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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on October 29, 2013

Registration No. 333-191424

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549




Amendment No. 5 to
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933




58.com Inc.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)

Cayman Islands   7370   Not Applicable
(State or other jurisdiction
of incorporation or
organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

Block E, The North American International Business Center
Yi 108 Beiyuan Road, Chaoyang District, Beijing 100101
People's Republic of China
Tel: (86 10) 5139-5858

(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)

Law Debenture Corporate Services Inc.
400 Madison Avenue, 4th Floor
New York, New York 10017
(212) 750-6474

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Z. Julie Gao, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
c/o 42/F, Edinburgh Tower
The Landmark
15 Queen's Road Central
Hong Kong
(852) 3740-4700
  David Roberts, Esq.
Ke Geng, Esq.
O'Melveny & Myers LLP
Yin Tai Centre Office Tower, 37th Floor
No. 2 Jianguomenwai Ave.
Beijing 100022
People's Republic of China
(86 10) 6563-4200



          Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o                        

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o                        

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o                        

CALCULATION OF REGISTRATION FEE

 
Title of each class of
securities to be registered

  Amount to
be registered(1)(2)

  Proposed maximum
offering price per share(1)

  Proposed maximum
aggregate offering price(2)

  Amount of
registration fee

 
Class A ordinary shares, par value US$0.00001 per share(2)(3)   25,300,000   US$8.00   US$202,400,000   US$27,210(4)
 
(1)
Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(a) under the Securities Act of 1933.
(2)
Includes Class A ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public, and also includes ordinary shares that may be purchased by the underwriters pursuant to an over-allotment option. These Class A ordinary shares are not being registered for the purpose of sales outside the United States.
(3)
American depositary shares issuable upon deposit of the Class A ordinary shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No.333-191776). Each American depositary share represents two Class A ordinary shares.
(4)
US$25,580 was previously paid.

          The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.


Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchanges Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)
Issued October 29, 2013

11,000,000 American Depositary Shares

LOGO

58.com Inc.

REPRESENTING 22,000,000 CLASS A ORDINARY SHARES



58.com Inc. is offering 11,000,000 American Depositary Shares, or ADSs. Each ADS represents two Class A ordinary shares, par value $0.00001 per share. This is our initial public offering and no public market exists for our ADSs or our ordinary shares. We anticipate the initial public offering price of the ADSs will be between $15.00 and $16.00 per ADS.



Upon the completion of this offering, we will have a dual class ordinary share structure. Our ordinary shares will be divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are entitled to one vote per share, while holders of Class B ordinary shares are entitled to ten votes per share. Holders of Class A and Class B ordinary shares will vote together as one class on all matters that require shareholders' approval. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstance. Upon the completion of this offering, our existing shareholders will own an aggregate of 131,811,987 Class B ordinary shares, which will represent 98.2% of the then total voting power of our outstanding shares.



We are an "emerging growth company" under applicable U.S. federal securities laws and are eligible for reduced public company reporting requirements.



We have applied for the listing of our ADSs on the NYSE under the symbol "WUBA."



Investing in our ADSs involves risks. See "Risk Factors" beginning on page 17.



PRICE $            AN ADS



 
  Price to
Public
  Underwriting
Discounts and
Commissions
  Proceeds to
58.com Inc.
 

Per ADS

  $     $     $    

Total

  $     $     $    

We have granted the underwriters the right to purchase up to an aggregate of 1,650,000 additional ADSs to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the ADSs to purchasers on                           , 2013.



MORGAN STANLEY   CREDIT SUISSE   CITIGROUP



PACIFIC CREST SECURITIES

                           , 2013


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GRAPHIC


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TABLE OF CONTENTS

 
  Page

Prospectus Summary

  1

Risk Factors

  17

Special Note Regarding Forward-Looking Statements and Industry Data

  57

Use of Proceeds

  58

Dividend Policy

  59

Capitalization

  60

Dilution

  62

Enforceability of Civil Liabilities

  64

Corporate History and Structure

  66

Selected Consolidated Financial Data

  70

Management's Discussion and Analysis of Financial Condition and Results of Operations

  72

Industry Overview

  98

Business

  102

Regulation

  120

Management

  131

Principal Shareholders

  139

Related Party Transactions

  143

Description of Share Capital

  144

Description of American Depositary Shares

  154

Shares Eligible for Future Sale

  167

Taxation

  169

Underwriting

  177

Expenses Relating to This Offering

  183

Legal Matters

  184

Experts

  185

Where You Can Find Additional Information

  186

Index to Consolidated Financial Statements

  F-1

        You should rely only on the information contained in this prospectus or in any related free-writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, the ADSs only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the ADSs.

        We have not taken any action to permit a public offering of the ADSs outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the ADSs and the distribution of the prospectus outside the United States.

        Until                        , 2013 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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PROSPECTUS SUMMARY

        The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ADSs discussed under "Risk Factors" before deciding whether to buy our ADSs. This prospectus contains information from the iResearch China Online Classifieds Market Research Report, an industry report commissioned by us and conducted by iResearch Consulting Group, or iResearch, a third-party market research firm, to provide information on our market position among online classifieds providers in China. We refer to this report as the iResearch Report in this prospectus. The iResearch Report uses data for the relevant period as of May 31, 2013 when estimating the size of the online classifieds market and the position of the market participants including us. The iResearch Report uses monthly unique visitors data of online marketplaces on personal computers from January 2012 to May 2013 and data of online marketplaces on mobile applications from August 2012 to May 2013, when estimating the position of the market participants including us. iResearch started collecting monthly unique visitors data of online marketplaces on mobile applications in August 2012.

Our Business

        We operate the largest online marketplace serving local merchants and consumers in China, as measured by monthly unique visitors on both our www.58.com website and mobile applications, according to the iResearch Report. Our online marketplace enables local merchants and consumers to connect, share information and conduct business. Our large and growing user base, merchant network and massive database of local information create a powerful network effect that enables us to maintain our leadership position.

        Our online marketplace contains a vast amount of credible and up-to-date local information in approximately 380 cities, across diverse content categories, including housing, jobs, used goods, automotive, pets, tickets, yellow pages and other local services. We conduct automatic and manual screening using proprietary technology and processes to ensure relevance and accuracy of the information on our online marketplace. To further increase the quality of information and enhance user experience, we leverage our years of experience and continue to develop processes and features to certify local merchants, encourage user reviews, collect and respond to customer feedback through our customer service team and provide designed templates to local merchants to make listings more informative and effective. Our broad, in-depth and high quality local information, combined with our easy-to-use website and mobile applications, has made us a trusted marketplace for consumers.

        Our online marketplace also provides merchants with an affordable and effective marketing channel to reach a broad and targeted local consumer base. Our sales and customer service teams stay in regular contact with our customers to help them use our online marketing services to achieve optimal marketing effectiveness. Our well-recognized brand, "58.com," further helps local merchants to attract consumers in China. As a result, we had approximately 4.3 million active local merchants on our marketplace in the second quarter of 2013.

        Our business model is highly compatible with mobile internet. Our listing-based content is easy to display through mobile devices. Our location-based services and other mobile functionalities significantly increase user engagement. We have launched a separate merchant mobile application to increase consumer-merchant communication and enhance the ability of merchants to manage content and attract consumers. In the second quarter of 2013, 39.4% of our average monthly page views were on mobile applications.

 

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        Leveraging the network effect of our online marketplace with our focus on providing the best user experience, we have achieved market leadership with significant user traffic and growing user engagement, as shown by:

    our no.1 market position represented by 38.1% market share in terms of cash receipts in China's online classifieds market in 2012, according to the iResearch Report;

    an average of 129.7 million monthly unique visitors who visited our website or used our mobile applications in the second quarter of 2013;

    the number of page views per unique visitor on our website, which more than doubled in the second quarter of 2013 as compared to the same period in 2010; and

    an average of 1.9 million listings per day of local information that our users posted on our website and mobile applications in the second quarter of 2013.

        We generate revenues primarily from memberships and online marketing services. A membership is a basic service package consisting of merchant certification, display of an online storefront on our marketplace, preferential listing benefits such as daily priority listings and higher quota for daily listings and access to our dedicated customer service support team and online account management system. Our online marketing services mainly include listing services, such as real-time bidding and priority listing, and marketing services through collaboration with third-party internet companies in China. Merchants can use our real-time bidding services to bid for the most prominent placement of their listings in specific categories and locations on a daily basis. Merchants can also purchase our priority listing services, which place their listings below real-time bidding listings and above paying merchant members' listings.

        Our revenues were US$10.7 million, US$41.5 million and US$87.1 million in 2010, 2011 and 2012, respectively. We incurred net loss of US$13.9 million, US$83.4 million and US$30.4 million in 2010, 2011 and 2012, respectively. Our revenues were US$58.8 million and we had a net income of US$0.3 million in the six months ended June 30, 2013.

Our Industry

        China's online marketing industry has grown significantly as the internet continues to gain popularity as an effective marketing medium. According to the iResearch Report, China's online marketing industry is expected to grow from US$12.1 billion in 2012 to US$39.3 billion in 2017 representing a five-year compound annual growth rate, or CAGR, of 26.6%. Based on iResearch's estimates, online marketing is expected to become the largest marketing medium in China in 2013.

        The rapid proliferation of internet usage is also driving a shift in marketing services towards the online channel. The online classifieds market in China is expected to grow from US$275.4 million in 2012 to US$2.4 billion in 2017, and online classifieds as a percentage of total classifieds is expected to increase from 10.6% in 2012 to 43.9% in 2017, according to the iResearch Report, due to China's large number of megacities and the resources constraints faced by local merchants, especially small and medium-sized enterprises, or SMEs. There will be 57 million SMEs in China in 2013, according to the iResearch Report. Due to their relatively smaller scale, local merchants in China face a number of inherent challenges when conducting business, which include marketing effectively and gaining credibility and consumer trust. These challenges have set the stage for the emergence of online classifieds platforms as a cost-effective medium to connect local merchants with potential customers.

        The growing adoption of mobile internet usage combined with technological advancement has enabled the proliferation of rich content and more complex applications on mobile devices. According to the iResearch Report, the number of mobile internet users in China has been growing, and is expected to continue to grow at a fast pace, increasing from 420 million in 2012 to 784 million in 2017. The accessibility and range of functionalities provided by mobile devices will lead to a higher level of user engagement, and also allow local merchants to better manage their product offerings. Mobile

 

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applications also allow online marketing services providers to better track user behavior and monitor listing effectiveness, which will in turn drive more product innovation.

Why Consumers Choose Us

    Depth of information at the local level

    Breadth of content categories

    Up-to-date and credible information

    Ease of use

    Compelling mobile experience

Why Merchants Choose Us

    Broad consumer reach

    Affordable and effective marketing channel

    Ability to target consumers

    Strong customer service

    Well recognized brand

Our Strengths

        We believe that our success is largely attributable to the following key competitive strengths:

    Leading market position

    Powerful network effect

    Trusted marketplace

    Proven mobile adoption

    Extensive and engaged merchant network

    Strong brand recognition

    Significant monetization potential

    Strong product development and engineering capabilities

Our Strategies

        Our vision is to provide the most convenient and trusted online marketplace for local merchants and consumers in China. We intend to achieve our vision by pursing the following growth strategies:

    Grow user base and enhance user experience

    Expand and strengthen merchant network

    Enhance mobile capabilities

    Further monetize traffic

    Pursue strategic alliances and acquisition opportunities

Our Challenges

        We operate in a fast-evolving industry and face risks and uncertainties that could adversely impact our business, including those relating to our ability to:

    continually anticipate user preferences and provide attractive services on our online marketplace;

 

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    retain existing and attract new local merchants to use our online marketplace and pay for our membership and online marketing services;

    achieve and sustain operating profitability, given our history of losses;

    effectively respond to competition;

    manage our growth or execute our strategies effectively;

    maintain a strong brand image and avoid, or timely and effectively respond to, events that could cause negative publicity and harm our reputation;

    offer new, innovative and effective services at competitive prices to attract and retain a large user base;

    balance the need to market and advertise our services with the significant costs of doing so;

    capture and retain a significant portion of the growing number of users who access online marketplaces through mobile devices; and

    attract, train and retain qualified personnel.

