Hello, hello, and welcome everybody. Thank you for that. Good morning. Welcome everybody to the Prosus 2022 Capital Markets Day. It's great to have you here. Thanks for coming in person, and to those on the webcast, thank you very much for tuning in. I can tell what you're thinking right now. "God, Owen really worked out for this event, and he is much taller in person." Not so much. I will commend you all for making it here today. In the world that we live in, where it's so difficult to travel and to get where you want to go, the fact that you all got here without getting hit by a bike this morning is absolutely fantastic. If you look around here, there's a few empty seats.
Let's just take a moment for them. When we look around this group, we've representatives from all over the world, which is really illustrative of what the group has become. We have representatives from as far East as China, far West as the U.S., far North as the Nordics, and far South as South Africa. Where are my South Africans at today? Anyone that may make some noise, South Africa? No. It's 30 degrees in South Africa right now, so they're all miserable up here. You'll be able to tell the South Africans at the coffee break because they'll all be huddled together like emperor penguins, you know, in Antarctica in the middle of a blizzard. Be nice to them.
That's why I did get penguins in there because penguins are very important to our friends at Tencent, and I wanted to pay homage to them, and I wanted to say, welcome, Jane, welcome, Wendy. Thank you for coming. It's been a bit of a crazy year, and we've done as a group, what my shrink tells us to do, which is to focus on the things that we can control. If you look at the things that we've done over the last year plus, we've had the deep dive sessions early on in the year to give you a little bi-better view into the businesses, and today is the culmination of that. In July, we announced the beginning of an open-ended share repurchase program that's creating meaningful value, and I think it'll leverage our future returns.
You'll hear more about that from the team today. About 2 weeks ago, we as a group committed to e-commerce aggregate profitability by 1H 2025, and each one of the team will reaffirm their commitment to that today and outline a path to getting there. I won't go through the agenda in detail because you know, you know what, I'm sure you've looked. We've got a great day planned for you. There's a lot of time for Q&A. We'll have a 10-15-minute Q&A after each one of the speakers, after each one of the segment speakers. We'll have a coffee break for 30 minutes. We'll have a lunch for 90 minutes, where there's a lot of time to interact. We'll end the day with 30 minutes of Q&A.
For those of you who are students of the agenda, you know now that it is my time and my pleasure to welcome to the stage our CEO and leader, Mr. Bob van Dijk. Thank you very much. Enjoy the day.
Good morning. Good morning, everybody. Welcome to our 2022 Capital Markets Day. I am actually really excited to welcome all of you here to my home, the Netherlands, and to Amsterdam, which is the home of Prosus. We also welcome everybody who's joining us on the webcast today. Owen tells me there is 500 of you currently tuning in. I really look forward to hearing from you when we go into our Q&A session later. We're here today to share with you how we're positioned as a group. Actually, more importantly, we're gonna talk today about how we're gonna see continued outperformance for our shareholders from here. Since our last Capital Markets Day in December of 2019, the world has fundamentally changed.
You know while it's been a turbulent time, I'm actually really pleased with the progress that we have made over that time. We've scaled our businesses significantly, and they're now pushing forward to profitability. You'll hear a lot more about that specifically from Larry, from Laurent, and from Romain later today. We've also really strengthened our financial position, which is, in my view, a foundational advantage if you are in a turbulent market. Particularly, Basil will take you through more of that in the afternoon. Structurally, we've actually doubled the size of Prosus on Euronext, and we're committed to finding further solutions to simplify the group structure. We've also allocated capital sensibly, and Erwin will walk you through what you should expect about our capital allocation going forward.
Finally, I'm actually really pleased that we have a naturally sustainable, low carbon and high social impact business. That's great, right? That's the position we're in. Beyond that, I'm really pleased to see that in the last few years, we have really integrated sustainability deeply into our strategy and business practices. Prajna, who runs our sustainability team, will actually tell you more about that later in the afternoon. I'm very excited about that. Before we get into any of that, let me spend some time on how we think about our position as a group, and also how we plan to drive continued outperformance for you in the time to come. Let me begin just reminding you for a second about what we are working on every single day. It's our purpose, and that is to improve the lives of people through technology.
We do that by operating in 100 countries across the world, our products serve more than 2 billion customers at this point in time. Really having that ability to improve the daily lives of so many customers is what inspires us, it makes me get up in the morning, and it makes us go the extra mile in everything we do. Now, we achieve that purpose, and this is really specific about our group, by partnering with local entrepreneurs. I hope you walk through the hall of fame today where you see those local entrepreneurs. Those are really the heart of the company. The heart of the company is not me, the heart of the company are those entrepreneurs that you've seen earlier. We partner with these local entrepreneurs to build businesses with strong platform potential.
As you'll hear today, we are making great progress in building profitable businesses that also have sustainable growth opportunities. Again, we do that by identifying great products that are managed by great teams in markets that have high growth. We also are always focusing on large societal needs that we can serve with an online platform. That's what we are about. Also, this has driven tremendous value over time for the group. Actually, more importantly than the value we've created, it really is the foundation for the progress that we will make over the next few years. Now, if you look at the progress that we've made and our growth, it is helped a lot by the kind of markets that we operate in.
Our segments operate in high growth markets across the world, and most of our assets are actually not accessible to public investors. That makes Prosus a unique access point to this growth with a blend of exposure to China, to India, to Latin, to Eastern Europe, and other high growth markets, as well as to the global tech sector. That is really a unique combination of factors. In these markets, growth is superior, and that's because greater than average GDP growth and also greater than average growth in internet usage. Those are trends that are likely to persist over the long term, and typically also still work in an environment of recession, which we are likely to find ourselves in the next year or two.
Our geographic profile is also one of the reasons why Prosus has and continues to deliver growth that is well ahead of our European peers and well ahead of our global peers. These growth trends have really helped us to get business to significant and real scale. Over the last three years, our portfolio has really grown at an exceptional pace. You may ask, like, how have we done that? Well, it's really about our ability to leverage our online platforms to make offline transactions more efficient. That's played a central part here. In addition to that, building deeper ecosystems around our core products has driven substantial growth. You'll see a lot more of that going forward. You'll hear more from the team today on specifically what we've done to achieve this.
You will also hear a lot about our expectations for the core of each business, but also for the growth extensions. Actually, the combination of a strong core plus growth extensions, that lays the foundation for continued growth and profitability for many years to come. This is a really important slide, and what it basically says is that we have picked some of the most attractive segments in consumer tech. What it does, basically, it looks at all kind of different sectors in consumer technology over the last five years and looks at the returns that have been achieved in those sectors. Then we overlay that with the focus segments that we have picked, and it becomes really clear that we've picked many of the top-performing sub-segments in tech.
It's important to acknowledge that the market has corrected this year, and substantially so. I'm convinced that these sectors will continue to lead in innovation and growth over the next at least 5+ years. You'll hear a lot more from the team today on how we plan to drive that innovation and growth to get to that better outcome in the years to come. The combination of all of this has established Prosus as Europe's leading consumer tech company by some distance. We, from here, have ample room for further value creation and further value unlock. We're committed to driving the continued outperformance of our portfolio, and we also see several catalysts that will deliver that. I'll touch more upon those in a moment.
I think it's all for all of us, I think I can say that we see the future with confidence, but it's clear that times have changed. History has shown time and time again that in change lies opportunity, and I think the current environment actually provides the opportunity for many new things and good things to come, and we're determined to capture those. There's many ways to illustrate change, but I think this is one way to do so. We believe actually private markets are approaching a reckoning. Inflation is at 40-year highs. I don't have to tell you that public market valuations are depressed, and we think that private markets will see very similar trends, but probably with some delay.
We're also seeing an increasing number of private companies run out of cash. That's obviously a major factor in how we think about the world. Our portfolio companies are generally in better shape to weather the storm. We sit today in a position of significant financial strength to fund those companies. We can do that while others actually may fall by the wayside. That provides us with an opportunity to execute M&A if we see good returns. Just as an example, acquiring the remainder of iFood, I think is an example of doing exactly that. In uncertain times, it's actually tempting to look only at the short term. It's actually very normal for human beings when they're under a high amount of stress to only focus about the short term.
We're long-term thinkers, and it's important to zoom out. When you do that, you can see really that tech has a 20-year track record of outperformance. I also don't have to tell investors that past performance is not a guarantee for the future, but it's certainly a good guide on what to expect. Technology advancements in the last 20 years have driven innovation and disruption of industries, and that really underlies what you see here. I'm convinced that tech will continue to lead that disruption in the future. We're believers, but we're also operators and investors in that disruption. Our focus and our execution has led our group to outperform the market over the last 20 years and also tech as a whole by a good margin.
Today, you will hear more about how technology is disrupting the offline car sales model, how technology is making food and goods imminently more available to many, many people, but also around how tech is streamlining payments and making credit more accessible to billions of customers. Finally, you'll hear about how tech is bringing the classroom online and how it shapes education outside of the classroom and also inter-enterprise into enterprises across the globe. I'm really confident that investing in this disruption will continue to drive outperformance. I'm also not naive. This will not be easy. Strong execution will be required, but I would like to sort of give you some flavor of why we are uniquely positioned to navigate choppy waters. It's mainly because we have, A, a very strong balance sheet, and we're singularly focused on execution.
Change is not new to our company, right? If you lead a company that has more of a 100-year history, change is actually integral to what we are. As a company, we've evolved hugely. Just over the last 10 years, we very actively managed our portfolio. We made a number of very attractive acquisitions while we walked away from many others that we actually, with the benefit of hindsight, typically feel very good about. We've also successfully disposed of assets, and we've listed a meaningful number of assets in the market. We've also evolved our organization a great deal. 10 years ago, about a year before I became CEO, 80% of our revenue came from traditional media. At this point in time, it's 0%.
It's actually less than half a %, so I rounded down to 0%. We focused our efforts into a number of core segments, and I mentioned that earlier, you see all of the leaders of those segments today. We'll continue to explore the future, and we do that through our Ventures group. Actually, Ventures has brought us really tangible results, right? The segments of both Food Delivery and edtech were actually born out of our Ventures division. Finally, we have evolved the group structure, and we'll continue to look for ways to improve it going forward. If I summarize it, times are uncertain, but we are in exceptionally strong position. We have proven businesses that actually are growing profitability at the core, and I'll show you more about that later.
We also have some very clear catalysts that will continue to drive value creation from here. Finally, we start from a rock-solid financial position. We have both strong liquidity and flexibility. Now let's dive into all of these, and this is an important slide for us here. Our core businesses are now generating increasing profits, and we are committed to further increase profitability of each of these business. When you hear the team speak today, I think that will come very much to life. To be clear, we do expect continued growth, and we will continue to invest behind that growth, but we are moving now into a period where our scale really enables us to better balance profit and growth without having to sacrifice market share for that. We have some really clear catalysts for value creation.
When Tencent regains ground, and we're absolutely confident that it will, we should benefit from 3 further catalysts. Improving profitability in our e-commerce portfolio while maintaining our scale and competitive position. The second is the compounding effect and the continuation of our share repurchase program. Third, we are working towards simplifying the group structure over time and crystallizing assets at the right time in a more systematic way. Let's talk a little bit about how we get e-commerce to profitability. We plan to reach profitability on a consolidated basis in the first half of our financial year 2025. That's just under 2 years from now. Today, the teams, and Basil will give you more granularity on how we plan to achieve this, but in summary, sort of across the group, there are really 4 areas.
First, we're focusing on existing investments and winning in high-potential markets where we see the most value, potential to create value. That means that we probably won't branch out into 10 new things, but rather do the things we do now exceptionally well and with higher profitability going forward. The second is that core businesses that are already profitable, which you saw in the previous slide, will drive efficiencies, and they will reduce cost to drive margin. Third, while we already run a lean corporate structure, we're also committed to reducing costs, and our operating units are also committed to reducing costs. Fourth, like when businesses are not working out, we will exit them. Beyond growing our business profitly, profitably, and as long as our discount remains elevated, we will enhance our NAV per share by continuing the repurchase program.
Ervin will talk a lot more about that later today, but the program is having a very positive impact, and you should expect it to continue for the foreseeable future. Not only do the benefits of the share repurchase program compound over time, they also compound and elevate the return on past actions as well as our IRRs. Finally, I want to underline our conviction in Tencent and our expectation for a very strong recovery of the business. Every day, we are increasing our per share exposure to Tencent, and I'm confident that this will result in significant NAV per share growth for the group. Many of you know, but Tencent is just a phenomenal business.
It has a unique position in the China internet landscape, and it's led by a world-class leadership team that has a track record to manage the business through all kinds of environments over time. I remain committed to being a very large shareholder for a long time, and we still see tremendous upside potential. We also expect Tencent will benefit from what we see are a few really important short-term catalysts, and I'll name a few specifically. First, we expect that China will be dropping COVID zero. We can all speculate on when it is, but we expect sooner rather than later, and that should provide a substantial economic boost. Also, Tencent has received a commercially important game approval, and they expect more to come in the near term.
What you've also seen in Q3 results, if you looked closely, you've seen that actually advertising is turning a corner, and a rebound is expected when China reopens. Finally, we expect to see benefits from significant work on internal cost control because that's now largely completed. To close, I am very confident about our future. I realize we're going to have to manage through a great deal of change. There's a lot of reasons to be positive. First, we provide a unique access point to profitable growth in assets that are not readily accessible to public market investors. That access you actually get at a discount. Second, you will see that financially and operationally, the business in a very strong position to weather whatever uncertainty is ahead of us.
Third, our businesses are on the path to profitability, and we are committed to hitting aggregate e-commerce profitability by the first half of 2025. Fourth, as I mentioned, we see multiple catalysts for value creation in the years to come. Finally, we are already a very sustainable business and are becoming even more so going forward. That's where I wanted to leave you today. I'm actually super excited to see you here in person. I wanna echo what Erwin said. I know it's a big investment. I'm really happy and proud to have you here. I hope you find the day useful. I look forward to taking your questions, to having a chat in the breaks, and I'm sure you'll have a good time. Actually, I'm gonna stop.
I'm gonna hand over to Romain Vo, who is gonna talk about our OLX business and our classified segment, and I'll see you later. Thank you.
Good morning. I'm Romain Voog. I'm the CEO of OLX Group, the classified segment of Prosus. I'm very pleased to be here today to share an update on what we've achieved so far and the prospect for what we're very excited about for our future. I'll have three parts today. One is more about a presentation of the overall group and the trends we're seeing in our industry. The second one is a little bit of a deeper dive in what we call our core classified segment, a high growth, highly profitable part of our business. The last part of the presentation will be about our new investment into auto transaction, OLX, our OLX Autos business.
You will see how all of those works together in a perfect ecosystem, as I'll call it. First, OLX is a group of trading platform that serves millions of people with a global footprint in more than 30 markets around the world. It's one of the leading group of platform. In the last 12 months, we've achieved $2.7 billion of revenue, and we have grown our business by 64% in the first part of this year. As an operating company, we have a full-fledged management team of very experienced professional. To take an example, our latest addition, Tim Davis, our Group CTO, is joining us from Booking.com with 30 years of experience, having worked in companies such as Microsoft or Amazon.
He's leading us in the vision of what needs to be the IT transformation we need to drive within our entire group, so that we can take the challenge of tomorrow. In OLX Group, we have 1,500 engineers and data scientists helping us to lead that transformation. You look at classifieds, it has evolved quite significantly across the last decade. From an online version of the offline classifieds that we, some of us have known in the youth, we are now moving into what I call Classifieds 3.0. Classifieds 3.0 enables a category-specific user experience, is more transactional, offers an entire ecosystem of services and product in each of its category. It's driven by AI and enabled by data, and very importantly, is trust and safety enabled, which is very important for our users.
I'm very pleased to say that OLX Group has jumped into Classifieds 3.0 and is well advanced into making it a reality. What's very interesting when you move into Classifieds 3.0, you need to invest on one end, but you increase the addressable market and the profit pool, sorry, exponentially. If I'm taking general goods as an example, and here you see an example of our European business. General goods, you used to be able to either pay a listing fee to put your product online or actually list for free. As we move into transaction, as we move into Classifieds 3.0, we charge transactional fee on every transaction. The millions of transaction that happens every month, we can charge a monetization on it.
As we do that, we move from a listing fee to a share of a transaction, which is a significantly larger profit pool. When we look at the number, our estimate is we multiply our market by a factor of 80. Looking at Europe alone, we talk about a market we're operating of $12 billion. The runway for growth is significant in our business. One of the particularity of OLX Group is we build leading marketplace ecosystem. That is an illustration of what it means. We have, let's say, two big different businesses. One is core classified, and core classified is a mix of what I call horizontal general platform, where you can find all type of categories from motors to real estate to goods to jobs to services.
In goods, you have electronic, fashion, everything you want. A mix of what I call vertical dedicated platform, real estate specialist, motor specialist, new car leasing specialist, new real estate property development specialist. What's very interesting is both fuel each other. The customer of one platform go and shop in the other one. In some countries, we have the entire ecosystem and the, you know, three, four type of platform in the same space, so that we can actually address the entire part of the market. When we launched auto transaction through an acquisition of FCG, we obviously saw the opportunity to leverage our classified business into accelerating our auto transactional business to go quicker to scale and be more profitable quicker than anybody else could.
When you look at our classified under transaction, not only we share the same sellers, the same buyers, but we share an entire set of asset and capabilities. Technology, data and ML model, I'll say a little bit more later on, CRM, marketing, and obviously every shared function and support and the local expertise we have by working in 30 different countries. That's what we call building an ecosystem. At the end of the day, create a unique advantage and a very strong tailwind for fast growth and operational leverage. The beauty of OLX Group in the industry we're operating into is that we are at our core, a very strong actor and an enabler of sustainability.
By enabling people to trade used goods or buy refurbished car or used car that are refurbished, we've been able in 2021 to sell 34 million tons of CO2 equivalent emissions and almost half a billion gigajoules of energy, which you know, right now is not a small thing. More importantly, our entire company is invested and engaged into making sure we become a more sustainable company and enable sustainability in a broader scale. Let me now move into classifieds, what I call core classifieds. Once again, core classifieds is a set of different business models under the same umbrella, horizontal platform, which mainly operate in all categories and mainly address private users like you and I. We operate those in 20 different countries directly or through investment we've made.
We have a set of real estate vertical where you can buy and sell your houses, and we're familiar with those, mainly driven toward professional sellers, private buyers. Motor vertical, which are specialized vertical categories, also more geared toward professional dealers, which we operate in four countries. In some countries, we operate all the ecosystem once again. When you look at numbers, today, in the last 12 months, classifieds, half a billion dollars of revenue. Very importantly, it's a 20% growth rate in the last, you know, in the first part of the year, which is significantly above the peer industry benchmark, as we'll see later. 20% growth means in four years we more than double the business we're operating. 89 million active listings on our platform.
As I was saying, as we move into Classifieds 3.0, we multiply by 2 the size of our tech engineers in the last 2 years, which is a testament to our focus on building both platform enabled by technology. One of the very interesting thing about OLX is, by scaling our platform and investing in our brand and our businesses, we have been able to establish position in most of our category in almost all our markets around the world. This is very important because in classified, when you have leading position, you are uniquely placed to provide extremely more value to your customers, both buyers and seller, and hence be able to monetize that value.
As I was saying, if you take the example of Poland, where we are number one in all categories, we not only operate the horizontal platform, but also a vertical platform in real estate, a vertical platform in cars, a vertical platform in new car purchase. We really build it all together. Let me now focus on what is our main priorities in OLX core classified. I've segmented into three parts. One of them is accelerate profitability. No new news. The second one is about keep on fueling the foundation for growth and creating a bigger moat and a better customer experience. The last one is about driving the technology platform that enables that at scale and cost efficiently. I'll dive into some of those in the following slides. Here you can see what accelerating profitability means for us.
On the X-axis, you have the revenue growth of our different businesses with the peer growth at 11%. On the Y-axis, you have our trading margin versus the peer industry. The peers are the one we all know in the trading industry, in the classified industry, sorry. What you can see is all our businesses show significantly higher growth than any peer company. In term of profitability, one of our businesses is already up there into the higher end of the range of what classified profitability can be. A large part of Europe, and we've excluded Ukraine here for obvious reason, the last part of our business in Europe is getting to peer margin profitability with very strong improvement, if you remove Ukraine impact, year-over-year, and we are very confident we'll be able to achieve upper industry margin in the short to medium term.
I'm gonna dive a little bit deeper into what make us so confident about that, and I'm gonna take the example of what we've done in South Africa. In South Africa, we manage 2 vertical businesses, as I've said, real estate ones and the motor ones. As we were, during the last 4 years, increasing our market leadership, and we measure market leadership by how much additional demand or searches we have on our website versus the next competitor. We move from 3x larger in term of search to 5.1x larger. At the same time, we're able to improve margin from 39%-59% in our property vertical and from 28%-46% in our motor vertical.
This year again, our trailing profit are increasing in South Africa, while the growth rate of the business is around the, you know, 10% mark. This is the recipe we use in all of our markets. It happens that Africa is a bit more mature for us than some of the rest of the businesses, but you will see the same type of trends and improvement in profitability in the coming years. I've talked about monetization as a very important part of how we will improve that profitability. We have spent a lot of time, energy, and effort and resources to build those leading position in each of the market. That give us a unique opportunity to now monetize more the traffic we're providing to our marketplace users.
You can see here with the example of Poland, our largest market, that we've been able to increase the average revenue per user by 30% on average between our two big categories of motor and real estate in the last year. You can also see that when you compare our revenue per user versus peer benchmark around the world, but here I think it's mainly Europe to stay consistent, and we adjust for buying power, agent margin, dealer margin. We adjust for any external economic factor. We still have an ability to increase by 100% our monetization to be at the same level as where those peers are today. By then, the monetization we will improve through better, you know, multiple ways of monetization for lead, selling data as a product, and so on.
30%+ this year, a runway to double our monetization in the short term. Obviously, we'll do that cautiously 'cause we wanna make sure we provide the right level of services for our users as we increase the monetization, but it give you a sense of upside potential we have here. I'm moving into how we keep on investing in the foundation of classified as a business and moving into a full-fledged Classifieds 3.0 business. That is Panship. Panship is the ability of any one of us finding a product on our platform, buying directly this product on the platform, having this product shipped to your place, and having the guarantee that this product is genuine and is exactly what you need. If you don't like it, you can return it. An extraordinary service.
Extraordinary, sorry, that, you know, within a 2-year timeframe, we've been able to build 12.5 million transactions in the first part of the year. 65% improvement versus last year. A very strong vetting by our customers. When you look at what I call adoption, 1 customer out of 2 is now using Panship on our platform. 65% of our sellers, 2 out of 3, is using Panship as a product to increase their sales on our platform. What's very interesting too is the way Panship increase retention. The difference between non-Panship users and Panship users is a 23 percentage point improvement in retention. As we develop Panship, as we get more adoption, we get more users, we get more retention. That is building the flying wheel of future successes.
Very important part of Pay & Ship in the industry is the unit economics. We started Pay & Ship by providing the service at a very low fee. The idea was build it to scale, demonstrate the product to customer, get them excited, and then monetize. Very common route to market when it comes to introducing a product. What's interesting to see is we've been able to triple the monetization of that product, still increasing by 65% the number of people who use it. We have a very clear path of doubling this monetization in the midterm and bringing Pay & Ship to break even. We are very confident we'll be able to execute on that strategy. We believe that we can deliver a 15% profit out of net revenue, so the 1.2% profit margin divided by the 7.8% tech rate.
That is probably a conservative scenario. I'll finish here by sharing a little bit more about technology. As I've said, technology is an absolute enabler of success for us. We've invested in technology, we've invested in leadership to drive technology, we've already made a lot of progress when it's come to building global platform that can serve all our markets and innovate faster and at a cheaper and a more efficient cost. I'm gonna go quickly through the fact that we're moving from more monolith type of historic system, but you can find a lot of industry players to a full microservice API-based platform, very standardized, very standard type of IT transformation. More importantly, we are building single global product across all our market.
