For the next three years, we are fixated on dominance in automotive, property, and services, says CEO
ArabFinance: Can we start with the story of 4Sale? How and when did you launch the service and corresponding app? What gap did you see in the Kuwaiti market that you sought to fill?
I moved to Kuwait in 2004. Upon arriving, I tried to buy my first car, and it was an extremely painful experience. It was hot, it was July, and I had to go round all these independent dealerships to find a used car. There was a website called Q8 Car, which was archaic, old, and nothing like the sites I’d seen in the United States, but it had some new inventory every day – perhaps 6 or 7 cars a day - nothing huge.
So, I followed this site, and ultimately I found a car via it. But, immediately, I felt with a bit of time and some digitization, this listings business could become a real thing; it could take off.
It’s funny, although this was just in the automotive sector, I could see it all back then - the beginning of an entirely new classifieds model.
At the time in Kuwait, there was a classifieds newspaper called Waseet, and it was for everything: cars, real estate, services, everything you could imagine. Think 25 years ago, before Craigslist (the American classifieds website), and every country - including the likes of the UK - had a classifieds newspaper that was thrown on your lawn, or mailed to your house. You opened it, and you found listings.
As digitization happened, this model started to change. So, during those early years, I saw there were still listings in newspapers even with websites. I thought - if we can take this website, build it out, we could disrupt the classifieds space, because you have an endless inventory, and it’s a nice offering. You don’t have to wait until Tuesday or Friday to see your listing – it goes up straightaway. So that was my initial thought process.
So, we bought the IP and took over this website in 2006, and 7-8 months later, we were growing like crazy. We could see it right in front of our eyes. Less people were listing cars in the newspaper, and more of them were putting cars with us.
A couple of years in, we had become very profitable. I was thinking, I’m doing this in automotive only, but if I can replace an automotive section in a competitor – why can’t I do it fully across all sectors?
We tried initially, with a couple of different names, to various degrees of success. We had some traction, but it wasn’t in the form we wanted. It wasn’t going to replace the competition. We needed to think bigger.
Then in 2008-2009, when the iPhone came out, we grew a lot because we were the first app. We were still only operating with cars at the time, but we were the first app for automotive. We were the first people to allow online payments, so you could take a photo of your car, list it and pay for it – all in one go. And then it would just hit the site.
For Kuwait, that was a totally new thing. And I could see instantly, people wanted this convenience with all their listings: whether it was phones, electronics, anything they wanted to sell – you ought to be able to take a snapshot and put it online.
In 2011, we found someone had put an app on the App Store called ‘4Sale’ – and the app name was amazing – we loved it.
We didn’t think we could get a better name because it wasn’t just about automotive. ‘4Sale’ is very general, it’s very descriptive of what you do, so we went after that IP and bought it.
Before we bought it, that 4Sale app was focused on competing with us, but it was still in its infancy phase. We took over that app in 2014, and everything we had done from 2006 to 2014 came to fruition.
In hindsight, I was given a lot of time to div out where we wanted to go and how to get there! What I mean is - we didn’t have today’s landscape back then. Today, people are raising money like crazy. Wherever there is a need, you’ll find someone raising money to attack that need. Investors are allocating a lot of capital because money is cheap. It is not hard to raise $500,000 or $1 million. If you have a good idea and a good team - you can do it.
Back then, when we did it, it was quite different. I outsourced technology – which gave me terrible results! The app would go down, we had lots of things that wouldn’t be tolerated today. So, we were given four years to really get our footing.
We had a first mover advantage though; we had the time to learn and grow from experiences. We were very early to the space, and despite the operational challenges and the lessons we had to learn - we became profitable very early.
What kind of funding did you need to initially kick off your idea?
Because of the different environment back then - we never took funding. We had to sink or swim. If the business didn’t make money, it wouldn’t exist. It was that simple. We were just one of those companies; we built a business and it became very profitable.
Can you run us through your business model? How do you monetize?
As time progressed, everything we had done wrong, we eventually did right. At the time I took over 4Sale, I had a team in Egypt, I had a dedicated technology team, I knew what UI was, and I had a lot of experience.
In the five-month period – we completely flipped the app.
We added online payments, we took every section in classified newspapers and opened it up online in the app, and made the offering free…in the beginning.
Then, within 18 months, we completely destroyed the classified newspapers in Kuwait. It shifted so fast. At one point we were at 9,000-10,000 listings a day, in what is a fairly small country. It was at that stage we realized listings were not what it was all about.
