit of color on the top line contribution? Because I'm sure that at the end of the day, people care about the absolute EBITDA growth as well.And the last question is on the advertising revenue, which I understand was still impacted by the lockdown. But I'm just wondering like structurally, do you see any major potential impact from all the changes in the privacy rules? I think iOS privacy -- yes, well, the privacy settings will change at some point this year, and then you have the Google Chrome cookies being eliminated. So I'm just wondering what proportion of the overall advertising revenue within [indiscernible] classifieds could be potentially affected.
So I think the first question with regarding the margins goes to Uvashni, and then perhaps we can take the advertising a little bit market by market, at least France and Spain.
Yes, sure. In terms of forward-looking, we don't provide specific guidance around where the margins are going. But what we are seeing is as you're ramping up on transactional and you are doing investments before you hit that volume level on your revenue, you are seeing some dilution, and it does come at a lower margin than what you expect in your traditional classifieds.We're also having an issue in terms of the change in mix at the same time. We're seeing at this point in time -- and that's how we said temporarily, you've got a faster-growing mix in France with transactional growing slightly faster than your online classifieds. So you're having that effect at the same time. And of course, there's a mix change in Spain as well where you'll find that your jobs generally contributes much higher margin elements. And at this point in time, with jobs being impacted so drastically, you're finding a mix change there as well. So those are -- there are a couple of things that are contributing to the margin dilution, not just transactional at this stage. And we talked about temporarily, but you have to do some investment heavily in your transactional, and this is still growing and an evolving business. So as that investment comes, it comes at a lower margin as well.
Right. I think in the advertisement and new restrictions, do you want to comment on that in France and Spain, perhaps?
Sure. So we think the advertising environment, of course, we had a lockdown in November, but it was a different lockdown in comparison with the first one. So globally, with adverts, they have continued to advertise in our platform. We did not lose market share on this market during November, but it was, of course, a tough month because of the lockdown. But globally, we didn't lose market share. Globally, the market was tough.And regarding your question about the legal stuff about iOS and globally the ePrivacy [ thing ], at this moment, we're analyzing the consequences for our business. As you know, our strategy is to focus on local and programmatic. So at this stage, we are not so worried about that, but we are still analyzing. And we will see also what Google and Apple will decide during the next months.
Yes. Thanks, Antoine. From Spain, a quick update, there's not like a tremendous differences in market trends, but we've seen the overall digital market flat as a macro trend in Spain. Although our unit CPMs are moving slightly down because there is price pressure. We have compensated our positions due to higher load and optimizing all our offering, in particular in programmatic and also with additionally -- additional inventory sold. So we managed to keep our performance flat year-on-year despite a more challenging market. And what we observed in big advertisers is a significant level of uncertainty due to low visibility on midterm spending approach from big advertisers.In general, I agree with Antoine on how we are looking at ePrivacy and cookie-less world, et cetera. We are analyzing this. For sure, we are paying attention to it despite -- even in Spain, this does not represent a significant part of our total revenues. When you look at the medium, long term, I believe that this could also represent an opportunity for marketplaces in general because in a cookie-less world, we might observe and gaining in importance, again, of contextual advertising. And that kind of advertising works much better in an environment like a marketplace where you can really show ads depending on what the user is searching and what kind of content you are displaying. So something that we observe carefully where we see some potential risk but also some potential opportunities.
Yes. And back to your margin question. We still have a positive outlook for our own margin development. And you know that we published that for Adevinta standalone previously, the target to grow to [ 40% ]. And we're saying this year, we're seeing that due to the mix and the strong growth in investments in transactional, that might be affected somewhat this year. But as you know, we will -- as soon after the eCG transaction is completed, then we will sit down and have an investor day and come out with new revised targets for the new company. And as you know, eCG has had margins that -- at a higher level than ours.
Great. Sorry if I misunderstood, but can I just clarify? So when you say will be affected, you mean margin will be down versus 2020? And then on the transactional, is it possible to get the -- at least the contribution for France in Q4? Like out of the 14%, like how much of that was coming from transactional?
Sorry, Lisa, you broke up there. Could you repeat that, please?
Sorry. Yes. I just want to clarify, maybe I misunderstood. So do you basically expect margin to actually be down year-on-year in 2021 when you say it will be affected? Just want to clarify that. And also, could you also give us the contribution from transactional in France in Q4?
I don't think -- we have not guided that margin will go down, but we've said that there are some -- we're not guiding on margins, but there are some growth factors in especially transactions that will affect the revenue mix, and we'll see how that plays out with the growth. And then we have not guided also specifically and disclosed what is the contribution at this stage also for competitive reasons.
The next question is coming from the line of Marcus Diebel from JPMorgan.
