Singapore’s Carousell makes its mark on the global classifieds stage


Carousell, Singapore’s startup darling, has found its path. In November, the seven-year-old mobile classifieds service announced a merger deal with Telenor-owned rival, 701Search. The deal values the combined entity at $850 million and brings together two of the region’s most prominent classifieds businesses.

The Singapore-based company was “unbelievably lucky” to pick up this deal, an investor whose portfolio includes classifieds businesses told The Ken. This turns the business into a genuine contender for unicorn status (a valuation north of $1 billion), said the investor.

The Carousell story is well known in Southeast Asia startup folklore. It was founded by three early-twenties graduates of the National University of Singapore (NUS) after they spent a year in Silicon Valley as part of their undergraduate program.

The company only began to monetise its service in the past few years, adopting a classic classifieds approach by charging for advertising and visibility with a focus on high-priced assets. Profitability, however, remained a distant dream. Not anymore. 701Search is a company even rarer than a unicorn—it’s a profitable business. The combination of Carousell’s reach and 701Search’s profitability is seen as a perfect match.

What Was The Concern?

For Carousell, the deal is a vindication of its perseverance. Southeast Asia is a region where major startup exits remain rare despite increased firepower from investors (a topic that The Ken recently explored in depth), but Carousell has had its past temptations. Its three young leaders once rejected a $100 million acquisition offer that Bloomberg reported would have made CEO Siu Rui Quek (and co-founders Marcus Tan and Lucas Ngoo) “wealthy beyond his dreams.”

Not only did Carousell choose to stay the course, but it also earned major validation this past April when it closed a $56 million investment from OLX, the classifieds business belonging to Naspers. South Africa-based conglomerate Naspers is best known for an early and lucrative investment in Chinese internet giant Tencent.

One industry source said at the time that the deal could be a precursor to an eventual takeover from OLX, a process that’s fairly common for the group. Carousell’s tie-in with 701Search furthers that thinking—it is precisely the kind of regional consolidation one would expect of a company on its way to becoming a must-buy business for a major global player like OLX.

But success is not a guarantee. Both Carousell and 701Search’s assets will continue to live on independently post the deal. The challenge for Carousell will be in how it allows each service to grow while replicating success across its portfolio. There may be opportunities to lower operational costs. The investor quoted earlier said retaining the “undoubted” talent of 701Search staff will be critical—this is truly an operational challenge.

Opposites attract

The contrast between 701Search and Carousell goes beyond just profitability. While the former is a 13-year-old service born of corporations and anchored to traditional desktop web listings, the latter is a startup focused on mobile classifieds. The two companies are also at very different points financially.

It’s difficult to compare the financials of the two companies as financial data for 701Search is scant and dated. The most recent year a like-for-like comparison can be made, in fact, is 2017. In that year, according to Telenor’s year-end 2017 financial report, 701Search made a NOK 37 million ($4 million) loss on revenue of NOK 66 million ($7.2 million). This was markedly better than Carousell, which reported a loss of $29.8 million on revenue of just $1.7 million in the same period.

Both companies have improved since. In 2018, the last year for which its financials are available, Carousell lost $25 million on revenue of $7 million the following year—a 4X increase in total sales and a $5 million reduction in losses from 2017. 701Search, on the other hand, has since turned profitable. According to company CFO Rakesh Malani, Carousell is also profitable in two countries, though he declined to specify which.

A second investor with a focus on classifieds businesses told The Ken that 701Search is estimated to have a $20 million annual revenue rate today. Some three-quarters of this is thought to come from Mudah, its marketplace in Malaysia, courtesy of its lucrative automotive and real estate verticals. This estimate is plausible since Carousell told the press that the combined entity’s annual revenue stands at “over $40 million”.