58.com and its arch-rival Ganji.com agreed to merge earlier this year amid accelerating consolidation in the Chinese technology sector. The two companies will continue to operate independently, whereas the CEOs will jointly manage the recently-joined company as co-CEOs. Analysts believe that this merger might generate savings in the companies’ advertising budgets, considering the fact that Ganji.com has been one of the closest competitors of 58.com. Reportedly, the management of 58.com revealed in a financial report last year its intentions to triple its advertising budget so as to compete with Ganji.com. In addition to that, some analysts have outlined that the merger can result in revenue synergies as well as the cost synergies, considering the companies’ strengths and areas of expertise are complementary. Moving on to the details of the transaction, the classified service 58.com acquired a 43.2% stake in Ganji.com by issuing 34 million shares and paying $412.2 million in cash. Finally, the merger has stopped the long-lasting fight between the two companies and created a leading Internet conglomerate on the Chinese market with a market capitalization of over $10 billion.
A little while ago, 58.com posted its financial results for the first quarter of this year. The classified service posted total revenues of $87.1 million, an increase of 80.5% year-over-year and exceeding the company’s guidance of $82.0 – $84.0 million. However, the company registered a loss for the quarter despite generating higher-than-expected revenues. Precisely, the company’s net loss came to $52.4 million, compared to a net income of $2.3 million reported a year ago. The heavy spending on advertising in the first quarter, when people return from the Chinese New Year holidays and refocus on their businesses, stands out as a prime factor behind the $52.4 million loss. Daniel Och’s OZ Management is one of the largest shareholders in 58.com Inc. (NYSE:WUBA), holding an equity stake of 1.52 million shares as of March 31.