Thanks again for giving the information on transactional services. I think I'm just conceptual to think about it. I mean, it looks like that the additional revenues from transaction services in your consumer-to-consumer business seemed incremental to your current EBITDA. So could you tell us a little bit more about the margin expansion in kind of like the core cars and property business that you see from here? That will be helpful.Rolv Erik, if you could also maybe at least help us a bit conceptually, given what you've seen over the last 12 months and the state of your client base, but on the other hand, also the new products that you're launching. Could you give us a broad indication about how you see kind of like your markets to perform in terms of top line longer term? I mean, previously, you gave guidance for classifieds growing at least close to double digits on an annual basis in the midterm. Is that something that, at least conceptually, you still see very much in place?And then thirdly, maybe on Brazil on Andries. If you could tell us a little bit more about the relationship between you and moving into a transactions in Frontier Car Group. How much do you actually interact with them? Is it really kind of like relatively separate? Or do you still already at this point that you share some technology successes between each other? Yes.
That was 3 questions. There was one still on margin by Uvashni and there was one on the kind of the bigger picture for me. And then there was then with this specific question with Brazil for Andries. Do you want to start with the margins again, Uvashni?
Yes. In terms of longer-term progressions, we don't -- we -- for the Adevinta parameter, we still believe that our medium- to long-term targets around 40% for margins are still on track and double-digit growth from a revenue perspective as well. So we still believe in those elements. What we are saying is in the short term, as you have a differential mix coming and then transactional does come to play, there'll be some investment ahead of some of the volume coming in on revenue. And that acceleration you see in revenue, that is starting to impact on margins to an extent. But long term -- medium to long term, we're still on track in terms of our targets and we have provided previously, both on revenue and on EBITDA.
Yes. On the bigger picture, Marcus, I'm -- we think that this will continue to be a very positive business. And online classified sites, the leading classified sites, are an increasingly important partner for all the professional customers. And that's why we're working so hard with some of the product developments that we've talked through previously and also today. And I mentioned some numbers about machine learning cases that we're using to improve the experience for customers and also for the car dealers and real estate brokers. And they really want a strong partner. They work -- to work closely with us. And I think that if you look at our take rate compared to the total commission pool in all of our countries, it's still relatively small. And I think that after the pandemic, both real estate brokers and car dealers will be even more cost conscious and see where are the leads really coming from. And there, I think we have a very strong case to increase our part of the commission pool over time. So as long as we continue to develop those products, we're very optimistic about what we can achieve in that partnership.I think Brazil...
Yes, I can answer the question on Brazil. So your question was whether we're working with the Frontier Car Group on building offline inspection centers in Brazil. We're not doing that, and Frontier Car Group is not active in Brazil. The way we're looking at it now is that we are building a full end-to-end digital process for cars, but we do it in a scalable way. We sell more than 5 cars per minute in Brazil. And obviously, building our own inspection centers is not something we can do at that scale in the short term. So basically, what we're doing now is working with partners, developing a full digital flow with car history reports, ownership verification, inspection centers, safe transaction places, car financing, escrow guarantee, all these kind of services, so we have all the components of digital flow, which we can sell at scale, and that way, we already offer a much better experience. And only after that will we evaluate whether we really want to take ownership of the cars like FCG does.
Sure. Then just on the market technology, I guess, perfect. I think just one for Uvashni. So just to really get it right on the margins because there seems to be some debate. So you're basically saying that the core business, the margin is still likely to go up in the cars and property business, and it's only that you have incremental revenues in the C2C business, which is obviously due to the mix effect as margin dilutive, if that's the way to read your comments.
Yes, that's correct.
The next question is coming from the line of Adam Berlin from UBS.
Just 3 quick questions from me, 2 on France, first of all. Could you just explain in the property vertical in France what the revenue model is? Are you charging per listing and then additional for extra products? Is there a subscription model? And if you could just provide some clarity on the revenue model for French property, that would be really helpful.Second question on France is, in the last few years, if you adjust for Argus, it looks like you've been spending about EUR 30 million more every year in OpEx. Is that a trend we should expect to continue or accelerate in the next couple of years as you go harder on transactions?And then my third question is about Brazil. In the very helpful presentation going into Brazil, there was commentary that revenue growth could accelerate and margins could expand substantially. Is that a commentary about 2021 in particular at all? Or is it more medium term?
I'll leave that to Andries to answer it shortly. But first, you want to talk a little bit about France, Antoine, and how the revenue model works with -- in the real estate sector? [ Start to last ].
