Cdon AB

STO:CDON

Earnings Call Transcript 2021-Q2

[Operator]

Hello, and welcome to the CDON Q2 Report 2021. [Operator Instructions] Today, I'm pleased to present Josephine Salenstedt. Chairman of the Board. Please begin the meeting.

[Josephine Eva Salenstedt, Chairman of the Board]

Next Slide, please. Thank you, and good afternoon to everyone. Thank you for joining the call today. I'm Josephine Salenstedt, Chairperson of the Board. As our current CEO, Kristoffer Väliharju, will hand over the leadership of CDON in a couple of days, we agreed I will present today. I'm 37 years old, I'm partner and shareholder of Rite Ventures, which owns about 26% of CDON. I've been working with active ownership, entrepreneurship, and technology growth companies for more than 15 years.With me on the call, I have Niclas Szieger, who's the CFO of CDON, and one of the persons to thank for the CDON we have today. I'm very happy to be able to present next to him today. I became the Chair of CDON at the end of Q1 this year. Our CEO had to go on unexpected sick leave following a heart surgery, and our chair to time, Marcus Lindqvist stepped in as Interim CEO. While Kristoffer eventually came back as CEO, May 1, he resigned just a couple of days after that. It has been a turbulent time without a long-term executive leader in place. So what did we do? During these 4 months, the Board and I, together with management spent our day shifting from long-term perspectives and very hands-on operational details. What can we fix here now? What needs do we need to put in place to win in Q3? How can we rapidly increase the quality of our UX? What do we need to do today for us to be able to close and handle the acquisitions we want to make? What to do in terms of hires team culture and financing. We don't have time for all of it today. However, jumping into next slide, I'll give you the high-level story that I tell different stakeholders of CDON every day. That story starts with the market opportunity, what we want to accomplish and some of the headlines on how to get there, how we think about the team and the leadership of CDON. Assuming on Q2, our short-term battles and the short-term wins. Traffic acquisition has, as most of you know, being an issue. Well, that is still a problem. Now we actually feel some momentum. So I'll touch upon what we do to accelerate that as well.On the next slide, let's start with the basic question, why CDON? As a Swedish citizen, I know CDON since many years. When I grew up, the Internet came, e-mail came, CDs came, then CDON came and sold CDs on the Internet. CDON did this very well and started to sell other stuff from CDON: books, PC games, that kind of stuff. Most of the Swedish people know CDON for this reason because CDON was a great business. But the music and book industry evolved and CDON would have to develop as well. A couple of times, CDON tried to transform to our marketplace. And about 2 years ago, a successful transformation started. Today, CDON is a leading marketplace of the Nordics. Over 1,800 merchants sell more than 10 million products on our platform, and there are 2 million customers that comes to CDON on to do their online shopping. But in the first place, why did the former e-commerce star decided to transform to a marketplace when the Nordic population hadn't obviously shown any interest in that type of platform so far.If we move ahead to the next slide, we see that more than 50% of global e-commerce goes via marketplaces and the marketplace e-commerce grows fast. The latest number I heard was expected CAGR of 17% up until 2027. Example of strong European local marketplaces are Allegro in Poland, Bol.com in Netherlands, and Cdiscount in France. These companies typically have substantial share of the e-commerce sales in their markets. Allegro, I think, is over 50% market share and Bol.com around 20%.Moving into the next slide. You can see that in many markets, the local marketplaces exist and grow alongside Amazon. The local marketplace typically have a quite clear offering in position toward merchants compared to Amazon. Merchants, depending on their needs and dynamics chooses either one of them or both. This slide also highlights that while many countries are well above 30% in marketplace penetration, in the Nordics, we are well below 10%. In 3 out of 4 countries, even at 5% or below. Some argue that the Nordics has some special characteristics that makes the marketplace business model less attractive here. We at CDON haven't found founders in any convincing arguments for this. We believe that the main reason for the current low marketplace penetration here is the lack of a platform good enough going for the opportunity. To us, this is supported by Amazon recently entering the Nordics and the increased interest of merchants for the marketplace model as CDON that we have seen since Amazon entered. The underlying macro trend is very strong. And there are only a limited number of platforms in the Nordics that could potentially go for that opportunity and CDON is one of those.Moving on into the next slide. We note that the Nordic economy in itself is attractive. The population is about the same size as Russia, Australia, or Canada. The GDP per capita is about twice the European average. And the capital cities, Stockholm, Copenhagen, Oslo, and Helsinki are among the fastest-growing capitals in Europe.Jumping into the next slide, we can elaborate on the size of the CDON opportunity. We are gassing at Netherlands, which is quite similar to the Nordics in terms of size of population, GDP per capita, and culturally. Their local marketplace Bol.com, have a 20% market share of Dutch non-food e-commerce in 2020. Would CDON has the same market share in the Nordics as Bol.com have in the Netherlands? We are looking at the 55 million stake opportunity.On the next slide, we have been down 4 strategic pillars to build our execution priorities around. First, CDON aims to become the starting