The Pay & Ship I mentioned operate in 3 different countries today, used to be operating on multiple different platform. By the end of the year, we'll have a single platform. That means when you innovate, you innovate for free market in one go. That means that you need 3 less people to do the same innovation, 2.5 to be specific. We do the same for real estate vertical. We operate in 4 different countries. We used to have different platform. We're merging to 1 platform. You can see that it doesn't prevent us from growing, it's a very strong enabler of profitability and innovation. Innovation will be key to be growing quickly, efficiently, and stay in the game. I can go on and on.
Payment is one platform, advertising tech, marketing tech, and all the component that you'll find in a tech ecosystem. One important thing I want to share is we have millions, I'd say hundreds of millions of customers around the world. All of those customers can be identified on a single ID across all our platform. I know exactly who's coming to which site from which device, and we can track all of our customer from device to device. Choose not to be the case. Now we have a unique opportunity to leverage all this entire customer base and expose them to our entire set of services. That was a huge effort and a huge transformation, but is now fully complete. Another big aspect of what make us successful is data and machine learning.
I'm very happy to say that I think we are very well positioned to take the full benefit of data and ML within OLX Classified. The first thing is we have now a single data team, a single data engineering, a single data platform, multiple data platform, but a single data platform that basically supply all of our businesses across all our countries. We have a single ML model platform. We are 130 teams are working on the platform. Any ML model that is developed in one part of the organization can be implemented in the other one and retrained way quicker. ML is everywhere in what we do. It is doing our trust and safety.
More than 90% of our ads are going every day through machine learning algorithm to help understand whether it's eligible for being on the platform. Every day, we have 8 million images being scanned through ML-enabled algorithm to make sure they are relevant for our platform. We improve search, we improve ranking algorithm, we improve transaction, we improve monetization. Let's talk a little bit about numbers here. We've shared that during the H1 result of Prosus, I'll share again.
We've been able to improve, if you exclude Ukraine, by 20% the revenue growth of our businesses if you remove FX impact, which has been quite significant as we know in our part of the world. More importantly, we've been able to improve training profit from 19% to 27%, almost a 50% improvement year-over-year. This is the first part of the year. I'm expecting the second part of the year to see a strong improvement to, given the actions we've taken about our focus on profitability. I want to wrap up the classified, core classified part here by reiterating our focus on accelerating profitability through capturing more monetization upside and getting operational gearing from our existing cost base.
The second part is really keep on fueling the building the foundation and fueling the growth that will make us a strong leader and uniquely positioned to win in those categories by investing into category-specific product and services and, obviously, investing in partnership. Finally, what we've just seen, which is the investment in technology as an enabler of success. If we look in the future, we believe that Europe will keep on growing at a 15%-20% growth rate, which is very consistent from what we've told you a couple of years ago in our last capital market day. The trading profit will get in the upper level of the industry margin, 35%-45%, roughly a little bit less than double what we have today.
Brazil, our joint venture with Adevinta, will have a 15%-25% growth rate, depending on the market the macro situation, will reach a 30%-35% profitability. We are very confident that this is absolutely within our reach, I've showed you today a couple of the elements that will give you confidence that this will be done and executed. Let me now move to the second part of our business, our investment case with OLX Autos. We are all very excited about OLX Autos, I'll share a little bit more why now. The first thing I wanna do is to make sure everybody's on the same page with what, you know, OLX Autos stands for and is. OLX Autos is a fully transactional business model.
Car sellers want to sell a car, he gets in touch with us through multiple apps or, you know, self-inspection tool. We can provide him with an instant quotation of how much is your car worth, and we can basically buy the car on the spot, giving the cash, taking the car. We will then take that car, eventually do some minor repairs, we don't do big repairs, minor repairs to bring it to the next level, warehouse it, and then sell it back to dealers or end consumers. We own the car, and we resell it. OLX Auto today operates in 9 markets. We are number one or number two in each of those markets, and cumulatively across the last 12 months, we've delivered $2 billion of revenue in OLX Auto.
That makes OLX Auto one of the large player in the world now. What get us so excited about OLX Auto? Three main things. The first one is it's an incredibly large business in term of addressable market. Only in our 9 markets, this is $1 trillion of revenue. $1 trillion. The second thing, it's absolutely fragmented. Like, it's multiple small dealers, most of them mom-and-pop stores who are doing that business. Online penetration is still very low, 1%, 2%, 3%, 4%, 5% in the most advanced market, so up for grab. The last thing, and the most important thing for me, is the customer experience of the analog world is absolutely disastrous. Who bought a used car? I did a lot. You never know what you buy. You don't know whether you're getting fooled or not.
You don't know the right price of the vehicle. You have no warranties. It's very complicated. What we come is you wanna sell your car, you can sell it in a minute. Go on OLX Auto, you'll get a quote, we buy the car. You wanna buy a car, we'll sell you the car with a 200-point inspection report. We will deliver it to your house. You have 7 days to change your mind and getting back to us, and we'll give you 12-month warranty. On top of that, there will be full transparency on the pricing. We believe this type of proposal can absolutely disrupt this industry and enable us to consolidate the used car market under our type of services. The 6 focus we have on OLX Auto are the following. The first bucket is really about scaling profitably.
We all have seen what happened in the market in the last couple of months. Getting to profitable unit economics is absolutely critical. I'm very pleased to say that we've already achieved that in some of our market last year, so we know how to do it in a sense. Scale profitability will be one of the main focus. The second one is go about driving constant efficiency so that you can get to the right level of bottom line dollars at the end of the day. Scaling profitably is about, first, focusing on the core markets. You will have read that we've closed some of our smaller markets because we wanna focus on nine markets. We wanna be number one. We wanna be profitable in those markets. Those nine markets are mainly there.
You will see that in each of those markets, we've been able to consolidate our leadership position or get closer to the number one by building scale at a fast pace. I mean, we're talking about 100% growth, plus growth in most of those markets. The second thing we're doing to scale profitably is we historically were selling our cars directly to dealers. When you do that, you get only a share of the profit pool. We're now shifting our business towards selling cars to the end consumer. When I'm saying shifting, right now we are at 50/50. Half of our cars are sold to dealer, half our cars are sold to end consumer. Couple of years ago, 24 months, it was 0.
When you look at the last 12 months, we multiplied by 2.6 times the number of cars we've sold to what I call B2C, so end consumer. Business to consumers. Why is it important? It is important because B2C yields 6 to 8 percentage point better margin than if you are selling to an end dealer. Why? First, you have extra margin. There is 1 less people in the middle, right? You become the end dealer. You do roughly 4 percentage point better margin selling C2B, sorry, B2C, business to consumer, than C2B. On top of that, as you sell to the end consumer, you're able to actually offer him the additional value services and financing. This is a huge part of profit improvement.
In Chile, for instance, we have 4 percentage point better margin when we sell directly to the consumer, and 3.3 better percentage points through selling financing and other value-added services. That's an overall 7.3 percentage point better. That is a huge part of our profit. To do so, you need to do a couple of things very well. One of them is you need to build a strong brand. Great news. OLX is already a very strong brand in the country we operating to. It's with no surprise that you will see that OLX Auto brand awareness is already ranking around the highest in the country we're operating to, because we piggybacked on the already very strongly well-known OLX brand in those market.
The second thing is, in the market we're operating to, the car is sometimes the largest investment somebody will do in their entire lifetime. They don't have a home, but the biggest second asset is the car. It's a lot of online expense, but you still need to provide some kind of offline trust and reassurance. For that, we build inspection centers. We have 442 of them in September last year. This year, we only added 10. What you see here is while we multiply by 2.6 the number of volume transacted, we only increase by, you know, couple of percent the level of our offline infrastructure investment. We're leveraging our current asset and get a gearing out of it, and that's part of the profitability improvement.
More importantly, when we do that, we use technology and data to be more relevant. Right now, if you buy a car on OLX Auto, the pricing you will get is actually AI directed. There are a couple of people in the back checking things, but basically, we use our extraordinary access to data in all of the markets we operate, to be able to provide a very accurate price of how much should I buy, how much should I sell. We have developed inspection tool, one of them will be demonstrated to you later on. Basically allow you at home to just scan your car and they will tell you exactly what are the dents, what are the problems, and give you a price instantly that you can accept or not.
One of our goal is to move a lot of a transaction online. I'm very pleased to say that we are progressing very well on that aspect. 75% of the car in Mexico are bought through self-inspection. We don't even touch the car. We self-inspect it, and we buy it. If there is a problem or a doubt, then we'll get it into a forklift for a car lift, and we'll make sure that, you know, everything's fine. We have 90% of our purchase that I'm doing from your home in India. You call us, we come to your place, we inspect the car, we buy it on the spot. In Indonesia, 35% of our car is delivered directly to your home.
That means that you start your journey online, you purchase with us, the car is delivered to your home. It's fully online. 35% already there. B2C is an very strong investment for us, that's why you will see that our profitability has decreased a little bit this year. It's a very strong investment, and it's an investment for the future. It's an investment to build our path to profitability, and this is the explanation why. I'm gonna go quickly here. It's about integrated financing. Every time you buy a car on OLX in countries such as Chile, Colombia, Mexico, Indonesia, automatically, we offer you, if you're screened, obviously, and eligible for it, a financing capability. Financing is a 3%-5% margin on top of a car.
The attachment rate of financing is 40%-60%. More than 1 people out of 2 will buy a car through a financing loan. It's both a margin sweetener for us. It's also a great customer experience. We have built our own financing capability, also leveraging what we know in the Prosus Group. In some of our markets, our intent will be to be leading most, if not all of our market, because it's an important element for the path of profitability. As we do that, we are very cautious on the way we're scaling it, especially in current market environment. I'm very pleased to say that so far, we've been able to deliver a financing capability at scale in those market with a low single-digit delinquency rate, which happened to be 100 basis points lower than the market rate.
We're doing it, we're scaling it very cautiously, and we're able to see that we are picking the right type of risk profile. One of the thing I wanna stress is we are very well positioned at OLX to do that business. When you're doing loan car financing, the biggest problem is, as an insurer, you don't necessarily know what you insure. Here, we've inspected the car. We know exactly the value of the car. The second thing is, if people don't pay, it's not a problem. Come to us, give us back the car, we'll rebuy it from you, and we're done. We have the ability to buy back and sell back the car, but it's not something everybody can do.
I think we have a, we're quite convinced we have a slight competitive advantage to be more successful in that field. OLX Autos is clearly benefiting from our ecosystem. When you look at OLX Autos versus OLX Classified, today, 30%-40% of the car we buy come from a seller on one of our OLX platforms. We know exactly when they listed. We know how many time, you know, they've been waiting to sell their cars. We are very well positioned to come exactly when they need, with the right offer and buy the car from them. Similarly, 30%-60% of the car we sell are sold back through, you know, leads that come from our OLX Classified platform. I'll say that finally, data is a key piece of success here.
The hardest part of most of the players in the auto transaction part is getting access to the data. What do customers want to buy? What is the price of a car I should buy or sell? You know, how do I contact sellers or buyers? All of this data we already have. Millions of customers share this data with us every day on our classified platform. That puts us a unique advantage to win in that market more than any other person. Couple of numbers. If you exclude effects, we've grown our revenue in car transaction by 84% in the first part of the year, reaching close to $1 billion. Our profit has slightly deteriorated as we keep on investing in building of a foundation in technology and B2C.
The very clear commitment we have, it's not a surprise, is that we believe we will have this year, the bottom of a curve of investment and that we will see in the coming years an improvement toward the path to profitability. If you look at longer term margin and how this business will evolve, and I know there's been a lot of discussion in the industry about that, we believe the net revenue margin, the type of, margin you get on selling your car could reach the 13%+ type of percent. Part of it is metal margin, we've discussed about it. Part of it is value-added services from B2C. The mix of B2C, the ability to buy and sell well will be critical in achieving that.
As we improve our efficiency, our variable cost will go down, and as we scale our business, our fixed cost will be better, you know, leveraged. Overall, we think we can reach a 5% trading profit. When you do trading profit divided by net revenue margin, that means a 30%-40%, 35% profit out of net revenue. That is, we think, the stable state of where we will get into the OLX Autos. What make us very confident here is that we've already seen that trend. In some of our markets, more last year, where the business was very well oriented, we saw this kind of margin in the most mature part of some of our markets.
This is not something that is unexpected to us, and it's not something that is not a new news for us. OLX Autos accelerate path to profitability, and we want to see or we expect tangible results in the next 12-18 months as we capitalize on growth margin upside, integrating financing and leverage our existing cost base. We're investing a lot in our cost base on building the infrastructure. We have a unique opportunity to get leverage out of it, and we're already doing it as we speak. The second thing is we will keep on consolidating our position in car markets by deepening our B2C penetration and leveraging our existing capabilities. Finally, we have a chance or we have a competitive advantage of having a unique global tech platform across our nine countries.
It's a single platform, single team that give us a unique opportunity that every new engineer is contributing to the entire business. We will keep on investing in that platform as we need to build the technology that enable us to be more efficient and build at scale. Let me wrap up. OLX Group key takeaway will be obviously accelerating path to profitability. This is our first focus. We believe we have a very clear achievable plan to succeed. We are very confident in our ability to do so. The second thing is obviously getting leverage and gearing from our existing operational costs. Once again, we've already started this year. At the second part of the year, we'll already see the first result of this cost efficiency that we've been driving in the first part of the year.
Finally, you will see us keep on investing in technology, both on the resource side and on the investment side, to build this leading competitive advantage, both on tech and data. When you look at our path to profitability, we believe, you know, as I've said, long-term ambition is 35%-45% core classified margin, 30%-35% on net revenue, out of net revenue for OLX Auto, FY 2025-FY 2026. When you talk about valuation, you have on the left-hand side here the valuation we have. Right now we're sitting at a $6 billion valuation based on public company and peer benchmarks, so we think it's quite accurate. We believe that in the near future we'll be able to improve by 2.5 times the core classified valuation.
When you think about a business that double every 4 years, when you think of a business that will double its profitability in the next 3 years, you do the math and it seems pretty realistic to me. Obviously, that will be done through margin expansion and cost efficiency, sustainable growth, 20% in Europe, and the acceleration and monetization of our transaction capabilities in township. In auto, we see a higher potential here as we really scale and improve the profitability of our business with a 4x valuation ambition. With that, I wanna pause and welcome back Aaron on stage for Q&A session. Thank you.
Thanks very much, Romain. All right, we are gonna go into the Q&A session. I'll give you a little bit of instruction here, just in case you've never asked a question before. We've got two catch boxes on both sides of the aisle. Please raise your hand. I'll direct it. Please stand up when you ask the question, speak into the mic. We'll take them from the room, and we'll take some from the webcast. If you're on the webcast, please just type it into the system. First question, always really, Will Packer. Please limit it to two, Will.
My reputation precedes me. Thank you for allowing me to ask a couple of questions. The listed comps in the OLX Autos space are down 90% plus in the last year or so. Could you just help us think through what gives you the confidence going forward? Is it the fact that you're a emerging market focused? Is it the integration with the traditional online classified business? You know, why are you more optimistic than the market? Secondly, when we think about the long-term of the OLX core business, to what extent is its future independent of the OLX Autos business? For example, in Classifieds 3.0 you cite quite heavily the transactional business as a key driver of the future.
Could you, in the event that OLX Autos is less successful, could you pivot towards a less capital-intensive model? Could you work with JV partners, for example, or do you need OLX Autos for the auto classified business to succeed in the next phase of growth? Thanks.
Thank you. Let me address the first question. We obviously all have seen what has happened in the auto transaction industry and the type of valuation and sometimes skepticism that we've seen from investors. As I've said, we stay very excited about the opportunity we see in OLX Autos, first because of the size of the market, secondly because of the fact that this market is right for disruption, thirdly because the customer expands that our type of offering can provide is absolutely superior to what is existing right now in the market. The second thing that is very make us very convinced is once again, we've seen our businesses operating at the right type of property in some more mature markets, and we have refocused our business on those on nine markets.
We have this unique platform that we can leverage. We will demonstrate the progress we can do around profitability of our Auto business in the next future. On our end, we stay very committed to it, and we stay very confident about it. I will finally say that, you know, we have also the opportunity of having Classified as a very strong tailwind to our success in the business we operate. For us, OLX Autos stays a very strong opportunity for growth and value creation. The second part of your question was about how the two are linked. I've illustrated during our presentation how the two were fueling each other. Now a lot of people are operating Classified segment separately from Auto transaction businesses, and a lot of people are doing Auto transaction without Classified.
absolutely tomorrow if, you know, we cannot successfully execute and we cannot successfully demonstrate the profitability path of a Auto transaction, we can absolutely separate those business.
I will take one from the webcast. This one is: "Hi, Romain." It's a good start. "Do you mind sharing what the AOV and product mix shift is for the Pay & Ship since launch?
Sure. The Pay & Ship is mainly offered in the, what I call the goods category, and you would expect that given the logistic needs of Pay & Ship, it's rather product that basically fit in a box, right. No fridge and these kind of things. The product mix shift is, as you would expect, a lot of electronics, a lot of fashion, and that's common across any commerce platform. AOV wise, we've seen actually an increase in AOV as we start monetizing and as once again, when Pay & Ship was free, there was no limit. When Pay & Ship becomes for a fee, when people start arbitraging a little bit more on how they use the services.
What's more interesting though is with Pay & Ship we've moved from a business which was mainly inter-city to a business that is now, sorry, intra-city to a business that is now inter-city. What we're seeing is Pay & Ship adoption is really increasing when it's about shipping from one city to another. Once again, not very surprising, but a proof point, and we're very excited by that because suddenly it opens a lot of opportunity. People who used to purchase on OLX were basically looking at the thing in their surroundings. Now you go on OLX, and you can have any of the 90 million listings we have and basically get it from anywhere you want. It's a great opportunity to increase the transformation level, increase the leads.
I'll just say the final thing, which I think is very interesting about Pay & Ship is Pay & Ship is a mechanism for us to monetize a category of customers that previously didn't pay anything on our platform. It's not cannibalizing anything. It's actually incremental to what we used to have, which is a great upside for future growth and future profit pool.
Okay. Cesar, did you have one? Want to speak into that?
Hi, it's Cesar from Bank of America. I have 3 questions, if that's okay. The first one would be to explain. When you buy cars, you said that 40% of them are sourced from the classified business. Where is the other 60% sourced from? Sourcing 100% from the car classified vertical, does it basically has an impact on profitability? The second question would be on understanding better how do you mitigate the credit risk. The third one, to understand if the number of inspection centers has reached the scale that you wanted it to have. Thank you.
On the first one, indeed, 40% are, of our, supply is coming from OLX Autos. The rest is coming from customer walking in our inspection center and selling their cars. It's coming from people directly logging on to OLX Autos. As you've seen, the brand awareness of OLX Autos is quite high. If you go in Indonesia, where we are number one, people now know that we're there, and when they sell the car, they wanna come to us and get a quote from us. A lot of the traffic is just direct SEO or marketing, performance marketing, driven or brand driven. The 40% is indeed classified. That's first element. The second element was around the, if I recall, well, around the, credit risk.
Here, I mean, providing credit is not new to Prosus. We're very lucky to be part of a, you know, group that already have a lot of expertise. We stepped into that expertise to really go down the learning curve very quickly. We've obviously hired people that help us build our credit risk policy and our credit risk tool. Right now what we have is we have an entire tech stack that basically deal and analyze credit risk. Once again, we have a lot of data. We complement those data with external source of information that help us have a better prediction. So we have a tech stack. We have an entire set of teams that are used and come from an industry.
Finally, we've provided a very strong governance framework in line with Prosus governance around having a credit risk policy with professionals, independent professionals that help us better manage that risk policy. That's on the risk side when you provide the credit. As I was sharing, there is another effect where we are probably uniquely positioned to succeed, is that when we see defect or delinquency, we're able to actually very quickly do trade-ins with the customers, retake the car and giving a cheaper car or something like that, or just, you know, retake the car and resell the car ourselves. Our ability to recover when there is delinquency is actually higher than any competitors, which is a great thing in both sides.
Great.
The third question was country member.
On the inspection centers.
Oh.
If you think it, already reached the scale that you wanted to have, or do you need to open more?
We probably open some more as we scale, because at a point in time, you know, there is this stat where you need somebody to be not too far away from your inspection center. Let me share with you one of the way we wanna do that, right? This is offline infrastructure and cost, and we wanna try to be as viable as possible as we wanna reach profitability. I'm gonna take the example of Turkey. In Turkey, we've taken a small equity stake into the largest operator of inspection center in Turkey. With a minimum investment, we've been able to reach 300 inspection point that are manned by an external person.
When you go there, you see a no OLX, you know, branded place, and they basically inspect on our behalf the car, and we take the car from them. By the way, the great thing is, if it's not properly inspected, they bear the risk and they bear the cost. We are developing model where it's way more flexible and viable to be able to inspect cars. Yes, it will probably grow, but we gear ourselves toward more flexible models. First answer. Second answer is, we will see more and more technology being used, self-inspection, home inspection, to try to not rely on offline infrastructure, but more technology or very viable cost type of infrastructure.
Thank you.
Okay. Running up on time, but Lisa, let's take... Maybe just listed to one, and then, we'll have Romain back later on the day.
Thank you very much. I have actually two questions. I think you have a number-
Much for my instruction.
I think you have a number of associates and JV, obviously OLX Brazil, Carousell, EMPG, et cetera, and Let go. What are your intentions over time with the ownership, in terms of ownership of these assets, and how integrated they are with all your initiatives in terms of shifting to this global tech platform? Can you achieve a similar synergies with these associates and JV? That's the first question. Secondly, a question on your margin targets of, I think you said 35%-45% for Europe and, I think 30%-35% for Brazil. Firstly, why is the margin in Brazil structurally lower than Europe? 'Cause I think you're already number one in real estate and auto, so anything we should, you know, you can flag here.
Secondly, what's your assumption in terms of the share of transactionals? 'Cause I guess this is much lower margin than core business. How big you think the transactional within C2C is gonna be within that margin target? Thank you.
The first question was.
Associates.
Associates, sorry.
Yeah.
Associates. We have, you know, we have a history at OLX and Prosus to invest early in some businesses and then grow into the shareholdings and sometime fully acquiring, right? We've done that with couple of our businesses, including in OLX Classified. You will probably see this type of behavior when it makes sense, when we see a business that we have strong conviction about, when we see a business that has strong synergies with our core businesses, and where it see a business that can accelerate our profitability. In other businesses, sometime we've just decided to divest those businesses, and we've also done that at OLX, or OLX Classified. I would say there is not a single answer here.
We will make sure that the business we increase our share in have the potential to bring the extra value and disproportionate value to OLX. You then asked a question about... You have better memory than I have.
Margins structurally in Brazil versus...
Margin in Brazil is due to the fact that you have probably a market which is a little bit less mature, and Brazil margin is very impacted by, you know, the real estate market that has been seeing a couple of headwinds lately, especially with interest rate increase and the like. There is still path of margin issue in Brazil. The next one, it's short-term reason. The longer-term reason about the margin in Brazil is just the maturity of the business. Brazil is a huge market. We are really at the early stage about market growth, you'll just see the delay in the maturity. Your last question was around Pay & Ship and the size of Pay & Ship in the future.
Pay & Ship, you know, we do 12.5 million transaction, but we are really at the beginning of it, and that's the beauty of it. Right now, most of our transaction are used, but as we build Pay & Ship, what is really exciting is that we build the capability to not only offer you to transact used goods, but to enable any merchant who wanna use our platform to sell new product to consumers to actually get on our platform and operate with us. That has been seen in other businesses. Right now we're at the beginning. It's a single-digit size of our transaction, and we expect it to obviously grow. The type of growth rate right now is you're seeing 65% year-over-year.
If you multiply that by an AOV that has grown, you're probably around the, you know, you're closing on the 100% growth marks. Yeah. How far it will go? Very hard to say, but we know it will be a significant part of our goods business in the future.
Brilliant. I think the symmetry there is perfect between Lisa to Romain. Let's keep the French connection going and bring over, Laurent from PayU. Thank you very much.
Thank you.
Thank you. Hello, good morning. For the past six years I've been with PayU, we've been investing to build and to grow a global payments business purely by focusing on fast-growing developing markets. The reason we exist is very simple. It's actually just to connect, you know, consumers and merchants on our platform. On one end, we integrate all the payment methods that we have in our markets so that consumers can pay with what they know and what they prefer. On the other end, we enable merchants to collect payments from all of these markets in all the currencies, and they can do that with just one single API. Today we are in four continents and 17 markets doing just that. In all of these markets, there is really one that stands out, and that's India.