        In addition, we face risks and uncertainties related to our corporate structure and doing business in China, including:

    risks associated with our control over Beijing 58 Information Technology Co., Ltd., or Beijing 58, which is based on contractual arrangements rather than equity ownership, including our ability to use and enjoy assets held by Beijing 58 and its subsidiaries that are material to the operation of our business, such as the domain names and trademarks held by Beijing 58;

    risks related to the potential conflict between PRC and Cayman Islands fiduciary duties owed by directors of Beijing 58 and our company and the lack of framework for the resolution of fiduciary duty conflicts between these different jurisdictions;

    uncertainties associated with the interpretation and application of PRC regulations and policies, including those relating to the distribution of internet content in China; and

    risks related to our ability to use the proceeds of this offering to make additional capital contributions or loans to our PRC subsidiaries as a result of PRC regulations and governmental control of currency conversion.

        Please see "Risk Factors" for a more detailed discussion of these and other risks and uncertainties we face.

        Under PRC laws and regulations, we are permitted to utilize the proceeds from this offering to fund our PRC subsidiaries only through loans or capital contributions, subject to applicable government registration and approval requirements. We cannot assure you that we will be able to meet these requirements on a timely basis, if at all. See "Risk Factors—Risks Relating to Doing Business in China—PRC regulation of direct investment and loans by offshore holding companies to PRC entities and governmental control of currency conversion may delay or limit us from using the proceeds of this offering to make additional capital contributions or loans to our PRC subsidiaries." We currently plan to use a substantial portion of proceeds from this offering to increase the registered capital of Wanglin and 58 Technology and will apply to obtain approval from the Ministry of Commerce or its local counterparts for such increases and register the changes with the State Administration for Industry and Commerce and the SAFE or their local counterparts. We currently do not plan to use the proceeds from this offering to fund the operations of Beijing 58, our consolidated affiliated entity, and its subsidiaries.

Corporate History and Structure

        We began our operations in China in 2005 through Beijing 58, a PRC limited liability company, which became our consolidated affiliated entity through certain contractual arrangements. Due to the

 

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legal restrictions and qualification requirements on foreign ownership of value-added telecommunications services, we operate our online marketplace through Beijing 58.

        In January 2010, we incorporated China Classified Network Corporation, or CCNC BVI, a holding company established in the British Virgin Islands. Subsequently, CCNC BVI established China Classified Information Corporation Limited, or CCIC HK, a Hong Kong limited liability company, as its wholly owned subsidiary. CCIC HK then established Beijing Chengshi Wanglin Information Technology Co., Ltd., or Wanglin, as a wholly foreign-owned enterprise in China. Wanglin entered into a series of contractual agreements with Beijing 58 and its shareholders, including the exclusive business cooperation agreement, the equity pledge agreement, the exclusive option agreement and the power of attorney, under which Wanglin exercises effective control over the operations of Beijing 58. The shareholders of Beijing 58 received nominal monetary benefits in return for entering into the contractual arrangements with Wanglin.

        Our current holding company, 58.com Inc., was incorporated in May 2011 as a limited liability company in the Cayman Islands. Through a share exchange in July 2011, CCNC BVI became a wholly owned subsidiary of 58.com Inc.

        In March 2012, CCIC HK established 58 Tongcheng Information Technology Co., Ltd. or 58 Technology, as a wholly foreign-owned enterprise in China, to operate our customer service operations in China.

        Due to PRC legal restrictions and qualification requirements on foreign ownership and investment in value-added telecommunications services in China, we operate our www.58.com website and value-added telecommunications through our consolidated affiliated entity, Beijing 58, and its subsidiaries. Beijing 58 holds an ICP license that is necessary for the operation of our website and provision of value-added telecommunications services. Beijing 58 owns all of the six registered domain names used in our value-added telecommunications businesses, including www.58.com and www.58.com.cn, which are material to our business. Moreover, Beijing 58 is also the owner of all registered trademarks used in our value-added telecommunications businesses and is the applicant of all the applications for trademark registration we have made. As the registrant of the trademarks, Beijing 58 has an exclusive right to use such trademarks in China for the goods or services under the trademark categories that it has registered. Beijing 58 also enjoys the exclusive right to use the domain names that it has registered.

        We do not hold any equity interest in Beijing 58; however, through a series of contractual arrangements with Beijing 58 and its shareholders, we effectively control Beijing 58 and its subsidiaries and enjoy their economic benefits. Beijing 58 and its subsidiaries are considered "variable interest entities" of our company under U.S. generally accepted accounting principles. Therefore, we have consolidated the financial results of Beijing 58 and its subsidiaries into our financial statements. We rely on contractual arrangements to control and operate the businesses and assets held by Beijing 58 and its subsidiaries, including the domain names and trademarks held by Beijing 58. The contractual arrangements may not be as effective in providing control as direct ownership. For example, Beijing 58 could breach their contractual arrangements with us by, among other things, failing to conduct its operations, including maintaining our website and using the domain names and trademarks for which it has exclusive right to use, in an acceptable manner or taking other actions that are detrimental to our interests. If Beijing 58 or its shareholders fail to perform their respective obligations under the contractual arrangements, we could be limited in our ability to enforce the contractual arrangements that give us effective control over Beijing 58. Furthermore, if we are unable to maintain effective control over Beijing 58, we would not be able to continue to consolidate the financial results of Beijing 58 and its subsidiaries with ours. See "Risk Factors—Risks Relating to Our Corporate Structure and Restrictions on Our Industry—We rely on contractual arrangements with our consolidated affiliated entities and their shareholders for the operation of our business, which may not be as effective as direct ownership. If we are unable to maintain effective control, we would not be able to continue to consolidate the financial results of our consolidated affiliated entities with our financial results. If our

 

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consolidated affiliated entities and their shareholders fail to perform their obligations under these contractual arrangements, we may have to resort to litigation or arbitration to enforce our rights, which may be time-consuming, unpredictable, expensive and damaging to our operations and reputation" and "—We may lose the ability to use and enjoy assets held by our consolidated affiliated entities that are material to the operation of our business if any of such entities goes bankrupt or becomes subject to a dissolution or liquidation proceeding."

        Under the exclusive business cooperation agreement, Wanglin has the exclusive right to provide technical and business support and consulting services to Beijing 58 in exchange for service fees. Beijing 58 agrees to pay a quarterly service fee to Wanglin at an amount determined solely by Wanglin after taking into account factors including the complexity and difficulty of the services provided, the time consumed, the seniority of the Wanglin employees providing the services to Beijing 58, the value of services provided, the market price of comparable services and the operating conditions of Beijing 58. The exclusive business cooperation agreement will remain in effect unless Wanglin terminates the agreement in writing at its sole discretion or a relevant government authority rejects the renewal applications by either Beijing 58 or Wanglin to renew its respective business license upon expiration. The shareholders of Beijing 58, under the equity pledge agreements, pledged their equity interests in Beijing 58 to secure Beijing 58's and its shareholders' performance under the contractual arrangements. As a result, Wanglin is entitled to all dividends and other distributions made by Beijing 58. In order to maintain sufficient working capital in Beijing 58, Wanglin has not yet exercised its right to provide services to Beijing 58 and thus has not yet received any service fee payment from Beijing 58, as of the date of this prospectus. We currently expect Beijing 58 to begin paying a portion of its quarterly profit as service fee to Wanglin once Beijing 58 becomes profitable net of accumulated losses, taking into account Beijing 58's working capital requirements. In addition, Beijing 58's shareholders, in the exclusive option agreements, irrevocably granted Wanglin, or Wanglin's designees, an unconditional and exclusive option to purchase, to the extent permitted by applicable PRC laws, all of the equity interests in Beijing 58 from the shareholders for either a nominal price or a specified price equal to the loan provided by Wanglin to the individual shareholder. If the lowest price permitted under PRC law is higher than the above price, the lowest price permitted under PRC law shall apply. The exclusive option agreements will remain effective until all equity interests in Beijing 58 held by Beijing 58's shareholders are transferred or assigned to Wanglin or Wanglin's designee. The equity pledge agreements will remain in effect until Beijing 58 and its shareholders fulfill all of their obligations under the contractual arrangements. The equity pledge agreements can only be terminated when Beijing 58 and its shareholders discharge all of their obligations under the contractual arrangements to the satisfaction of Wanglin. Furthermore, Beijing 58's shareholders irrevocably appointed Wanglin as their exclusive agent and attorney and vested Wanglin with full power to exercise all their rights as Beijing 58's shareholders under the powers of attorney. The powers of attorney remain in effect indefinitely as long as the shareholders remain Beijing 58's shareholders.

 

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        The following diagram illustrates our corporate structure, including our subsidiaries and consolidated affiliated entities as of the date of this prospectus:

GRAPHIC


Note:

(1)
Jinbo Yao, Lianqing Zhang, Jianbo Su, Beijing Wanglintong Information Technology Co., Ltd., or Beijing Wanglintong, hold 37.8%, 39.8%, 9.0%, and 13.4% equity interests in Beijing 58, respectively. Among the shareholders of Beijing 58, Jinbo Yao and Jianbo Su are shareholders of our company. Lianqing Zhang is an employee of SAIF Partners, one of our shareholders. Mr. Yao is the sole director and holds a 16.7% equity interest in Beijing Wanglintong, which is jointly owned by Mr. Yao, Mr. Xiaohua Chen, holding 15.92% equity interest, Mr. Jiandong Zhuang, holding 15.8% equity interest, and five other individuals who are employees or ex-employees of our company. Beijing Wanglintong, a PRC domestic company, does not have any business operations or assets other than its equity interest in Beijing 58. The registered business scope of Beijing Wanglintong includes technology promotional services, software development and computer technology training.

(2)
Inactive.

(3)
Inactive and in the process of being liquidated.

*
Beijing Tongchengtong Information Technology Co., Ltd. owns 2.7% of the equity interest in Chengshi Wangxun (Beijing) Information Technology Co., Ltd., which is inactive currently.