point of shopping in the Nordics. Right now, many customers in the Nordics know CDON brand, but we are not yet their go-to-market place for the shopping. However, our aim is to become a destination. Second, CDON is designed to become a powerful sales engine for merchants, both local and international merchants. That means providing the distribution platform, applications, and services to substantially increase the merchant's revenue. The power of the platform will be stronger for every new merchant and every new customer joining. And our service layer would be developed to help the merchants leverage that to drive their sales.Third, we shall do this by focusing very hard on our core categories. We will tailor our offering in terms of customer experience, merchants, fulfillment solutions around our core categories. This means that we will work very hard for certain merchants, making sure we do everything we need to get them, could be UX fulfillment in terms. And the same goes for customers. The experience for our end customers will be designed for us to win specifically in the core categories.Fourth, we are going to create a strong local brand. This goes back to becoming a destination. Customer experience and growth will be integral part of all these work streams. And we expect our growth story to include both organic growth and acquisitions.On the next slide, I'll elaborate on the first key pillar. Shopping online in the Nordics can still today in July 2021, be both time-consuming and frustrating. If you don't know for sure what you want and where you can find it, your shopping experiences tend to start with a Google search, the opening of several new windows to check out different websites, and going back and forth between different pages comparing, checking specification, reading product reviews. At CDON, we aim to eliminate all of this, creating a frictionless shopping experience. Shopping research and selection tools will be the core of our offering. At CDON, customers should be able to find the best assortment, the lowest prices, the best tools to make the shopping decision, be it reviews, product specifications, sustainability implications of our purchase, delivery options or whatever else. They should know that deliveries and returns are simple, convenient, and reliable. They should trust that the potential contact with customer service through CDON will be a pleasant experience. This needs to be true in all scenarios for the customers, independently of whether the selling merchant at CDON is the local retailer down the street, an American indebted brand, or a French home electronics mega store.Next slide, please. Next, please. Now moving to Q2 and our business performance and execution priorities. While we managed to regain some momentum by the end of the quarter, we started off weak with negative marketplace GMV growth in April. We were negatively impacted by a steep decline in traffic and in all traffic channels, but with most effect in SEO and SCM. Obviously, mitigating the negative trend in sales was a top priority, and we took actions in several streams. I'm incredibly proud of what the team of CDON did in Q2. In May, we started to see some results of our actions, and we were able to close May at a positive marketplace GMV growth. And June was even better than May. We ended the quarter with June Marketplace double-digit growth. And so far, July has started better than June with GMV marketplace growth of around 20%. We also made a lot of changes in the teams and the way we work. We made additions to our team at all levels and revisited division of responsibility. The goal has been to increase execution pace and speed up time to market of various projects primarily connected to growth and customer experience. And we have seen an immediate effect from the changes.During the quarter, Kristoffer Väliharju decided to leave CDON as the CEO. I want to thank Kristoffer for his work at CDON. He has very successfully led the company from being a legacy e-commerce retailer to a leading marketplace. That's very hard, and I'm tremendously impressed by that. We are deep into the recruitment process for our long-term CEO. It is our thought process, and we want to make sure we find the right person. So this takes time. And while this is being done, the team is executing at a high pace on a daily basis. So we need leadership there every day. That's why in the Board, we decided to sign an Interim CEO, and I'm very happy to welcome Allan Junge-Jensen to CDON as Interim CEO, starting from July 26. As you see on the next slide, Allan has extensive experience from fast-growing e-commerce and technology companies. We think he has the skill set and drive that we need now, and we're prepared for having Allan to be able to hit the ground running in a couple of days. And so I'm very excited for Allan joining.Now back to assessing our performance and growth. On the next slide, you can see our year-on-year marketplace growth compared to the estimation of our underlying e-commerce market growth since the IPO last year. As you see in 2020, the underlying market growth was massive, and we at CDON grew fast as well. In Q1 this year, though, even though we had a growth rate of 25%, the market grew faster, and we lost market share. While we came in just below the estimates for market growth, we believe that by the second half of Q2, we were in line with or even slightly above market growth. July so far looks better, however, early in the month and the estimates for the market are not updated yet by first note. As for the short and long-term, being early stage in our journey, we expect bumpiness in our way also in the future. This means that some quarters, we will grow little and some quarters we will grow more. Over a longer cycle, though, we aim to take market share at a high pace.Next slide, please. During Q2, we launched CDON Ads. CDON gives the merchants the ability to build on certain product keywords on