That's really the topic that I want to discuss with all of you today. What are we doing? What are we working on in India that makes us really so excited about the opportunity? To understand India, you need to understand UPI before. Some of you might be familiar with UPI. Otherwise, I'll give you a 1-minute crash course on this. UPI stands for Unified Payments Interface. What it is it's a payment platform actually built and developed by the government in India to boost digital payments. It's actually very easy to use if you are a consumer. You can link it directly to your bank account. For merchants, it's a real-time payment, and it's free. It's been a huge success actually in the market. Let me show you. You can see here on this graph, this incredible green line going up.
That's the number of transactions going through the UPI platform in India in just a few years. This is truly unique in the world. This is truly unique in the payments industry. There's a couple of points though to know about UPI. The first one is that it's really, really good for small transaction. You know, low value, small transactions that you do on your phone on a daily basis. Really good for that, right? Not so much for the rest. For the rest, high value transaction, more complex transactions, cards are still dominant, right? The second thing is for all the success of UPI, still today, 60% of all the transactions are still made with cash. You can see you know the runway that we have in the market ahead of us.
Now that you are a bit more familiar with UPI, let's see what is the opportunity for us in India, what is our plan actually, and why we are so excited about this. Well, the first reason, as you know, is that India is the fastest-growing economy in the world right now. It's not just today. India is on its path to become the third-largest economy by the end of this decade. It's quite unique. Look at the trajectory of the whole country. It's incredible. For us, if you look at financial services, the opportunity is in the trillions. A big part of that is, of course, the growth in digital payments, right? This will triple in the next five years. The time horizon is actually very short.
I think more importantly, what we see in India is the rise of a young, affluent middle class, purely digital, who want to have access to a new type of services, financial services, like lending, for instance, that are not given to them by the banks or new services to manage their money. That's the opportunity that we are going after, this young, affluent middle class with our products and services. It takes us well beyond payments. To do that, we are building an ecosystem. We focus on three different and very distinct sets of customers. The first one are, of course, the merchants, right. That's where we started from. In India, we focus only on e-commerce, online e-commerce, and we've been quite successful at this. If you take the top 100 e-commerce merchants in India, 96 actually use our platforms for our payments.
With merchants, we give them not just a checkout solutions, we give them also a way to increase their sale. That's the Buy Now, Pay Later product that we have developed. To do that, we move to the consumer side of the equation. In India, there's about, you know, 300 million active consumers really shopping online on a monthly basis, 300. At one point in their life, they will come through our platform, and they will share with us their data, their payments credentials, their phone number. It's truly by using this data that they're sharing with us that we can build new products like Buy Now, Pay Later, which help the merchant increase their sale. It's actually the merchants offering that to the consumer. You can see how the two work together.
The third set of customers we are serving are the banks. The banks are, of course, critical in any financial services industry, and they come to us actually to use our payment platform. We have a wide level payment platform that banks can use for their mobile payments, for instance. They come to us also to use our technology for more advanced services like fraud management. They contribute also to the data on our platform. In India, really, we are building this ecosystems around merchants, consumers and banks to lead with our product, to lead with our technology and to lead with our data. We're also leading, you know, in the market with our scale. This has been really a rapid growth business for us, and we've reached scale in payments.
We've processed, you know, last year, more than $40 billion, you know, of volumes, 7x, right, in just a few years. We are leading also in terms of revenues in the payments industry in India. I should say, we are also one of the very few profitable companies in the payments industry there. This leads me, you know, to the key question, a question that we get most of the time, so I don't want to preempt your questions, but I'll do that one for you. How do you make money in India? How can you be profitable in India, especially when UPI is free for the merchant? There's a couple of things here. The first one is, as I say, UPI is very good for low-value transaction, but for the rest of e-commerce, cards still dominate.
In our payments mix, all the transactions that go through our platform, UPI is only 18% of our mix. All the rest are cards. We make money from that. The second thing is, by the way, we are still able to charge a small service fee for UPI transaction. It's a very small take rate, but it's a very high profit margin, 85% pure profit margin. I think more importantly and more strategically for us, we've been investing over the past 3 years to build new products that are not linked to our ability to charge a merchant discount rate, products that are not linked to us charging a processing fee. Products that are actually more like a SaaS type of business, subscription services.
Today, what you can see, these products that were really nonexistent five years ago, they now account for one-third of all of our revenues in payments. This diversification of revenues, it's really at the core of our strategy. These are products like affordability platform that we sell to merchants. These are products like authentication, fraud management that we sell to merchants on a subscription basis. This is also omnichannel. Today, it's one-third of our revenues already. What we can really see going forward in the next few years is that this will account for half of all our revenues, and therefore, that gives us the confidence in terms of the ability for us to protect but also expand our profit margin. Beyond the diversification of revenues, what is important for us are the two next waves of growth.
The first one that we see is around omnichannel. Omnichannel is, to put it simply, the solution for consumer to use their phone and pay in store, right? To make a transaction in store. For us, at the end of the day, it's the same transaction. It starts with your phone, it goes to the cloud. That's where we process it. This is it. The big difference here is that we are embedding our payment solution directly in the app of the merchant or in consumer interface like WhatsApp. WhatsApp is de facto the consumer interface in India, and that's a key partner of us. The point here is also that we are completely leapfrogging the legacy systems of the point of sale terminals. This is not a hardware market. This is not a hardware solution at all.
We go directly through our software in the mobile of the consumers, and we start now seeing the growth coming from the channel, and this will be a big driver for us in the coming years. The second wave of growth will be credit, will be our ability to deliver digital lending solutions to the consumers. That's a very big part of our strategy. This has been a big part of our investments. To go deeper on that opportunity, really explain you how it works and the details, I want to invite to join me, you know, Prashanth. Prashanth is the founder of PaySense. He's the CEO of our credit business, and he will spend some time with you going through this opportunity. Prashanth.
Thank you, Laurent.
There you go. The clicker is yours.
Awesome. Thanks. Folks, I'm Prashanth Ranganathan. I'm the CEO of PayU Credit in India, and it's my pleasure to be here today. I've been at the helm of PayU Credit for just over three and a half years now, and prior to that, I was the founder and CEO of PaySense, a company that PayU invested very early on and then subsequently bought in January of 2020. Why am I still here? The credit opportunity in India is the next big S-curve that builds on top of a already thriving, already at scale payments business. A great credit business is built in harmony across three key dimensions: growth, resilience, and profitability. It's these three that I will unpack over the next few minutes for you. Let's talk growth. There's no growth without a large target market, and we have one.
We all know that once you go digital, you don't go back, whether it's the way you order your food, it's the way you educate your children, it's the way you hail a cab, it's the way you perhaps process your payments or the way you avail credit. India is going through an unprecedented rate of digitalization across all sectors. Credit is no exception. We, as PayU, as PayU Credit, in fact, with the scale, the license, and the capital we enjoy, sit in a very privileged position to capture a lot of this white space that's becoming available. We build the credit business through our key strength. We leverage our large merchant network to promote and distribute our Buy Now, Pay Later product, which is called LazyPay.
LazyPay actually drives convenience at checkout by allowing a customer to conduct any number of transactions at a merchant on a monthly basis and pay for it at the end of the month in one shot. This is a huge convenience factor for consumers, and consumers love it. In fact, so much so, it's actually the merchants that love it just as much because it actually improves not just their basket size, not just their checkout experience, but also delivers a fundamentally much better success rate at checkout. Merchants promote it. Customers love it. Let's talk some numbers. We have 58,000 merchants in India who use LazyPay, who offer and promote LazyPay every day. Laurent talked about 300 million consumers who are digital and online.
Out of those, we have pre-approved 66 million consumers today using our data science, and out of those 66 million, 4 million of them have already onboarded on our platform. Each month, through our large merchant network, we onboard 200,000 net new consumers who come and onboard themselves onto our platform. These are net new customers, free of cost, delivered to us through our merchant network. This is phenomenal. This is a great flywheel that's working for us. These consumers, when they activate, do 3 to 5 transactions every week. Why is that important? An engaged customer continuously participates in an exchange of data and trust on the platform. They give us data, we deliver more trust, and they give us more data, and we systematically grow them into longer form, much bigger, much more needed credit formats.
Those credit formats are far more profitable. You may know those credit formats as personal loans, revolving lines of credit, or what have you. That's the journey we've built. That's the flywheel that's really, really, really working for us. That's what we're building on for the next future. Today, we use the flywheel to deliver credit to the consumers. We're not limited to credit. We can deliver other financial services right on the back of this very same flywheel. That's what we're most excited about. Let's switch gears. Let's talk about resilience. The best way to talk about resilience is to talk about what happened over the last 2.5 years. The last 2.5 years, boom, our customer growth went from 1.3 million to 3.9 million. That's quite impressive.
The chart on the right tells a very different story. It tells a story of resilience through the lens of monthly issuance. If you notice, back in Feb 2020, even before the pandemic actually hit, we actually anticipated a large macro shock and we retreated to higher ground. We pulled back our issuances and we deployed all our energy in supporting our customers remotely and also setting up teams to help collect on those customers while we were remotely working. Very quickly, as the lockdown started to roll out, we noticed that most offline businesses suddenly went online, and customers were demanding this BNPL product that we were offering. We systematically started to see that we were more resilient in our BNPL short-form credit, and we started to grow our issuances in BNPL.
We were conservative in how we approached the long-form personal loans, but we did double down on customers that were resilient, that were making on-time payments, and we were able to build out a fundamentally different business by the time COVID wave two hit. COVID wave two was far more devastating in India, bringing the country on her knees. For us, it was nothing much more than a tiny little blip. We had, by this time, used the year that had just passed to fundamentally transform the business, build a far more robust credit profile, and we were able to continue our issuances, and we haven't stopped since. I'm proud to announce that the book we have written through COVID and since is far superior to any book that was ever written in the history of the company prior. This exemplifies two things.
It exemplifies agility and resilience, two key traits, as you know, that are super important for any business to survive and scale in emerging markets, especially in a country like India. While that was going on, our revenues went boom, boom, pow, 4x. Our losses went half, 6 to 3. That in combination with the fact that we diversified our pools of capital, we got our NBFC rated, we expanded our co-lending, we pulled off an industry-first securitization of our unsecured port loans, and kept our operating costs relatively flat, results in a culmination with me standing here in front of you today proud to announce that we are now break even. At this point forward, we are forever hashtag profitable. Thanks. Oops.
Talking about profitability, it is really important to know the difference between a manufacturer of credit and a distributor of credit. Many of our partners, many of our competitors, many of them you know, are actually distributors. We, as manufacturers of credit, fundamentally enjoy much better economics in our business than any distributor does. Let's unpack this by looking at a horizontal view, an annualized view of a loan at steady-state. In our business, we enjoy a net revenue margin of 23%. We are at 22 today. We can get to 23 because we know how to underwrite high-yield segments better than anyone else can without taking on additional risk.
Our cost of capital, I just mentioned that we got our NBFC rated, we have diversified our pools of capital, we have a large co-lending mix to our base, our cost of capital is coming down. We are at 10 today, we're trending to 9. Our loss rates I already talked about. We went from 6 to 3. In fact, we're trending lower than 3 today. Lastly, we've brought down our marketing and CAC significantly. There are two things working for us. One, we've gotten laser-focused in how we market to our customers, who we market to, when we market to. We know what their customer lifetime value is, and we know how to build a CAC to CLTV ratio even before we onboard the customer. The second thing is we have a large BNPL base now.
We know how to get in front of them, they're highly engaged, and they do love our product. That's working for us. What does that mean in financial terms? That means we can generate a trading profit margin of 6%. Today, we are north of 1%, but we can generate a 6% trading profit margin, which effectively means a 20%+ ROE delivered at steady-state. To bring this to a close. We have a phenomenal flywheel that's working for us, delivering very low CAC customers every month to our doorstep. We know how to engage them. We know how to create this trust data exchange with them through our app. We know how to underwrite them very deeply and meaningfully, better than any other manufacturer in the industry can.
We can also use our capital to our advantage by significantly lowering that cost over time, by diversifying that pool of capital. Finally, that results in a very beautiful, profitable business, if I say so myself. Thank you for your time, and more importantly, thank you for helping me build this amazing business over the last few years. Back to you, Laurent.
Great. Thank you. Let's look at the hashtag profitability. Thank you, Prashanth, on this one. You heard Prashanth, right? With his passion, but you know, supported by real data. Let's see now how the numbers stack up actually for our business. The first one that you need to remember is the growth in our business, right? Actually, what we've seen is an acceleration of the growth across all of PayU over the past two financial cycles, right? Growth in volumes, we've reached the scale that we need there, and growth in revenues. This growth is coming not just from India, of course. We have a very successful franchise outside of India, especially in our cross-border business, which is growing actually north of 50% year-on-year. That growth that we've seen is translating also in revenues and profits, right?
If you look at more of the details here, a couple of points I want to make. The first one is on the payments volume, yes, you can see the importance of India. You see also the importance of the rest of our franchise. We have leadership position in really key markets, like Poland, for instance, or Colombia or Turkey. We are quite confident that we can sustain this level of growth for the next financial cycle. The second element is if you look at the mix of revenues, what you start seeing here is our credit is becoming a really important part of our revenue mix. Today, credit is already 15% of all the revenues that we are adding in India. By the end really of the next financial cycle, it will be 1/3.
A third of all of our revenues coming from credit, okay? That's quite significant. We're quite confident on this because we know how to scale the user base. We know how to scale the loan book and get really the risk under control. The third element, which is really important, is that we are coming at the end of our investment cycle. We've invested really, especially over the past three years, to build a credit platform, right? To build our loan book. Also to build, you know, these new products and services that are really critical to diversify our revenue base. Now we are coming to the end of this credit cycle. With the scale and the momentum that we have, we can really see, you know, the path to profitability. How we will get there is actually for us quite straightforward.
The first one is, of course, the scale, as I mentioned. It's going to be, you know, half of the impact. The second thing is the constant optimization of our platform. What I mean by optimization is we are constantly, you know, reducing the cost of payments. Constantly reducing the cost of operations through automation. The third one is also, you know, the rationalization of our cost base across all of the countries and more synergies there across our platforms. With these steps, with the momentum that we have in the business, the scale, the growth in revenues, and the unit economics that we have in our credit business, we are quite confident we can reach profitability.
Here you have, you know, a level of ambition for us in the next financial cycle, really to get to 10%-12% profit margin in our core payments business and the double in credit. A couple of points here. For those of you who follow the payments industry, when we report our profit margin, it's based on our gross revenues. If we were to look at our net revenues, this profit margin would actually be more between 30%-35%, and that's actually more in line with other global payments company. The second thing is you see here how, you know, credit is much more profitable than payments. We can see credit becoming 1/3 of our revenues. By the end of the next financial cycle, what you can expect is 1/3 revenues credit, 2/3 payments. For profits, it will be 50/50.
If we do all of this, like we've done in the past, we are quite confident, you know, that we can increase the value of the PayU franchise for the benefit of Prosus, for the benefit of all our shareholders. Our value has gone up. You know, last time I presented to you it was $2.6 billion, went up to $6 billion, you know, at the end of last year when actually we listed Remitly. Now it's down to $4 billion. With the plan that we have, with the momentum that we have, with the markets that we have, we are quite confident, you know, we can double or triple that in the next few years. Before we take your questions, just a few takeaways, right?
What I hope you can remember from this presentation, PayU is in all the right markets, high growth markets, sometimes complicated markets, but this is where the growth is for the next 10 years. We have a leadership position in India, not just in payments, but across all financial services. We have the right to play and to win in India. We are rapidly scaling our credit business. That's a business that is break-even at the end of this year, and that will be profitable for the next financial cycle. With the momentum, the scale, the growth, we are focused on the profitability to increase the value. It's as simple as that, really. Thank you for your attention. Now we're gonna take some of your questions. Eoin is gonna come back to be the master of ceremony.
All right, everybody.
Prashant, yes, we can take the questions together. Thank you.
Right. Same, same as before. Yeah, that's right. Give it up. I think boom, pow will stick with me for the rest of my life.
Hashtag profitability.
Hashtag profitability. Hashtag questions. All right, Will.
Thanks. It's Will Packer from BNP Paribas. Just two questions, please. Firstly, you in recent history announced the acquisition and then termination of BillDesk.
Mm-hmm.
At the time of the deal, I remember you citing that Billdesk did 4 times as many transactions as PayU. I think on reflection, obviously, with the changes in market backdrop, that the termination was well supported by the market. Could you just help us think about the growth opportunities associated with that deal and whether you need to pursue M&A or can organically drive those areas of growth? You know, what are you missing from Billdesk and what can you create separately? Secondly, from a global standpoint, credit is quite politically sensitive. We've seen Ant Financial and Tencent Fintech credit as a growth driver evaporate. We've seen in the West credit be quite sensitive as well with enhanced regulation.
Could you just talk us through the maturity of the regulatory environment in India and whether we should view that as a risk? Thank you.
Okay. I'll take the first one. Prashant, if you want to take the second one-
Yeah, of course.
I'll add a few comments on this one. Look, BillDesk, very simple. Good topic for lunch by the way. You do a deal in September 2021, one year after the market has changed completely, right? That's one. For sure, I think there was a sigh of relief from a lot of shareholders when actually that deal didn't come through one year after. The reality is also that India is a market that is growing extremely fast. For us, we couldn't wait any time further because we need to innovate, we need to release new products, and it was already one year for that deal, right? That was starting to hamper actually our innovation capacity in the market. The third one is, yeah, indeed, one of the area of synergy was around data, right?
The reason for that is they have a big payments platform for bill payments, which is a lot of transactions, very low value. The reality here is we can get access to this data through other commercial partnerships with other platforms. That's what we've been doing. You know, I mentioned omnichannel, for instance, you know. For us, the importance is to embed our payments platform, you know, into different consumer apps. WhatsApp is one of them, for instance. WhatsApp, you know, is 250 million daily active users, I think even more. That's where we get the, this type of data as well, right? At the end of the day, the deal didn't happen. Actually, our franchise in India is stronger than ever and we continue actually on our credit, you know, strategy without this source of data, but we have others.
As simple as that. You wanna take the second one-
Yeah.
On the global one?
Yeah.
Ready?
I'll answer it in a few different ways. The first is, I think it's important to note that we do carry the right licenses in the, in the market to operate and offer credit to both consumers as well as merchants. That's important because, in a emerging market, often you find players on the fringe. We are fair and square in the middle, in front of the regulator. We're actually helping shape some of the regulation. The regulator in India has actually been very active. If you've looked at what's happened over the last year, the regulator has been fairly active. We welcome this because I think once the regulation is set and is clear, it actually creates a pathway to operate. That's the second part.
India still has a very low level of credit penetration as compared to China or the U.S. or other markets. The regulator and the government both recognize that for the trillions of dollars of growth in GDP that they wanna see, credit has to play a fundamental and crucial role. Credit is actually embraced. For players that are at scale, like PayU, I think it's less of a risk that we would find ourselves on the wrong end of regulation. We are actually actively helping shape that regulation with the regulator. We're actually holding the right licenses to offer the product. Given the fact that the credit penetration in the country remains low, there are. I don't see a significant kind of spillover risk similar to the U.S. or China in India.
Thanks very much.
Do we have anything over here? We do have one from the webcast. It reads, "Laurent," that would be you.
I think so, yeah.
Do you expect UPI will become more used for larger payment amounts? If so, would that be a threat or a benefit to PayU?
The answer is yes, of course. Look, the reason for that is it's not because consumers don't want that, right? It's more because the capabilities really of the platform were not quite up to the game. Without becoming too technical, what is fundamental, you know, for merchant is the conversion rate. It's like, "Look, I've got 100 transactions coming my way. How many of them will actually close, will actually convert into a real payment that will settle?" That conversion rate is the one metric that everybody's looking at. It was actually quite low for UPI on high volume and high value, sorry, transactions. That's actually what we can build ourselves. 'Cause, you know, we integrate UPI in our platform. What we are delivering to merchant is the higher conversion rate. We will be an enabler of that.
Is that a threat for us if people, you know, go from a credit card to UPI? The simple answer is no. UPI is incremental growth of transactions that we didn't see in the market. It didn't cannibalize the credit cards. It was on top of the credit cards. If you have a high purchasing power in India with a credit card in your wallet, you will still use it for your points, for your credit and so on. What we are doing here with UPI is actually enabling it because we want that incremental growth. The last thing you need to remember again is lower take rate, but much higher margin for us. Okay? That's why actually we're quite bullish in facilitating UPI payments.
Okay. I think we have time for one more. Silvia.
Thank you. Good morning, everyone. It's Silvia Cuneo from Deutsche Bank. First question, you talked about how you're close to the end of the investment cycle in India. Can you maybe share some thoughts about the other countries, to what extent you are investing there or you can leverage what you've done in India? Second question about the loss rate. You talked about the opportunity to reduce it further from 3%.
Mm-hmm.
Just wondering if there is any impact of the cycle potentially that we should be aware of.
I'll take the first one, you take the second.
Yep, all right.
On the first one, when I mention investment cycle, that's across all countries, across all business, okay. It's not just India, it's investment cycle across all of our business of PayU. We've built, you know, new services, as I said, for India, but also for cross-border specifically or for some very important markets, for instance like Colombia, right. We did an acquisition recently just to, you know, beef up basically our acquiring capabilities in that market, which is really critical to us. As I said, you know, in our financial plans now, this investment cycle is basically finished. We will always stay very opportunistic, of course. If there are some very good acquisitions to be done, you know, accretive, you know, to the overall business. Overall, for us, this is pretty much it.
Yeah. I think with regards to the loss rates, I think you have to look at the 3% in contrast with the 23% headline rate, right? As a function of like what the loans are going out at, 3% is still a acceptable number. In fact, public traded companies in similar landscape will often be at 5.5%, 6% if you look at their reports. We're at 3. We're trending to 2.5 as we speak, and we'll perhaps settle just around there or just a little bit lower than that.
The reason I say we will not go down to where the banks are at 1% is because I think as we expand the market, as we look to kind of bring on net new consumers that we can serve, we would also like to learn. This is learning capital. It's not loss, but learning as I see it. With that said, you know, if we need to fundamentally alter the economics of the business, we can always juice it down, go back, retreat to higher ground again. This is a good time to scale credit-.
Yeah.
Coming on the back of a large, long pandemic. We're looking at 3% as a good number to hold at this point. Very good. Thank you very much, gentlemen.
Thank you.
Thank you. That was PayU.
Thanks.
All right. It's now time to stretch the legs a little bit. We're running a tad late, we're gonna go to the coffee session now. There's gonna be some snacks down here, but if you want something hot, you wanna go back out to where we were in the morning. The bathrooms are there. For those listening on the webcast, we're gonna be coming back in 30 minutes, that's 11:33 CET. Thank you. We'll see you in 30 minutes.
Hello again. Sorry about the delay. Right now, hopefully you had some nice coffee. You're all jacked up. Speaking of jacked up, I'm gonna bring Larry to the stage and EdTech.
Sorry about the late start. We were in hair and makeup, and I like an aggressive part down the middle. Goes kind of back here. Took a little more time than we expected. You won't get bang, boom, pow from me. Strictly jokes. Now on to EdTech. Bob touched on it earlier today when he talked about, you know, one of the visions for our group from an investment perspective, is to invest in large areas of consumer need that have yet to be addressed by technology. In general, you know, we don't like to hang our hat on TAMS as a pipe dream, but, you know, it's hard to look past the numbers for EdTech, right?
You're talking about a global sector that's measured in the $ trillions, huge chunk of global GDP, and, you know, number on the bottom right of this slide is the one that drew us first to the sector when we started looking back in 2014. Sort of very low online penetration and presented a huge opportunity. As we look at the demographic shifts that are happening, not just leading up to when we started looking at the space, but for the next, you know, 30 years, you're talking about 2 billion new learners. One of the things that struck us about that is, you know, the physical infrastructure of the West couldn't possibly keep up to this, you know, tidal wave that's coming. It's convenient this slide is done in blue.