 

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        Mr. Jinbo Yao is the chairman, chief executive officer and a shareholder of our company and beneficially owns 27.9% of our outstanding share capital prior to this offering. He is also the sole director, an executive officer and a shareholder of Beijing 58, holding 37.8% equity interest in Beijing 58. In addition, Mr. Yao is the sole director and a 16.7% shareholder of Beijing Wanglintong Information Technology Co., Ltd., an entity that holds 13.4% equity interest in Beijing 58. Thus, conflicts of interest between his fiduciary duties to our company, his duties to Beijing 58 and his interests as a major shareholder of Beijing 58 may arise. We cannot assure you that he will act entirely in our interests when conflicts of interest arise or that conflicts of interest will be resolved in our favor. Furthermore, in the context of Mr. Yao's acting as the director and an executive officer of Beijing 58, PRC law would not require him to consider our company's best interests. We rely on Mr. Yao to abide by PRC law, which provides that directors and executive officers owe a duty of loyalty and duty of care to a company and require them to avoid conflicts of interest and not to take advantage of their positions for personal gains, and the laws of Cayman Islands which provide that directors owe a duty of care and duty of loyalty to the company. The respective legal framework of China and the Cayman Islands does not provide guidance in the event of a conflict with another corporate governance regime. If we cannot resolve any conflict of interest or dispute between us and directors and executive officers of Beijing 58 should any arise, we would have to rely on legal proceedings, the outcome of which would be uncertain. Any such dispute could result in significant disruption of our business and possibly temporary or permanent loss of control over Beijing 58 and its subsidiaries. See "Risk Factors—Risks Related to Our Corporate Structure and Restrictions on Our Industry—The shareholders of our consolidated affiliated entities have potential conflicts of interest with us, which may adversely affect our business."

        Prior to 2012, we conducted substantially all of our business operations through Beijing 58. Since 2012, we have started to conduct our business operations that are not subject to PRC legal restrictions on foreign ownership through our wholly owned subsidiaries, Wanglin and 58 Technology, to address risks related to the contractual arrangements discussed above and under "Risk Factors—Risks Relating to Our Corporate Structure and Restrictions on Our Industry." Currently, we primarily use Wanglin and 58 Technology, rather than Beijing 58, to provide services to our customers, and we have transferred a significant portion of our personnel, including substantially all of our administrative and product development personnel, from Beijing 58 to Wanglin and 58 Technology. We intend to transfer our field sales team from Beijing 58 to our wholly owned subsidiaries, Wanglin and 58 Technology, gradually. As of June 30, 2013, the substantial majority of our assets were held by Wanglin and 58 Technology. Wanglin and 58 Technology collectively generated a majority of our revenues in the six months ended June 30, 2013, and we currently expect that they will continue to generate a majority of our revenues going forward. We further expect Beijing 58's business to be limited primarily to services that are legally required to be conducted through a PRC domestic entity.

Recent Developments

        The following sets forth certain unaudited consolidated statements of operations data for the three months ended September 30, 2013. We have prepared these unaudited consolidated statements of operations data on the same basis as our audited consolidated financial statements. These unaudited consolidated statements of operations data reflect all adjustments, consisting only of normal and recurring adjustments, which we consider necessary for a fair statement of our results of operations for the period presented. We cannot assure you that our results for the three months ended September 30, 2013 will be indicative of our financial results for the full year ending December 31, 2013 or for future periods. Please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" included elsewhere in this prospectus for information regarding trends and other factors that may affect our results of operations.

 

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    our total revenues for the three months ended September 30, 2013 were US$41.6 million, consisting of membership revenues of US$24.2 million, online marketing services revenues of US$17.1 million and other services revenues of US$0.3 million, and we had approximately 353,000 paying merchant members during the same period;

    our gross profit for the three months ended September 30, 2013 was US$39.3 million; and

    our net income for the three months ended September 30, 2013 was US$8.5 million.

Corporate Information

        Our principal executive offices are located at Block E, the North American International Business Center, Yi 108 Beiyuan Road, Chaoyang District, Beijing 100101, People's Republic of China. Our telephone number at this address is (86 10) 5139-5858. Our registered office in the Cayman Islands is located at the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 400 Madison Avenue, 4th Floor, New York, New York 10017.

        Investors should contact us for any inquiries through the address and telephone number of our principal executive offices. Our principal website is www.58.com. The information contained on our website is not a part of this prospectus.

Conventions Which Apply to this Prospectus

        In determining the market share of each major online marketing services provider, iResearch used the total amount of cash received by the service provider as the main criterion. iResearch determined the total amount of cash received by online marketing service providers through a combination of interviews with industry executives and statistical extrapolation. In a survey of a sample of major online marketing services companies, executives provided estimates of cash receipts for their respective companies, which iResearch aggregated and used as a basis to extrapolate the total amount of cash receipts by the industry as a whole. Amounts of cash receipts from online classifieds are generally higher than revenues recognized under the accounting principles generally accepted in the United States, or U.S. GAAP, as such amounts do not take into consideration revenue recognition polices or accounting policies on advances and deposits from customers and deferred revenues.

        Except where the context otherwise requires and for purposes of this prospectus only:

    "ADSs" refer to American depositary shares, representing our Class A ordinary shares; each ADS represents two Class A ordinary shares;

    "active local merchants" refer to registered users on our marketplace that have identified themselves as corporate entities (as opposed to individuals) and that have logged onto www.58.com or one of our mobile applications at least once in a given period specified in this prospectus;

    "average quarterly paying merchant members" refers to the quarterly average number of paying merchant members over a given period;

    "paying merchant members" refer to the registered accounts through which our users have purchased our membership services and whose membership subscriptions are in their service period at any point during a given period specified in this prospectus;

    "monthly page views" refer to the number of monthly page views on the listing pages and landing pages on www.58.com and on our mobile applications;

 

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    "monthly unique visitors on www.58.com" refer to different IP addresses visiting www.58.com in a given month, as measured by Google Analytics, a product that provides digital marketing intelligence;

    "monthly unique visitors on mobile applications" refer to different IDs visiting any of our mobile applications in a given month. Monthly unique visitors on our different types of mobile applications are obtained either from our database or based on our best estimates for some feature phones that are not set up to provide cookie information;

    "monthly unique visitors on www.58.com and our mobile applications" refer to the total of monthly unique visitors on www.58.com and monthly unique visitors on our mobile applications;

    "ordinary shares" refer to the Class A and Class B ordinary shares of 58.com Inc., par value US$0.00001 per share;

    "PRC" or "China" refers to the People's Republic of China, excluding, for the purpose of this prospectus only, Taiwan, Hong Kong and Macau;

    "preference shares" refer to series A, series A-1, series B and series B-1 convertible and redeemable preference shares of 58.com Inc., par value US$0.00001 per share;

    "RMB" or "Renminbi" refers to the legal currency of China;

    "US$" or "U.S. dollars" refer to the legal currency of the United States;

    "we," "us" and "our company" refer to 58.com Inc., a Cayman Islands company, its subsidiaries, China Classified Network Corporation, a British Virgin Islands company, and China Classified Information Corporation Limited, a Hong Kong company, and its PRC subsidiaries, including Beijing Chengshi Wanglin Information Technology Co., Ltd. and 58 Tongcheng Information Technology Co., Ltd., and, in the context of describing our operations and consolidated financial information, also include the consolidated affiliated entities, Beijing 58 Information Technology Co., Ltd. and its subsidiaries; and

    "58.com" brand refers to LOGO

    , LOGO

    and our other trademarks.

        Renminbi amounts shown in this prospectus are accompanied by translations into U.S. dollars solely for the convenience of the reader. In addition, certain PRC economic and market data shown in U.S. dollars in this prospectus have been translated from Renminbi amounts. Unless otherwise noted, all such translations from Renminbi to U.S. dollars in this prospectus were made at RMB6.1374 to US$1.0000, the noon buying rate for June 28, 2013 set forth in the H.10 statistical release of the Federal Reserve Board. We make no representation that the Renminbi or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. The PRC government restricts the conversion of Renminbi into foreign currency and foreign currency into Renminbi for certain types of transactions. On October 25, 2013, the noon buying rate set forth in the H.10 statistical release of the Federal Reserve Board was RMB6.0838 to US$1.0000.

 

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THE OFFERING

        The following information assumes that the underwriters will not exercise their option to purchase additional ADSs in the offering, unless otherwise indicated.

Offering price   We currently estimate that the initial public offering price will be between US$15.00 and US$16.00 per ADS.

ADSs offered by us

 

11,000,000 ADSs.

Concurrent Private Placement

 

Concurrently with, and subject to, the completion of this offering, DCM Hybrid RMB Fund, L.P., a fund affiliated with DCM V, L.P., our existing shareholder, has agreed to purchase from us US$15.0 million in Class A ordinary shares at a price per share equal to the initial public offering price adjusted to reflect the ADS-to-ordinary share ratio. Assuming an initial offering price of US$15.50 per ADS, the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus, this investor will purchase 1,935,484 Class A ordinary shares from us. Our proposed issuance and sale of Class A ordinary shares to this investor are being made through private placement pursuant to an exemption from registration with the U.S. Securities and Exchange Commission under Regulation S of the Securities Act. The investor has agreed with the underwriters not to, directly or indirectly, sell, transfer or dispose of any Class A ordinary shares acquired in the private placement for a period of 180 days after the date of this prospectus, subject to certain exceptions.


Ordinary shares outstanding immediately after this offering

 

We will adopt a dual class ordinary share structure immediately prior to the completion of this offering. Immediately upon the completion of this offering, 155,747,471 ordinary shares (or 159,047,471 ordinary shares if the underwriters exercise their over-allotment option in full) will be outstanding, comprised of (1) 23,935,484 Class A ordinary shares, par value US$0.00001 per share (or 27,235,484 Class A ordinary shares if the underwriters exercise their over-allotment option in full), including 1,935,484 Class A ordinary shares we will issue and sell in the private placement to DCM Hybrid RMB Fund concurrently with this offering, assuming an initial offering price of US$15.50 per ADS, the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus and (2) 131,811,987 Class B ordinary shares, par value US$0.00001 per share (or 131,811,987 Class B ordinary shares if the underwriters exercise their over-allotment option in full). Class B ordinary shares outstanding immediately after the completion of this offering will represent 84.6% of our total outstanding shares and 98.2% of the then total voting power (or 82.9% of our total outstanding shares and 98.0% of the then total voting power if the underwriters exercise their over-allotment option in full).

 

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ADSs outstanding immediately after this offering   11,000,000 ADSs (or 12,650,000 ADSs if the underwriters exercise their over-allotment option in full).

The ADSs

 

Each ADS represents two Class A ordinary shares, par value US$0.00001 per share.

 

 

The depositary will hold the Class A ordinary shares underlying your ADSs. You will have rights as provided in the deposit agreement.

 

 

If we declare dividends on our ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our Class A ordinary shares, after deducting its fees and expenses.

 

 

You may turn in your ADSs to the depositary in exchange for Class A ordinary shares. The depositary will charge you fees for any exchange.

 

 

We may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs, you agree to be bound by the deposit agreement as amended.

 

 

To better understand the terms of the ADSs, you should carefully read the "Description of American Depositary Shares" section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.

Ordinary shares

 

We will issue 22,000,000 Class A ordinary shares represented by our ADSs in this offering.

 

 

All of our existing ordinary shares will be redesignated as Class B ordinary shares and all of our outstanding preference shares will be redesignated or automatically converted into Class B ordinary shares on a one-for-one basis immediately prior to completion of this offering.

 

 

All options, regardless of grant dates, will entitle holders to the equivalent number of Class A ordinary shares once the vesting and exercising conditions on such share-based compensation awards are met.

 

 

Immediately upon the completion of this offering, we will have 131,811,987 Class B ordinary shares outstanding (or 131,811,987 if the underwriters exercise their over-allotment option in full).

 

 

Holders of Class A ordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled to ten votes per share on all matters subject to shareholders' vote.

 

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    Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any transfer of Class B ordinary shares by a holder to any person or entity which is not an affiliate of such holder, such Class B ordinary shares will be automatically and immediately converted into the equivalent number of Class A ordinary shares.