the platform. Over time, this will add positively to our gross margin. More mature marketplaces typically have a more diversified revenue base than CDON. For CDON, major part of the marketplace gross profit comes from merchant commissions. Commissions today represent over 90% of GMV and the lying part of the rest is income related to payments. We expect to add new income streams as we grow. A year ago, we added merchant subscription fees and now we launched CDON Ads.Zooming in on the operations of Q2, we see on the next slide that Q2 was a lot about optimizing our engine. Late Q1, early Q2, we were concerned. We didn't seem to get the leverage from our stable inflow of our merchants and products. The platform shift in 2020 still took a lot of bandwidth, development of our customer experience on site was slow. So what did we do? Well, we put a lot of effort into analyzing and digging into what was the reason behind the lost momentum. We searched for straightforward explanations for something that has suddenly changed. But we could not identify 1 single event that would explain the full situation. Our view today is that we suffered from a perfect storm. The platform shift and the IPO process during the fall had taken focus from developing part of the infrastructure fast enough. The underlying comparable numbers from last year were also tougher than before due to the pandemic starting end of Q1 last year. We digged into the underlying issues and how to fix them in terms of Traffic acquisition, struggles in SEO, SEM, on-site conversion, and several parts of our customer experience. Doing that, we found ourselves repeatedly coming down to the same team of product data and the structure of it. Up until now, we had been growing so fast, we hadn't had time to develop and structure the data appropriately. As a result, we now suffered from slower processes in many areas. While we, to some extent, had the same problem with the previous platform, with the strong growth that we have had during 2020, we hadn't needed to really get our arms around the problem before. Now with slower underlying growth and exponentially increasing amount of data, structuring product data has become critical. It is a top priority to address this, and we expect incremental improvements during the fall. In order to mitigate the negative effects until we have turned around the trend in traffic acquisition, we started end of March to rework other parts of the engine, focusing on the part not directly related to traffic acquisition and product data. For example, we have developed our process for securing attractive products from merchants, and we have changed the way we prioritize and drive onboarding of new merchants. We are updating our routines and agreements regarding commission structure with merchants to enable more sophisticated and efficient merchant commission structures, and this will increase our ability to acquire traffic efficiently and will help merchants to drive your sales on our platform. We see results from this work in the increased average order values in the quarter and an increased conversion rates in June.I mentioned before our ambitions related to providing the best selection tools for customers. Obviously, in order to deliver on that, good product data is really important. So that's why I'm particularly excited about our investment in Shopit communicated last week. As you see on the next slide, Shopit is a technology company specialized in big product data. Shopit engine automatically improves and enhances product data by adding attributes to the products that CDON has. It will, in essence, help us to do product comparison on many other attributes and price. This is a key component in our strategy, and we estimate that it will save us more than a year of development time and also to enable us to focus our tech resources on the next service layer of this. We also expect Shopit technology will provide solution to part of the product data structure program that I mentioned before.CDON has entered into a commercial agreement with Shopit and at the same time, acquired a 30% share of the company. In addition, we have an option to acquire the remaining part of the company within 18 months.Let's go to the next slide, summing in on our team. One surroundings are unpredictable and unsecured, especially on CEO level, it is common that development of the rest of the organization is left behind. For CDON, we believe it is important to develop fast all the time. So it has been a priority for me and the Board to make sure that we continue to develop the CDON team. In Q2, we executed on a number of changes in our team and in the way we work. I am incredibly proud of the team we have in place now. The key people have that kind of commercial understanding and leadership we look for, great customer vision, and they have a great ability to drive execution at a high pace.In terms of Q2 changes, Eldar Terzic will rejoin CDON as Chief Product and Technology Officer with main responsibility to create a great customer experience. Linda Andersson and David Olhed have both been critical to the transformation from a retailer to marketplace. And the last couple of months, they have been key to CDON in regaining the momentum in the business. Now Linda has taken on the challenge to make sure that we would reach category leadership in our core categories. And they will lead our work in developing our merchant offering and drive the performance of our merchants on our platform. We have also strengthened the team and our capabilities in several areas outside the management team, for example, within AI take customer acquisition. The management team has been strengthened with top talent and competence within concept development and brand building.With this team and Allan in place as our Interim CEO, I believe we have a strong lineup going into Q3. With that, I'll hand over to Niclas, who will walk you through the Q2 financials more in detail.