2 billion people that want access to upskilling and reskilling, and also new learners. One of the things I know, you know, everything is down and dark in the world, but one of the things that I like a lot about this data is that number on the bottom right, 400 million people will be removed from the no education bucket. That global need we feel very acutely in what we consider our markets, the growth markets, be it Africa, India, Southeast Asia, right? The physical infrastructure, if we see strain in Western markets and more mature markets, it's going to be even more extreme in growth markets. Another trend that we notice is the lack of talent. You know, we think about some of the secular trends that are driving this industry.
The lack of talent is especially notable in tech and management. Again, we think about how will the institutions that many of us grew up with address this kind of big need. Again, as a global operator of companies, we feel this problem also very acutely. A lot of our operating teams are struggling for talent in the areas highlighted here. We take those secular trends and think the learning model and education has to change, and that'll be both on the learning model side and link to that, the economics for the sector. We think the world will move from more theoretical to practical learning, shifting online, and instead of being frankly in venues like this, more personalized and self-paced. As a result, a lot of the economics around the sector will also change. It'll move from...
We've come from several decades of heavy government investment in education. Feel like that's gonna move more with the individual and be more private in nature, instead of being more of a luxury good and a high fixed cost with a higher level of accessibility. How do these trends play out in terms of what we see in the businesses themselves? We think about the evolution of workforce learning. For those that know our group, we started with investing in consumer platforms and workforce education at the time in the mid-2010s was very transactional in nature. The monetization was structured as such. Didn't feel like a business that had a long tail to it. What we're seeing now tied to that, mostly company needs, frankly, to upskill and reskill their talent.
We see greater investment in products that will be enduring in nature in companies and have much more long-term monetization, long-term contracts, and better economic models. When I've talked to some of the folks in the room about the space and what's happening with edTech and especially workforce education, a lot of people ask me, "Well, given that the world seems either in recession or depending where you are, on the brink of recession, isn't this a luxury good that will fall away?" You know, this is one of many surveys that we've seen out there. We talked to L&D professionals, even in the face of a global kind of macro slowdown, they say, "This is one of the areas of our budget that we're not gonna cut." It brings me to the, you know, portfolio that we've assembled today.
We first started looking at the space in 2014, first invested in 2016. Again, started with consumer-facing platforms, be it Udemy or Brainly. Quickly recognized that some of the more compelling economics existed on the workforce and higher education platforms. You know, to date, we've invested $3.8 billion in a portfolio of 12 companies. Now I'll shift gears to Stack for a moment. For those who are familiar with Stack Overflow, Prashant will come on in a moment and talk about the company itself. It's not naturally considered an education company.
In fact, when I, when I first reached out to Prashant to have a conversation about Stack, and I introduced myself as a person responsible for education investments, you know, we'll talk about it later, but he didn't take my call. It took a couple of conversations around it, aligned with some of these secular trends that we talk about to say the learning institutions of the future will not look like the learning institutions we have today. Again, he'll talk about his business in more detail. One of the things we ask from here, from this great starting point that he'll talk about, how do we continue to grow the company, grow the community, but also push on this path to profitability?
Prashant will talk about some of the business models that they have in place today that are all rooted in this very strong community and, you know, long-term margin ambition for the company. We know we're still in some ways in the early days, but we can see a path to, you know, ±15% long-term margins. We expect that will lead to significant value creation, right? The value that we have today for Stack is about $1.5 billion. Again, Prashant will talk about these specific products. It's a mix of two different business models today.
There's a very fast-growing teams product, which looks like a classic SaaS business, and also an advertising business that's tied to a very vibrant community of 100 million of the most valuable people on the Internet, technologists. With that, I'll hand over to Prashant.
Thanks. Thank you. Appreciate it. Hello, everyone. Thank you for your time. Wonderful to see everyone here and talk a little bit about Stack Overflow and give you a little bit of a deep dive on our company. My name is Prashanth Chandrasekar. I'm the CEO of Stack. Let's kick off with, you know, the numbers very quickly, just to give you a sense of who we are as a company. We are the world's largest software developer community and platform. We serve close to 100 million monthly visitors from all around the world. The reason why we're so popular is 'cause we have about 50 million questions and answers on every possible technology topic.
Anything that you read in the news today, whether that's cloud technologies, programming languages like Python, scripting languages like JavaScript, cybersecurity topics, all of that knowledge exists on Stack Overflow. It's existed since 2008. It's been compounding since 2008 as a knowledge base. Over 14 years, it now has driven an impact that's very, very meaningful. All this information has been accessed 50 billion times all around the world. All of this makes us one of the most popular websites in the world, a top 200 based on traffic, based on Similarweb. You know, this is the foundational part of our company. You know, this is the community, the health and growth of this is really where we differentiate ourselves.
It is the competitive moat of our company in many ways, that gives us the competitive advantage, that I'll talk about here in a second. Our presence, by the way, is absolutely global. We exist in about 179 countries. Obviously, the U.S. is a huge part of our traffic. Western Europe for sure, and of course, India, as it's already been mentioned a few times today, a huge population for us, Brazil, other parts of South America. You'd be hard-pressed to find a software developer or technologist in the world that has not heard of us.
In fact, I would challenge all of you to go back to your companies and ask your own technologists, you know, your CTOs of your banks, or maybe perhaps the developers, you know, who are in the action, who are definitely going to have a very strong sense of goodwill for our company. You know, fundamentally, we talk a lot about secular shifts, right? Larry talked a little bit about this, where education, especially given how much of it is going online, even though the penetration rate is quite low, especially in technology, 70% of developers are learning to code through online resources. This is really, really exciting. This has really been propelling and by the way, these percentages have been going up very meaningfully.
It's gone up about 10 percentage points in about a year since 2021 to this year. We conduct a lot of surveys on our end. If you think about the various sources through which people learn how to code, Stack Overflow is absolutely one of the most prominent places. just short of technical documentation, which is sort of the, you know, the raw truth, if you will, which is out there. Stack Overflow is the easiest way for people to access knowledge when they're, when they're having an issue, when they're stuck writing code, and they typically get unstuck when they come to Stack Overflow 'cause it has a very specific answer to solve their problem and their workflow. Let's talk about the problem that we're trying to solve, right? Given all those sort of background secular shift points.
The problems, especially when you talk to CTOs and CIOs, who I have the pleasure of speaking with literally on a weekly basis, comes down to three things these days. Larry talked a little bit about in the context of talent, and this is absolutely an issue, right? If you think about the supply-demand issue in technology talent to do all the things that even in many of the presentations today, Romain mentioned earlier this morning about all the initiatives he's driving from a technology standpoint, ML, moving to a microservices architecture, et cetera. All of that requires people. If you look at even the jobs report in the U.S. recently, there are tons of jobs available, right? Despite the layoffs and so on. There's absolutely a supply-demand imbalance, especially as it relates to technology talent.
Hiring, onboarding, reskilling people within companies to do the work that needs to get done is a big driver. Number 2 issue is executing these big transformations, whether that's moving to the cloud from your data centers, with unlocking the value of your data platform through machine learning, whether that is improving your security posture to prevent bad actors from accessing your systems. All of those things are pretty big initiatives within companies. By the way, many of you know, banks are customers of ours, by the way. We know all the big transformations that you're driving. This is a huge focus for CIOs within organizations.
Finally, COVID, even though it was, you know, you could talk about all the things, obviously a lot of negative things that came out of it, but one of the things that did happen that is a permanent shift in our opinion, is the move to hybrid work. Whether or not you believe in fully remote or not, the reality is that people are gonna be working in very distributed ways for a long time to come. Those are the three big challenges. Let's go into each one of these in a little bit. Let's talk about hiring, onboarding, reskilling, and retention. What can companies do inside their companies, things that they can actually control, to make sure that they actually make a difference on this topic?
Based on a lot of research that we conduct, we believe it comes down to 3 things. It comes down to, number 1, giving employees, especially technologists within companies, opportunities to learn and grow. If they're not learning, they're gonna leave. Giving them the opportunity to be truly flexible in their workplace, how they do their work, where they do their work, when they do their work, you know, giving them truly that flexibility, especially for technologists, super critical. If you don't do that, they're gonna leave.
Number three, productivity, is that if you're gonna be distracting technologists who are, you know, notorious for being known to sort of stay in the flow or not context switch, if you're distracting them with a lot of sort of inbounds from people are knocking on their shoulders asking for new information all the time or the same information, rather, all the time, that's gonna be distracting, and that's not gonna be great, and they're wanting to leave. These are three things that technology leaders within companies can absolutely control to make sure that they keep their people and make sure that they are happy. I'll talk about how we're solving these problems in a second. The second big issue is around these big transformations. As we've already talked about, these transformations are very large scale.
Cloud, big data, machine learning, DevOps, a big, you know, agile story that's going on. How do you get faster and closer to your customers so you're releasing features very quickly? Security clearly makes sense, right? All of these transformations are very, very meaningful, like I mentioned. Small example, Amazon Web Services, a space that I operated in right before Stack Overflow. That business is close to an $80 billion business growing at a run rate about That's an $80 billion run rate business growing at about 27% year-on-year, and only about 30% of enterprise workloads have actually moved to the cloud. Just imagine the scale of these transformations. They're just still pretty fairly early in their innings, but a lot of companies are just embarking on these journeys. Number three, managing distributed team environments.
You know, it's easy to say, "Hey, hybrid work's the future." The reality is that what has happened is that there's just been a ton of distractions and cacophonous environments that have been built within companies now because of the distractions of Slack messages and Microsoft Teams messages and, you know, text messages and Zoom calls. People just can't seem to get out of meetings online, and it's absolutely inefficient. Especially for technologists, it is super critical for folks to stay in the flow state, as we like to say at Stack Overflow. This is what is causing a lot of people to leave companies 'cause they just can't take it anymore, right? This is a very key issue that companies have to solve.
The good news is that there's actually an answer, and it's an answer that we talk about a lot, which is to focus on the developer experience. These three issues, while, you know, they are sort of core to sort of making sure that you actually, you know, can control the environment, developer experience actually is some of the topics that I spoke about. You know, flexibility, learning, productivity. These three issues, if you focus on it, then you're able to make sure that you keep your people happy. Now let's talk about Stack Overflow and our products as it relates to these issues that I just mentioned, right? Firstly, let's start with our vision for our company.
It's all about making sure that the current and next generation of technologists. Again, Larry mentioned the younger generation that's from all around the world looking to become, you know, proficient in technology. That's a huge secular shift, you know, for us. We wanna be able to serve not only the current, but the next generation of technologists and to make Stack absolutely the destination, even more than it is today, right? That is where we're going as a company. If you think about the wheel that I just explained, the three challenges and the developer experience as the answer, our products, specifically our SaaS products, Stack Overflow for Teams, which I'll explain in detail, is it touches each one of these issues in a very real way.
In addition, all our advertising products, including products like our employer branding capability, which specifically speaks to companies being able to hire developers by promoting themselves as great companies on our platform, is another great way to make sure that folks are solving this hiring and retention problem. In addition to, of course, all the other ones. There's a full map where we basically map almost directly to these issues that CTOs and CIOs are faced with today, right? We're sort of at the right place and right time. To summarize sort of who we are as a company, what you see on the left here is what I covered about our public community.
Our 14-year legacy of building this massive knowledge base, this great competitive moat, in the words of Charlie Munger, that is the foundation of the company. 100 million technologists going through our storefront pretty much every day, right? We have, obviously, as a function of that, traffic. We have a great advertising business that has got a range of advertising products that I'll explain, but that is obvious given that we're such a popular website. The primary business model for us is the most resilient revenue source that you can imagine, which is a SaaS, software as a service model, which is Stack Overflow for Teams. That is effectively providing a private version of Stack Overflow for companies to share and collaborate information within their organizations, many of your organizations.
We'll go into each of these in detail. Let's talk about the advertising business first. The advertising business, you know, we have so much information on users, their history, how they've actually accessed. You know, they asked a question two years ago, they answered this question this year. They are a top recognized member in the Python community within Stack Overflow and so on. Companies really find a lot of value engaging directly with these users. A company like Google Cloud is building its sub-community on Stack Overflow. Google Cloud has 250,000 questions and answers on Stack Overflow, and they have established a walled garden where they've got members of our community that are opting into this sub-community, becoming members of it as recognized members.
They are interacting directly with these folks to get things like product feedback. They're announcing product releases. They're able to showcase new announcements and also sort of endorse answers in the community, all in our sub-community product called Collectives on Stack Overflow. Pretty phenomenal. We've got other advertising products, a range of them. Those of you that are familiar with that model will recognize many of these, whether that is all the way at the bottom of the totem pole, you know, banner advertising to more native capabilities like director developer ads to sponsorships like podcasts and newsletter sponsorships. Our podcasts are one of the most popular podcasts in the world. It goes out to millions of people. All of this are also great opportunities for people to get access to our user base.
Finally, our talent or employer branding product, as I mentioned, is a great way for companies to advertise about their own capability on Stack, as in their company and why it is such a great place to go work there. Of course, we don't do things like job listings, but ultimately it is to, again, promote their company so they can go and apply to these companies on their own websites. This has been an amazingly resilient business. You would think in this economic cycle that you would see weakness, but the reality is that the employer branding business is far, has, you know, far exceeded our expectations because companies just cannot afford not to have their brand out there as great, as a great employer. Very, very great, resilient advertising set of products. Now let's talk about Teams.
The format that you see on this screen here is the much loved format of Stack Overflow that's been used by every developer for the past 14 years. This product is, I think, a key point, is already in companies, right? It's not like we're a random company going and knocking on their door saying, "Hey, we have a product to sell you." This product exists in companies, and it is in a much loved format that people have been adopting for 14 years, and they've been trained with muscle memory to use it. When we call into companies, they're very happy to talk to us in general. It's also not because of the goodwill that we have gained over the past 14 years, but it's solving real problems, right?
It's able to really attract, onboard, and retain the star talent that we're talking about. We're boosting team productivity and collaboration through all the gamification and breaking down silos across organizations, to make sure that people are answering questions. You're identifying subject matter experts in a different part of the world. Then you're ultimately accelerating innovation within your teams because you're unlocking capacity of your technologists. So they're then able to then go and work on the things that you actually they care about within the companies, all the things I mentioned. That's why this is such a powerful capability. If you think about the technology universe, there are many capabilities that companies have sort of pulled together as the new technology stack. It includes cloud technologies, includes DevOps technologies, data technologies, real-time ChatOps, things like that, project management tools.
This whole space around knowledge sharing and collaborative knowledge sharing, or even internal communities, whatever you want to call it, has been a very fragmented space. It's been documents flying around, emails flying around, wikis that have been built internally that are vastly out of date, typically. Technologists especially, they come to us as quote-unquote "burn victims" because they just have not been able to keep up with information in an efficient way within companies. It's been just a few years since we launched this product. Microsoft came to us back in 2017 and said, "Hey, we love Stack Overflow. We'd love to use this capability internally." We basically built this business effectively from the ground up, where we have all the components of a fast-growing SaaS business that have come together.
With a great leadership team, that again, all the top-tier ones. We've hired people from all the top SaaS companies that you can imagine, but everything with sort of the Stack Overflow DNA. The logos that we've assembled here are only a small fraction of the names that are customers of ours. We have close to 15,000 organizations leveraging Stack Overflow for Teams just in a few years. We're only getting started, as I'll talk about. If you look at a few of these metrics up top, we have very healthy bookings growth rates, about 68% year-over-year. We have about, what is...
A net revenue retention, for those of you that are aware, that's making sure that every dollar of revenue that we generate, how much does it grow over time? That is about 115%, very much in the zone of a healthy SaaS company in the context of the public markets. Our ASP, our average selling price is about $289,000. As in, we go into one of these companies and the first deal that we strike is around $289,000 to get started. What's next? Let me give you a preview, a little bit about our product releases here, and then we'll talk about our financials.
A couple things that are coming up that you will see pretty soon is that in the spirit of making sure that we even had even more value and engagement on our product and make it even more stick, and to make it stickier, we will be launching something called Communities on Stack Overflow for Teams.
What that means is a company like a bank that has perhaps a corporate, a corporate bank, an investment bank, a corporate retail bank, an investment bank or, and some other sector, could have all the database experts at that company across divisions effectively form a sub-community like this so that they can collaborate and share information on, "Hey, this is how we launch an AWS instance within the retail bank and the investment bank." All of them are able to then share information together, be part of that internal community, and that drives up a lot of engagement and breaks down silos.
The other thing that we're doing is taking a lot of the external public Stack Overflow information, giving users the ability to curate that content into their organizations and share it with their colleagues to drive, you know, obviously for them, it's sharing of information that's critical, and of course, that drives a lot of fast user adoption from our standpoint. Ultimately, Topic Collectives, which is the ability for companies to sponsor certain category areas on Stack Overflow. Imagine a space that says security, you've got all the security content, people opting into that space, then you have sponsors. There are thousands of security companies who want to sort of get in front of developers are the ones that are making recommendations to organizations on which or which technologies to use, right?
Imagine being able to sponsor this, these areas that we will form. They can be literally hundreds of areas. That's another exciting thing that we're thinking about here in the very future. Let's talk about some of the financials. Firstly, markets. Market sizing, I should say. We generally operate the... We can triangulate multiple data points, but if you look at the collaboration market, the DevOps market, all of those are growing very rapidly, and they're very large ones, right? We're talking $10 billion or so, in size. If you think about the user base, we have about a 450,000 users on Stack Overflow for Teams today, our SaaS business.
If you think about the number of developers that exist in the world, there are about 28 million developers in the world. If you think about the number of technologists that exist in the world, that includes people like data scientists, cybersecurity experts, you know, you name it, right? All the other set of areas, DevOps engineers and so on, that's about 100 million. By the way, that is the size of Stack Overflow's community, about 100 million monthly visitors, as I mentioned earlier. Then finally, you have about 1 billion knowledge workers in the world. That includes many of people who are on your teams, including finance folks that are writing Python scripts to do their work these days, right? Everybody's sort of becoming a technologist in some fashion.
All of this creates a massive amount of number of users for us to be able to sort of onboard onto our product. If you look at it in the context of companies that exist, even that is a very large market for us. We have about 1,000 companies who are paying customers today, even though we have 15,000 organizations leveraging it through all our, including our freemium product. Just out of the 1,000, you know, it pales in comparison to the number of companies that exist that we are focused on, right? We have 4,000 super strategic companies. These are big ones in the Fortune 100, et cetera.
There are about 36,000 enterprise or mid-market companies that exist in the world, and there are about 720,000 SMB companies that exist in the world. Again, we have a very, very small fraction of this. If you look at, if you do some rough math around how many users exist in each one of these and the average and sort of a very conservative penetration rate, out of the $24 billion or so of the market size, you know, at a minimum, it's about a $2 billion market opportunity for us to go after, just in terms of a very conservative number. Great underlying sort of metrics. If you look at our general economic model, it's around land and expand, and this is what I mean by that. We land in a global financial institution.
This is a real customer. It's one of you sitting in the room, right? We land at about either that 280 or so number that I mentioned earlier. In this case, we landed about $400,000. Over a few years, we're able to expand into multiple teams within that organization. This particular account has gone from $408 to about $2 million in annual recurring revenue. As you can see, the number of technologists that has expanded. Similar stories, I can give you plenty of these. Global software provider, big tech company, global tech company in the world, started at about $150,000, are now at $1.5 million compounding. Global telecom provider, started about $400,000, sitting at about $2 million or so, $1.9 million.
Big consumer financial services firm, started about $450,000 just a couple of years ago, now sitting up shy of $1 million. This is a very standard land and expand model, which is a really great leveraged way for us to grow into profitable revenue. This, just to summarize, is the way we do it. You know, we land in an initial software developer team, given all the goodwill that we've generated over the past decade, and that quickly expands into year two and three into other software development teams within their company, typically globally. Then in years four and beyond, we start expanding into other technologist organizations, and it sort of becomes this walls-to-wall type of arrangement. That's why we're able to generate all this seat expansion and value-added services.
If you look at the fundamental financial points about our company, the LTV of a CAC or lifetime value over cost of acquisition is very healthy. It's about 3 to 1. That is, you know, that's fully loaded sales and marketing costs, et cetera. That is overall, you know, given to how sticky our customer base is, given the net revenue retention I mentioned, a very healthy number. Our ARR, our annual recurring revenue, which is a great compounding force, has grown to about $50 million during the halfway point of this year, and we're well on our way to sort of continue to grow in that spirit. You know, we're, again, very much in our early days of growth. We're just starting out, but we're already at a fairly significant number.
Remember, we only started this business in about 2018 or so. Finally, Rule of 40, which is a fundamental SaaS metric, is all around, it's the sort of the sum of your revenue growth rate and your EBITDA margin. The goal, of course, is to go past 40, and we're currently at about 20 or so. Just as a quick point here, we were actually profitable as a company in 2018, 2019 and 2020. It's not a foreign concept to us. Very deliberately, in 2021, we entered an investment year to go very deeply and to invest in our team's SaaS business because of the massive opportunity that I've shared with you.
It's a very specific move that we've now sort of made tons of investments on the go-to-market side, on the engineering side, et cetera. Now it's about the path towards profitability. It's the path towards Rule of 40, as I just explained. To summarize, we have a huge community of engaged users, about 100 million, that's been built over a 14-year period that exist and being used within companies. We have absolutely a willingness to pay for our product, specifically our SaaS product, and of course, our ads products. Only about 450,000 users and only about 1,000 companies are paying for our products at the moment, so a long way to go. The market opportunity is massive. It is truly massive.
We're just super excited about this opportunity in front of us and for us to build a massive business, alongside Prosus and our colleagues. With that, I will conclude, and I'll have Larry back on.
All right, everybody. I think we know the drill at this stage. Will asks the first question, and then everyone else follows. No. We have one right behind Will there.
Really? No, no.
I'm fine with it. Hi, it's Chris.
Oh, it's Chris. Hey, Chris.
Just a quick one from me. I think I have a better understanding on Stack Overflow now with respect to advertising and the proposition that Teams brings. What I don't really understand quite yet is how something like ChatGPT could influence your business. Maybe you could talk about that. I'm sure you've tried over the last week.
Yeah.
That'd be interesting.
Yeah. No, great. For those of you that didn't hear that, the question was about understand Stack Overflow, but there's all this AI work that's happening around OpenAI. For those of you that have been paying attention to that, over the weekend, there was a release around something called ChatGPT, where you can go and, you know, very quickly search. You know, it's kinda like a Google search, but it's responded to by a machine learning model. we actually were quite excited about it because, you know, it presents a tremendous opportunity for Stack, in a way that we are absolutely evaluating all these things all the time.
Absolutely, we have a team, and we actually work very closely with the Prosus AI, ML team on this subject as well, where we've actually got some remnants of this in our own sort of community. I'll give you a small example. We built something called the unfriendly robot a few years ago. It is specifically a machine learning model that goes and skims the 50 million questions and answers and identifies any sort of untoward comments and flags that to the moderator community in our company, right? That's a small example of us using ML technology.
While that is, it's fantastic, this also gives us a great opportunity to think about, as we think about, this technology maturing. It's not yet completely sort of at a place where I think we could trust it to do sort of, you know, even though some of the use cases have been interesting to watch, you know. Hey, like, can you create a legal contract for us to? A merger agreement between two companies, and it'll produce something. It looks really, really powerful, right, in terms of it.
The question is that as that, the trust increases in our ability to say, "Okay, the answers are correct," or this is actually returning something that's really powerful, I think we will look to integrate it into what we think about in terms of our paid products and potentially our public platform. It's a great opportunity for us to leverage.
All right. Will, can't stop him.
Hi, it's Will Packer from BNP Paribas, and couple of quick ones from me. I suppose one thing that came less clearly from the presentation was the path to profitability.
Mm.
both for the edtech business as a whole and Stack Overflow. Could you just talk to from both the unit of Stack Overflow and the wider edtech business, when we should expect you to break even, and what the key drivers of that improving profitability will be? Thanks.
Yeah. Makes sense. Do you want me to-?
You start first.
Okay. Yeah. On Stack, you know, we generally have a very defined plan. As I mentioned, we're in an investment year that we just sort of spent a bunch of time and effort making sure that we invest in the right components for the SaaS business. The 3 ways in which we will get to the sort of the from a path to profitability standpoint, number 1 is that we can generate a lot of scale with our partner alliances, and that's a huge motion. We haven't spent a lot of time publicly talking about it, but we're a big partner of Microsoft, as an example, right? We've invested to be part of their marketplace. We've got teams engaging directly with them, so they have a huge channel motion.