 

 

In addition, if at any time Mr. Jinbo Yao and his affiliates collectively own less than 5% of the total number of the issued and outstanding Class B ordinary shares, each issued and outstanding Class B ordinary share will be automatically and immediately converted into one Class A ordinary share, and we will not issue any Class B ordinary shares thereafter.

 

 

See "Description of Share Capital."

Over-allotment option

 

We have granted to the underwriters an option, which is exercisable within 30 days from the date of this prospectus, to purchase up to an additional 1,650,000 ADSs to cover over-allotments.

Use of proceeds

 

We plan to use the net proceeds of this offering primarily for general corporate purposes, which may include investment in our product development, engineering capability, sales and marketing activities, technology infrastructure, capital expenditures, improvement of corporate facilities and other general and administrative matters. We may also use a portion of these proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any acquisitions or investments.

Lock-up

 

We, our directors and executive officers, and our existing shareholders have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our ADSs or ordinary shares or securities convertible into or exercisable or exchangeable for our ADSs or ordinary shares for a period of 180 days after the date of this prospectus. See "Shares Eligible for Future Sale" and "Underwriting" for more information.

Proposed NYSE symbol

 

We have applied to have the ADSs listed on the NYSE under the symbol "WUBA." Our ADSs and ordinary shares will not be listed on any other stock exchange or traded on any automated quotation system.

Payment and settlement

 

The underwriters expect to deliver the ADSs against payment therefor through the facilities of the Depository Trust Company on                         , 2013.

Depositary

 

Citibank, N.A.

Directed share program

 

At our request, the underwriters have reserved for sale, at the initial public offering price, up to 770,000 ADSs offered by this prospectus to our directors, officers, employees, business associates and related persons.

 

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Risk factors   See "Risk Factors" and other information included in this prospectus for a discussion of risks that you should carefully consider before investing in our ADSs.

The number of ordinary shares that will be outstanding immediately after this offering:

is based on 131,811,987 ordinary shares outstanding as of the date of this prospectus, assuming conversion of all outstanding series A, series A-1, series B and series B-1 convertible and redeemable preference shares into 87,566,599 Class B ordinary shares immediately prior to the completion of this offering;

includes 1,935,484 Class A ordinary shares we will issue and sell in the private placement to DCM Hybrid RMB Fund concurrently with this offering, assuming an initial offering price of US$15.50 per ADS, the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus;

excludes 855,794 unissued ordinary shares underlying exercised options; we will issue 855,794 Class A ordinary shares to the option holders after the expiration of the 180-day lock-up period after the completion of this offering; and

excludes 12,148,235 Class A ordinary shares reserved for future issuances under our 2010 Employee Stock Option Plan and our 2013 Share Incentive Plan, including 9,841,177 Class A ordinary shares issuable upon exercise of options outstanding as of the date of this prospectus.

 

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Our Summary Consolidated Financial Data

        The following summary data of consolidated statements of comprehensive loss and summary consolidated cash flow data for the years ended December 31, 2010, 2011 and 2012 and summary consolidated balance sheet data as of December 31, 2010, 2011 and 2012 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America. The summary data of consolidated statements of comprehensive loss and summary consolidated cash flow data for the six months ended June 30, 2012 and 2013 and summary consolidated balance sheet data as of June 30, 2013 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair presentation of our financial position and operating results for the periods presented. Our historical results for any period are not necessarily indicative of results to be expected for any future period. You should read the following summary financial information in conjunction with the consolidated financial statements and related notes and the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

 
  For the Years Ended December 31,   For the Six Months Ended June 30,  
 
  2010   2011   2012   2012   2013  
 
  (in thousands of US$, except for share, per share and per ADS data)
 

Summary Data of Consolidated Statements of Comprehensive Loss:

                               

Revenues:

                               

Membership

    3,447     19,654     47,919     19,264     35,461  

Online marketing services

    6,597     15,500     28,509     11,679     22,430  

Other services

    658     6,380     10,694     8,032     952  
                       

Total revenues

    10,702     41,534     87,122     38,975     58,843  

Cost of revenues(1)

    2,330     6,301     10,406     4,911     4,094  
                       

Gross profit

    8,372     35,233     76,716     34,064     54,749  

Operating expenses(1):

                               

Sales and marketing expenses

    16,783     100,134     76,422     40,049     38,088  

Research and development expenses

    2,247     7,784     18,464     7,712     11,852  

General and administrative expenses

    3,170     10,721     13,088     6,514     5,462  
                       

Total operating expenses

    22,200     118,639     107,974     54,275     55,402  
                       

Loss from operations

    (13,828 )   (83,406 )   (31,258 )   (20,211 )   (653 )
                       

Net (loss)/income

    (13,871 )   (83,402 )   (30,401 )   (19,283 )   285  
                       

Accretions to preference shares redemption values

    (860 )   (6,547 )   (10,233 )   (4,983 )   (5,381 )

Deemed dividends to preference shareholders

    (664 )                
                       

Net loss attributable to ordinary shareholders

    (15,395 )   (89,949 )   (40,634 )   (24,266 )   (5,096 )
                       

Net (loss)/income

    (13,871 )   (83,402 )   (30,401 )   (19,283 )   285  

Foreign currency translation adjustment, net of nil tax

    (38 )   2     (48 )   120     (511 )
                       

Comprehensive loss

    (13,909 )   (83,400 )   (30,449 )   (19,163 )   (226 )
                       

Net loss per ordinary share attributable to ordinary shareholders—basic and diluted

    (0.30 )   (2.03 )   (0.92 )   (0.55 )   (0.12 )

Weighted average number of ordinary shares used in computing basic and diluted earnings per share

    50,589,146     44,245,388     44,245,388     44,245,388     44,245,388  

Net loss per ADS(2):

                               

Basic and diluted

    (0.61 )   (4.07 )   (1.84 )   (1.10 )   (0.23 )

Notes:

(1)
Share-based compensation expenses were allocated in cost of revenues and operating expenses as follows:

 

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  For the Years Ended December 31,   For the Six Months Ended June 30,  
   
  2010   2011   2012   2012   2013  
   
  (in thousands of US$)
 
 

Cost of revenues

    112     26     30     16     24  
 

Sales and marketing expenses

    47     225     270     152     218  
 

Research and development expenses

    429     443     489     259     426  
 

General and administrative expenses

    1,194     1,276     882     482     464  
                         
 

Total

    1,782     1,970     1,671     909     1,132  
                         
(2)
Each ADS represents two Class A ordinary shares.

 
   
   
   
  As of June 30, 2013  
 
  As of December 31,  
 
   
   
  Pro forma as
adjusted(2)
 
 
  2010   2011   2012   Actual   Pro forma(1)  
 
  (in thousands of US$)
 

Summary Data of Consolidated Balance Sheets:

                                     

Cash, cash equivalents and short-term investments

    45,655     45,485     35,647     51,626     51,626     221,344  

Total assets

    51,426     65,994     56,456     70,925     70,925     240,643  

Deferred revenues

   
4,838
   
15,399
   
28,955
   
39,448
   
39,448
   
39,448
 

Customer advances and deposits

    507     3,813     11,040     14,135     14,135     14,135  

Total liabilities

    11,128     50,016     69,003     82,276     82,276     82,276  

Total mezzanine equity

   
65,627
   
129,284
   
139,517
   
144,898
   
   
 

Total shareholders' (deficit)/equity

    (25,329 )   (113,306 )   (152,064 )   (156,249 )   (11,351 )   158,367  

Notes:

(1)
The consolidated balance sheet data as of June 30, 2013 are adjusted on a pro forma basis to give effect to the automatic conversion of all of our outstanding series A, series A-1, series B and series B-1 preference shares into 87,566,599 Class B ordinary shares immediately prior to the completion of this offering.

(2)
The consolidated balance sheet data as of June 30, 2013 are adjusted on a pro forma as adjusted basis to give effect to (1) the automatic conversion of all of our outstanding series A, series A-1, series B and series B-1 preference shares into 87,566,599 Class B ordinary shares immediately prior to the completion of this offering, (2) the sale of Class A ordinary shares in the form of ADSs by us in this offering at an assumed initial public offering price of US$15.50 per ADS, the mid-point of the estimated range of the initial public offering price shown on the front cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, assuming the underwriters do not exercise the over-allotment option and (3) the issuance and sale of 1,935,484 Class A ordinary shares in the private placement to DCM Hybrid RMB Fund concurrently with this offering, assuming an initial offering price of US$15.50 per ADS, the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus.

 

 
  For the Years Ended
December 31,
  For the Six Months Ended June 30,  
 
  2010   2011   2012   2012   2013  
 
  (in thousands of US$)
 

Summary Data of Consolidated Statements of Cash Flows:

                               

Net cash (used in)/provided by operating activities

    (5,922 )   (50,323 )   (4,728 )   (9,270 )   17,898  

Cash used in purchase of property and equipment

    (2,522 )   (5,655 )   (5,227 )   (2,509 )   (1,857 )

Net cash used in investing activities

    (2,522 )   (10,455 )   (27,153 )   (11,978 )   (20,255 )

Net cash provided by financing activities

    53,246     57,110     253     54     290  

 

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RISK FACTORS

        An investment in our ADSs involves significant risks. You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our ADSs. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our ADSs could decline, and you may lose all or part of your investment.

Risks Related to Our Business

    We operate in a fast-evolving industry, which makes it difficult to evaluate our business and prospects.

        We commenced operations in 2005 and many of the elements of our business are evolving and relatively unproven. The markets for our technology and products and services are relatively new and rapidly developing and are subject to significant challenges. Our business plan relies heavily upon growing our user base and explore new market opportunities, and we may not succeed in any of these respects.

        As the online marketing services and mobile services industries in China are relatively young and untested, there are few proven methods of projecting user demand or available industry standards on which we can rely. We cannot assure you that our attempts to expand our user base and products and services will be successful, profitable or widely accepted and therefore the future revenue and income potential of our business are difficult to evaluate. You should consider our prospects in light of the risks and uncertainties fast-growing companies with limited operating histories may encounter.

    If we fail to continually anticipate user preferences and provide attractive services on our online marketplace, we may not be able to grow and retain our user base.

        Our success depends on our ability to grow and retain our user base. In order to attract and retain users and compete against our direct competitors and other industry or content-specific vertical websites, we must continue to innovate and introduce services that our users find useful and attract them to use our online marketplace more frequently and become our paying users. For example, we must continue to develop new content categories on our online marketplace that appeal to our users. The popularity of online marketing services and other internet services is difficult to predict, and we cannot be certain that the services we offer will continue to be popular with our users or sufficiently successful to offset the costs incurred to offer these services. Given that we operate in a rapidly evolving industry in China, we need to continually anticipate user preferences and industry changes and respond to such changes in a timely and effective manner. If we fail to anticipate and meet the needs of our users, the size of our user base may decrease. A decrease in our user base would render our online marketplace less attractive to merchants and may reduce our membership and online marketing revenues, which may have a material and adverse effect on our marketing business, financial condition and results of operations.

    If we fail to retain existing or attract new local merchants to use our online marketplace and pay for our membership and online marketing services, our business, financial condition and prospects may be materially and adversely affected.

