Interview with former Avito CEO Vladimir Pravdivy

We spoke with Vladimir Pravdivy, who as CEO of Avito played a key role in helping the online marketplace to become one of the global market leaders. It was really interesting to get his perspective on operating marketplaces, building a high growth company and how to be an effective CEO:

 

What did you do in your early career before joining Avito?

I started my career in 1997. I worked originally in the advisory practice of PWC, and then I moved into industry. I initially worked in the software industry following the dotcom crash in 2001 as a CFO, and for the next thirteen years I worked as a CFO in the telco, internet and media sectors. I met the founders of Avito and the PE owners of the business, and they hired me as CFO to help float the business on the stockmarket, and also as a potential successor in time to the founders.

 

For people who may be unfamiliar with Avito, what does the company do?

Avito could be described as a classifieds business, but I prefer to call it a marketplace. There are of course a number of other classified businesses around Europe such as Autotrader, Rightmove and Gumtree in the UK, or Leboncoin in France for example. Including also a number of traditional print media businesses who transitioned their classified business online. On Avito a broad range of products and services are sold – new and used cars, real estate, a wide range of consumer goods, jobs and so forth.

I don’t like the term “classifieds” – it brings to mind an old print business. Modern technology companies like Avito are marketplaces that provide sophisticated technology solutions to help people and businesses buy and sell products effectively.

 

You were with Avito for a long time – ten years – how much did the business grow during your time?

I remember during my first days in the office it was just two overcrowded rooms with about ninety employees. Since 2014, the business has grown 30x in revenues, generating over $500m in profits, and by the time I left the business we were doing over 500bn in GMV [gross merchandise value – the total value of goods sold on the platform]. When I left we had over 6,000 people in the overall company.

 

Who are the key competitors for Avito?

Avito operates in a lot of different sectors, so there are a broad range of competitors. They range from second hand clothing marketplaces, to real estate platforms, jobs, services and automobile marketplaces. Google search is also arguably a competitor. There’s also the large marketplaces like Amazon or Ozon in Russia. There’s also remaining competition from offline businesses – not all the trading has moved online yet.

 

How much are marketplace companies local businesses in the sense that every market has different customs around how particular products and services are bought and sold, have different regulatory environments and so forth? And if marketplace businesses do need a lot of local customization, how easy is it to achieve economies of scale? 

It’s a very interesting question. Whilst there are some platforms like Facebook that have gained global popularity, there is no single classified/C2C marketplace platform that has become truly international. Craigslist was at the foundation of classifieds, but due to a complacency and focus on their original business model, they haven’t been able to internationalize the company. The different regulation and maturity of international markets make expansion challenging. It’s less of an issue for the consumer side of marketplaces, but much more so on the B2B side. For example, real estate agencies may or may not be regulated depending on the country, and car dealerships may vary in maturity massively from country to country.

I think it’s also a product of the old advertising model. The proximity of sales on each platform was very local. If you were selling an iPhone, people might be willing to travel a few miles to buy it. If it was a car or real estate – perhaps a few hundred miles. With a shift towards a more transactional model, it means that it becomes much more possible to buy and sell products across an entire country, or indeed internationally.

For example, Vinted – an app for buying and selling used fashion – has successfully grown internationally with a transactional model, as have Vestiaire Collective in France. I think in the consumer-to-consumer space marketplaces will become increasingly international, but the B2B business will still remain as being pretty local by its nature.

 

How has Avito’s ownership changed over the years? 

Originally the business was owned by the founders and Kinnevik, and Vostok New Ventures, the Swedish private equity firms. Later, Northzone and Accel invested in the company. Naspers acquired 10% of the company, and would later increase their stake to 67%. In 2019, the minority shareholders sold their remaining shares to Naspers, who gained full ownership over the business. The latest transaction happened in August 2022, when a Russian private equity firm bought the business from Naspers.

 

How did you become CEO?

When Naspers bought a majority stake in the business, the founders stepped down from their executive roles and I became CEO of the company.

 

What was it like when you became CEO of Avito?