They're in pretty much every company you can think of. We have our own sales team working with their sales team along with our product in their marketplace that basically drives a ton of scale. In terms of CAC, that should reduce the CAC very meaningfully. That's number one. Number two is our land and expand model. Because of our ability to go into companies, 'cause it's already being used within companies, and we have such great goodwill, we're able to go in and really very quickly expand seat expansion. For us, it's a very specific... Even though we're already at 115%, that's only scratching the surface because that's what's happened organically, right? It's happened organically to go from developer team to developer team.
The ability for us to go from developers to technologists and even to the knowledge worker area over a multi-year period, that's a very high-scale motion. It doesn't take a lot of investment to do because it's a very viral product. It has a lot of great network effects. That, again, should reduce CAC, especially when you focus on our... Our long-term value should increase because we are focused on our existing customers. Thirdly, we are focused on replicating almost 80 or so percent of our business is US in terms of our SaaS business. We have not really done a huge amount of international expansion. We've only sort of begun this in, in Western Europe at the moment. We don't have much of a presence in APAC as an example, in Australia, and so on.
All of those should provide us with a tremendous amount of operating leverage because we've got the same fixed costs around the product, which has been built, and it's basically a rinse and repeat model. For us, yes, we will incur costs in terms of sales resources locally, but it's a far less cost compared to what we actually saw at the U.S. business. More broadly, I'll just mention one other point, is our ads business, it subsidizes the growth of our Teams business. Our ads business, if you look at it on a P&L perspective, is actually a very extremely high gross margin business, right? And, you know, you'll be surprised.
At the same time, the ability for that to ultimately fund our overall, our SaaS business is another great lever that we have just foundationally as a company. Those are some of the thoughts.
Yeah. Just to piggyback on that. If you think about our broader edtech portfolio, we have Stack and GoodHabitz that are companies that, you know, we control, and we can set budgets for. The other, you know, 10 companies are, you know, minority holdings. You know, in some cases, you know, profitable and meaningfully so already, like in the case of Skillsoft. Some of the other ones, you know, we, given those minority positions, we see path to profitability for each of those and, you know, fully funded business plans. It's a little bit the matter of, like, time passing and as they each sort of follow their own journey.
All right, Okay, we have one there in the middle.
Throw it. Oh.
Do it.
I call a catch box. I call a pass box.
Thank you. Sebastian Patulea from Jefferies. I've got a question regarding the enterprise product for Stack Overflow. Now it's a collaborative medium where employees within organizations, they can share information. It looks like you guys are providing them great value because the retention keeps increasing. It seems like $300K it's great value. My question is, can you guys get to a certain point where, for example, there was a client where they were paying you guys $2 million. Maybe 3, 4 years from now, they'll give you guys $5 million, and they'll be like, "Okay, can we actually do this in-house instead of giving these guys $5 million per year?" The $5 million goes directly to zero.
Can you guys become like a victim of your own success in a way and just decide that to do it inside?
Got it. Yeah. It was echoing a little bit. I think I got most of that. I think the crux of your question is, can companies decide to build this internally and replace something like Stack Overflow for Teams?
Exactly. If it becomes too big, you know, they goes EUR 5 million, EUR 10 million per year.
Right.
-let's just do it in-house, and then it goes directly to zero.
Sure, yeah. No, great question. You know, the interesting thing about this is that companies. This is not the first time we've been talking about knowledge management, right? Knowledge management's been actually one of these, like, an old school category for a long, long, long time. A lot of companies have been building a lot of internal wikis to sort of maintain information. In fact, those are the companies that come to us 'cause they've just not been able to replicate what is the secret sauce of Stack Overflow.
If any of you go to Stack Overflow, the community, you'll see that there's a whole gamification process around up votes and down votes and badges, and it's, you know, prompting users as the expert to say, "You're the identified SME to go and answer this question that Larry has asked, you know, yesterday," or, "You're a brand new person that's joining the company. Here are the six pieces of information you need to know to be onboarded rapidly as an engineer to be productive." All the functionality that's there. You know, there's only one Stack Overflow for a reason, right? 'Cause there's something... There's a virtual cycle there that brings together all that functionality in a way that makes it really, really powerful. The adoption, especially within companies, is very, very significant. Technologists have, you know...
I think you go talk to any technologist, they absolutely despise documentation. You know, there are memes running around about the subject on Twitter all the time. In fact, we posted one recently. So you have to be in the workflow of a technologist, and that's what we do. We're in their daily workflow, right? So for them to go and say, "How do I do this on Amazon Web Services?" The answer is always gonna be on Stack Overflow. When they do that, they're gonna be able to very quickly upload a question and share that with their colleague. And that's the differentiator. That's the ability for us to sort of be part of their workflow. That's not going away in any way, right? This...
It'd be very hard for companies to replicate that on their own. They can certainly try.
Okay. That's perfect timing. Looks like we're out of time. With that, thank you, gentlemen.
Thank you.
Thank you.
Appreciate the questions.
All right, we're on to the next session, which is food. Larry's so good, they named him twice. We're gonna bring him back up. Let's roll the video first.
Ba ck again. This time makeup was faster. Kind of building on the... promise not to do this too much like a Mad Lib on the last section, but, you know, building on the edtech conversation, similar theme for us as an investor around food. Big societal need, yet to be fully addressed by technology. For those who've, you know, been around our business for some time, you'll remember that we made our first investment in food, in iFood back in 2013.
While I don't think it had the formal venture kind of nomenclature, it would be the equivalent of like a Series A investment. Bob alluded to it earlier. This was truly a venture investment that I'm now proud to say we are 100% owners of. That started us. We studied this business from iFood up.
You know, we had a bunch of experience with consumer marketplaces and a lot of exposure to Brazil, but got to see this sector through iFood, and then of course, invested in Delivery Hero and Swiggy among others. As we've studied it, the sector focused on this, you know, essential human need and how we satisfy the different players in the space. You know, the winning platforms will need to create value for consumers, drivers, and restaurants. Again, coming back to TAM, you know, the TAM is sizable today, ±$600 billion, and with a reasonable CAGR over the next 5 years, you can see that space, you know, kinda 2x at the core. Obviously, there's a remainder of this slide that's white for a reason, because the adjacencies that are available to us are massive.
Right? You can talk about, you know, 20x the size of the TAM today if you consider global restaurants and grocery opportunities that are addressable to us because we have that deep understanding of consumers and local logistics. Also opens up other adjacencies, be it in logistic services, fintech, e-tail. Fabricio will talk next a little bit about some of the things that they're doing from a fintech perspective. It's important to note sometimes when people put these, you know, "Oh, here are the adjacent opportunities," up and you kinda raise an eyebrow and say, "Is that, is that really real?" It's important to note that two of the businesses that I won't talk about today, eMag and Takealot, got into food delivery from an e-tail starting point.
These adjacencies are very real, and the lines between these spaces are in many ways blurry. Everybody loves a map. We like this space a lot, but it's, you know, we shouldn't be confused that this is a very local game. This is not a global game. We'll talk a little bit. If you, if you go deep into these products and develop an understanding of the companies, you'll see, you know, for those I know many in the room are also, you know, study Delivery Hero. Delivery Hero is an amalgamation of local brands. This is fundamentally they compete, they operate locally. A standard joke I make here usually is, you know, if you're getting your pizza delivered across border, it's probably not fresh. It's local, local.
The last time we met, I presented a version of this slide that talked about the evolution of the category, right? When we first got involved with iFood, it was very, very much Food Delivery 1.0. In fact, a good chunk of the orders back in 2013 were done by fax, which is kind of ironic given the AIML question shows how far the world has come in the last, the last 9 years. Started as a third-party marketplace. The last time we met, you know, we were, as I saw it, squarely in this kind of Food Delivery 2.0 with the emergence of native first-party players.
Presenting to many folks in the room said, "Look at the opportunities that are sitting out there with Food Delivery 3.0." Some of you said, "Well, wait, can we go back to Food Delivery 2.0? 'Cause we're not sure you can make money there." Right? 'Cause the visibility that many investors had was just to the native one-key players, and you'd see their financials and say, "How can they possibly make the math work?" Now, you'll see more in some of the upcoming slides, you can comfortably say we've got proof points, real proof points, you'll see them that Food Delivery 2.0, you know, with 3P and 1P is profitable, can be run profitably. We're taking the same disciplined approach to the next, to Food Delivery 3.0.
You know, since last time, we've grown this food revenue 6x. It's obviously a testament to all the local operating teams and the work that they've done. And there's some natural questions, hey, how much of this was demand being brought forward from the pandemic? There was certainly a lot of that under the surface, but the growth continues even though we're well past lapping the pandemic. Again, we've established profitability proof points, and I'll throw two of these up here. One is iFood. iFood's been profitable. This year will be the third year. Again, something that many folks in the room told me this couldn't be done. It's we're profitable and comfortably so on the iFood side.
Delivery Hero is break even this fiscal year in their, in their core platform business. What next? With this focus very much on, you know, quick commerce and food delivery 3.0, we start with kind of the right hand of this slide, right? You think about all the other products and services that you can offer to a consumer on the back of that logistics and data backbone that's been built. I mention this a lot, but it's hard to overstate how important the relationships and the data and market understanding we have at a local level through those leadership positions. This is where leadership positions really matter.
You know, when some of the questions that I often get and got some today during the break were around, "Oh, wait, you know, isn't the kind of air coming out of quick commerce?" What you're seeing is capital has dried up. These are very hard businesses to build, these local logistics businesses at national scale, in some respects global scale. A lot of the native startups popped up in a world of cheap capital. The minute that that dried up, all of a sudden they're like, "Wait, I don't yet have enough customers. I don't yet have enough logistics infrastructure.
I don't have enough data to make this viable." This is something that is still available to us because we have that starting point. We're taking a similar approach to grocery and quick commerce as we did to moving our businesses from third party to first party food delivery, right? There's still a big growth opportunity, really thinking about how can we leverage that starting point and find the most profitable version, the most economically sensible version of this model. If we can't do it with a food delivery starting point, then nobody can. We have such a built-in advantage from that starting point. We're seeing this play out across our three food delivery platforms. You see, we've basically doubled the scale of the businesses over the last year. It's important to note in the slide a little bit of a nuance.
There are different business models in play here. In some cases, based on the infrastructure that exists in the market, we might have a marketplace, we might lean more towards a marketplace, you know, an Instacart type model. In other cases where dark stores make sense, we'll go that way. So this is one another advantage we have. We don't have to be beholden to a specific business model as we solve this consumer need. In terms of, you know, can this space be run profitably, there's a lot of data on the slide, but really points you to the one on the bottom right. You know, Nicholas and Delivery Hero pointing to their performance for their seven best in class countries that show their D-marts, basically running at breakeven.
Again, you know that this can be run at scale in multiple geographies, breakeven. Obviously, a lot of work to get there, but it's strategically important, and the financials will increasingly look better as the company scales. That's a similar story, you know, building from Delivery Hero to how we see our business evolving over time. Core restaurant food delivery put a number ±25% for profitability. It's important to note that it really depends on country, you know, and business model. For grocery and quick commerce, it's obviously it's grocery, so it's structurally lower margin, but we can see a path to, you know, ±10% margins long term. We'll get to iFood in a moment, but we see significant value creation.
Again, I can't say enough how excited we are to finally own the remaining slice of the company. Valued at $5 billion today, we see a reasonably clear path to a 3x value increase. Fabricio would probably point you to a more Brazil type number, a higher number. Driven off of value both in the core food delivery business, grocery, and also some of the adjacencies that we're excited about. With that, before I introduce Fabricio, we're gonna have a video to introduce iFood.
As the most loved brand of Brazilians, serving 47 million Brazilian customers each year, iFood has brought joy to many over the last 10 years. Made for Brazil by Brazilians, we've expanded from restaurant food delivery into quick commerce and groceries, introduced new delivery methods to become one of the most sustainable networks in Brazil with over 200,000 drivers and optimized logistics due to our powerful AI tools. We are a trusted partner for more than 300,000 Brazilian restaurants, providing them with food delivery, supply and logistics, and payment services. We have extended our fintech proposition to consumers with our iFood Meal Voucher Program. Why stop there? If we can deliver groceries in under 15 minutes, why can't we deliver anything in 15 minutes?
If we are already offering prepaid meal voucher cards, then why can't we offer consumers a full range of fintech services and provide those to our delivery partners and restaurant workers too? Using what we know about our customers and our powerful AI engine to predict what consumer wants and make the experience more fun with gamification and rewards to strengthen our loyalty program. We have the speed of a startup with the strength of a big tech company, and we are feeding the future in Brazil.
Good morning, Amsterdam. Hello, everyone. Hello, everyone. There is some problem with my microphone. Hello. I see some movement there. Hello, everyone. I'm Fabricio. I'm Brazilian. I'm going to talk about a Brazilian company, and we are required by law that every time we win 4-1, we use our shirts. The guy there very happy. I'm going to give the shirt for the best nice Q&A answers. Remember, everyone knows 4-1 yesterday. There is someone from Croatia here. Croatia. Croatia. No? Okay. Friday, Brazil and Croatia, 4-1 again. Please don't miss the game. There's the guys from home here. You at home here, the best questions. You can see the World Cup final with this shirt. We are going to win. My first prediction.
I'm going to keep the shirt here so you can remember that the winner of the World Cup are very happy, excited today. We can answer to any question today just because of yesterday match. Basil starts to say, "Oh, my God, what's happening?" Guys, I'm back here 3 years after the last Capital Market Day. Anyone here was here 3 years ago? Raise your hand. Thank you very much for keep attending the show. That was what we were talking a lot 3 years ago. I've been here during the last session, everyone was crazy asking, "You are a big 3P player, We have a marketplace for food delivery, You are going to 1P. Can it be profitable? Is it possible to compete against the pure 1P players?
Everyone was asking that all the time. I want to start from here because I don't want to give you like, a table and like, some numbers. I want to give you a story about what we are building. Hope you enjoy the last three years, and we can dream a little together about the next three years. 3P going to 1P, can it be profitable? Are you going to keep growing iFood? That was the question that these 10 guys that raised their hand asked. It took some time, I'm going to answer it now. That was the chart three years ago in the last Capital Market Days. iFood was doing almost BRL 800 million of GMV, and we are entering the 1P. All that confusion that probably you remember. What happened?
3P kept growing. Marketplace keep growing a lot and became a very nice business. That new idea, creative people doing 1P also grow a lot. Starting 1P was really a good thing for iFood. We kept growing from BRL 800 million to BRL 3 billion. That new business we were launching 3 years ago also grow a lot, and now is almost 40% of iFood share. It was really good that you stayed connected, that we kept investing 1P, and we got a lot of growth over the last 2-3 years. There is much more ahead. I'm going to talk a lot more about that over the next charts.
We grow a lot in the Food Delivery business, but we also, over the last one year and a half, started many adjacency business that I'm very excited about. That's new business line that you can see that's more or less 15%. A lot of business that didn't exist when I came here last time. Now we have ads, for example, that is super good, and we sell on top of grocery, very good results. The whole grocery business, the whole quick commerce delivery in 15 minutes with our own stores, a card, iFood cards, B2B services. iFood today is much bigger than the iFood that you saw 3 years ago with many more products, and we are just starting. That's the story for today. I know some of you. Where's the light? Can you turn more the lights there?
There's some people here that are not paying more lights to them. They are not listening to me. Lights. This guy here looking to me, let's talk about how important it is, not only what we are doing food delivery, but what we are building from here. That's a little of the story I'm going to tell you today. Started with 3P, migrated to 1P with a lot of growth. Now we're having many new business, but most important, we are building an ecosystem where our existing products and brand and people and innovation can leverage what we are doing to create many more business around the original food delivery. If you start asking, "And the food delivery, what are the numbers?" I see someone there taking notes about numbers.
These are the numbers of the core food delivery. iFood today is 1,600 cities. We have a very high market share in Brazil. We are doing this year more or less 750 million deliveries of food specifically, and the 1P proved a very good bet. I want, before getting to the big question that you want to answer, to highlight this slide. I know, this is an investor presentation. They don't like to talk about this slide. I think you should put this slide in your models. It's much more than a business. It's much more than someone asking, "Eh, this asset," it's much more than an asset.
It's a company with an amazing culture, a very recognizable brand all around the country, with 6,000 people that behave as owners of the company. We are really just starting. In this slide, you can see in this last research that was from a few months ago, that iFood was ranked the number 1 most loved brand in Brazil. On top of WhatsApp, Coca-Cola and other great Brazilian brands. We also, during this year, won many very nice prizes like the more innovative company, the more innovative business, the best customer experience, the most sustainable company. We have a long list of prizes that is the result of a company that is really connected to our purpose, that is really connected to build something 10 times bigger.
My message to you is today is I'm extremely excited and optimistic about what we will build over the next years on iFood. We already built a very nice core that you saw growing very fast, that is food delivery, but the best parts are ahead of us. The guy of the model there asked, "Can you be profitable? I know you are just telling nice charts because you don't want to talk about that." No, wrong answer. You lost the shirt. Yes, obviously, we can be profitable. We are profitable, and we are just starting on that too. These are on the food delivery business, our numbers for the last five quarters. We were investing much more, having some losses, one or two years ago. We reverted completely this year.
We are more or less today at 10% EBITDA margin in the core food delivery and growing. I'm quite confident that we have a good business, a profitable business, and we have a lot of growth ahead. Again, the big question 3 years ago was, is it possible to do that with the 1P business? For sure, 10% margin is 1P plus 3P. All the business are profitable. We are running 10% margins. Food deliveries are profitable and more mature business. We still have a lot of growth and opportunities ahead. Why I believe we have a so nice core that we can leverage. We can see here a few of the data that is nice to show to you. In terms of monthly unique buyers, we grow from 7 to 17.
In total, we have more than 40 million, I think around 45 million customers buying iFood uniquely and paying on iFood per year. Every month, almost 17.5. What I really love is the monthly frequency. The monthly frequency over the last three years went from 2.9 to 4.2. I don't have what I'm going to tell you in a chart, but I want to reinforce to you, if I look to the frequency of the user that has six, seven, eight years on iFood, it's around 70 purchases per year in average. We have customer that do 500, 700, 800, but in average 70. If you look to the customer that joined the company over the last one year or two years, it's between five and 10.
For every year it increases from like 5, 10, 15, 20, 25, 30 until 70. Why I'm telling that to you? What we have is a machine that every year that go by, the customer that is using that for one, two, three, four year, it uses more iFood more frequently and is happier with the service they are getting. Therefore, only with my existing 45 million base customer, I have at least 25, 30 million customers that we are going to see keep growing their frequency over the next one, two, three, four years. That's why I'm so excited. I'm kidding, I'm always excited, but that's why I am especially excited today. Average order value is also going up a lot.
What I want to tell you the story today, we invested a lot, and I know some of you criticized, why we invest so much in food delivery because we are creating this base. This food delivery base where we're creating assets like our app, artificial intelligence, an amazing culture, and the demand, like 45 million active customers to have a viable and good business. Starting now, it's much cheaper and faster to create new business and get to a good payback faster and cheaper because we can leverage all this core. That's what I'm going to show you quickly. First, besides our core, we are doing groceries now. We started doing grocery just like a supermarket delivery. Now we have beverage, convenience, delivering 15 minutes, pharma. I always bet that...
I never imagined that 26% of grocery would be pharma, but you see, the customers are really buying pharma items through iFood. Even pet food, they are buying on iFood grocery, we have a very strong growth in grocery, but it is still small comparing to the size of the grocery opportunity. The total addressable markets of grocery is bigger than Food Delivery. We have a very good solution, we are going to keep making it grow for a lot of time. Also, 70 NPS, what is a very happy customers. We have two types of groceries, grocery offer, I have to show it to you because I'm sure some of the questions are going to be around that. We have the Marketplace Grocery, where we just connect a grocery store just like the restaurants, they sell directly.
We are just connect them to the customers and deliver. We have the Quick Commerce, where we have some dark stores, and we buy the things, and we package everything, and we sell to the customers. We have these two models: Marketplace and Quick Commerce. I want to tell you very briefly what the mature of each one of the models. First, on Marketplace, it's growing, it's growing well, you saw in the other charts. The question that people are all, that is, how can I say, the fashionable question today is, can you be profitable very fast? This is the profitability structure in the more mature cities we offer. We started losing BRL 5.6, 8 months ago per order. Now, we are breakeven a little more, BRL 0.4.
This is on our more mature cities that we launched one year, one year and a half ago. We expect it to be breakeven with all existing customers in all cities by March 2023 in the Marketplace business. I'm sure it's a business that has demand, customers are happy, is growing, and it's going to be profitable on all existing users, all existing cities in three months. We are not overall profitable yet because we are still investing a little more than we are getting to get more user faster, I think we can keep growing for some time. As you can see, we have a lot of control on what is the profitability profile we can have on this business. We are very small. I think we are number 10-12 biggest grocery store in the country. We can grow a lot.
We have a second business that is called Quick Commerce, where we also own the delivery, the dark store. We started this business just seven, eight months ago, so it's a very young business. It's not profitable yet. I believe it's between one to two years is more or less when we think this, the profitability of this business will come. This is important business to me because one variable, that is these broken orders. First, the NPS is higher, 76, the broken orders is very small, what generates more frequency, more happiness for the... Broken orders mean, meaning some of the items in the grocery store is missing. We can deliver a very high quality on this business, and I believe with one to two years more, this is going to be, I strongly believe.
I know the market sometimes is very excited and then sometimes it is very unexcited. I really believe we are going to make this business work financially in 1 to 2 years. That's our true grocery business. Just to remember, we keep innovating. We started doing fintech offer. We just saw the PayU excellent, profitable presentation. We started on fintech because a demand of the market in the pandemic. During the pandemic, we have 300,000 restaurants. Many of them were without money to keep operating. We helped to deliver $ billions together with some bank partners. I think $3 billion or $4 billion to cash flow to restaurants anticipating money.
This was critical to the economy of Brazil, to the restaurants economy, because hundreds of thousands of restaurants was open because we are getting cash flow faster. We transform that in the business we call the restaurant bank, and we have a few thousand loans per month where the restaurants anticipate money for us. It's a very small business yet, consider the size of iFood. I want to tell that in the perspective to say that 1P was a very small business when I was here 2 years ago, 3 years ago. Grocery was a very small business 2 years ago, I believe we are just starting offering. We are learning a lot from PayU. Thank you, PayU, for all the very good ideas because I believe this can be substantially bigger inside the iFood ecosystem.
We have also a payment business that is the customers paying through us. We have a bank of restaurants, and we have a meal voucher. A meal voucher is basically a card, just like a credit card, that you use only to buy food. I believe there is a lot of growth on this business. That's the big message on this story. I know we are in times of being more conservative in many things, but we have a company that has amazing culture, people connected to really build the next biggest technology company of Latin America, innovating a lot. These videos are a success in iFood. We deliver it through drones or robots or electric motorcycles. That is a thing that we are pushing a lot and connected to our purpose.
I really believe we are just starting in the next capital market day in three years. I don't know, maybe before, but the next one, it's going to keep having very good news on iFood. I put here in the end, our purpose and our connection to deliver value to society is a very important thing to iFood. We call it deliver education, environment, and inclusion. We really believe that the best companies in the world for the next 1 to 5, 10 years are going to be the company that really impacts positively the society. We want to be perceived as a global leader, not only a Brazil leader, but a global leader on this area. We are doing more or less 50 projects in this area. Just want to highlight a few of them.
We are pushing aggressively on electric motorcycle. Our goal is to have 100,000 electric motorcycle and to push the electricity on transportation in Brazil through the iFood strength. It is happening. We are helping many factories to build these motorcycles to distribute in Brazil. We want to have 50% of our delivery just in three years on clean models using electricity or bikes. This number was 0 three years ago when I came here. Today, it's 20% of clean deliveries, and it's going to be 50% in 2025 or before if the supply chain helps me because no one delivers electrical motorcycle today. We are doing well on the environmental. We are investing a lot on the packaging too.