[Niclas Szieger, Chief Financial Officer]

Thank you very much, Josephine. As previously mentioned, we've had a mixed quarter. It started out extremely tough with sales decreasing versus last year in April for CDON on Marketplace before we saw improvements in May and even more in June. The improvements we saw during May and June was partly a result of new processes and a more data-driven approach together with merchants to secure availability on attractive SKUs. In total, we saw Marketplace growth of 4%, but as I said before, a positive momentum towards the end and going into July.Our momentum of adding new merchant continues and is now at 1,868, an increase with 355 new merchants in 2021. Our Retail business continues to be phased out and declined with 48% in the quarter and is now 15% of total CDON volume.Moving to next slide, please. Looking at the income statement, we can see that the growth of the GMV of 4% for Marketplace resulted in net sales of SEK 41 million, a decrease of 15% and a gross profit that also decreased with 15% to SEK 39 million. The reason for the lower gross profit is related to a negative product mix and that we, during April and May also gave selected commission discounts to merchants to push sales. During June, we did not give any discounts and we saw commission increase with approximately 1 percentage points versus May. And at the same time, we also, as mentioned, saw a higher year-on-year GMV growth in June.In total, Marketplace gross margin decreased with almost 2 percentage points in the quarter versus last year. Our other segment, CDON Retail continues according to strategy to be phased out as the majority of the volume is related to traditional media categories, which is a declining market. As a result of the change in sales between Marketplace and Retail, total net sales declined with 40%, whilst the gross profit declined with 22%. Gross margin continues to increase as a result of the business shifting towards Marketplace. This resulted in a gross margin that increased with 8.8 percentage points in the quarter and amounted to 38.4%. Our EBITDA amounted to minus SEK 18.7 million. This decline versus last year is mainly driven by lower gross profit, higher acquisition costs and increased operating expenses.Moving to next slide, please. Looking at some of our KPIs and the drivers of the business. Starting with Traffic, we did see a decline of 37%. The decline is seen in all channels, but with the largest drop in SEM and SEO. In total, approximately 80% of total GMV decline versus last year came from SEO and SEM. As a result of the decline in traffic, number of orders also declined with 26%. However, thanks to strong execution within other parts of our engine, we managed to deliver good growth within selected categories, which increased our average order value with 22%. Our customer base is 10% higher compared to the same period last year, and that is the customer that has purchased that CDON within the last 12 months. Also, as I mentioned before, the momentum of adding new merchant continues, and we have 50% more merchants compared to Q2 last year.Moving on to next slide, please. Looking at the balance sheet and the cash flow. As the CDON Retail is being phased out, we continue to decrease our inventory accordingly. In total, inventory amounted to SEK 16 million, which is 62% lower than last year. Cash flow from operations during the quarter amounted to minus SEK 16 million compared to SEK 30 million last year. The difference versus last year is mainly related to lower EBITDA and inventory that during last year had a positive cash flow effect of SEK 15 million compared to SEK 5 million in 2021. In the quarter, we invested SEK 5.5 million in CapEx, which is the same level as last year, which resulted in a total cash flow of minus SEK 21.4 million and a cash balance of SEK 42 million. With that, I hand back over to you, Josephine.

