COMMENT - The Swiss online champion goes public – but its dominance is fleeting

It will likely be one of the largest IPOs in Switzerland in years – and a special one at that: The Swiss Marketplace Group (SMG) plans to list its shares in Zurich in 2025. With its online marketplaces such as Ricardo, Tutti, Homegate, Immoscout 24, and Autoscout 24, the company is aiming for a billion-dollar valuation.

Three aspects in particular make the IPO particularly sensational. This isn't an anonymous global corporation listing on the Zurich Stock Exchange: SMG is a company with Swiss roots that conducts its business exclusively in Switzerland. Consumers are familiar with this – it's almost impossible to avoid SMG's online marketplaces in Switzerland.

Furthermore, the company doesn't come from sectors where Switzerland is traditionally strong, such as manufacturing, pharmaceuticals, or finance. SMG makes its money in the digital world. The Swiss may now be surprised to discover that not only the Americans can do this; Switzerland also has an online champion.

Indeed, SMG is a very Swiss online giant. The names Ricardo, Tutti, and Homegate are unknown abroad. For small investors considering whether to buy shares in the company, this means that an investment in SMG is also a bet that the online marketplaces can maintain their dominance in Switzerland. A high stock market valuation can only be maintained if SMG remains a highly profitable company.

There are some indications that SMG will not lose its strong market position anytime soon. With the merger in 2021, the media conglomerate TX Group, on the one hand, and the Ringier/Mobiliar partnership, on the other, combined their previously competing online marketplaces.

Since then, the same company has been behind the real estate platforms Homegate and Immoscout 24, for example. SMG also secured a dominant market position in online car sales and classifieds. Swiss competition authorities had no means of preventing the merger because merger control is weak in this country.

In addition, the competition is tough. Disgruntled real estate agents have taken action: They not only complained about SMG's allegedly monopoly-like pricing policy, but have also been pushing a competing offering with the portal Newhome for some time. Major car dealer Emil Frey has launched its own portal, Carmarket.

But these portals haven't been a resounding success so far. They suffer from the network effect: In the online world, people are often where everyone else is already – and in Switzerland, these are predominantly the SMG platforms.

The assumption that global tech giants like Google or Facebook might launch online marketplaces themselves hasn't materialized yet. Online bartering has remained a local business in most countries. Proximity seems to be important to both buyers and sellers.

Nevertheless, the success of SMG marketplaces is far from assured. In the online world, market conditions can change quickly and abruptly. The history of the internet age is full of examples of once-powerful companies that have become insignificant or gone under: AOL, Yahoo, Netscape, Nokia, Myspace, and RIM Blackberry are just a few examples.

Perhaps at some point, a provider working with AI technology will emerge that can offer an online marketplace in Switzerland for free. It's unknown if that will happen, or when. Because you never know in advance what a disruption will look like – until it happens. SMG's dominance may be temporary. Investors should keep this in mind when planning its IPO.