We have the scale to push the society to say, "I can buy 1 billion packaging at a cheaper price," and price is critical. Many people say, "Yeah, people are going to be sustainable because it's nice." We offer people, "Can you pay $1 more to have a sustainable package?" The answer is no. Our job is to use our size to make the market of sustainable packaging work and therefore reduce the price and therefore increase the number of sustainable packaging. We are pushing that very strong. If you want to learn more, please ask more. Inclusion, we deliver 6 tons, 6,000 tons of food to people in need. We are one of the biggest companies giving money to people on food security.
In education, we already impact 1 million people in education, especially drivers, where we are doing a strong push to increase education of drivers. I hope I will be recognized as one of the most aggressive companies to deliver social impact. That, I think, is something that the tech companies has to build over the next few years. Just to finish, someone say here, "Your time is over. Stop talking. Just because Brazil won, you can't monopolize here." I think I can because Brazil... Well, okay, I'll stop talking. I just want to finish saying we have 43 million active customers, more or less $10 billion of GMV. This number grow a lot over the next years.
It's a common question to ask to me, "After pandemic, is it going down?" No, we're still growing and growing sustainably, and we are happy with our growth today. Our cost per order is reducing a lot because with our scale and our focus in increasing profitability, our numbers are really improving in terms of profitability. We are, since last month, a break-even consolidated company. Not only food delivery is break even, but all the investments I show makes the whole company break even. I'm very confident we are going to keep showing good results over the next few years, and I look forward your difficult and nice questions to win the shirts. Pleasure to be here. That's it. Thank you very much.
Thank you.
Bye-bye. Bye-bye. No.
All right.
No bye-bye. Larry is here. Remember, difficult questions with tables, Larry.
Just-
Okay.
Welcome to-
The easy ones about World Cup to me.
Welcome to the...
I think Larry is here.
...the Brazilian shirt sweepstakes. All right. Who's got the question? There we go, right in the middle. Okay. Does that work?
Okay.
If you wouldn't mind standing up, when you're asking the question so we can, we can see your beautiful face.
Great. Thanks for the opportunity. It's Warwick Bam from Avior Capital Markets. 3 from me, all on a similar topic. You spoke about the positive relationship between customers' tenure on the platform and order frequency and order size. Are you finding that the time to achieve high adoption rates is declining? Question 1. What percentage of your growth comes from existing customers versus acquiring new customers? Lastly, in assessing your addressable market, can you give us a sense of whether there's any demographic bias to your user base, such as single individuals with full-time jobs?
Needs to be higher. Can you make higher the microphone? Can you put closer to your...
I can. Is that better?
Yes. Brazilians need to talk louder, otherwise.
No problem. Should I start at the top, or did you hear the first few?
No. Why don't you go the first one?
It's on you. They're all for you.
They're all for me.
Yeah.
I was thinking, "Hope it's for Larry, because I'm not understanding.
Can you run 'em back?
Hope it's the first one.
No.
No. Okay. I'll repeat very quickly.
The first one is really about the relationship between-
Right
...the positive relationship between customer tenure on the platform. The longer the customer's been on the platform, the higher the order frequency and order size as to whether that's declining over time. Otherwise, you know, in other words, the newer customers coming on, is the adoption rate, is that accelerating? Then can you give us a sense of the mix of your growth between existing customers from previous cohorts from earlier years versus, I guess, customers you're acquiring? Your rate of increase is quite fast.
Okay. wait before next. I have this chart. It's a super nice chart showing exactly what I show you. The customer entered this year, 5 orders per year. Last year, 10 orders per year. Two years before, 15, 18, 20. It goes up to 70. Every year that goes by, customers are ordering more frequent. The average order value is also increasing substantially for many reasons, including we are expanding the selection. We started doing food delivery only. Now we have, for example, grocery, and people do much bigger orders in grocery. Also bigger restaurants or more fancy restaurants where we have also bigger orders. I see it as a trend to keep improving. Just you asked about the how.
More or less half of the user base joined during the last, if not two, three years, probably two years. Half of the user base the last two years. Because half of the user base are just ordering in average, let's say a number 12, between 10 and 15, there's a lot of upside until this user base mature to at least 30 or even 60, as I just said. This trend today, I think a big thing to talk to you about the model is over the last three, four, five years, we are talking about adding tens of millions of new customers per year.
The thing is I have a very big user base, and the user base is maturing and only this time going by and increasing the frequency of the user buying, the whole numbers of the platform keep improving.
Then last question, just do you have a demographic bias to your user base? In other words, do you find that, I guess, single individuals with full-time jobs are? Is there any insight you can give us on the demographic bias of your user base? Younger individuals, single individuals with full-time jobs.
Actually, I'm not gonna answer that directly, but one of the things that we've learned over the years, Fabricio mentioned that the model itself is now in 1,600 cities. I distinctly remember a conversation we had when you were at 300 cities.
Yeah.
We wondered how big you could get. Like, this is why we're often dubious of TAM, right? 'Cause the business looks very different, the things that you can do when you cover 5x the cities. We wondered the exact same thing. Was this an offering that was only relevant in big cities, wealthy populations, Friday, Saturday nights? As the business grows, we've seen a lot of our initial concerns about that fall away.
Let me connect that with the variable. I think it's more important. I don't think the question is young couples, et cetera. Everyone is using iFood. 44 million, 43 million was in the slide in a year. It's a lot of people. Remember, average order is for two people. We are talking like 80, 90 million people eating on iFood. Young people, 20 years, kids use iFood a lot. They ask their parents or they using their own phones and older people, everyone is using iFood. A suggestion to you, if you go to Brazil, just walking the streets, you remember the iFood brand five times between you leave any place and go to a other place close by. More than five times, 10, 15 times.
You just walk in a car and all the motorcycles are iFood delivering orders. The variable that to me is important, another one, that is the economic moments of the country. Today, when we do researches, why don't you order more iFood? Almost none say to go to a competitor because they offer better service, because our quality is substantially higher than the other 2 competitors. The reason is because I can't afford to buy more frequent. I can buy once or twice a month just because it's a special date. If I have more money, I buy 20 or 30 or 40 times per month.
My opinion is that with, when the economy goes better and you have, again, much more middle class or poor people getting to middle class, the number goes up because the biggest restriction today is I have free money to give myself the pleasure of ordering at home. I have demand in all areas. Where I don't have the demand is in the more poor population, I think it's a function of the economy of the whole country.
Thank you very much.
Thanks, Warwick. All right, Chris. Oh, yeah. You can go right there as we get that over. Silvia.
I took 10 minutes to answer this question. Next one, I'll be in 20 seconds because...
Thank you. A question for Fabricio.
Hello.
I'm sorry, but it's about profitability, but I'm going to ask in a different way. Just wondering, to what extent this is coming thanks to marketing as a percentage of revenue becoming more efficient, thanks to your strong brand in Brazil, and what do you think this means for the competitive landscape? Can more than one players operate profitably?
If more than one player can be profitable in the end, I don't know. You have to ask them. What I can tell you is that if you compare ourselves in terms of NPS for customers, for drivers, for restaurants, we are substantially higher than the other players playing, substantially higher. Buying iFood is a substantially better experience than buying the rest. Today, we have a market share of around 25% if you count all orders of the restaurants. Not only the orders that you do through app, but through WhatsApp, through phone, or you go there and take the orders. The number two competitor has around more or less 1.5%.
The customers are saying, "We completely prefer iFood as a full experience to buy food delivery in Brazil." I think we also. You talked at the beginning about the marketing. We have a very strong brand today, and people also believe iFood can be a technology company that has a positive impact, what I think help us to have this positive relation with all the customers.
All right. Quickly, Chris, and then Will. We got one minute, 15 seconds. 12 seconds. 11.
I'm not sure if that'll be enough, though. Just a quick one on consolidation. I mean, iFood obviously super strong in Brazil. Is there any appetite to grow outside of that? I mean, I know there is another Delivery Hero, for example, has a huge Latin business. I mean, sort of consolidating that continent. Could that be something that, at least in theory, is of interest or?
Yeah, I think for us, and you heard me mention earlier in our presentation, this is fundamentally a local business. And even building on the last question, you know, that iFood itself has grown from 300 to 1,600 cities can, on some dimensions, make it more national. Like new, you know, marketing channels open up. You can do, you know, national television in a way that a local, you know, neighborhood or city provider can't. It's the synergies in this business, the network effects start local, maybe national. They're the weakest on a more global scale versus some other businesses we look at.
Just to complement, I think just like, for example, Mercado Libre, that I think it's an interesting benchmark, the idea of expanding to other verticals around, for example, fintech or grocery, I think there is a lot of upside on this expanding inside Brazil with this customer base. I think that's my priority today.
All right. Big question. Who won the jersey sweepstakes?
What's her name?
Silvia. Hey.
Sylvia.
Come on down.
What's the result of yesterday match? Let's check. What's happening?
I'm Italian, so I'm not watching it that much.
Oh my God, Silvia, you have a shirt here.
You had the shirt.
But-
It's Warwick's shirt now, I think.
Because of our diversity project to say, "Women, take care about the Brazilian match," you won the Brazilian shirt. You are going to see us in the final. Congratulations, Silvia. I'm going to give her the shirt.
All right. Thank you very much, guys. That brings to conclusion the food session.
Oh.
Oh. That food session brings on yet another food session, and that is what we call an Irish lunch. Let me give you... It's also in English.
If you want, you can ask iFood delivery. I go, I take the food to your table, so you can ask. I'm a user to delivery, so you can ask iFood delivery here too.
Brilliant. I'm gonna ask you, as you can see, the screen behind me is opening up, and I'm gonna ask you to join us.
Oh.
Oh, hello. Look at that. Look at that surprise. We have tables there with markings. We'll ask you to go pick up your lunch, bring it to a table. We also have a number of activations around. You can go out and see an OLX Autos car inspection.
You can go see the iFood booth. Lots to do. Well, not obviously, I've been reminded once again to tell you to get your NFTs out front. Don't be afraid. That could make you an instant billionaire, if you drive some demand. Please, we're gonna gain our 10 minutes back, so please be back here at 2:30 P.M. Enjoy your lunch. We will see you at lunch.
Hello. Welcome back from lunch. We are on the final stretch. three more sessions and then some Q&A. Hope you had a lovely lunch, and I hope you're well rested. Gonna keep an eye on you, though. No sleeping, no food induced coma because more food for thought is sustainability with Pragya. Thank you very much.
Good afternoon. After lunch and after Fabricio, hard act to follow. Here we are. Over the next few minutes, I'll be sharing a snapshot of our sustainability agenda here at Naspers and Prosus. We first start with understanding how we articulate our shared value system as investors and how we embed ESG criteria in our capital allocation decisions. We will zoom in on how we are driving climate action across this very diverse range of businesses that you saw before and that you're coming up later. We will go into our commitments to building inclusive communities, both inside and outside our organization. Let's start with first framing the shared reality of the world around us. We're living in an increasingly turbulent and unpredictable world, where technology is transforming the way we live and interact with each other very rapidly.
In this post-COVID reality, with geopolitical instability already contributing to deeply stressed resources, on the 15th of November, the eighth billionth human was born. We have no choice but to transition to a more sustainable way of being and doing business to meet the needs of not just this generation, but the generations to come. Critically, every actor in society has to be part of this transition. We believe that we can harness the power of technology to drive this transition, which is why at Prosus, being a force for good underpins our sustainability approach. What does it mean to translate being a force for good into practical implementation? It first requires us to very responsibly manage the impact of our business and our operations on the world around us. We start with setting the foundation to mitigate potential harm consequent to our operations.
We then graduate to doing good and giving back to some of the communities where we are operating in, ultimately accelerating the transition to greener, more sustainable societies by leveraging our core strengths. We are building from a position of strength. I'm reinforcing Bob's message from before. We invest in local entrepreneurs who are solving for local needs. This underpins local economic growth and progress in these communities, which in the long run is the most sustainable way of enabling economic parity and equitable access to resources and opportunities in a society. From an environmental perspective, we are not a high emitting sector, and our capital allocation strategy has enabled us to develop a portfolio of businesses that are asset light, low carbon, and are able to further catalyze the transition to wider systemic responsible consumption for every user of those platforms. Allow me to illustrate.
You saw before our classifieds business, OLX. Romain shared on all the emissions saved and the equivalent of energy that is saved through the trade of secondhand goods that would possibly otherwise end up in landfill. Our payments and fintech platforms enable digital access to financial services with a lower carbon footprint compared to traditional brick-and-mortar-based delivery of the same services. Our vast portfolio of EdTech platforms are enabling an increasingly diverse user base to access online learning anywhere, anytime, without the carbon footprint of a physical learning institution. There are no books to be printed, no buildings to be heated, and no fossil fuels generated in commuting to and fro. Similarly, we've all made online purchases. eTail allows for the sale and purchase of products without the accompanying physical footprint.
While our best-in-class food delivery models are creating livelihood opportunities for people all over the globe. We do recognize that there are some pockets of carbon-intense activities across our businesses and our operations, such as in the delivery of food and products, and we're working very hard to find solutions to drive down these emissions. Fabrizio shared earlier about the electric vehicles. Every eTail and food delivery business in our portfolio is at some stage of piloting electric vehicles in their delivery fleet. To learn more about these, I encourage you to visit our sustainability booth at the entrance during the next break. Let me take a step back. Across the very vast range of ESG issues that are presented to any business like ours, how do we decide where to focus and where to allocate resources?
We started with conducting a materiality analysis to understand what is important to our stakeholders like yourselves, where they believe we can have an impact or we can be impacted by from an ESG lens. As you can see, the outcomes of our materiality mapping are extremely intuitive and reflective of the common denominators across the diversity of business models in our portfolio, common to digital platforms. Not surprisingly, we have data privacy, cybersecurity, cyber resilience, innovation, digital inclusion, and AI right up there. I was personally very pleased to see climate action despite a low carbon footprint, and this is only demonstrative of the fact of how highly indexed climate action is in the world around us and the expectations for private sector to play their part.
How we cascade our approach and our engagement with our portfolio companies across these material issues is we apply a differentiated approach based on our interest, which is an indicator of our influence on our ability to influence. Where we have a controlling interest, we cascade our group principles, our group approach, engage deeply with the business to integrate them onto our sustainability agenda and pathway. Where we have a minority share, we demonstrate best practice and encourage the best we can. I would really like to take this opportunity to call out what is very unique to us is a sustainability accelerators network. It's a unique forum that we offer to all Prosus companies, regardless of control and ownership levels. Where sustainability leaders and experts across the group come together on a quarterly basis to share updates, exchange best practices, insights, and knowledge.
This forum has actually seen a few offshoots of smaller working groups on plastics and waste, for example, and packaging and waste, and electric vehicles. Now I'm gonna dive deeper into one of these material topics that we saw before, responsible investing. It was also a topic that I was asked about at lunch a few times. As you have seen before me, we have a very clear focus on sectors and businesses where we proactively seek out opportunities to invest. Similarly, we also have very clearly defined for ourselves activities that we do not want to have an exposure to. These are tobacco, weapons, pornography, cannabis, amongst others. Our investment teams, while steering away from these opportunities in these activities and sectors, they also conducted due diligence on material areas like data privacy, cybersecurity during the very early stages of investment.
Our second pillar of our responsible investment thesis is how deeply we engage to onboard all of our subsidiary companies onto our group sustainability strategy agenda and help them with their performance. Our third pillar covers two elements. One is to quantify the net positive impact of our business segments, such as the classifieds business. You must have seen, it's on our website as the OLX impact report, which is an annual report that we release on emissions avoided from their business. While the second element is to uncover and invest in new sectors and businesses that are sustainability native and solve for environmental and social challenges. This is led by our ventures teams. In the video you saw before when I just walked in, loved that video, there was one of the ventures new investments was featured, Aruna.
That is an integrated e-commerce platform that is connecting local fishermen and fishermen in Indonesia to global buyers to help them get fair pricing. Now I'm gonna go a little bit deeper into our climate program, environmental program here. For every company that is onboarded into our group, and last year we started this journey with Stack Overflow, we cascaded three-step climate strategy. The first step is to start mapping the environmental impact and do carbon accounting across the extended value chain for the purpose of disclosures in the long run. Within the first 24 months of onboarding, the company is required to calculate and disclose its Scope 1 and Scope 2 data, which is the use of fossil fuels, solid fuels in their operations and the energy mix, whether they're procuring gray energy or green energy.
Through our centralized data management tool, we graduate them into the extended footprint, which is Scope 3. Data from this tool, our centralized carbon data management tool, is aggregated into a group level disclosure that we then seek assurance on annually, you would have seen that in our integrated report. The next step is to help each business. As you can imagine, the profile, carbon profile of a food delivery business will look very different to a payments and fintech and edtech and a e-tail business. The next step is to help them define their decarbonization pathway and set long-term multi-year targets guided by global best practice and science-based frameworks. Once they've set their multi-year targets, finally, the most important is to identify scalable technologies, partnerships, and strategies to achieve these targets in the long run.
This has actually been our journey as well at Naspers and Prosus at a corporate level. Over the past eight months, we've been working on defining a climate action plan that resonates with our practical reality and our group structure. Our Naspers and Prosus targets have been submitted to the Science Based Targets initiative that you may know is the leading independent verification body for corporate targets. These have three material elements. The first is a reduction of our Scope 1 and 2 emissions by year 2025. The second is a core very material element of our entire carbon footprint at Naspers and Prosus corporate level, which is business travel. From a technical perspective, it's category 3, category 6 in Scope 3. This is a voluntary target. We've set a 30% reduction.
The crux of our science-based target and our net zero pathway is a portfolio coverage target metric, where we commit to encouraging at least 50% of our portfolio of businesses, majority of our businesses, to have defined their own targets by 2030. The qualifier for this is invested capital rather than share of revenues. Using invested capital as the qualifying metric is reflective of our reality and does not skew the target to be influenced by Tencent, who earlier in March this year already announced their Science Based Targets initiative, the commitment to it. We could very easily let go of our responsibility simply by leaning on them if we took the share of revenues as a qualifying metric. Financial year 2020 is the most recent year not affected by the pandemic and therefore has been set as our base year for this target.
What I'd really like to highlight is the coming messaging is on the fact that most of our businesses are located in the Global South. It's an important nuance for us to consider when defining our climate strategy and that of our portfolio of companies. Countries in the Global North have contributed overwhelmingly to the current state of global warming as it stands today. The U.S. is responsible for 25% of historical carbon emissions. E.U. is at 22%, while India is at 3% and South Africa is 1.3%. In fact, as it stands today, currently, there are 3 billion people overwhelmingly represented in the Global South, who have the same annual per capita emissions as an average American refrigerator.
While the expected trajectory for all companies to be aligned to the same level of reductions to keeping global warming limited to 1.5 degrees by 2050, as you may have all heard, from the Paris alignment, Paris Accord, each business will have to define their own pathway, and it has to be just and fair. A theme that we saw prioritized at COP27 recently. Crucially, most of our businesses are also operating in those very vulnerable communities that are most vulnerable to the impacts of climate change. These are our employees, our customers, and our larger ecosystem, which is why driving the climate change agenda within our portfolio remains such a priority for us. However, as each business defines their pathway, it has to be just and fair.
What is super important for us to see is the country-level context of the business of where the business is operating. We see that most of our countries have a very differentiated approach to their carbon set, carbon targets and pathways. While South Africa has a 2050 target, India has a 2070 target. There will be a much bigger difference in the ability of a company that is operating out of South Africa to reach and achieve their targets than the same company, a similar company in South Africa. These companies are going to be materially influenced also by the enabling policy, the energy mix, the opportunity for them to actually transition and decarbonize, and incentives provided by the governments.
For example, a food delivery business in Germany is going to find it far easier to decarbonize their delivery fleet rather than a food delivery business in Brazil or a food delivery business in South Africa and in India. They will have a lower cost of capital. They will be able to leverage off the infrastructure in the country, and also will be able to have the opportunity to align themselves to the country-level maturity of decarbonization. I'm going to now move on to how we are creating inclusive and diverse learning organizations within our own company. Though we are a very varied group of companies, there are some things that are consistent for our people wherever we operate.
We want to build a workforce that is reflective of our diversity, of our customers, and our user base around the world. We also know that diversity in our teams and our thinking gives us a competitive advantage, which is why we proactively embed actions right from how we recruit and hire talent to employee development, rewards, and career progression to remove bias and discrimination. We work very hard to build a culture where everyone feels welcome and encouraged to contribute. Here, I'd like to highlight that the diversity and inclusion target contributes to 16.7% of the short-term incentives linked to our CEO and CFO remuneration, and that is cascaded through the organization. How are we contributing to building inclusive communities outside of our organization?
In line with our purpose to improve the everyday life of billions of people through technology, community investment is a, remains a very natural focus for the group. Our businesses implement corporate responsibility programs, social initiatives that meet the specific needs of the local communities where they operate. That will look very different from what iFood is doing to what eMAG is doing and what Swiggy would be doing in India. This enables them to extend their strengths for positive local impact. What we also encourage our companies to do is to align their design and delivery of their social impact programs to what they do commercially and their positive strengths. Let me give an example.
We saw the Brazil example Fabricio spoke so passionately about and the SICA program, the Prosus Social Impact Challenge for Accessibility in India that we've been funding for quite some years, that identifies and supports young Indian entrepreneurs innovating with, for assistive technologies to help Indians with disabilities. This was another question that I was asked during lunch. Sustainability governance, what is the oversight and the performance management for sustainability? Accountability for sustainability performance cascades right through the organization with oversight from the board level and regular reporting to board committees. KPIs are set at CEO and CFO level and cascaded through to the CEOs of each of the segments. The total contribution of ESG linked targets is one-third of CEO and CFO short-term incentives. Finally, we welcome the codification of ESG performance assessment by third-party agencies.
This really helps with addressing market concerns and greenwashing or self-declared ESG front runners. We use these sources to also benchmark our own sustainability performance, our own path and progress, and for feedback on where we can further improve on our performance and our disclosures. Thank you for your attention and engagement. I'll conclude by highlighting that the opportunity to harness the power of technology to drive green growth remains vast, and our businesses are committed to supporting their own transition and the transition in the communities around them for a more sustainable future for us all. Thank you. I have the absolute pleasure of introducing Ervin Tu, who is our CIO, who's going to talk to you about fun stuff like capital allocation.
Thank you, Prajna, for that important color on our sustainability strategy. Very exciting stuff. I'm Ervin Tu. I am the Group CIO of Prosus. I had the privilege of joining this amazing team a little over a year ago. My topic today is capital allocation and a few other things. Before I start, I have to warn you, I have no fancy, slickly produced videos. I have no free shirts. Clearly not the personality of that one Fabricio, who's sitting over here. Nor do I have boom, boom, pow, which I think should be the real hashtag from the afternoon. I have a few new things to show you, which I think will pique your interest. Stay with me. Let's hope we can still have some fun together. All right, capital allocation.
We are often asked by shareholders to articulate our approach to capital allocation. The approach is very simple. It's expressed in a fraction. Maximization of NAV per share. On the left, you see the simple expression. On the right, you see the elements. You entrust us with your capital. We want to maximize the return you enjoy on that capital by investing, building, and optimizing our portfolio of growth companies, and by managing the share count when appropriate. We place great focus on both the numerator and the denominator. I'll go into depth in the next few minutes to describe how we manage each side of the equation and balance the elements. Let's get into a little bit more depth here. This is the right-hand side of the previous slide. On new investments, we manage our portfolio actively across many geographies and segments.
We draw on a wealth of experience across the group and apply them to all of the situations and markets in which we invest. New investments undergo a rigorous process of identification, evaluation, are only approved once our hurdle rates are met. These opportunities are vetted by senior members of our team and ultimately our investment committee, chaired by Bob, with ultimate approval resting with our board for larger investments. Second, the existing portfolio. We are not passive money. We actively engage with our companies and monitor them closely. I can assure you, I've been at different shops. The metrics we use to review and assess the health of our businesses go far beyond a simple evaluation of a P&L and cash flow statement. In our performance review sessions, we discuss how best to optimize any given investment.