        The success of our business depends on our ability to attract and retain local merchants that provide information on our online marketplace to consumers and pay for our membership and online marketing services and to offer attractive products and services to our consumer users. If we are unable to grow and maintain a healthy ecosystem of local merchants, our users may find our online marketplace to be less useful than expected and may not continue to use our online marketplace. This in turn may affect our ability to attract new merchants and convince existing merchants to renew their paid memberships or increase their level of spending on our services. Our membership contracts have

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terms ranging from one month to one year. A significant portion of our paying merchant members are small and medium-sized local merchants who fail to renew their membership contracts upon expiration for a number of reasons. The competitive landscape of such local merchants changes quickly and may have temporary recruiting or marketing needs from time to time. In addition, our efforts to provide greater incentives for our existing paying merchant members to use our online marketing services, including marketing activities to highlight the value of differentiated paying merchant members-only services, may not be successful. Our customers may terminate their memberships or other spending on our online marketing services because we no longer serve their needs or because their demands can be better fulfilled by our competitors or other service providers. Decisions by our customers not to renew their memberships or not to use our online marketing services could reduce our revenues, as well as cause us to incur additional cost in attracting new paying merchant members and other customers. A significant increase in local merchant attrition or decrease in local merchant spending on our services would have an adverse effect on our business, financial condition and results of operations.

    We incurred net loss and experienced negative cash flow from operations in the past. We may not be able to achieve or maintain profitability or positive net cash flow from operations.

        We have incurred net losses historically and we may incur losses in the future as we grow our business. In 2010, 2011 and 2012, we incurred net loss of US$13.9 million, US$83.4 million and US$30.4 million, respectively. In addition, we had negative cash flow from operations of US$5.9 million, US$50.3 million and US$4.7 million in 2010, 2011 and 2012, respectively. Our historical net loss and negative cash flow from operations are primarily related to sales and marketing expenses, research and development expenses, and other costs and expenses we incurred to build, operate and expand our online marketplace, grow our user base and establish our market position. We expect that we will continue to incur marketing and sales, research and development and other expenses to launch new services and grow our user base, which may affect our profitability and operating cash flow in the future.

        Our future profitability may also be significantly impacted by the success of our recent and new service offerings, such as our mobile services. As competition in these new services intensifies in China, we may choose to invest heavily to gain market share, which may adversely affect our profitability.

        In addition, our ability to achieves profitability is affected by various factors that are beyond our control. For example, our revenues and profitability depend on the continuous development of the online marketing industry in China and local merchants' allocation of more of their budgets to online marketing services companies. We cannot assure you that online marketing services companies will become more widely accepted in China or that merchants will increase their spending on online marketing services websites.

        If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected and we may continue to incur net loss in the future. If we are unable to achieve and maintain positive operating cash flows, we may need to seek debt or equity financing or may cease to operate as a going concern. If we seek further equity financing, it may dilute our existing shareholders.

    We face intense competition, and if we do not compete successfully against existing and new competitors, we may lose market share and suffer losses.

        We face intense competition. Our competitors in the online marketing space include industry or content-specific vertical websites whose information serve the same underlying industries as certain content categories of our online marketplace, as well as smaller or regional online classifieds websites. We may also face competition from major internet companies, who may enter the online classifieds

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market in China. We compete primarily on the basis of user traffic, effectiveness of services in reaching targeted users, ability to demonstrate marketing results and customer service capabilities.

        We believe that our competitiveness depends upon many factors both within and beyond our control, including our ability to increase our brand recognition and continue to develop user loyalty, our ability to keep up with the technological developments and users' changing demands and our ability to raise sufficient capital to sustain and expand our business. Some of our current and potential competitors may have greater financial, marketing, user traffic and other resources than we have. In addition, local content providers may be acquired by, receive investments from or enter into strategic relationships with larger, well-established and well-financed companies or investors. Certain of our competitors may be able to devote greater resources to marketing and promotional campaigns and devote substantially more resources to website and system development than us. Increased competition may reduce our market share and require us to increase our marketing and promotion efforts, which could negatively affect our operating margins or force us to incur losses. There can be no assurance that we will be able to compete successfully against current and future competitors or maintain our leading position or level of user traffic in the online marketing services market in China, and competitive pressures may have a material adverse effect on our business, prospects, financial condition and results of operations.

    We may not be able to effectively manage our growth and expansion or implement our business strategies, in which case our business and results of operations may be materially and adversely affected.

        We have experienced a period of rapid growth and expansion, which has placed, and continues to place, significant strain on our management and resources. We cannot assure you that this level of significant growth and expansion will be sustainable or achieved at all in the future. We believe that our continued growth and expansion will depend on our ability to develop new sources of revenue, attract new users, paying merchant members and customers, retain and expand paying merchant members and customers, encourage additional spending by our customers, continue developing innovative technologies in response to user demand, increase brand awareness through marketing and promotional activities, react to changes in user access to and use of the internet, expand into new market segments, integrate new devices, platforms and operating systems and take advantage of any growth in the relevant markets. We cannot assure you that we will achieve any of the above.

        To manage our growth and expansion, and to attain and maintain profitability, we anticipate that we will need to implement a variety of new and upgraded operational and financial systems, procedures and controls, including the improvement of our accounting and other internal management systems. We will also need to further expand, train, manage and motivate our workforce and manage our relationships with our paying merchant members and customers. All of these endeavors involve risks and will require substantial management efforts and skills and significant additional expenditures. Our further expansion may divert our management, operational or technological resources from our existing business operations. In addition, our expansion may require us to operate in new cities in China, including a number of small cities in China, where we may have difficulty in adjusting to local market demands and regulatory requirements. We cannot assure you that we will be able to effectively manage our growth and expansion or implement our future business strategies effectively, and failure to do so may materially and adversely affect our business and results of operations.

    Any damage to our reputation and brand or failure to enhance our brand recognition may materially and adversely affect our business, financial condition and results of operations.

        We believe that the market recognition and reputation of our brand have significantly contributed to the success of our business. Maintaining and enhancing our brand is critical to our success and

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ability to compete. Many factors, some of which are beyond our control, may negatively impact our brand and reputation, such as:

    any failure to maintain a pleasant and reliable experience for users as their preferences evolve and as we expand into new services;

    any decrease in brand awareness among our existing and potential users; and

    any negative publicity about us or online marketing services or mobile services in general, including any actual or perceived security or product or service quality problems involving online marketing services providers in China.

        Although all of our paying merchant members and a portion of our registered users go through certain verification procedures, fraudulent transactions and sale of counterfeit or pirated, as well as faulty or defective, items through our online marketplace have occurred in the past and may occur in the future. In the past, we found several counterfeit products sold through our website primarily relating to our group buying business, which we significantly scaled back since mid-2012, and immediately stopped the sellers from selling such counterfeit products. Although we do not believe that we are responsible for the sellers' wrongdoings, several Chinese media reported the incidents and accused us of failure to safeguard buyers' rights on our website. These incidents and any similar incidents or true or untrue claims of such incidents could harm our reputation, impair our ability to attract and retain users and grow our base of paying customers. If we are unable to maintain a good reputation, further enhance our brand recognition, continue to develop our user loyalty and increase positive awareness of our website, our results of operations may be materially and adversely affected.

    We have incurred significant costs on a variety of marketing efforts, including significant advertising expenses, designed to attract users, and some marketing campaigns and methods may turn out to be ineffective.

        We have invested significantly in marketing to promote public awareness of online marketing services, enhance our brand recognition and drive user growth, including incurring US$8.2 million, US$68.5 million, US$25.1 million and US$10.3 million in advertising expenses in 2010, 2011, 2012 and the six months ended June 30, 2013, respectively. Such advertising expenses represented 49.0%, 68.4%, 32.8% and 27.0% of our total sales and marketing expenses and 76.9%, 164.9%, 28.8% and 17.5% of our revenues in the corresponding periods. Our marketing activities may not be well received by users and may not attract the additional traffic that we anticipated. The evolving marketing approaches and tools require us to enhance our marketing approaches and experiment with new marketing methods to keep pace with industry developments and user preferences. Failure to refine our existing marketing approaches or to introduce new effective marketing approaches in a cost-effective manner could reduce our market share, cause our revenues to decline and negatively impact our profitability.

    We derive a significant portion of our revenues from five of China's major cities and we face market risk due to our concentration in these major urban areas.

        We derive a significant portion of our revenues from five of China's major cities: Beijing, Shanghai, Shenzhen, Guangzhou and Chengdu. We expect these five cities to continue to be important sources of revenues in all of our content categories. If any of these major cities experience events which negatively impact the internet industry, such as a serious economic downturn or contraction, a natural disaster, or slower economic growth due to adverse governmental policies or otherwise, demand for our services could decline significantly and our revenues and profitability could be materially reduced. Any of these cities may experience decreases in demand for services related to specific content categories on our marketplace, such as housing or automotive, due to local policies, regulations or economic conditions. In addition, if a competitor, including a local competitor whose business focuses on one of

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these cities, were to gain significant market share in any of these cities, our revenues may be materially and adversely affected.

    The markets for online marketing services and mobile services in China are constantly evolving and may not grow as quickly as expected or at all.

        Our business and prospects are affected by the development of emerging internet business models in China, including those for online marketing services and mobile services. Our membership services and other online marketing services have distinct business models which may differ from models for these businesses in other markets, such as the United States, and that are in varying stages of development and monetization. Our future success will depend on our ability to respond to rapidly changing technologies, adapt our products and services to evolving industry standards and improve the performance and reliability of our products and services. Our failure to adapt to such changes could harm our business. In addition, changes in user behavior resulting from technological developments may also adversely affect us. We cannot assure you that the online marketing services and mobile services industries in China will continue to grow as rapidly as they have in the past or at all. With the development of technology, new internet services may emerge which are not a part of our service offerings and which may render online marketing services or mobile services less attractive to users. The growth and development of these industries are affected by numerous factors, such as the macroeconomic environment, regulatory changes, technological innovations, development of internet and internet-based services, users' general online experience, cultural influences and changes in tastes and preferences. If the online marketing services and mobile services industries in China do not grow as quickly as expected or at all, or if we fail to benefit from such growth by successfully implementing our business strategies, our business and prospects may be adversely affected.

    If we fail to keep up with the technological developments and users' changing requirements or to successfully capture and retain a significant portion of the growing number of users that access online marketing services, we may be unable to meet our revenue growth expectations and our results of operation may be adversely affected.

        The internet industries in China are subject to rapid and continuous changes in technology, user preferences, the nature of services offered and business models. Our success will depend on our ability to keep up with the changes in technology and user behavior resulting from technological developments. If we do not adapt our services to such changes in an effective and timely manner, we may suffer from decreased user traffic, which may result in a reduction of revenues from our membership services or a decrease in spending on our other services.

        Our online marketing services are now accessible to users from many internet-enabled devices, and we offer versions of our services for mobile operating systems, including Android and iOS. An important element of our strategy is to continue to develop our online marketplace and services for mobile devices to capture a greater share of the growing number of users that access online marketing services and other internet services through smartphones and other mobile devices. The lower resolution, functionality and memory associated with some mobile devices make the use of services through such devices more difficult and the services we develop for these devices may fail to prove compelling to users. Manufacturers or distributors may establish unique technical standards for their devices, and our services may not work or be viewable on these devices as a result. As new devices and new services are continually being released, it is difficult to predict the problems we may encounter in developing our services for use on these devices and we may need to devote significant resources to the creation, support and maintenance of such services. Devices providing access to our products and services are not manufactured and sold by us, and we cannot assure you that the companies manufacturing or selling these devices would always ensure that their devices perform reliably and are maximally compatible with our systems. Any faulty connection between these devices and our products

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and services may result in consumer dissatisfaction with us, which could damage our brand and have a material and adverse effect on our financial results. Furthermore, new online marketing services may emerge which are specifically created to function on mobile platforms, as compared to our online marketing services that were originally designed to be accessed through personal computers, or PCs, and such new services may operate more effectively through mobile devices than our own. If we are unable to attract and retain a substantial number of mobile device users to our services, or if we are slower than our competitors in developing attractive services that are adapted for such devices, we may fail to capture a significant share of an increasingly important portion of the market for our services or lose existing users, either of which may have a material adverse effect on our business, financial condition and results of operations.