It was quite a change. Becoming a CEO requires a mindset shift, especially when you had worked previously in finance. As CFO I often focussed on risk management and capital allocation, whereas the CEO’s remit is so much broader. It probably took a year or two before I realized that I had a developed a good understanding of what the role was about. I had great support from the owners and founders which played a pivotal role in helping me as the CEO.

 

As CEO, what were the areas of the business where you tended to be most hands-on? What do you see as the essence of the CEO role?

Surprisingly, I tried to keep myself far away from finance – I didn’t want to potentially undermine the new CFO by being too hands-on in my old department. I focussed mostly on product and customers, as I believe that is the heart of the business. I think people management is a very important part of the CEO role, and I often regarded myself as the Chief People Officer for the company. You have to set the vision, make sure that your team believes and buys into it, and execute that vision well. To do that you need great talent and people who are much stronger than you. My focus changed based on the priorities and the growth stage of the company at the time. When we moved to a transactional model, I focussed on the new products and launches that we had. During crisis times, obviously you focus on those issues.

I don’t think a CEO can delegate managing the investor base and dealing with shareholders. I think a CEO also needs to set and sell the vision and manage the talent.

 

During the almost seven years that you were CEO of Avito, what were some of the major changes during that time?

First it was scaling the company. I inherited a successful business, but it was very much marketing led. One of the first changes I made was creating and establishing a product management function within the company. We also changed from a single monolithic product to a number of highly autonomous business units operating within one superapp. This entailed delegating a lot of control over different product areas to the managing directors of the different business units. Another big change was moving from an advertising based model to a transactional one. This required a change of mindset and the capabilities within the company.

 

What are the key advantages of a transactional model compared to an advertising based one?

For customers it offers much more convenience and security. In the advertising based model – the risk falls entirely on the consumer, whereas with the transactional model, the cash is secured by escrow until the buyer receives the goods and is happy with them. As a consumer, you now have access to sellers across the entire country or internationally rather than just your local market.

 

Presumably one challenge of managing a marketplace business is that you want to run a relatively low-touch, frictionless marketplace, but equally you have to ensure trust and safety and protect outcomes for your customers? If someone is selling a $10 t-shirt, trust and safety might not matter so much as if you’re selling a luxury watch or a car. Do you therefore have to have a customized approach based on the nature of the products or services being sold on your marketplace?

Yes, I think that’s right. You can run a one-size-fits all model if it’s just a simple, low value listing, but more expensive products require authentication and other verifications. If you’re selling fashion, or electronics or luxury goods, each requires a different customer experience and therefore tailored infrastructure. By guaranteeing the safety of your customers under the transactional model, you are providing a lot of extra value to the consumer. This makes people much more comfortable buying and selling on your platform and makes your addressable market much larger. If people feel comfortable selling high value items on your marketplace, then there are also opportunities to provide them with loans and financing too and create extra revenue streams.

 

If you could give any advice to a first time CEO, what would you suggest?

Firstly, I would say that being a CEO is a fantastic opportunity to have an impact and really make a difference to a company. When you become a CEO for the first time it is always a big change to what you are used to. I had some great mentors who really helped me when I became CEO of Avito, including the founders of the company. There are also some great books you can read on the subject. You need to understand what the CEO role is in a particular context – what are your objectives and where you should focus your time. Focus is important. I’d recommend getting a mentor, having one or two senior executives can help you to be more self-confident. Quite often a challenge for a new CEO is being confident in your vision and sometimes speed is important.

 

Managing board members and investors can be a challenge for a lot of CEOs. What would you recommend on this side?

Don’t limit your interactions with them to just board meetings – that’s just the tip of the iceberg. You need to build a strong relationship with them beyond that. Try to build trust with them and understand their motivations. Be transparent with them and let them know what is going on in the business. Don’t be afraid to admit mistakes. Trust comes from delivery and them knowing you as a person. It’s much more about personal relationships than just official materials and meetings.

 

What have you been doing since stepping down as CEO of Avito?

First, I just wanted to have a proper break as we’d worked really hard to build the business over the last ten years. Growing the business 30x requires a lot of energy and the CEO should be a role model for the rest of the company. After that, I’ve been mentoring some young CEOs and doing some advisory projects for private equity firms. Right now, I’m considering different investment opportunities and trying to find an interesting new executive role that would inspire me as much as Avito did.