Cian Plc

Since its foundation in 2001, according to the Frost & Sullivan Report, the company has become the most recognizable and reliable brand of real estate ads in the most densely populated regions of Russia and has expanded its business beyond online real estate ads to offer additional products and services that turn real estate search and transactions into an unhindered, transparent and efficient process. The real estate network platform connects millions of users, buyers and tenants of real estate with millions of high-quality real estate of all types - residential and commercial, primary and secondary, urban and suburban, both for sale and for rent.

Market volume and dynamics

The company operates in the Russian real estate market, which, according to the Frost & Sullivan Report, amounted to about 238 billion US dollars in 2020 and is just beginning digitalization. Being at the forefront of this digitalization trend and being one of the main driving forces behind it, CIAN is considering an immediate market opportunity of approximately US$ 6 billion (in 2020, based on the Frost & Sullivan Report), which includes real estate agent commissions, developer advertising budgets, as well as related markets, including mortgage advertising and digital services facilitating transactions. According to a Frost & Sullivan report, the main online real estate listings market will grow at an average annual growth rate (CAGR) of approximately 27% between 2021 and 2025.

Uniqueness of the idea and competitive advantages

-The leading Russian platform of online real estate ads, which occupies the first place in the largest markets of Russia;

-Powerful network effect that strengthens the leading position in the market;

-Strong brand strength, contributing to further growth and protecting competitiveness;

-The most complete range of services on the Russian market, provided with the help of an advanced technology platform with a focus on mobile devices;

-A reliable financial profile that demonstrates steady growth and a clear path to profitability;

-A management team with experience in implementing innovations, supported by large shareholders.

Competition

According to the Frost & Sullivan Report, the market for online residential real estate services in Russia is concentrated, and there are more than 4,000 websites with real estate ads. The company faces competition from various digital market players and, in the case of the primary real estate market, also from offline advertising media, each of which provides clients with platforms and advertising space.

The key competitors are other vertical ad platforms (or platforms specializing in one ad category) that specialize in real estate ads, such as DomClick, Yandex.Real estate and Square Meter. Some of these platforms are owned by large Russian banking groups, such as Onclick, which is owned by Sberbank, and Square Meter, which is owned by VTB. The rest belong to large Internet companies such as Yandex.Real estate, which is owned by Yandex, one of the largest Internet companies in Russia.

Key competitors also include horizontal ad platforms (or universal online ad platforms that offer listings across various product categories, including real estate), such as Avito and Youla. Some of these platforms are also supported by larger internet companies, for example, Youla is an ad platform Mail.ru Group, and Avito belongs to Naspers. In addition, the company may also face competition from platforms offering short-term rentals, such as Airbnb and Booking.com if these platforms start paying more attention to more comprehensive real estate offers that current users like.

Monetization model

-Listing fees in the verticals of secondary residential and commercial real estate and fees for attracting potential customers in the vertical of primary residential real estate, as well as fees for value-added services such as premium listing and dedicated listings, as well as listing auctions and other additional services. In June 2020, the company introduced a new subscription-based model for customers, which allows customers to purchase a monthly subscription and combine a number of ads with additional services, increasing efficiency for them, as well as increasing efficiency and monetization for the company. In the first half of 2021, the average share of listings under the subscription model was approximately 41% compared to approximately 26% in the second half of 2020, and fees are also charged for providing advertising tools through the platform to various parties, primarily developers and banks.

-In the segment of the mortgage market - commissions charged from partner banks for the distribution of their mortgage products, through an advanced platform for comparing mortgage prices, pre-approval and issuance of mortgage loans.

-In the Valuation and analytics segment, the fees charged to clients and partners for providing access to their own real estate market research, data analytics and market analysis services, either through the sale of individual reports or on a subscription basis.

-In the C2C rental segment, there are fees charged to users for providing comprehensive solutions that facilitate unhindered rental of real estate online (including background checks of tenants, digital execution of contracts, online payments and insurance).

-In the segment of complex offers, starting with commissions charged to customers and users for services that allow real estate transactions to be carried out online (including document verification, verification, signing and storage, notary services, registration and tax refund) and simplify the simultaneous execution of purchase and sale, which makes it possible to increase the efficiency of real estate transactions.

CIAN users can search for real estate for free through mobile applications, as well as on mobile and desktop websites. They can also take advantage of a wide range of different innovative services that the company offers, for example, real estate valuation and access to various real estate financing options.

Limitations and risks

-The company's business is focused on several regions: in the six months of 2021, Moscow and the region accounted for 74% of Cian's revenue. Historically, the service also has strong positions in St. Petersburg and the Leningrad region, the documents say. Changes in these markets can negatively affect the entire business.

-The company's main markets are megacities like Yekaterinburg, Moscow, St. Petersburg and Novosibirsk, where real estate prices, transaction volumes and competition are usually higher than in most other regions of Russia. If users move to small cities, and the company is not able to adapt quickly, this will affect business.

-The success of a business depends on the state of the Russian real estate market. It may also be affected by changes in the preferential mortgage program: for example, a reduction in the maximum loan amount under the program to 3 million rubles. Now residents of Moscow, the Moscow region, St. Petersburg and the Leningrad Region cannot actually participate in it - these are the main regions of the company.

-The company provides services in Crimea, because of which it may lose the opportunity to raise money on international markets and run into sanctions. The region accounts for only 1% of revenue.

Operations cover the whole of Russia, with a special focus on key megacities, in particular, Moscow and the Moscow region, St. Petersburg and the Leningrad Region, Yekaterinburg and Novosibirsk. The company's services are also available in other cities and regions, including Samara, Nizhny Novgorod, Krasnodar, Ufa, Kazan, Omsk, Krasnoyarsk, Arkhangelsk, Chelyabinsk, Tyumen and Perm, as well as other cities and regions.

Maxim Melnikov has been CEO since February 2014. Mr. Melnikov has been a member of the Board of Directors of HeadHunter Group PLC, an online recruitment platform in Russia and CIS countries, since May 2019. From 2010 to 2014, Mr. Melnikov served as Chief Executive Officer and Director of Media3 Holding, a large print and digital media holding specializing in the sale of print media and investing in online media. Mr. Melnikov received a Master's degree in Finance with honors from the Finance Academy under the Government of the Russian Federation, where he specialized in banking, securities and public markets. Mr. Melnikov later earned a Master of Business Administration degree from Stanford Graduate School of Business at Stanford University.

Mikhail Lukyanov has held the position of Finance Director and Strategy Director of a key operating subsidiary since May 2015. Prior to joining the company in March 2014, Mr. Lukyanov worked as an investment manager at Media 3 LLC. Mr. Lukyanov holds a Master's degree in Finance from the Financial University under the Government of the Russian Federation. Mr. Lukyanov is, among other things, responsible for the development of strategy, accounting processes and financial reporting.

Shareholders

Among the shareholders of CIAN are investment funds Goldman Sachs and Elbrus Capital.