        Furthermore, changes in technologies may require substantial capital expenditures in development of new features, applications and services as well as in modification of existing features, applications, services or infrastructure. We may not successfully execute our business strategies due to a variety of reasons such as technical hurdles, misunderstandings or erroneous predictions of market demand or lack of necessary resources. Failure in keeping up with technological developments may result in our online marketplace being less attractive, and as a result we may be unable to meet our revenue growth expectations and our results of operations may be adversely affected.

    If internet search engines' ranking methodologies are modified or our search result page rankings decline for other reasons, our user traffic could decrease.

        We depend in part on various internet companies to direct traffic to our website. Our ability to maintain the number of visitors directed to our website is not entirely within our control. Our competitors' search engine optimization efforts may result in their websites receiving a higher search result page ranking than ours, or internet companies could revise their methodologies in an attempt to improve their search results, which could adversely affect the placement of our search result page ranking. If internet companies modify their search algorithms in ways that are detrimental to our user growth or in ways that make it harder for our users to find our website, or if our competitors' search engine optimization efforts are more successful than ours, our overall growth in user traffic could slowdown or decrease, and we could lose existing users. Our website has experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of users directed to our website would harm our business and results of operations.

    Our business depends substantially on the continuing efforts of our executive officers and key employees, and our business may be severely disrupted if we lose their services.

        We currently depend on the continued services and performance of the key members of our management team, in particular Mr. Jinbo Yao, our chairman and chief executive officer. Mr. Yao is one of our founders and his leadership has played an integral role in our growth. Our future success depends substantially on the continued efforts of our executive officers and key employees. If one or more of our executive officers or key employees were unable or unwilling to continue their service, we might not be able to replace them easily, in a timely manner, or at all, and our business may be severely disrupted, our financial conditions and results of operations may be materially and adversely affected and we may incur additional expenses to recruit, train and retain personnel. If any of our executive officers or key employees joins a competitor or forms a competing company, we may lose users, know-how and key professionals and staff members. Each of our executive officers and key employees has entered into an employment agreement and a confidentiality and non-competition agreement with us. However, if any dispute arises between our executive officers and key employees, on one hand, and us on the other, we cannot assure you that we would be able to enforce these non-compete provisions in China, where these executive officers reside, in light of uncertainties with China's legal system. See "—Risks Relating to Doing Business in China—Uncertainties in the

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interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us."

    If we are unable to attract, train and retain qualified personnel, our business may be materially and adversely affected.

        Our future success depends, to a significant extent, on our ability to attract, train and retain qualified personnel, particularly management, technical and marketing personnel with expertise in the online marketing industry. Our field sales and customer service teams are also critical to maintaining the quality of our services as they interact with local merchants on a daily basis. We must continue to attract qualified personnel at a fast pace to keep up with our growing user base and the scale of our operations. Since our industry is characterized by high demand and intense competition for talent, there can be no assurance that we will be able to attract or retain qualified staff or other highly skilled employees that we will need to achieve our strategic objectives. As we are still a relatively young company, our ability to train and integrate new employees into our operations may not meet the growing demands of our business. If we are unable to attract, train, and retain qualified personnel, our business may be materially and adversely affected.

    The proper functioning of our marketplace, network infrastructure and information technology systems is essential to our business, and any failure to maintain the satisfactory performance, security and integrity of our systems will materially and adversely impair our ability to provide services and affect our business, reputation, financial condition and results of operations.

        The proper functioning of our marketplace is essential to the conduct of our business. Specifically, the satisfactory performance, reliability and availability of our website and mobile applications, our transaction-processing systems and our network infrastructure are critical to our success and our ability to attract and retain users and provide adequate services. Our revenues depend on the user traffic on our website and the volume of activities that traffic creates.

        In addition, our ability to provide consumers and local merchants with a high quality online experience depends on the continuing operation and scalability of our network infrastructure and information technology systems. The risks we face in this area include:

    our systems are potentially vulnerable to damage or interruption as a result of earthquakes, floods, fires, extreme temperatures, power loss, telecommunications failures, technical error, computer viruses, hacking and similar events;

    we may encounter problems when upgrading our systems or services and undetected programming errors could adversely affect the performance of the software we use to provide our services. The development and implementation of software upgrades and other improvements to our internet services is a complex process, and issues not identified during pre-launch testing of new services may only become evident when such services are made available to our entire user base; and

    we rely on servers, data centers and other network facilities provided by third parties, and the limited availability of third-party providers with sufficient capacity to house additional network facilities and broadband capacity in China may lead to higher costs or limit our ability to offer certain services or expand our business. In particular, electricity, temperature control or other failures at the data centers we use may adversely affect the operation of our servers or result in service interruptions or data loss.

        These and other events in the past occasionally led to and may in the future lead to interruptions, decreases in connection speed, degradation of our services or the permanent loss of user data and uploaded content. Any system interruptions caused by telecommunications failures, computer viruses,

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or hacking or other attempts to harm our systems that result in the unavailability of our website and mobile applications or reduced performance would reduce the attractiveness of the services offered on our online marketplace. If we experience frequent or persistent service disruptions, whether caused by failures of our own systems or those of third-party service providers, our reputation or relationships with our users may be damaged and our users may switch to our competitors, which may have a material adverse effect on our business, financial condition and results of operations.

    Our operations depend on the performance of the internet infrastructure and fixed telecommunications networks in China.

        Almost all access to the internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology, or the MIIT. Moreover, we primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity through local telecommunications lines and internet data centers to host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with China's internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our website. We cannot assure you that the internet infrastructure and the fixed telecommunications networks in China will be able to support the demands associated with the continued growth in internet usage.

        In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and internet services rise significantly, our results of operations may be materially and adversely affected. Furthermore, if internet access fees or other charges to internet users increase, our user traffic may decline and our business may be harmed.

    We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.

        We regard our trademarks, service marks, domain names, trade secrets, proprietary technologies and similar intellectual property as critical to our success, and we rely on trademark law, trade secret protection and confidentiality and license agreements with our employees, partners and others to protect our proprietary rights. We have registered six domain names that are material to our business, including www.58.com, and www.58.com.cn, and 31 trademarks in China. As the registrant of the trademarks, Beijing 58 has an exclusive right to use such trademarks in China for the goods or services under the trademark categories that it has registered. Beijing 58 also enjoys the exclusive right to use the domain names that it has registered. However, trademarks may also be invalidated, circumvented, or challenged. For example, under PRC law, certain graphics may not be registered as a trademark and if a registered trademark is found to violate such prohibition, the relevant authority can invalidate the trademark; third parties may challenge such registered trademarks and apply to the authority for invalidation. In addition, if a registered trademark is identical or similar to a well-known trademark or prejudices the existing right obtained by others, it may be invalidated by the relevant authority upon request by the right holder. Trade secrets are difficult to protect, and our trade secrets may be leaked or otherwise become known or be independently discovered by competitors. Confidentiality agreements may be breached, and we may not have adequate remedies for any breach.

        It is often difficult to enforce intellectual property rights in China. Even where adequate laws exist in China, it may not be possible to obtain prompt and equitable enforcement of such laws, or to obtain enforcement of a court judgment or an arbitration award delivered in another jurisdiction, and accordingly, we may not be able to effectively protect our intellectual property rights in China. Policing

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any unauthorized use of our intellectual property is difficult and costly and the steps we have taken may be inadequate to prevent the misappropriation of our technologies.

    We may not be able to successfully halt the operations of websites that aggregate our data as well as data from other companies, including social networks, or "copycat" websites that have misappropriated our data in the past or may misappropriate our data in the future.

        From time to time, third parties have misappropriated our data through website scraping, robots or other means and aggregated this data on their websites. In addition, "copycat" websites have misappropriated data on our website and attempted to imitate our brand or the functionality of our website. When we have become aware of such websites, we have taken measures to halt such conduct. However, we may not be able to detect all such websites in a timely manner and the measures we take may be insufficient to stop their conduct. In those cases, our available remedies may not be adequate to protect us against such websites. Regardless of whether we can successfully enforce our rights against these websites, any measures that we may take could require us to expend significant financial or other resources.

    We may be subject to intellectual property infringement claims or other allegations by third parties for services we provide or for information or content displayed on, retrieved from or linked to our website, or distributed to our users, which may materially and adversely affect our business, financial condition and prospects.

        Internet, technology and media companies are frequently involved in litigation based on allegations of infringement of intellectual property rights, unfair competition, invasion of privacy, defamation and other violations of other parties' rights. The validity, enforceability and scope of protection of intellectual property rights in internet-related industries, particularly in China, are uncertain and still evolving. We face, from time to time, and expect to face in the future, allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including our competitors, or allegations that we are involved in unfair competition against our competitors. As we face increasing competition and sometimes have to take defensive measures in response to competitive pressure and as litigation becomes more common in China in resolving commercial disputes, we face a higher risk of being the subject of intellectual property infringement and unfair competition claims. Intellectual property and unfair competition claims and litigation may be expensive and time-consuming to investigate and defend, and may divert resources and management attention from the operation of our business. Such claims, even if they do not result in liability, may harm our reputation. Any resulting liability or expenses, or changes required to be made to our website to reduce the risk of future liability, may have a material adverse effect on our business, financial condition and prospects.

        We utilize software that selectively identifies classified information listings on other websites in certain content categories for which our certification procedure is not required and replicates such listings on www.58.com. These replicated listings are not given individualized registered user accounts and are not counted as listings for purposes of calculating the listings per day posted by our users as disclosed in this prospectus. If an original poster wants to delete a replicated listing on our website, the poster can either use our online self-help functions or contact our customer service online to delete the listing. We do not explicitly indicate the replicated listings on our website, although we notify our users of the replicated nature of the listings upon inquiry. We believe this is a widespread practice in our industry in China. However, the practice may be deemed to be in violation of the PRC Anti-Unfair Competition Law. If other market participants bring legal claims against us for conducting unfair competition, we may be held liable by the court and be required to pay damages to the plaintiffs equal to the losses suffered by the market participants as a result of the unfair competition practices or, if it is difficult to calculate the losses, equal to the aggregate profits earned through the unfair competition

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practices and the reasonable expenses incurred by the plaintiffs to investigate the unfair competition practices. We have never generated revenue from replicated listings. In addition, if the replicated listings are protected under copyright law, the practice of replicating listings may be deemed to be copyright infringement. In such case, we may be required to cease the act of infringement, eliminate any influence caused, apologize to and pay damages to the copyright owners and be subject to penalties including confiscation of illegal gains and imposition of fines by the relevant governmental authorities. In addition, we have from time to time been the subject of critical media coverage due to this practice, which could harm our reputation and business.

    We may be held liable to third parties for information or content displayed on, retrieved from or linked to our website, or distributed to website users, which could harm our reputation and business.