Sure. So we are monetizing this market on 2 ways. One is the private part. The private part where it's for free. You can put your app in for free. But we are a premium model, so it means that our private people, they can bump their ads, they can buy some extra pictures. So we are monetizing the private content like that. The second part is the professional part. This is the majority of our revenue. So this is a subscription model, and we have 2 ways of spending your money on leboncoin. First, you can put your ads manually, so you are paying one by one; or you can buy a monthly subscription fee. This is a 12-year contract, and we are pushing automatically your ads on leboncoin. So this is the first thing you can do, so pushing your ads on leboncoin and [ getting ] more leads.And then, of course, we have visibility options on top that you can buy. You can bump your ads. You can have some premium offers like the smart bump offer, while we are automatically bumping your ads. So this kind of offer, it's more expensive if you are buying it. And the last offer we have launched is a lead generation offer, so it's bringing leads to real estate agents. As you know, this is something very important for real estate agent to find new goods to sell. But we are proposing to private sellers to push, to put their goods to the real estate agent. And the real estate agent is buying leads and paying for that, okay?
And I think the second question...
Yes. On Brazil, I think this is longer-term trends growth acceleration and EBITDA acceleration. I think that we're very confident about in the midterm. We cannot give specific guidance on 2021, but we've already begun the implementation of our cross-selling strategy and capturing cost synergies already in Q1 of this year.
Was that an answer to your questions?
Just a question on France OpEx.
I mean, Uvashni, do you want to talk about OpEx in general, how that's related to the margin that you already commented on?
Yes. No. Specifically with France OpEx, I didn't get -- quite get that question. Sorry.
I just was saying that in the last few years, you've been spending about EUR 30 million a year more on OpEx. I'm just wondering, is that going to accelerate as you invest in the new transaction model or kind of stay at a similar rate?
Yes. No. I mean, there was an acceleration, of course, in France when you came to some of the OpEx. That transactional and new product offerings and activity. And as we start to increase the value chain, you started to see an increase in operating costs. Of course, as your revenue starts to come up because a lot of that cost now becomes a fixed element, there are some variable elements as you increase your transactional footprint, and that becomes larger from a back-office element of things. But you won't probably see it at the same accelerated pace because quite a bit of your investment is in there already. So we don't anticipate any further acceleration, but you do have some variability as you increase your footprint around transactional.
The next question is coming from the line of Sarah Simon from Berenberg.
I've also got 3 questions. First one is on advertising revenue. Can you give us a split, a, between programmatic and direct sales; and b, between what's in the horizontal business and what's in the verticals?Second one was on the jobs business. Obviously, it's been, if you like, a bit better than expected in 2020 because of the subscription nature of the contracts. Can you talk a bit about how the renewal has gone there for 2021 in terms of people scaling down to smaller packages or pricing sensitivity or whatever?And then the third one was back on this transactional revenue margin dilution. I understand that you have to invest to develop those solutions. But once the revenues are coming in, you obviously don't have to spend any extra money on driving traffic or anything, and it's a net commission model. So why is it dilutive to the margin? You'd thought it should have a pretty high incremental margin.
I think the first 2 questions, I think if you start to then, Gianpa, to talk about the jobs business and the advertising revenues in Spain. Perhaps, Antoine, if you want to comment also on advertising revenues. And then I think there was a third question on transactional and margin to you, Uvashni. Gianpa, do you hear me?
Yes, yes. So thanks for the questions. In general, starting with the question on advertising, I think that advertising represents a range of between 10% and 15% of total revenues for Adevinta Spain. And this can be equally split between advertising that we sell to our core classified customers. And this usually comes through a kind of direct sales model, where we actually also, most of the time, bundle this advertising offering in our packages for other solution for our car dealers or for our real estate agents. And then the other part is to noncore classified customers, so big agencies or big car manufacturers, banks and insurances. And this can either come through direct sales by direct contact with our customers or through programmatic solutions. And sometimes, there's also like a mix of the 2 because sometimes our biggest customers have a direct relationship with us, but then they ask us to operate through programmatic platforms.When it comes to the second question about jobs, we have said in the past that jobs is our, in Spain, our most profitable asset and also the most cyclical one as it is normal for the nature of the marketplace. During Q4, the renewal rate has been better than my expectations and improving quarter-after-quarter. And more than -- we have managed to renegotiate and reapprove more than 80% of our existing contracts. So that is a solid development in the difficult situation we are in. It's also true to be honest that these renewals have also, in most of the cases, happened with a slight reduction in terms of volumes. So we are renewing the contracts with our customers, but they're asking a bit less slots because their hiring needs are lower. So in general, the value of our average renewals in Q4 was 10% lower than our average renewal in Q4 2019.
Right. Do you want to comment, Antoine, on the ad revenues in France display ads?
Yes. So as I said before, the advertising market last year was tough, was negative because of the different lockdowns. But globally, France has kept its market share. The advertising revenues are representing more or less 15% of our revenue. And the programmatic is doing -- part of this part is doing [ 50% ] of its revenue. As I said, our strategy on this market is we believe in this market. We are investing in this market. We are focusing on local advertisement. We are focusing on data. We are developing some machine learning solution for our customers. So this is a market where we are -- we believe that the opportunities because we have strong position in our classified market, and this is completely complementary with our core business.