[Josephine Eva Salenstedt, Chairman of the Board]

Thank you, Niclas. So what should we take away from today? One, the opportunity is big. CDON is one of the few platforms that realistically could go for that opportunity. And I believe we are off to a good start with more than 1,800 merchants selling on the platform and over 2 million customers. On top of this, we have only scratched on the surface of the potential of adding services and other offerings.Two, from this one, we believe it is and will be an execution race. Now we also have the team in place to do what we want to do. Of course, we are in the middle of the recruitment process for the long-term CEO, and we will let you know as soon as we can. Until then, we have the best Interim CEO candidate I can think of starting in just a couple of days.Three, traffic acquisition and customer experience are in focus. We are targeting product data quality and structure as a root cause that will help us get a long way in several dimensions related to this. We expect incremental improvements during H2, and Shopit will be part of that solution. Four, finally, moving forward, shareholders and customers should expect execution at a high pace. Okay. This was all I had for now. Thank you, and let's open up for questions.

[Operator]

[Operator Instructions] Our first question comes from David Leaf from Visit Investors.

[Unknown Analyst]

Maybe talk a little bit about -- because you guys are able to add merchants at a still fairly rapid rate, right, in Q2 despite the transition you guys are going through? I'm just kind of curious what drove that merchant ads growth? And because the transition guys are going through, why are they in a hurry to sign up at this moment as opposed to once the business recover? I'm curious what are the drivers behind it? And I have another follow-up.

[Josephine Eva Salenstedt, Chairman of the Board]

Okay. Thank you, David. Great question. Well, the onboarding of new merchants that process works really well. We have had a nice inflow of merchants for quite a few quarters now. We see that the demand for what we are doing, what CDON is doing and what Marketplaces generally are doing is high among merchants. And we actually -- when Amazon entered, we saw -- entered the Nordic market, we saw an increased interest from merchants to join the platform. So even though we are in a transition, I think from the merchant point of view, we are a highly relevant and important channel for them to drive their sales on.

[Unknown Analyst]

Okay. Maybe you talk about market share versus Aamzon as part of looking at traffic growth for the last quarter or last few months, obviously, Amazon has been pretty aggressive in gaining market share. Maybe just talk a little bit about how concerning is that for you guys going forward as you're going to come back and grow the business, right, return to growth? Are you -- do you have to take market share from Amazon? Or how should I think about that market share during the last few years -- or last few months in terms of share loss?