        Our online marketing services enable users to exchange local business or service information, generate content, market products and services, conduct business and engage in various other online activities. Claims may be brought against us for defamation, libel, negligence, copyright, patent or trademark infringement, tort (including personal injury), fraud, other unlawful activity or other theories and claims based on the nature and content of information to which we link or that may be posted on our website, generated by our users, or delivered or shared hypertext links to third-party websites, or video or image services, if appropriate licenses and/or third-party consents have not been obtained. Third-parties may also seek to assert claims against us alleging unfair competition or violations of privacy rights or failure to maintain the confidentiality of user data. Our defense of any such actions could be costly and involve significant time and attention of our management and other resources.

        We are also regularly approached and asked to remove content uploaded by users on the grounds of alleged copyright or personal rights infringement. In such cases, we investigate the claims and remove any uploads that appear to infringe the rights of a third party after our reasonable investigation and determination. Our corporate policy requires a user to enter into a user agreement in the registration process before posting any content on our website. Pursuant to the user agreement, a user makes certain representations and warranties relating to the user generated content on our website. See "Business—Content Management and Monitoring." However, we have been and in the future may be subject to intellectual property infringement claims or other allegations by third parties for services provided or content displayed on our website. Although we believe that we will have recourse to indemnification from alleged infringing users on the basis of the user agreement, such right to recourse is subject to the enforcement mechanism of PRC legal system, which may not be effective. Our data security team also screens our website to eliminate content that we believe may infringe copyrights. Although our internal policy, terms of our user agreements and the screening system are designed to help limit the occurrences and impact of infringing activities, they may not be effective in eliminating such occurrences or dissemination of infringing materials on our website.

        Pursuant to PRC national and Beijing local regulations and judicial interpretations, online service providers that provide information storage space for users to upload works or link services may be held liable for damages if such providers know or have reason to know that the works uploaded or linked infringe others' copyrights. The Supreme People's Court of China promulgated a judicial interpretation on infringement of the right of dissemination through internet in December 2012. This judicial interpretation, like certain court rulings and certain other judicial interpretations, provide that the courts will place the burden on internet service providers to remove not only links or contents that have been specifically mentioned in the notices of infringement from right holders, but also links or contents they should have known to contain infringing content. The interpretation further provides that where an internet service provider has directly obtained economic benefits from any contents made available by an internet user, it has a higher duty of care with respect to internet users' infringement of third-party copyrights. This interpretation could subject us and other online service providers to significant administrative burdens and litigation risks.

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    Concerns about collection and use of personal data could damage our reputation and deter current and potential users from using our services.

        Concerns about our practices with regard to the collection, use or disclosure of personal information or other privacy-related matters, even if unfounded, could damage our reputation and operating results. Pursuant to the applicable PRC laws and regulations concerning the collection, use and sharing of personal data, our PRC subsidiaries and consolidated affiliated entities are required to keep our users' personal information confidential and are prohibited from disclosing such information to any third parties without the users' consent. We apply strict management and protection to any information provided by users, and under our privacy policy, without our users' prior consent, we will not provide any of our users' personal information to any unrelated third party. In December 2012 and July 2013, new laws and regulations were issued by the standing committee of the PRC National People's Congress and the MIIT to enhance the legal protection of information security and privacy on the internet. The laws and regulations also require internet operators to take measures to ensure confidentiality of information of users. While we strive to comply with our privacy guidelines as well as all applicable data protection laws and regulations, any failure or perceived failure to comply may result in proceedings or actions against us by government entities or others, and could damage our reputation. User and regulatory attitudes towards privacy are evolving, and future regulatory or user concerns about the extent to which personal information is shared with merchants or others may adversely affect our ability to share certain data with merchants, which may limit certain methods of targeted marketing. Concerns about the security of personal data could also lead to a decline in general internet usage, which could lead to lower user traffic on our website. A significant reduction in user traffic could lead to lower revenues from paying users, which could have a material adverse effect on our business, financial condition and results of operations.

    We could be liable for any breach of security relating to the third-party online payment platforms we use, and concerns about the security of internet transactions could damage our reputation, deter current and potential users from using our online marketplace and have other adverse consequences to our business.

        Users may conduct transactions on our online marketplace through third-party online payment platforms. In these online payment transactions, secured transmission of confidential information, such as customers' credit card numbers and expiration dates, personal information and billing addresses, over public networks is essential to maintain consumer confidence. In addition, we expect that an increasing amount of our sales and transactions conducted on our online marketplace will be conducted over the internet as a result of the growing use of online payment platforms. As the prevalence of using online payment methods increases, associated online crimes will likely increase as well. Our current security measures and those of the third-party online payment platform service providers may not be adequate. We must be prepared to increase and enhance our security measures and efforts so that our users have confidence in the reliability of the online payment platforms that we use, which will impose additional costs and expenses and may still not guarantee complete safety. In addition, we do not have control over the security measures of our third-party online payment platform service providers. Security breaches of the online payment platforms that we use could expose us to litigation and possible liability for failing to secure confidential user information and could, among other things, damage our reputation.

        A significant barrier to financial transactions or other electronic payment processing platforms over the internet in general has been public concern over the security of online payments. If these concerns are not adequately addressed, they may inhibit the growth of paid online services generally. If an internet or mobile network security breach were to occur and get publicized, the perceived security of the online payment platforms may be damaged, and users concerned about the security of their transactions may become reluctant to purchase our services even if the publicized breach did not involve payment platforms or methods used by us.

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        If any of the above were to occur and damage our reputation or the perceived security of the online payment platforms that we use, we may lose users and user traffic, and users may be discouraged from purchasing our services, which may have an adverse effect on our business. Any significant reduction in user traffic could lead to lower revenues from membership and online marketing services.

    Spammers and malicious applications may make our services less user-friendly and discourage users from using our website or services.

        Spammers may use our website and services to send targeted and untargeted spam messages to users, which may embarrass or annoy users and make usage of our website and services more time-consuming and less user-friendly. As a result, our users may use our services less or stop using them altogether. As part of fraudulent spamming activities, spammers typically create multiple user accounts, such as accounts being set-up for the purposes of sending spam messages. Although we have technologies and employees that attempt to identify and delete accounts created for spamming purposes, we are not able to eliminate all spam messages from being sent on our website.

    Our business, financial condition and results of operations, as well as our ability to obtain financing, may be adversely affected by the downturn in the global or Chinese economy.

        The global financial markets experienced significant disruptions in 2008 and the United States, Europe and other economies went into recession. The recovery from the lows of 2008 and 2009 was uneven and the global economy has continued to face new challenges, including the escalation of the European sovereign debt crisis in 2011 and the slowdown of the Chinese economy since 2012. It is unclear whether the European sovereign debt crisis will be contained and whether the Chinese economy will maintain its high growth rate. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies that have been adopted by the central banks and financial authorities of some of the world's leading economies, including the United States. There have also been concerns over unrest in the Middle East and Africa, which have resulted in volatility in oil prices and other markets, and over the possibility of a war involving Iran. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China.

        The online information services and mobile services industries may be affected by economic downturns. Thus, our business and prospects may be affected by the macroeconomic environment in China. A prolonged slowdown in the Chinese economy may lead to a reduced amount of activities on our marketplace, which could materially and adversely affect our business, financial condition and results of operations. In addition, our products and services may be viewed as discretionary by our users, who may choose to discontinue or reduce spending on such products and services during an economic downturn. In such an event, our ability to retain existing paying merchant members and customers and recruiting new paying merchant members and customers will be adversely affected, which would in turn negatively impact our business and results of operations.

        Moreover, a slowdown or disruption in the global or China's economy may have a material and adverse impact on financings available to us. The weakness in the economy could erode investors' confidence, which constitutes the basis of the credit market. The recent financial turmoil affecting the financial markets and banking system may significantly restrict our ability to obtain financing in the capital markets or from financial institutions on commercially reasonable terms, or at all. Although we are uncertain about the extent to which the recent global financial and economic crisis and slowdown of China's economy may impact our business in the short-term and long-term, there is a risk that our business, results of operations and prospects would be materially and adversely affected by any global economic downturn or disruption or slowdown of China's economy.

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    Future strategic alliances or acquisitions may have a material and adverse effect on our business, reputation and results of operations.

        We may in the future enter into strategic alliances with various third parties to further our business purposes from time to time. Strategic alliances with third parties could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the counter-party, and an increase in expenses incurred in establishing new strategic alliances, any of which may materially and adversely affect our business. In addition, to the extent the strategic partner suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with such third parties, and we may have little ability to control or monitor their actions.

        In addition, although we have no current acquisition plans, if we are presented with appropriate opportunities, we may acquire additional assets, products, technologies or businesses that are complementary to our existing business. Future acquisitions and the subsequent integration of new assets and businesses into our own would require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our business operations. Acquired assets or businesses may not generate the financial results we expect. Furthermore, acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant. In addition to possible shareholders' approval, we may also have to obtain approvals and licenses from the relevant government authorities in the PRC for the acquisitions and to comply with any applicable PRC laws and regulations, which could result in increased costs and delay.

        Furthermore, the legal requirements on acquisitions by us and our PRC subsidiaries are different from acquisitions by our consolidated affiliated entities. Most importantly, if we or our PRC subsidiaries acquire any domestic companies in China, such acquisition will be subject to PRC laws and regulations on foreign investment. We and our PRC subsidiaries are restricted or prohibited from directly acquiring interests in companies in certain industries under PRC laws and regulations. See "Regulation—Regulations on Value-Added Telecommunication Services." Our consolidated affiliated entities are not subject to PRC laws and regulations on foreign investment and may acquire PRC companies operating in industries where foreign investments are restricted or prohibited. However, there are uncertainties with respect to the interpretation and application of PRC laws and regulations regarding indirect foreign investments in such industries. See "Risk Factors—Risks Relating to Our Corporate Structure and Restrictions on Our Industry—Substantial uncertainties and restrictions exist with respect to the interpretation and application of PRC laws and regulations relating to online commerce and the distribution of internet content in China. If the PRC government finds that the structure we have adopted for our business operations does not comply with PRC laws and regulations, we could be subject to severe penalties, including the shutting down of our website."

    We may need additional capital, and the sale of additional ADSs or other equity securities could result in additional dilution to our shareholders.

        We believe that our current cash and cash equivalents, anticipated cash flow from operations and the proceeds from this offering will be sufficient to meet our anticipated cash needs for the foreseeable future. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If these resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service

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obligations and could result in operating and financing covenants that would restrict our operations. It is uncertain whether financing will be available in amounts or on terms acceptable to us, if at all.

    If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely report our results of operations or prevent fraud, and investor confidence and the market price of our ADSs may be materially and adversely affected.

        Prior to this offering, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in connection with the audits of our consolidated financial statements as of and for the two years ended December 31, 2012, we and our independent registered public accounting firm identified one "material weakness" in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States, or PCAOB. The material weakness identified related to the lack of sufficient financial reporting and accounting personnel to formalize key controls over financial reporting and to prepare and review financial statements and related footnote disclosures based on U.S. GAAP and SEC reporting requirements timely and properly. Following the identification of the material weakness and other control deficiencies, we have taken measures and plan to continue to take measures to remedy these deficiencies. For details of these remedies, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Control over Financial Reporting." However, the implementation of these measures may not fully address these deficiencies in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure to correct these control deficiencies or our failure to discover and address any other control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our ADSs, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud.

        Furthermore, it is possible that, had our independent registered public accounting firm conducted an audit of our internal control over financial reporting, such firm might have identified additional material weaknesses and deficiencies. Upon completion of this offering, we will become subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, will require that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2014. In addition, once we cease to be an "emerging growth company" as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

        During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time,

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we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

    We have granted employee share options and other share-based awards in the past and will continue to do so in the future. We recognize share-based compensation expenses in our consolidated statement of income in accordance with U.S. GAAP. Any additional grant of employee share options and other share-based awards in the future may have a material adverse effect on our results of operation.