People have a misconception with classifieds. They believe you need a huge number of listings. This is not true. You need a reasonable number of listings - yes - but they need to be quality. If you have 10,000 listings, and there are many duplications, or a poor search experience, many listings not making sense or boring readers, then commercially – you don’t win.
What you need is quality listings. When I go to ‘automobiles,’ I want to find proper listings, real prices, real cars, and real information. If there is an absence of this, it reduces the legitimacy of the app.
So, we realized – we had to start charging. When we started charging and eliminating the free option – it had a huge commercial impact. Our offering became so strong that when free content was removed - people started to pay because we were not asking for much per listing, maybe $5-$10.
However, users who were just messing around and duplicating listings – stopped immediately. Somebody paying $5-10 a listing is going to take a proper picture and share proper information. They are not going to mess around.
We did that very early. This helped us enormously as it cleaned up the quality of our listings. It optimized our legitimacy.
Can you share some statistics with us? How many registered users? How many transactions on a daily basis, on average? What are the most popular classified category types? Can you offer any other interesting/insightful conclusions on your users based on trend data (average user age/demographics, more web or mobile app usage, etc)?
Within four years of starting charging, we sold a majority stake of the business to NBK Capital Partners – which shows how big we had got.
We now have over 1 million monthly active users in a population of 4 million and over 6,000 listings every day.
We definitely see the users in Kuwait prefer to access 4Sale via the app, but we’ve built a hugely popular website and we’re seeing a lot of new traffic landing there too.
Kuwait has a population of just above 4 million people. Why should Kuwaitis use your service and not other classified ad platforms, especially the ones integrated into popular social media platforms? What does innovation look like for a company such as 4sale?
Classifieds, generally, is a winner takes all model. People who come in early and get critical mass, and then defend their position properly, become very difficult to displace. Think of Gumtree in London, Craigslist in the United States, TradeMe in New Zealand, Avito in Russia, or Baltic Classifieds Group – which is on the London Stock Exchange.
These businesses have many competitors, but none of the competitors can scratch the surface.
If you are a number two player in classifieds, you cannot really charge and are completely marginalized. You may find a situation where they pay me (4Sale) to place your listing and then they put it with a competitor for free. But if the smaller competitor tries to charge, people listing items will stop using you. It is a pointless process.
Sometimes competitors attack verticals. They try and compete in real estate, or automotive – and they try to twist the offering slightly. Even in Kuwait, if I get complacent, or think I’m a monopoly and so stop my product development and thinking outside the box, then I leave room to share the vertical spaces. That’s why we’re always pushing the envelope to stay ahead of the competition.
For the next three years - we are fixated on dominance in automotive, property, and services, which are the main three pillars of our business, and in which we have so much liquidity.
How big is your team? What would you say are your biggest expenses in running your company?
Unsurprisingly, salaries, technology, and marketing are our biggest expenses. We now have a headcount of approximately 100, a big part of that is our technology team which is currently 60 people strong and growing.
As a CEO, I’ve learned the most important thing I can do is hire people smarter than me. You frequently hear CEOs say this, but it really takes a lot of time. You gain much experience which is invaluable, but you have energy when you’re younger. I started all this at 26!
I’m trying to hire people smarter than me; I really am – it’s not a sound bite. It’s a fact. For the business to grow, we have to have the right people with the right expertise. I can give vision and leadership, and nobody will have the DNA of the company like me – because I started it from zero.
But, in specialist areas like technology, product, or marketing, there are people who know more than I do, and I need the top and best people. We attract the best talent and show them all the opportunities that 4Sale has, and they know this is a place they can make a huge impact.
What are your next plans going forward, to raise additional funding or expand regionally?
We want to keep growing inside Kuwait instead of going regional because doing so is very difficult in our business - where it is all about local players. If I go to Dubai, I will spend a lot of money over two or three years to become the second or third biggest player in the city. Can I then charge for listings? Absolutely not.
So, we will expand in Kuwait. In two to three years here, I believe we will probably be very close to 2 million active users for a country of 4 million.
With this sort of growth trajectory, we are cash generative enough that we don’t need any more funding, but I know we are attractive to potential investors! It’s nice to have such suitors, even though at the moment we’re focused on growth.
Operationally, we need to continue to have an extremely good UI, an excellent customer experience, and make it very difficult for people to leave the platform. We are working on getting even closer to the transaction and we see that as a big win in the near future.
Our average time on site now is 15–20 minutes, and that is a lot. People go on when they’re bored. If you’re looking for a plumber – you come to 4Sale; you want to sell a car or buy an iPhone – you come to 4Sale; you want to find a house, you come to 4Sale here.
You make the offering so rich and wide that it is difficult to leave the ecosystem.