[Josephine Eva Salenstedt, Chairman of the Board]

Yes, sure. Well, Amazon is a great company. I have tremendously respect for Amazon. So -- and expect Amazon to take market share in the Nordics in general. So sure, yes, we see competition from Amazon, but we see competition from many players in the market right now. And as CDON is aiming for taking a substantial part of Nordic e-commerce. Amazon will be one on the competitors, right? But at the same time, as I said on your previous question, we also see that Amazon sort of paved a way for us, putting marketplace distribution higher on the agenda for merchants. And what we think is important is that we have a very clear offering towards merchants compared to Amazon. And here, the obvious one of the obvious unique selling points that we have is that we are local and that we know that the market really, really well and that we speak to local language, but also that we are -- we try to be super easy to work with for the merchants and be very, very much and friendly. We are also -- yes. Sorry.

[Unknown Analyst]

Go ahead.

[Josephine Eva Salenstedt, Chairman of the Board]

Yes. And then most of you in the call, you know the marketplace landscape really well. I know that, but I think it is worth mentioning that in many countries, you see that local marketplaces grow and try alongside Amazon. So what is really important here is that you actually have a clear positioning compared to Amazon.

[Unknown Analyst]

And last question, I'll jump back into the queue. Just Allan, whom actually you must have probably known him from Boozt, given their terrific job they've done. Is that position -- is the Interim CEO with a possibility of a permanent position? Or is he just here for a temporary time being before you find a new CEO for the longer term?

[Josephine Eva Salenstedt, Chairman of the Board]

Yes. I completely understand the question if I were in a new position, I would also do the same. Unfortunately, I can't really comment on it. We are running a really thorough process. And we want to make sure we find the right candidates. But -- and I think Allan is a great option for Interim position, but I can't really comment on what are the candidates for the long-term position from a new [indiscernible]

[Unknown Analyst]

No. I mean like, is there a possibility that he will become -- he is interim right now, that he will become a full-time 6 months from now? Or he's only here for the interim position before you guys find someone permanent?

[Josephine Eva Salenstedt, Chairman of the Board]

Yes, sure. So now we have a temporary contract with him. But would the Board decide that he would also be the long-term CEO, that would be something that we would have to communicate in the right order with a press release and so forth. So...

[Operator]

Our next question comes from Adam Wyden from ADW Capital.

[Adam David Wyden]

Guys, can you hear me all right.

[Josephine Eva Salenstedt, Chairman of the Board]

Yes, sure.

[Adam David Wyden]

Congratulations on the nice progress...

[Josephine Eva Salenstedt, Chairman of the Board]

Sorry, Adam, I lost you there. Could you repeat please?

[Adam David Wyden]

Yes. It sounds like you guys have made nice progress with the Shopit acquisition and being Allan in and getting Eldar back on board and kind of going through the notes that it looks like the peer group, why? So clearly, you're seeing continued positive trends. And then obviously, it was nice to meet everybody in Sweden and having said we join. Can you -- maybe this is helpful for you to explain to the rest of the audience and myself, my understanding coming back from Sweden is, that the long-term vision for CDON is to drill the destination, like what can Amazon or Shopit or something else. But historically your growth has come from paid search i.e., price runner, price grab or price comparisons like in Google within the platform change and obviously you had issues with SEO, SEM and duplicate.Eldar's back, you started to see improvements on that front. I mean can -- is it unreasonable to think that once we get the SEO and SEM fixed that our growth rates can -- just on paid search, our growth rates can approximate what they were before, before any kind of, what I would say, destinational organic initiatives, that would be the app, that would be increasing GMV per customer. I mean you obviously had a tough comp, but you're already growing 20%. I mean is it fair to assume that just based on kind of -- if we can go back to what we were doing before on the paid search front that we can have similar growth rates? Or is that something that was kind of a historical thing because you're already growing 20%, and it's like that's even before really any organic initiatives.