What operating advice can we provide, for example, from other investments across our portfolio that involve similar models, or from the collective operating experience of our many executives who have actually run businesses? We have a number of operators on our senior team. Is more capital needed? If so, in what form? Third, reevaluate and reshape. We actively consider whether we should shape the investment in a different way. When I say shape, I mean list it, sell it, merge it, and so on. Holding a position is an action. Do we need to do something different? Lastly, with respect to the denominator, I'll get into more depth on the denominator in a second, we make our decision based on return potential relative to other opportunities to generate NAV. How do we balance the two sides? We get this question often in addition to capital allocation generally.
The ingredients are the following. On the left of the slide, what return can we generate and with what risk envelope? Versus on the right, what return can we generate given market conditions and the level of discount? Our goal is to drive the highest risk-adjusted return with our capital, full stop. We believe, you've heard why we believe from our senior team previously, we are good at creating NAV for you. Until the recent market downturn, we had a track record of producing 20% plus IRRs. In the spirit of further transparency, I will show you in a few minutes how we've done more recently so you see what we see. The beauty of managing both the numerator and the denominator is we can provide significant leverage to asset level IRRs by reducing shares outstanding over time.
At the moment, given the level of uncertainty risk we see in the market, the fact that private valuations haven't yet corrected, you saw that earlier in Bob's presentation, and the level of discount we still see to our underlying NAV, we are opting to keep the bar high on investing and are shifting capital from our Tencent-funded buyback to manage our share count. Let's get deeper into our performance building NAV. This is new. First, before I get to the new stuff, let's all take a breath and look at a very messy picture. Owen calls this the messy slide, and he's right, because it's been a rough year. What this picture depicts is a number of sectors of tech over the course of the last year. Some of them are segments of ours, some of them are not.
You see the simpler, more visible version of the table. The thing that's clear in all of this mess is downward trajectory. Downward trajectory, downward trajectory. You know, because you know us well, that we are not dedicated public market investors. The valuation downdraft has hurt us everywhere, not just in our listed portfolio. Here's the new slide. Yes, you will get these slides at the end of the session, so you don't have to frantically scribble. This is a picture of our performance as of September 30th, with both our wins and losses. Capital invested, cash in on a gross basis, cash inflows, valuation, IRR, and then MOIC. We know you, our shareholders, have been asking for greater transparency, so we've set ourselves the goal of increasing the transparency of our performance so that you could see what we see.
We can engage in a better and more specific dialogue about our opportunities and risks with data. Note that the valuations here use analyst consensus valuations for our private positions where available or last transaction round valuation, and we supplemented for some of the smaller assets with our internal valuations. The summary at the bottom is sobering. Well, much of it is sobering, but the summary at the bottom is also sobering, and we aren't satisfied. Since 2008, and not including Tencent returns, we've invested $32 billion of gross capital on the left, returned over $11 billion, and produced an 8% IRR, 1.3x MOIC. That compares, you know, to 20%+ IRRs we've published in recent years. We've been hit hard by the public market downturn and significant multiple contraction for high-growth, unprofitable businesses.
The great focus you've heard from Bob, from others who have been up here, hashtag profitability, in a moment you'll hear further from Basil on accelerating the profitability of our portfolio. We cannot control multiples. No one can. We can certainly influence the earnings performance of our businesses. That's where we're focusing. This slide shows that we've also been affected in terms of our exit performance by the recent environment. Three prominent exits at the top. The other reflects a number of different situations, including all failed and disposed businesses. This is full open kimono. Everything is in there. There's no exclusion. Exits have been affected by the recent environment, particularly Avito, which I wanted to share more about because it was our most recent and painful exit with respect to a business that was a jewel of a business.
We actually produced a modest return on Avito. Had we not been confronted with certain market circumstances, the outcome would have been significantly better. At a reasonable valuation, we show here our potential return at our last third-party valuation from March this year. Our outcome would have been materially higher at 2.9x MOIC, I'm on the far right, and would have resulted in an overall adjusted average of 2.2. This has all been about e-commerce. I'd be remiss if I didn't talk about what we've also produced for you in terms of Tencent. Our gains from our position in Tencent have produced $37.5 billion of cash inflows, and the MOIC is incredibly over 3,500 times. This is our portfolio again. You can see top right, $31 billion. That was a number from two slides ago.
The segment contributions, also the same numbers from 2 slides ago. We have actually over 100 positions in our portfolio. Our largest ones, the ones represented here, are where we as a management team and our board spend most of our time. Overall, notwithstanding the valuation hits our portfolio has taken, we feel confident about our large positions. You've heard from Bob, Larry, Ramon, Laurent as to why we have that confidence. When we look at the scorecards of our businesses, and we do so frequently, we see an incredible discrepancy between their health and performance relative to the market's valuation. We continue to be optimistic that these businesses will generate meaningful returns for you, for us and for you.
We're working hard to deliver 20% plus returns again. Now, here's one last picture of our performance, which is a relative view as opposed to a standalone view of our returns. What's on the chart? The bars depict our e-commerce SARs scheme, an LTI vehicle for our management, and it reflects the valuation of our e-commerce portfolio over a one, two, and three-year period. Note that these valuations are conducted by a third-party firm and are generally close to analyst consensus valuation. The peers reflected by that green vertical line in each case are a set of over 20 internet companies. You can see the full list in our annual remuneration report, and those companies sit across a range of internet sectors.
Our e-commerce portfolio has meaningfully outperformed the median and has placed near the front of the pack even more so if you consider Avito at a more normalized valuation. That's the dotted box section. Here again, we use the $7 billion number, which was our last third-party valuation from earlier this year. Let me emphasize again, we are not satisfied, but we hope you will consider, as we do, both our absolute and relative performance at a moment like this one. Those are our returns. Let's move on to share count. Some of these pictures you've probably seen from us before results, but I'm gonna give you a little bit more color and emphasize a few other things. The open-ended buyback program. You all know we've been actively enhancing NAV per share by reducing the share count in this meaningful way.
Here you can see the results associated with EUR 6 billion of buyback to date at the top, which results in 3% NAV per share accretion. On an annualized basis, that results in just shy of 7%, 6.9% accretion. As Bob has said before, we are absolutely committed to this program, we will keep going as long as our discount remains elevated. I'll show you how the benefits will cumulatively increase. Here's the per share accretion year by year. The 7% from the previous line, the six nine, 15% in year two, 24% in year three. The bigger the discount and the larger the program, the bigger the benefit for you. The other feature we've talked about, but worth saying again.
The program will give our asset returns, those returns that I talked about a few slides ago, a kicker as conditions eventually improve and we start to grow NAV again. Without a buyback, the group IR, of course, simply equates to the growth of the underlying assets. The program will amplify these returns. Let's just take the midpoint, 20%, the gray bar. That just assumes our asset side produces a 20% return. With the buyback program, the returns that you enjoy would be 29%. Significant magnification. On the right-hand side, let's talk about Tencent. I reiterate Bob's comments that 100% of the value creates from arbitraging the value of our assets against our market cap. It has nothing to do with Tencent's current valuation as we sell and buy the way the program's designed with almost no delay.
A key component of the program then is that we increase our exposure to Tencent. You increase your exposure to Tencent per share. Here we show the annualized number, which is over 3%. That means we're more geared to a recovery in Tencent share price, and given the scale of the program, we will remain a very large shareholder for a long time. You've heard Bob's strong conviction on Tencent earlier in the day. It's a conviction I also share. To summarize, we are committed to this open-ended buyback program because it creates significant NAV per share accretion for you, it enhances our per share exposure to Tencent, and it provides additional important leverage to our asset level returns. What's next? This is a picture you've seen before, but let me emphasize it again.
We cannot control multiples, but we can influence earnings, and we are utterly focused on accelerating eCommerce profitability for that reason. We are committed to our open-ended buyback program, and we expect a strong recovery from China and Tencent. Lastly, on simplification, we are committed to finding a solution to the complexity of our group, excuse me. Our efforts at greater transparency today were part of this spirit to provide you a clearer and simpler view of our performance. Lastly, let me comment on the bottom. It's a graph you've seen from us before as well. While we think we're great builders, we acknowledge you expect more from us, so you should expect to see more of this cycle. We invest, we scale, we crystallize, we repeat, and where possible, we return.
Let me close on this before the final summary, which is crystallization. Everyone asks us about crystallization as well. I want to offer some more comments on it because we know you care deeply about it. We've recommitted ourselves to doing it in a way that shareholders tangibly benefit. It's core to our strategy. People ask us, "What are the examples?" Well, we've demonstrated that over time. You can see on the left-hand side with respect to companies we've listed in some form, six examples, on the right, eight examples of companies that we've sold or positions that we've sold in some way. We understand there's more to do. I'm not here to offer you any announcements today. Trust that we have teams now working on multiple other situations, markets and conditions willing, this list will grow in the next 12-18 months.
What will we do with any proceeds we generate? Facts and circumstances, of course, matter, but when possible, we will look to return some of that value to shareholders while also keeping some of it to fund further growth. Let me close. We are laser-focused on growing NAV per share over time. We will achieve this by actively managing the numerator and denominator of the NAV equation consistently. Current market conditions have affected our strong historic returns, but we have ambition to return to 20%+, and we will be more transparent about how and why. We are firmly committed to our open-ended share buyback program, while it continues to create NAV per share on a standalone basis and because it magnifies returns on our NAV.
We are building a repeatable process of investing towards crystallization and return that will define the next generation of value creation at a group level. Lastly, and you'll hear more about this from Basil, who's coming up next, we sit in a position of significant financial flexibility, which affords the group optionality to act quickly if opportunity presents itself. The bar will remain very high for external investment at the moment. I'll close there and let me invite our group CFO, Basil, to join us.
When you sit on the money, you literally sit on the money. As a CFO, at a time like this, I have the benefit of requesting a chair. Just give us a second. I'm not getting all my slides up here. James. There we go. Okay, now I can see the slides and hopefully you can see them behind me. Yeah, great. Welcome, everyone. It's great to see so many of you in person. Thank you to the many who have joined us via the webcast, for they're joining us via these two cameras in the front here. I've enjoyed catching up with you in person, and as I've told you when we did catch up, I find the in-person connection invaluable. Thank you for making the trip out.
Before I get into the meat of my presentation, I just wanna take a moment to recognize our incredible IR team, our incredible comms team and our events team. They've really worked hard to put on the show for you, and it took my breath away. I hope it's done the same for you. Also to all our speakers who have put significant effort and thought into their presentations. You've heard from Bob, our segments and businesses, and Prajna and Ervin about how we plan to grow the group in a more profitable and sustainable way. This lays the foundation for a repeatable process of value crystallization and return for shareholders.
It's my turn now to share my own perspective, how we will drive profitable growth, how we will accelerate the path to consolidated e-commerce profitability, and how we will supplement this with additional actions to create and unlock significant value for you, our shareholders. I see four key drivers in this journey. First, our rock-solid balance sheet and significant liquidity. Second, our growing and profitable core, which underpins our conviction in the growth extensions you heard about today. Third, we're scaling our businesses, growing margins, attacking costs with a determination to deliver consolidated e-commerce profitability. Doing so will enhance our ability to crystallize value for our shareholders. Finally, we're growing our net asset value per share, increasing all future returns through our open-ended share repurchase program. These drivers give me the confidence that we will have a more profitable and valuable business in the years to come.
In the last three years, we've spoken. We've achieved a lot. They've been foundational to the journey ahead. We faced several challenges along the way, but we took actions to address them. A lot has been done since. I'm gonna talk about that in this slide here. We outgrew our peers, achieved scale, and delivered profitable core. Our core businesses created new opportunities. These extensions are growing fast. In the current climate, our investment focuses on these extensions. We have doubled processor size in Europe and Naspers is now right-sized for growth in South Africa. Reflecting on our dialogue with you, we have taken significant steps to improve our disclosure and importantly in taking this differential action with our open-ended share repurchase program, which is creating significant value for our shareholders.
We've leveraged our increased scale to significantly grow our bond program. We were deliberate in the timing and the size of the capital raises. We were very focused on locking in attractive interest rates at a point when we believed they would be at historical lows and anticipating the rapid rise from these lows. We raised $10 billion in 3 years. We extended the maturity of our debt profile. 85% of our debt is due after 5 years. We achieved this while significantly reducing the average cost of our debt, and this has been amplified by the proceeds from Avito and JD, and that's created a further significant boost. We're pleased with the Tencent distributions and we are, of course, like many of you who are also shareholders of Tencent, looking forward to receiving the Meituan shares in March.
Tencent is a great investment, it's also been very good for our balance sheet. Here you see the numbers that underpin the messages I just gave you. We have gross cash of $16.4 billion and we're in a net cash position. Our average cost of debt is just 3.2%. With our focus now on profitability, we will grow the dividends to the whole co further and recoup the dividends we lose having sold Avito. Tencent is paying sizable dividends and supplementing these with valuable asset distributions. Our liquidity is an important advantage. We have the required financial flexibility to support our businesses so that they can realize their full potential. That strengthens the businesses at a time when other companies may be forced to pull back. We've shown we can allocate capital and generate high returns.
This has increased our net asset value significantly. We have created significant value by investing in our businesses, making smart acquisition, and reducing our share count through share repurchases. As Irvin just explained, we've actively managed both the numerator and the denominator, continually growing the net asset value per share. We remain committed to this process, which boosts equity returns for our shareholders. Our investments have delivered tremendous growth. You heard from my colleagues today on how they've driven growth and scale in their businesses. Our consolidated revenues are 3x what they were 3 years ago. We have diverse businesses which are resilient to the market shocks. These businesses continue to grow well despite the most challenging backdrop we've had in 40 years. There's more runway for growth.
Of course, for me as the CFO, what is particularly pleasing is that this growth is scaling profits at the core, and I'm confident we will walk a similar path for our growth extensions. This is a trend that I expect to continue for many years to come. The group has outgrown its peers for a long time. This is a slide we've shown at each capital market day. The macro context, of course, means growth will come down for everyone, including us. The slide shows that in the first half of this year, we have drastically improved our growth outperformance versus our peers. This points to the resilience of our businesses and our markets. Today, you have heard from our business leaders that they are confident they can continue to grow and drive operating leverage to improve profitability notwithstanding the current climate.
We've been through this cycle before. You'll recall, after extensive investment in the core operations, we've now achieved scale and profitability. These core businesses continue to grow at a very healthy pace. 20% in Classifieds, 29% in iFood, and 47% in our consolidated PayU business. This growth, combined with cost action, will deliver margin expansion in the years to come. Classifieds ex Avito is already delivering healthy margins, 27%, which Romain told you about earlier. He also told you that those margins are going to expand. iFood's restaurant business has done a phenomenal job first building a profitable 3P business and then identifying the 1P opportunity and bringing that to scale and profitability in just 3 years. Fabrizio has told you about his conviction to repeat the journey in groceries and quick commerce.
Payments has been profitable at its core for a while and will return to profitability in the second half, driven by the initiatives you've heard from Laurent today. With each now profitable, we will see the benefit of further scale and further acceleration of profitability and margins. With a strong core as the foundation of the segments, scaled growth extensions will continue to grow rapidly. This fast growth, combined with cost discipline, but focused investment, will accelerate the path to profitability for these businesses too. Growth in our earlier stage businesses is strong and notable given the current market context. Autos has doubled its revenues. Our convenience revenues are now 9x and our credit revenue is 3.5x. As I mentioned earlier, this puts each business on a steady trajectory of continued growth, and with that scale will come profit improvement.
Our investments will remain focused, prioritizing the best market opportunities. We'll drive further efficiencies. As others may be pulling back in our markets, that will create an opportunity for a faster path to profitability. The strong balance sheet we spoke about earlier has enabled us to make this investment. Of course, we're conscious of the market context and how things are changing. We're adapting by focusing the investment predominantly inward to our existing businesses, which have a proven track record. The investments benefit from synergies with the core operations. This increases our confidence to invest behind them. Fabricio showed how groceries is a natural extension for iFood. Laurent and Prashant have shown the same for PayU and Ramah for Autos and OLX. In the first half, we increased investment to back this growth and scale our businesses, investing $483 million.
We also invested significantly less in M&A and new initiatives than any time in the recent past. The level of this inward investment has now peaked. It will come down in each subsequent half, and it will continue to grow as we optimize cost and investment further. We also have an exciting portfolio of minority investments in promising earlier stage businesses and opportunities. The vast majority of these businesses are well-funded. They have significant runway and, like us, are taking action to deliver profitability in a faster way. For example, Delivery Hero, that's our largest associate, and it's benefiting from the same dynamics as iFood. They are making great progress, and they're targeting free cash flow, break even in the second half of next year. Now our business is operating at scale. We're entering this new phase of growth.
It's about scaling our businesses further, and as we continue to grow, driving profitability. As the businesses presented through the course of the day, we have multiple drivers to deliver good growth off our scaled base, and we are benefiting from operating leverage while also cutting costs, and that action is already underway. As you think about the path from today to profitability in the aggregate in the first half of 2025, I want to emphasize that we expect the first half of 2023 to be the peak of the investment and a turning point for our consolidated e-commerce businesses. We will deliver consolidated e-commerce profitability in the first half of 2025, which is 2 years from now. You should expect improvements in profitability in each subsequent reporting period, and the improvements will gain momentum over time.
We'll not take on new, unrelated opportunities, and we're going to invest behind the momentum we have already with our market-leading positions. To accelerate our profitability and enhance our long-term profits, we're taking action to optimize our cost structure everywhere. First, we do not plan to add sizable new opportunities. Second, we'll optimize what we have, improving the unit economics, expanding the margins. And ensuring that we're investing behind performing businesses. Third, we'll reduce costs at the center, but also at the segments. Fourth, we will exit underperforming businesses. While a lot of execution is needed to deliver this, profitability is well in sight. As you will have seen this slide in each segment presentation. These are the areas that we're focusing on in delivering in the profitability ambition. We have plans and targets for each business.
Each of the actions I've covered in the previous slide will deliver meaningful profit improvements in their own right. They're all important in the journey ahead to consolidated e-commerce profitability by the first half of 2025. We realize that the devil lies in the execution. Across the organization, as you've heard today, we are committed to this goal. I have high conviction in our ability to deliver. All this means that there is significant margin expansion. With businesses continuing to grow, significant profit and cash pools to be realized. These profits and cash flows will highlight the true value of our businesses and will amplify and accelerate our ability to crystallize and return value for our shareholders. Folks, these are the three pillars that will continue to drive outperforming returns versus our peers.
The valuation growth and returns that our strategy will deliver will be amplified by our open-ended share repurchase program. With our work to try and address the feedback on the cross-holding while exploring further ideas for our structure, we will continue to deliver very strong returns ahead. Today, I am underlining that we will deliver long-term value creation for our shareholders. Finally, I will say that we're very excited about the journey ahead. From a position of financial strength, we will drive profitability and cash generation. We'll grow our net asset value per share, and we will realize the value we build for our shareholders in a repeatable manner. In time, markets will settle, opportunities will appear to deploy capital and repeat the process. It's going to require a lot of work from the people that have presented to you today and their teams.
Know we're all committed and confident in our plans to deliver value for you. With that, I'd like to thank you all for coming today. It's been great to see you again in person, and thank you to the hundreds of people who have joined on the webcast. Thank you for all your support and advice over the years. It's helped us in the journey to this point, and it'll help us in the journey ahead. It's well heard and much appreciated. With that, I'd like to invite the rest of the team back on the stage for our Q&A session.
All right. Here we are.
Yes. Thank you.
We're actually gonna have everybody from the company participate in this Q&A.
We're gonna do musical chairs.
We've made it. Famous last words. Don't you ever walk across me like that again.
Yeah, right.
We're gonna do 30 minutes of Q&A. We'll take it from the webcast and in person, and that which we don't get to on the webcast, IR will certainly respond by email. Romain, why don't you take that?
Sure.
Okay. Why don't you take that? Fire at will.
Metaphorically, please.
Do we have the catch? Mics? Oh, you've changed your seat, but I still see you, Will.
Hi, it's Will Packer from BNP Paribas Exane. Two questions, both for Ervin, please. Firstly, in terms of the Meituan stake, you've outlined a criteria for holding and selling investments. Is there a scenario in which you'd consider holding on to Meituan? Secondly, you're very committed to the buyback and increasing NAV per share. Is there a scenario in which you would use your cash resources rather than Tencent to fund that buyback? Could you just help us through the decision-making process on both of those? Thank you.
Yeah.
Yeah.
Yes, sir.
just to repeat the question because it may not been clear for everybody. I think the volume was a little low. The first question was around Meituan. Whether, if I heard it well, if there's a scenario in which we would hold on to those shares rather than hold them for sale as we did. Is that correct?
Yeah.
I think.
How you think about that decision-making process.
Yeah. The second question was around whether we would use cash for a buyback instead of Tencent shares.
Correct.
All right. Excellent. Ervin, the floor is yours.
On the first one, we don't have anything new to say with respect to our posture on Meituan. We indicated, as you undoubtedly saw in results, that we are considering it held for sale for the moment. What I'll tell you that, in addition perhaps, is just to say that we think it's a great business, right? The business has been performing, doing what we believe are the right things, and you can see that reflected in its performance relative to others in the internet, China internet landscape. Beyond saying that, we don't have anything new to say right now. We think it's a great business. It's of course, an important dividend from Tencent, which we appreciate greatly, and we'll leave it there for now. Nothing new to say on that. On the second question, would...
What's the scenario? I'm not gonna get into hypotheticals on what scenario would cause us to change the program. All I can tell you is, as you've heard undoubtedly from us many times today and in other settings, we are absolutely committed on continuing the program as it was designed and as it was announced, as it was announced in late June. We haven't come to a moment where we've thought about modifying. We're fully committed to the program as designed right now.
Thanks. Okay, Lisa?
Thank you very much. I have a couple of questions, please. Firstly, I think you said today that clearly the bar is very high for external investments. I'm just wondering what would make you consider looking at M&A again? Like, you know, is that external, internal? What needs to happen for you to start acquiring companies again? Secondly, I think, you know, you talked a lot about your focus on profitability. I think we heard the word profitability a number of times today. I'm just wondering how does that change potentially your management compensation structure? I think this year, you have the STIC, which is mainly linked to the discount.
As you think going forward, how are you thinking about potentially changing that to align more with your goal to reach profitability? The third question, if I may, is, obviously you talked a lot about, finding solutions to simplify the structure. I know you're probably not going to make any announcement today, but what sort of timeline are we talking about? Is that one year, five years? Are they like three, four, five type options? Any color we can get would be helpful. Thank you.
Yeah. Thanks a lot for those questions. I'll just repeat them back 'cause indeed I realize these mics are not ideal, even though they're a lot of fun to throw around. The first question was around we have a high bar for M&A and sort of under which circumstances and considerations would there be for us to start again. I'm actually happy to have a go at that question. I should be able to say, Erwin, you should definitely add to that. The second question was around incentives, whether we have a change in the structure of incentives that now really emphasize in the short term reduction of the discount, and is there a view on that.
I cannot say too much about it, Lisa, because it's ultimately the remuneration committee that decides that. I can shed a little bit of light on the conversations that we've had about that. The third you need to remind me briefly.
Structure.
Hmm?
Simplifying the structure.
The... You said we probably are not gonna be specific about what we're doing to simplify the structure, but can we give any indication of timing? I'll probably pass that to Basil and Erwin to talk about, because that question is simply too difficult for me. No, just the joke is that I was actually realizing as I was sitting here that this may be a treat for you, but it's an even bigger treat for me because I see these people a lot, but I never have them sitting together with me, and I was looking at them with a great deal of pride and excitement. This is a treat for me, an unexpected unexpected treat.
On M&A, I think the question is obviously a fair one and the bar is high, and the reason why the bar is high is because the cost of capital has gone up, and we're also very committed to deliver an accelerated path to profitability. Those are things that up the bar, if you will. There are things and, that tick all the boxes for us, right? It needs to be strategically relevant, deliver an excellent return, and it needs to be something with a. I'm actually echoing what Erwin just said, right? It needs to deliver great returns, strategically relevant, and have acceptable risk. Those are really the things that will make an opportunity for us and bring it into the category where we would consider it.
I think the best example of one that makes that bar is iFood, right? Fabricio is nodding, and we know that actually we could do that additional purchase because of market circumstances at that price, right? We would not be able to do that at that price at all if we were in different circumstances. We know this business, we love this business, we love Fabricio, and we also think the execution risk is relatively low because we've seen Fabricio execute time and time again on new opportunities and bringing them to fruition. That's an example of something that meets the bar, and that's actually the three criteria that Ervin talked about that will make the difference.