Thank you. And then I think with the question on the transactional, again to you, Uvashni.
Yes. So effectively, if you look at the model that we have for the transactional, it's not on a net commission model. We do incur the cost of delivery and some of the costs that we have to pay to employment providers, et cetera. So you find that you will have a continued impact in margin on that business. However, you are right in terms of the investment to develop the product upfront, that will somewhat reduce as you have the product in place other than some maintenance. There are elements of, of course, customer support, et cetera, you have to actually also increase and back up or support as you increase the number of transactions and the volume [indiscernible]. So some variability with [indiscernible] in terms of costs there. So just the net commission model is not in play. We do have costs that are ascribed to the transactional model.
Great. Can I just ask one clarification? On the France advertising, is more of the advertising in the horizontal business or in the verticals?
We are working on all of them. Of course, the car market or the real estate market, they are doing -- a strong part of our audience are making a lot of money. But globally, we are in all the different categories on leboncoin. So we have a horizontal approach, but vertical by vertical, we have specific also product.
And do you have any sense for -- in terms of overall spending, how it would fall between the horizontal business and the verticals?
No, we are not disclosing this type of information.
We currently have one question remaining in the queue. [Operator Instructions] The next question is coming from the line of Andrew Ross from Barclays.
Great. I've got 3 as well. The first one is just back on the eBay transaction and the regulatory studies that are still going on in the U.K. and Austria. What happens if one or both of them extend their studies into a phase 2? How might that impact the timing of closure, would be helpful just to get a bit more color around that.The second question is back on the transactional model as you shift to that and C2C. Can you talk a bit about liquidity and conversion? Like are you getting new sellers and new buyers because of a better user experience? And is the percentage of listings that actually convert to a transaction going up? And as an extension to that, would you consider doing it with small businesses or sellers and building out a B2C product?And then the third question is on Brazil for Andries. Can you talk about the pricing strategy in real estate as you migrate to the bundled offer? And I guess I'm thinking agents who were taking both OLX and ZAP. Are they still paying the same as they were previously? And agents who were just taking one, are you now managing to persuade them to pay essentially double because they're now taking the bundled products?
So the first question was to me regarding timing of transaction. Then the second, I believe, was for Antoine about with kind of a little bit more about transaction. And the third one is for Andries.And then -- so what you said, Andrew, is that Q1 closing remains our target, and we're planning for that. Then, of course, it's subject to those 2 outstanding approvals. So the CMA will give its phase 1 decision on February 16. That's next week on Tuesday. In Austria, We hope to obtain the phase 1 decision around mid-March. So it's still our goal to close within the Q1, as we said all the time, is the target. We still have to wait to hear what the regulatory approval would say, if they want to take it, if they should decide that they need more time. But we are confident that we'll be able to close in Q1. And also, I think importantly is that we remain confident of obtaining necessary approvals in due course without material impact on the transactions.So I think second question goes to Antoine, a bit more color on the -- what's happening with the transactional model and the liquidity and whether you're attracting new advertisers.
Yes. So transaction for leboncoin is a very big opportunity. And understood what is a big opportunity, now it's a C2C solution. And what we noticed is that it's an accelerator of our liquidity. So as [ this service ] is very efficient. It's accelerating the use of our sellers and buyers. So when you're starting to use this solution, you are coming back and you are repurchasing. So that's a strong trend that we have noticed. And the record we are beating in our -- the record we are beating in terms of new ads, partly, is coming from the [indiscernible] which is accelerating what we are calling our virtuous cycle. And as I remember, now we have 50% of our product eligible to the transaction, and we will continue to open new categories during the next month to expand this transaction model in other categories. And I think -- sorry, regarding your question on the [ professional ] part, it is not open due to the [ professional ].
Okay. So over to you, Andries.
Yes, yes. So on the pricing strategy for the bundle in Brazil, there's a very small number of customers that already have the 3 sites, and they will pretty much continue to pay the same price but get a better experience because of a more integrated product. While the customers that are currently only buying 1 of the sites, especially if it's one of the lower priced ones, we'll see a big increase in price. And of course, we'll do that in a phased way, giving them a temporary offer so they can reexperience the increase in lead generation before we implement the common price for the triple bundle that is close to the sum of the 3 sites together.
There are no further questions. So I will hand you back to your host, Rolv Erik Ryssdal, to conclude today's conference. Thank you.
Thank you very much, operator, and thank you for listening in and for asking your questions. We said in the beginning, I think this was a good quarter for Adevinta, and we finished a difficult year in a good manner. And we see many interesting growth opportunities for our company going forward. Hopefully, we'd been able to illustrate that for you today. And we will remain at your disposal for further questions and comments, so please reach out to us. And thank you for listening, and have a great day.
Thank you for joining today's call. You may now disconnect.