[Josephine Eva Salenstedt, Chairman of the Board]

Okay. Thank you, Adam. Great question. Yes. We don't provide guidance. But as you said, July started off at a fairly good 20% growth rate on the Marketplace. We still haven't -- we are still deep into the process of working with fixing the part of the engine that is related to traffic acquisition. As you mentioned, SEM and SEO. So obviously, when that is fixed, we expect that we see results in the GMV growth as well. Coming back to the question of our destination, I would expect that to be on top of that, but we are not there yet. That would be a long-term race. Step by step that we're going to -- first, we're going to fix the quality of the product data, Shopit will need probably that, I hope and expect. And the next step will be to really make sure that we provide a great customer experience so that customers want to come back and that they have CDON on top of mind for whatever you want to shop, especially if in building our core categories. I don't know if that answers your question, but...

[Adam David Wyden]

Yes. Yes, no. I mean look, I mean that's what's express-full color has been exciting to me about this opportunity is that, you guys have largely been historically before the platform change and being the new [ Opera. ] You guys were growing at 40%, 50% or 100% largely from paid search and price comparison with no app and no really amazing organic initiatives and this probably means like I could myself do that, you think about your GMV per customer, right. I mean we're basically a 1/7. I think that was the math that we did. Like 1/7 or touching like 10% of Nordic e-commerce shoppers, but we're basically only penetrating about 1/7 of them. So I mean I think it's probably the same thing, you're going to answer me the same thing. As the people become familiar with the destination and the UI, UX, GMV per customer can grow. But I mean, it's -- the fact of the matter is, is that like at least from what I can tell, just based on paid search and SEO and SEM, this business can grow very, very quickly just based on marketplace penetration to begin with. And then you just layer on the fact that your GMV per customer is 1/7 of your peers, right? And you're not getting any of kind of the destination growth. So it's really, really exciting. Can I ask something else? When you talk about acquisitions, what is the framework for thinking about acquisitions? I mean obviously, Shopit solves an immediate need in terms of data traffic acquisition and duplicate data and stuff like that. But I mean what other types of acquisitions would make sense in this context in your mind.

[Josephine Eva Salenstedt, Chairman of the Board]

Yes. Thank you. Yes, you mentioned Shopit, that is a technology acquisition, right? When I think about acquisitions, I think about the, I would say, 2 or 3 categories, depending on how you see it. Shopit is a technology acquisition. The second type, which is closely related is acquisitions that would probably like software companies that could help us strengthen our tool books towards merchants. But I think even more higher up on the priority is acquisitions related to what I think of as building our core categories. So it could be yes, companies that would help us build our leading position in the categories that we want to have a leading position in. So in case you think that if we would buy this -- if we've made this acquisition, we can get to the position where we're going to be faster at a reasonable price, we will go for that opportunity.

[Adam David Wyden]

Good. Well, I think this goes without saying, I mean, look, you guys are doing a fabulous job and navigating a challenging period. And look, as I said before, if we can kind of get the right cost of capital that appropriately discounts the opportunity, the opportunities in front of you are quite numerous. So congratulations and keep up the good work.

[Operator]

[Operator Instructions] And our next question comes from Brad Hathaway from Far View Capital Management.

[Brad Hathaway, Managing Partner]

Thank you for a really important presentation, very helpful. So one question for me is, as you obviously opted to choose people here are paying attention to the traffic data. And as we saw, we saw a huge drop-off in January and then a kind of slow build through the rest of the year. I was wondering, could you provide a little more color as to what actually happened to lead to that steep drop off? And kind of why it takes a while to fix that?

[Josephine Eva Salenstedt, Chairman of the Board]

Yes. Thank you, Brad. Great question. So obviously, Traffic acquisition has been a priority for us, both Q1 and Q2. As you said, we had -- actually, it was 2, but especially one major drop in Q1. We had some -- at that time, we had some issues, some technical issues that are specific technical issues with Google. It took us a couple of days to solve it. And that is solved now. But -- and then it took us some time to get the traffic back. But that is a specific event. That is not the same thing as I talk about when I talk about the product data quality and structure, which is a different thing. And that is more of a root cause and goes into the core of how we structure data in our platform. And that will -- that is taking longer and will take longer to fix. And we will -- there are different ways to fix this. And some things we can do fast, some quicker, and some things will take longer. And we will do -- we expect to do incremental improvements over time during the fall. So I don't know if that answers your question. So the specific problem with a Q1 that is fixed, but we also have a larger underlying issue that is still ongoing.