On, sort of management incentives, again, like I don't decide them, but in the conversations with the remuneration committee, I think there were two things said. One is that, we're in an unusual set of circumstances, right? The discount, particularly at the time when those discussion happened, was what, at a completely unacceptable level, right? It's still, in our view, very much too high. It was, I think, very important for the remuneration committee to be really clear also in signaling to our shareholders how seriously the board takes this and how determined the board is to make sure we make a difference here. That's where it came from. When we're in a different spot, that may change.
again, I'm not a decision maker. Maybe, Basil, you've been part of some of those discussions. Anything to add?
Well, one thing I'd add is that the current incentives have brought us to this path, right? We've now made the commitment very publicly, so they're clearly working. I think we're aligned with shareholders. That's the most important thing here, right? Our incentives are aligned with shareholders, and if we create value for you, we create value for ourselves. Maybe, Lisa, on your third point, look, in thinking about structure and simplification, there are a couple of things to call out. First, we need to have something that we know that we have confidence we can execute, right? The second element of that is there's generally an element of regulatory approval, whether it's a stock exchange or. Third, generally, because it's structural and involves shareholder approvals, right?
The first one, I have complete control over timing, Ervin, Bob, everyone else. The other steps we don't have control over. That's why we can't actually put absolute timelines on this thing. I want you to know that it is a priority for all of us. We're working very hard at it, and if we have a good outcome on something, you will be the first to know.
All equally at the same time. Just to be very clear with that. Let's go to the webcast. This one seems to be one for Pragya and Ervin, I think. You might tag team this one. It's great to see you taking sustainability seriously in your strategy. Can you please provide a recent example of when ESG considerations might have influenced your decision-making and capital allocation? This pertains to your recently disclosed RI, right?
Thank you. Thank you for the question. I'm going to refer back to the slides that I shared before our responsible investment pieces over there. Actually, it's not from a recent perspective, it's every capital allocation decision that we're making, we are clearly steering away from categories of business activities and sectors that we do not want to have an exposure on. It is not I don't need to share one specific recent example, but every capital allocation decision that is made embeds ESG considerations into it, and it's also in the capital management of it, engaging with our portfolio companies and helping them get even better in their sustainability performance. That's, that's I think. Anything you'd like to add, Erv?
The only thing to add is there are specific situations where your team actually assists the deal teams in assessing a given investment for sustainability considerations. I can think of a specific example I know you know, which one I'm thinking about right now, where that's invaluable for us to consider. It absolutely affects beyond what Pragya described, the decisions, but also the process.
Great.
Well, maybe I actually give a specific example of a yes that I think what you mentioned, Aruna, earlier. I think it's a business that, besides it has a very solid business case, is one that we feel is one that excites us from a sustainability point of view and actually making us more excited about entering a business like that. It's sometimes it could lead to a no, and in some cases.
Yes.
it reinforces a yes.
Great. Did I see Caesar? Is Caesar up there? Yeah, up there. Past the, past the cameraman. No. We have an interception.
Wow.
Thank you. Good throw. Just a quick question. Can you say what the current level of the holding costs are, so the operating costs at the holdco level, and how that can be expected to de-develop over the coming years? Thank you.
Yeah. Just to make sure everybody heard, he can't see you because of the light, but what's your name?
Cesar.
Okay. Excellent. Thank you. Ask the question around what's the current level of the holding cost, the holding company cost, and how do you expect that to develop going forward? Basil knows everything about that.
There's three aspects. There's one that relates to supporting the business and then the true holdco cost. Ervin's cost, my cost, Bob's cost. That cost was about $81 million for the half. It actually hasn't grown much. The ambition is to reduce it. I won't give you the specific number yet. You'll have to see that when we put out our results in the full year, because that number is available. Know that we're very focused on that number and bringing that number down.
Okay. Question up top there, hand's waving. This could be. Oh. Got an injured investor.
Oh, okay. Very cushioned.
Thank you. It's Caesar from Bank of America. I have three questions, please. The first one for Larry, maybe on Swiggy. We haven't talked much about it. Can you please also outlay their path to profitability? Second one would be for probably Ervin. You've talked about returning to shareholders some of the proceeds, potentially from exits. Would that include Meituan? How would that work? Because you're already returning to shareholders the proceeds from the Tencent sales. Would that mean that you might consider paying a dividend? I have one final one on the structure simplification. That might have a cost.
I'm not talking about legal fees, potentially more about taxation. How do you think about it? Are you comparing the potential taxation cost or total cost of that simplification with the potential impact which you'd expect on the reduction of the discount? Thank you so much.
Thanks for the question, Cesar. You'll get your designated question and answer. Maybe I'll start briefly on your last question, which is around, do we take into consideration tax costs when we and obviously the corresponding advantages. The short answer is yes, absolutely. It's a key consideration in anything we do. In previous moves that we've made, and Basil can speak to you about it at any length that you want, the tax considerations are an important one. It doesn't mean that we wouldn't do something if there are tax considerations, but tax is an important part of the things we look at. If there's benefits that outweigh the tax, then that's definitely on the table.
I'd just add, right, sometimes the tax is theoretical, right? Because the thing that triggers the tax needs to get done, right? As an example. And that would need approvals, and sometimes, those approvals aren't there. I think, yeah, we look at the broad spectrum, tax, what approvals, and apply our minds to all the topics well.
Thank you. Larry.
Swiggy question on path to profitability. I guess it starts with macro in the market. This room will remember that India got hit with a bit of a lag from COVID. I would say it starts with volumes. The volumes are basically largely back in the India market to a more normal state. The core food delivery business has share positions somewhat settled. The next big area of investment that Swiggy is exploring, sound very consistent with what Fabrizio and Delivery Hero are doing, around grocery and quick commerce. In terms of profitability, you know, they'll follow their own journey there.
I think the important thing for this group to note is that they have a more than fully funded business plan. There'll be no, at least based on what we can see today in terms of macro market and the company's own strategy, no need for further fundraising.
All right. We'll go back to.
Yeah. I'll handle the second one.
Okay.
Your question about Meituan and what you should take away is the principle. I don't have much more to add, we don't have much more to add in terms of what we're gonna do with Meituan. The principle is facts and circumstances dependent. When possible, we will look to use some proceeds to fund further growth, but also look to return to shareholders. That's the principle. That's the spirit and focus I think you should take away, and as to specific situations, facts and circumstances matter. We're not gonna comment on that.
To clarify, the return can be a dividend or a share purchase?
Uh, we're-
In principle.
In principle, we're open-minded, but we're facts and circumstances will dictate what's best for the situation.
Thank you so much.
All right, we'll go back to the webcast, and this one is for the PayU guys. Well, sorry, Bob. You can give them to the PayU guys. What gives you the confidence that as you continue to scale the credit business, the loss rate will continue to be kept low?
Yeah, great question. Kudos to whoever asked it. Look, I think in any credit business, it's best to learn your lessons early. The pandemic couldn't be a better time, if there's such a thing as a good timed, well-timed pandemic. 'Cause as the business was small and growing, we learned a lot of lessons. Three things. One is, I think through the pandemic, we have figured out how to diversify our sourcing of customers. I spent a lot of time this morning talking about our BNPL flywheel and selecting into customers that we know a lot about and serving them and serving them more deeply. The second is, I think it's often underappreciated that when you're a manufacturer of credit, that you are system...
When you're driving your systematic cost of capital down, you're actually able to participate in the market in a far more competitive way. We are actually now serving more prime and super prime customers, leaving the super sub-prime customers for others to serve. That, again, gives me confidence that there is such a lot of headroom that we can continue to serve a very large prime base, customers that have shown through the cycle resilience. Mind you, we've also seen customers who have demonstrated through the cycle resilience, so we know what our models can predict, and so we can serve them a lot better.
That's what gives me confidence that between the diversification of how we source our customers and the fact that we can go after segments and serve them deeply with our lower cost of capital, that we will continue to serve with a lower loss rate and maintain that with scale.
Great. Here's one I saw during actually, Romain, your presentation, we didn't get to it. The classifieds business is becoming more capital-intensive. What does it mean for long-term moats investment and cash flow?
Thank you. That's definitely referring to the transactional part of classified and more specifically, to our auto transaction business. It is indeed more capital-intensive as you need to fund offline infrastructure and also inventory and car financing loans. It means that as you build that business and as you build it to scale, you obviously create a very strong moat for any new entrant in the market, which, you know, provide a great competitive advantage. Now in term of investment in the future, there are multiple things we can do to reduce that investment level, which is very important for us as we wanna return cash flow to shareholders and to obviously Prosus here.
The first thing is, as you've seen, we've been able, after a first initial phase of deploying capital to build our inventory level, to build our offline infrastructure. We're really now seeing the ability to leverage that operational infrastructure and really increase our volume while minimizing the additional investment. The second part is when you think about inventory, our current inventory turns are around 42 days, which is probably, among the, you know, good benchmark that we've seen in the industry. As we scaled our business, we've been able to increase the turnover inventory and be a bit smarter about predicting demand and adjusting our supply to the expected demand. You will see that we will be better at managing our inventory flow as we go.
Lastly, both on inventory and financing, you should expect with time that as we create, you know, credit history or delinquency history in the market, we're able to fund a part of this capital through external third party debt, and hence reducing the need for equity funding.
Great. Thanks. There's another one here, but yeah... Okay. In the middle here, please. Go on, throw it. Risk-averse investors. There we go, Ari. Well done.
Very good. Can you hear me? Yeah.
Yes.
It's Marcus Diebel from J.P. Morgan. One question. We've heard a lot about cost of capital, cost of capital went up clearly also for a lot of your associates. Is there a view that you use your balance sheet, which is clearly healthy and you're obviously doing really well in terms of progressing on profitability, to use your balance sheet to reduce the cost of capital for some of your associates if necessary? That's the first question. Then the second question is again on ESG. I found it very interesting, thanks for the slides, particular Food Delivery-related. Fabricio, you talked about briefly about packaging. Could you tell us a bit more what's actually happening, ideally, as specifically as possible?
Is it really growth first and we think about this more later, or is it really something on the ground that you're doing today already? Thank you.
Thanks for those questions. Fabricio will unleash the, I think, the fullness of his excitement and commitment to packaging. I've been, like, really impressed, but I won't steal your thunder. On the first question, who would like to go?
Maybe just on... in terms of our cash, right? We don't lend out cash, right? We're not, we're not a bank. We're equity investors. As Erwin said, and I'll hand it over to him, every decision is an action, right?
Yeah. No, I was gonna say the same thing, and the only other thing I'd add is, of course, in certain situations where there's a possibility to convert a debt-like instrument into equity, a convertible instrument, we will consider that. Yeah. We are ultimately equity investors in growth businesses. Fabricio.
Thank you for asking. I had an option to have many slides about that. I'll give you other shirts for this question. No, I'm just kidding. I don't have it. We just, we started working on that for maybe a year and a half. We are pushing many, many things on the ground. For example, we started selecting the restaurants that are more green restaurants that do not have recyclable packaging. We created like a green tag, and we started to separate them and promote them more so the demand would be higher on these restaurants.
We started a big project to stimulate the customers to say, "I want to pay more to have recyclable packaging." The reality is just like 70% say, "I want a green package," but just 5% effectively pay more to have a green packaging. That's what changed our mind. We have to change the whole industry to make sure that the packaging is the same size, price or cheaper. Because he said I can talk a lot, I want to talk about that related to the drivers. Today, the electrical bike driver, electric motorcycle driver, it is cheaper for the driver to have that bike. It is cheaper for the environment, obviously. He make more money, and he pay less on gas.
It's clearly better for everyone and for the customer. It don't pollute, and also, there is no noise. You make the good for all the value chain to be more sustainable and green. That's what we have to. We did that on electricity. It's not growing faster only because of the supply chain problem. The bikes are taking time to arrive, but we will have tens of thousands of electric bikes. On the packaging, that's what we have to build. After we do these two big projects, we did one that. Many tests, many projects to pay money to people that innovate in packaging. There is a big one with XPRIZE, a big one with. That's a global challenge. A big one with Suzano, a big producer of paper packaging.
All of these projects has the objective to pay like $100,000 to a few million dollars to develop new technology on packaging. We are committing to do big purchases when you have good technology for that. We have two or three concursus, two or three challenges on this. We have the green restaurant selections. What we need to do is to have a much better packaging at cheaper than what we have today. We don't have it today. It's cheaper today to buy a plastic packaging than the other one, and no one wants to pay for that. My point, I believe, like in more 6-18 months, we can keep making these numbers cheap enough until we really change to make the pro...
the cost versus we really make cheaper to have the sustainable packaging.
Fabrico-
It will take more time. The technology doesn't exist today to be cheaper.
I think you forgot to say that Brazil won yesterday.
Brazil. Yes, it's very important to say that we won, and it was 4-1. Everyone in Brazil today believes that everything is going to be sustainable, peace in the world, and happiness is ahead of us. We are very confident of the packaging. Thank you, Bob, for this part.
I was gonna say there's huge similarities between Irish people and Brazilians. Once you give them a mic, you can't take it away. When you talk about football, we can't talk about that. We have one here on Stack. Prashanth, you're up. This is as team customers, Team's customer monetization grows, are there new opportunities for growth extensions and adjacencies atop of that?
Yeah, great question. In terms of our growth opportunity, I spent a lot of time talking about, if you think about price times quantity, I spent a lot of time talking about quantity earlier today in terms of land and expand, growing the number of seats, right? Starting in developers, moving to technologists and so on within companies. The other area, of course, is price. When we think about the levers for price, it comes down to adding a lot of value-added features. I'll talk about exactly, you know, Larry was joking earlier, but there's the method of madness, right? There's adding value-added features, adding modules that make sense, right?
In order for us to be able to say, "Hey, these are value-added things that we can charge the customer for." When you think about what we talked about earlier around knowledge and why that's so central to what we do at Stack Overflow, for us, we believe a very logical extension of that is learning, 'cause that's ultimately what we're trying to do, right? We're really trying to make sure that people in the flow of work and in the flow of doing, you know, getting stuck, they're trying to get unstuck, and that's the best time to learn, as we've talked about.
Even though Larry explained earlier that, you know, it was somewhat of a interesting sort of setup to be part of the edTech portfolio, there are actually some tremendous benefits being part of it, because the learning mechanism opens up all sorts of possibilities to add value-added capabilities to a user. It is like, hey, you're getting unstuck, but then what about things like assessments? What about things like hackathons? What about hands-on learning? All this research that's come back from our users point to the fact that ultimately, what they are trying to do is really learn. That was one of the items around developer experience I explained earlier today, right?
Absolutely constantly looking at it, both organically as well as inorganically, and that's the power of being part of Prosus, because they've obviously got a phenomenal corporate development engine, and we can leverage that as asset prices decrease.
Brilliant. All right, we're running out of time here, so there's one there in the middle. Hi.
Miriam Adisa from Morgan Stanley. Can you hear me?
Oh, you have it. Oh, yeah.
Yep.
Oh, it's Miriam. Oh, Miriam, I didn't see you there. Sorry.
Hi. First one, just on the profitability target for the first half of 2025, how soon after can we expect sort of free cash flow breakeven for the portfolio? Also within that, have you already identified businesses where you're thinking of exiting and sort of what would be the sort of timeline for that as well in terms of bringing that to market? Secondly, just on iFood, given the sort of move to the sort of ecosystem approach, how are you sort of assessing the regulatory environment, particularly as you move towards fintech and other adjacencies?
Miriam, I said we're running out of time, and you asked an iFood question? I think, Basil, the first question is-
Sure.
firmly in your field.
Sure. We've been quite explicit about the ambition for core profitability. On free cash flow, there's some work for us to do, and Romar touched on it a bit, right? We're looking to build other funders of the working capital investment. In credit, as if our business continue on similar journey to Prashanth, we could be in a situation where for every $1 we put in, there's $4 of external debt. There's co-lending, there's various other aspects. There's no doubt free cash flow will be later, but I would be surprised if it's several years later, given all the work and the action we're taking.
Okay. I think the second question was around, the timing of crystallization. If I got it, did I get that right?
Yeah. Specifically exits as well.
Yeah. It's a very relevant question. I think to some extent, I can't give you a specific answer this then, and that is, that's not because I don't want to, but it's because not all of it is completely in our control, right? Whether an asset would be at the right stage for crystallization depends first of all, where is the business in its life cycle, right? There we obviously-
There are several business that could fit that bill within a reasonable amount of time. The other component, or the second component to those decisions is what is the market environment like? Which, however much we would like to control that on a monthly basis, we actually are much like the rest of you at the whim of the market. I think the important thing to take away is that several of our businesses are getting to a point where they could fit the bill, and then it's a matter for the market to be in the right place as well. Ervin, anything to-
All of that was spot on, of course. I just reiterate that we are working on specific projects, so we can't get into what those are and timing because everything that Bob just said is still, it's a condition, right? To getting something out is regulatory and market conditions and so forth. We are working on specific things, but we can't say more now.
Your last question I think is gonna be answered.
Yeah.
-a soccer score first and then-
Yes, exactly. The question is... I'm going to give a guidance, sorry, Brazil. Yes, Brazil is going to win the World Cup. You can take note and call me if something different happens. There's another part of the question. Yes, the second part of the question, we talk with the regulatory companies in Brazil all the time. We really believe Brazil is not, we don't have an anti-competitive market because we are all the time improving, all the time making sure that. We have many players trying to offer a better service, many players entering the market. We are working together with the government to make sure that it is a really open market for competition. We are for competition, for innovation, for creating new things that get delivered better for the customer.
This is the food deliveries part. On the other two areas that I described, we are small. We are a very small fintech player, we are a very small grocery player today. Hopefully, our entrance on these markets opens ups for more competition, better price, and more, more offer for customers. We are happy to keep competing and improving ourselves in the, in our journey.
All right. I think we'll take one more here from the webcast, and then, Bahram, you've had your hand up nicely there. Let's go to the webcast first. It said, "We heard a lot about the payments India business and its high potential. We've heard less about LatAm and Europe. Could Laurent discuss his outlook for that half of the business?
Yes, sure. short answer: outlook is great. It's great business. It's profitable. It's growing fast. Slightly longer answer: our cross-border business is actually growing north of 50% year-on-year. That's really, you know, the cross-border business that powers, you know, the Facebook, the Uber, the Netflix across all of our regions. That one really is a part of our business where we are invested in, you know, to build what we call the PayU Hub, and that we want to further accelerate. The second thing is, actually what we've done in India, we are starting to replicate that in other markets. 2 examples. The first one is in Romania. We started actually to build a credit product with our partner eMAG. You know, so you can see the synergies here in action within the Prosus group.
We've started to build together a credit product, to actually, you know, manufacture the credit and also distribute the credit to all the consumers of eMAG. We want to be careful. We want to grow it, you know, slowly but surely, but this is really, you know, what we've learned from India and that we're bringing to other markets. If it works, then we'll scale it across other markets. The third one is our business in Turkey. It's a fantastic business that actually came to us through an acquisition, a great company called iyzico, great team, a great product. Actually, here, we can really see that we have an opportunity in front of us to go beyond payments with credit, but also broader financial services. The reason for that is actually that in Turkey, there is no real competition for us.
Here what we have is a unique positioning where we can actually truly be, you know, in the middle between the merchants and the consumers. We have built our own wallet. We can start, you know, again, manufacturing our credit and going to broader opportunities. The outlook is actually quite bullish, you know, for the other markets that we cover.
Great. All right. We have that last one here. Yes. Throw and catch. Well done.
Hello. Can you hear me? Very good. Yep. I just lost my notes. Sorry. First of all, thank you for doing this, bringing us together and adding the transparency. There's one point of feedback that I want to give. When you first announced the buyback based on purely arbitrage, I think the balance sheet wasn't in the shape it is now, the situation has changed. There were a couple of months where we were hoping you wouldn't sell Tencent shares. Just continue with the buyback, don't sell Tencent. Maybe going forward, maybe those situations happen again and we would welcome flexibility. I mean, the buyback is very welcome, maybe some of that can also come from the balance sheet if you see the strengths, especially now when the portfolio is becoming more profitable.
Same thing also for Meituan. Some of the best investment decisions are hold decisions, right? Please be as disciplined with that one as with everything else, although you're just getting it as a dividend, but then you have it.
Then one question to Prashant regarding Stack Overflow. You mentioned the ambition to grow the market from just developers to technologists and to knowledge workers. There are some successful companies in the knowledge work space that are doing that very well. What would stop you from penetrating that market? Or where do you, where do you see the advantages to gain market share versus those established players, especially equally for knowledge workers?
Yeah, absolutely. Great, great question on the knowledge worker front. You know, we obviously have to play to our strengths, right? I think the biggest thing is, leverage the competitive mode that we have to start out, which is effectively developers, expand it to technologists, and then organically, I have to say that it is already expanding into knowledge workers, right? Just based on the fact that it has so much network effects when this product is kickstarted within a company, that automatically, for example, I'll give you a small example. If a technologist in a company asks, "What is the vacation policy for 2023?" The answer is gonna come probably from an HR person who is then gonna get invited to the product as a user. That's kind of what's happening automatically, right?
When you think about what most companies have, they have product and engineering, they have sales and marketing. If you think about what a salesperson wants to ask, they're asking, "Hey, what is the latest on product 3.1?" Rather than going and knocking on the product or engineering person to ask that question, they would ask it in the system, in Stack Overflow for Teams. We see this all the time. Like, Microsoft has 100,000 users on Stack Overflow for Teams. A good chunk of those folks are outside of product and engineering. They're actually knowledge workers. Our own company, we use it across the company to onboard new people into the company, doesn't matter what department. We see it at a very strong signal in our inherent behavior within our users.
You're right in that if we move into those areas, there will be obviously entrenched players who have been talking with knowledge management for a long time. We have our strength, which is starting out from within, always start with developers, which is our biggest strength, and move from there and expand out.
All right. That's it. Thank you very, very much, everybody. We're gonna move to the next section, which I'll ask you to exit stage right. Thank you very much. Bob has a few final remarks. Great job on that Q&A. Well done.
Thank you. Thank you all. All right. We're almost at the end of our day today. Before I actually close, I wanted to thank first all of you here in the audience, and most certainly also everybody on the webcast. I think it's been a day full of content. I really appreciate seeing you here face-to-face. It's been an absolute joy for me to have many of you in the same room who traveled all the way to be here. Thank you very much for that. Thanks for your attention. I've seen only faces on the stage. I haven't seen any laptops out, basically, which means that we probably didn't manage to bore you to death. Also a huge thank you to everybody who's involved in organizing this.
Owen, James, there's a whole crew behind here that made all this possible. A huge thanks to you guys. We really are at the end of our program today. I think and I hope that you found what the team has worked on is a good use of your time. I also want you to walk away knowing that we are committed to continue to create value, to crystallize value, and to return value to our shareholders. As the comment that we got last indicated, we are in a very strong financial position. In our view, it is a huge strategic advantage in times like we're now. Change creates opportunity. I think we talked about that at the beginning of the day, and I fundamentally believe in that.
Importantly, while the discount to our intrinsic value persists at levels that are too high, we will continue the share repurchase program. As you heard a few times today, that has created tremendous value for our shareholders. Importantly, it will enhance future returns. That's value today and value tomorrow. As we've talked about a few times, we're working towards the crystallization of value when that's appropriate for the business and also when markets are ready to the question that you asked earlier. We've done some of that in the past, but going forward, we'll run this at a repeatable and a predictable process. Finally, we touched upon, we got a few questions around it, we will continue to look for ways to simplify the group structure.
I'm very excited about the value creation opportunity that we see ahead for us and for you. In some investor meetings, actually with some of you that I've had over the years, I've heard the term Tencent plus. Basically, it speaks to investors' desire for the group to become far more than Tencent. Well, I could not agree more. That's what really we have been building over the last few years. I think today you've seen and heard that we are well on our way to become Prosus plus. What does it mean? It means current growth plus future growth. It means growth plus profitability. It means value creation plus value crystallization. It means investment plus capital return. It means geographical diversity plus business model diversity. That's what we're working on for you.
I thank you very much for your time, and I hope to see you again in person very soon or on the webcast. Thanks, everybody.