[Brad Hathaway, Managing Partner]

No. Understood. I guess what I'm trying to clarify a little bit is you mentioned it took you kind of 2 days to fix DSU in January, but all -- but then it took months for the traffic to kind of recover. Maybe I'd love to understand, obviously, you were able to fix it technically, but didn't kind of flow through the results for a while. What drives the difference in terms of that timing?

[Josephine Eva Salenstedt, Chairman of the Board]

Yes, it was not 2 days. It's just a few days, a couple of days. So the short answer, we don't know exactly why we did not get back to the levers we were before. And one reason for that is that we don't know what was the underlying changes in the market going on at the same time because there was quite a lot of things happening at the same time. So we can't really separate the different effects. But we know that we have worked really closely with Google on that specific issue, but we also had other more specific issues that we were still not fixed, and then we have this larger underlying issue with traffic acquisition with product data in general that we are still working on. And we also -- the underlying problem with product base, and that is also increasing when we onboard new merchants -- merchants because we don't get more data onto the platform. So -- and during Q1, we onboarded quite a lot of merchants. So that had also an effect, and we don't know exactly when that effect took place.

[Brad Hathaway, Managing Partner]

Great. Excellent. Okay. Switching gears looking forward, obviously, very excited to have Eldar back. Could you talk a little bit about maybe what some of his priorities are for the next 6 months? I mean what is he really going to be focused on?

[Josephine Eva Salenstedt, Chairman of the Board]

Yes. His main focus will be creating a great customer experience, but it will involve short-term fixes and long-term fixes, but he will also be responsible, and he is responsible for customer acquisition. So his short-term focus will be making sure that the product data and all the potential that we get from Shopit is leveraged as soon as possible. But in the long-term, he is responsible for making sure that we have a great customer experience and that we -- where we are now, we are in a fixed basic stage, but I hope that in short, we will be more innovative and he would be responsible to driving that innovation process as well. Doing this, obviously, a key part is developing the product and the fixing. So he will work with a lot with the team, making sure that we always have the best talent and competence within the company.

[Brad Hathaway, Managing Partner]

Okay. Great. And final question for me and thank you for being generous with the time. So obviously, you are the Chair of the Board, you're spending a lot of time on this. And Rite Ventures has a fair amount -- as a kind of a relatively long investment history. But I'm curious if you kind of what in your history, in Rite Ventures history give you comfort that you understand really the e-commerce opportunity here and the ability to kind of create the future of CDON?

[Josephine Eva Salenstedt, Chairman of the Board]

Thank you for that question. Yes. Well, we -- Rite Ventures, we are an investment firm, we're privately owned. We invest our own money. We have built our position by investing and working really close with entrepreneurs and management teams, both privately owned and stock-listed companies, software companies, and e-commerce, I would say, e-commerce is our -- one of our main focus areas. We have been and our investors in a number of e-commerce companies, ranging from turnover of a couple of million krona's to EUR 5 billion -- SEK 5 billion, sorry. And -- so that's what we are doing and what -- but I would say the -- what is common -- what the shared between all these companies is that they are really, really good at creating great customer experiences and great and very, very strong customer communities around their businesses. And we see that CDON is not there yet. But we see that CDON is in a good position to create that as well. And we think that will be a key part of the value creation of CDON -- repeating the creation of our great customer experience.

[Operator]

And there appears to be no further questions. I would turn the conference to the speakers for any closing remarks.

[Josephine Eva Salenstedt, Chairman of the Board]

Sorry, that was the last question. I didn't f*** hear you.

[Operator]

That was the last question, yes.

[Josephine Eva Salenstedt, Chairman of the Board]

Okay. So okay. Thank you, everyone, for joining our call. Look forward to speak to you later on or after Q3. Bye.