        We adopted an employee stock option plan in 2010, or the 2010 plan, and a share incentive plan in 2013, or the 2013 plan, for the purpose of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours. Under the 2010 plan, we are permitted to issue options to purchase up to 20,173,225 ordinary shares. Under the 2013 plan, we are authorized to grant options, restricted shares, restricted share units or other awards to purchase up to 2,800,000 or more ordinary shares as of the date of this prospectus. As of the date of this prospectus, options to purchase 9,841,177 ordinary shares are issued and outstanding, options to purchase 855,794 ordinary shares have been exercised for which we will issue 855,794 Class A ordinary shares to the option holders after the expiration of the 180-day lock-up period, and 9,969,196 ordinary shares have been issued upon exercised vested options under the 2010 plan. As a result of these grants and potential future grants, we incurred in the past and expect to continue to incur in future periods significant share-based compensation expenses. The amount of these expenses is based on the fair value of the share-based awards. We account for compensation costs for all share options using a fair-value based method and recognize expenses in our consolidated statement of income in accordance with U.S. GAAP. The expenses associated with share-based compensation will increase our net loss, perhaps materially, and the additional securities issued under share-based compensation plans will dilute the ownership interests of our shareholders, including holders of our ADSs. However, if we limit the scope of our share-based compensation plan, we may not be able to attract or retain key personnel who expect to be compensated by incentive shares or options.

    We have limited business insurance coverage.

        Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies do in more developed economies. Except for the property insurance and third-party liability insurance purchased by Wanglin, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured occurrence of business disruption may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our results of operations and financial condition.

    Failure to renew our current leases or locate desirable alternatives for our facilities could materially and adversely affect our business.

        All of our offices and data centers are presently located on leased premises. At the end of each lease term, we may not be able to negotiate an extension of the lease and may therefore be forced to move to a different location, or the rent we pay may increase significantly. This could disrupt our

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operations and adversely affect our profitability. We compete with other businesses for premises at certain locations or of desirable sizes and some landlords may have entered into long-term leases with our competitors for such premises. As a result, we may not be able to obtain new leases at desirable locations or renew our existing leases on acceptable terms or at all, which could materially and adversely affect our business.

Risks Relating to Our Corporate Structure and Restrictions on Our Industry

    Substantial uncertainties and restrictions exist with respect to the interpretation and application of PRC laws and regulations relating to online commerce and the distribution of internet content in China. If the PRC government finds that the structure we have adopted for our business operations does not comply with PRC laws and regulations, we could be subject to severe penalties, including the shutting down of our website.

        Foreign ownership of internet-based businesses is subject to significant restrictions under current PRC laws and regulations. The PRC government regulates internet access, the distribution of online information and the conduct of online commerce through strict business licensing requirements and other government regulations. These laws and regulations also include limitations on foreign ownership in PRC companies that provide internet content distribution services. Specifically, foreign investors are not allowed to own more than 50% of the equity interests in any entity conducting an internet content distribution business. The Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, or the MIIT Circular, issued by the MIIT in July 2006, reiterated the regulations on foreign investment in telecommunications businesses, which require foreign investors to set up foreign-invested enterprises and obtain business operating licenses for internet content provision to conduct any value-added telecommunications business in China. Under the MIIT Circular, a domestic company that holds an internet content provision license, or ICP license, is prohibited from leasing, transferring or selling the license to foreign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in China. Furthermore, the relevant trademarks and domain names that are used in the value-added telecommunications business must be owned by the local ICP license holder or its shareholders. Due to a lack of interpretation from MIIT, it is unclear what impact the MIIT Circular will have on us or the other PRC internet companies that have adopted the same or similar corporate and contractual structures as ours. Beijing 58 holds an ICP license, and owns all domain names used in our value-added telecommunications businesses. Beijing 58 is also the owner of all registered trademarks used in our value-added telecommunications businesses and is the applicant of all the applications for trademark registration we have made.

        We are a Cayman Islands company and our PRC subsidiary, Wanglin, is considered a foreign invested enterprise. To comply with PRC laws and regulations, we conduct our operations in China through a series of contractual arrangements entered into among Wanglin, Beijing 58 and Beijing 58's shareholders. As a result of these contractual arrangements, we exert control over our Beijing 58 and its subsidiaries and consolidate their operating results in our financial statements under U.S. GAAP. For a detailed description of these contractual arrangements, see "Corporate History and Structure."

        In the opinion of our PRC counsel, Han Kun Law Offices, our current ownership structure, the ownership structure of our PRC subsidiaries and our consolidated affiliated entities, the contractual arrangements among Wanglin, Beijing 58 and its shareholders, and, except as otherwise disclosed in this prospectus, our business operations, are not in violation of any existing PRC laws, rules and regulations. There are, however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, we cannot assure you that PRC government authorities will not ultimately take a view contrary to the opinion of our PRC legal counsel.

        Accordingly, if our ownership structure, contractual arrangements and businesses of our company, our PRC subsidiaries or our consolidated affiliated entities are found to be in violation of any existing

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or future PRC laws or regulations, or we fail to obtain or maintain any of the required permits or approvals, the relevant governmental authorities would have broad discretion in dealing with such violation, including levying fines, confiscating our income or the income of our PRC subsidiaries or consolidated affiliated entities, revoking the business licenses or operating licenses of our PRC subsidiaries or consolidated affiliated entities, shutting down our servers or blocking our website, discontinuing or placing restrictions or onerous conditions on our operations, requiring us to undergo a costly and disruptive restructuring, restricting or prohibiting our use of proceeds from this offering to finance our business and operations in China, and taking other regulatory or enforcement actions that could be harmful to our business. Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of any of our consolidated affiliated entities that most significantly impact its economic performance, and/or our failure to receive the economic benefits from any of our consolidated affiliated entities, we may not be able to consolidate the entity in our consolidated financial statements in accordance with U.S. GAAP.

    We rely on contractual arrangements with our consolidated affiliated entities and their shareholders for the operation of our business, which may not be as effective as direct ownership. If we are unable to maintain effective control, we would not be able to continue to consolidate the financial results of our consolidated affiliated entities with our financial results. If our consolidated affiliated entities and their shareholders fail to perform their obligations under these contractual arrangements, we may have to resort to litigation or arbitration to enforce our rights, which may be time-consuming, unpredictable, expensive and damaging to our operations and reputation.

        Because of PRC restrictions and qualification requirements on foreign ownership of value-added telecommunications services in China, we depend on contractual arrangements with our consolidated affiliated entities, in which we have no ownership interest, to conduct our business. These contractual arrangements are intended to provide us with effective control over these entities and allow us to obtain economic benefits from them. Although we have been advised by our PRC counsel, Han Kun Law Offices, that these contractual arrangements are valid, binding and enforceable under current PRC laws, these contractual arrangements may not be as effective in providing control as direct ownership. For example, our consolidated affiliated entities and their shareholders could breach their contractual arrangements with us by, among other things, failing to conduct its operations, including maintaining our website and using the domain names and trademarks for which it has exclusive right to use, in an acceptable manner or taking other actions that are detrimental to our interests. If we were the controlling shareholder of our consolidated affiliated entities with direct ownership, we would be able to exercise our rights as shareholders to effect changes to their board of directors, which in turn could implement changes at the management and operational level. Furthermore, each of our consolidated affiliated entities' company chops are held by each company's legal or accounting department. Our ability to ensure the consolidated affiliated entities' performance under the contractual agreements may be limited if we were unable to secure control of the company chops in the event of a dispute with the entity's management or shareholders as many official documents require affixation of company chops to become fully effective. As a result, if our consolidated affiliated entities or their shareholders fail to perform their obligations under these contractual arrangements we may have to incur substantial costs to enforce such arrangements, and rely on legal remedies under PRC law, including contract remedies, which may not be sufficient or effective. If we are unable to maintain effective control, we would not be able to continue to consolidate the financial results of these entities with our financial results.

        These contractual arrangements are governed by PRC law and provide for dispute resolution through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. Under PRC law, if parties to a contract have agreed to resolve disputes arising from the contract by arbitration, a

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PRC court will not accept a lawsuit initiated at the court by any contract party, unless the agreement for arbitration is invalid. An arbitration award issued by the arbitration commission chosen in accordance with the agreement is final, binding and enforceable against the parties. If any party fails to comply with the arbitration award, the other party has the right to apply with a competent court for enforcement. However, the legal environment in the PRC is not as developed as other jurisdictions such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements, which may make it difficult to exert effective control over our consolidated affiliated entities, and our ability to conduct our business may be negatively affected. In addition, a PRC court or arbitration tribunal may refuse to enforce the contractual arrangements on the grounds that they are designed to circumvent PRC foreign investment restrictions and therefore are against PRC public policy.

        If we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, our business and operations could be severely disrupted, which could materially and adversely affect our results of operations and damage our reputation. See "—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us."

    The shareholders of our consolidated affiliated entities have potential conflicts of interest with us, which may adversely affect our business.

        Mr. Jinbo Yao is the founder, chairman and chief executive officer of our company, having beneficial ownership of 27.9% of the total outstanding shares of our company. See "Principal Shareholder." He is also the sole director, an executive officer and a shareholder of Beijing 58, our consolidated affiliated entity, holding 37.8% equity interest in the entity. In addition, Mr. Yao is the sole director and a 16.7% shareholder of Beijing Wanglintong Information Technology Co., Ltd., an entity that holds 13.4% equity interest in Beijing 58. Conflicts of interest between his duties to our company, his duties to Beijing 58 and his interests as a major shareholder of Beijing 58 may arise. We cannot assure you that he will act entirely in our interests when conflicts of interest arise or that conflicts of interest will be resolved in our favor. Furthermore, in the context of Mr. Yao's acting as the director and an executive officer of Beijing 58, PRC law would not require him to consider our company's best interests. We rely on Mr. Yao to abide by the laws of China, which provide that directors and executive officers owe duty of loyalty and duty of care to the company and require them to avoid conflicts of interest and not to take advantage of their positions for personal gains, and the laws of Cayman Islands which provide that directors owe a duty of care and duty of loyalty to the company. The respective legal framework of China and the Cayman Islands does not provide guidance in the event of a conflict with another corporate governance regime. If we cannot resolve any conflict of interest or dispute between us and directors or executive officers of Beijing 58 should one arise, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings. In addition, Mr. Yao could violate his non-competition or employment agreements with us or his legal duties by diverting business opportunities from us, resulting in our loss of corporate opportunities. If we are unable to resolve any such conflicts, or if we suffer significant delays or other obstacles as a result of such conflicts, our business and operations could be severely disrupted, which could materially and adversely affect our results of operations and damage our reputation See "—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us."

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    Our Chairman and CEO, Mr. Jinbo Yao and Beijing 58 are named in a lawsuit recently filed in a local PRC court; there is substantial uncertainty as to the outcome of this lawsuit and its impact on us.

        We recently received a copy of a complaint filed by Mr. Xuanfu Liu on October 19, 2013 with a local court in Hubei Province in China against (1) Mr. Handong Cheng, legal representative of Business Opportunity Online (Beijing) Network Technology Co., Ltd., or Shangji, a PRC company, (2) Shangji, and (3) Mr. Jinbo Yao, our chairman and chief executive officer. Beijing 58 was named as a third party in the complaint. Mr. Liu purports to be a 36% minority shareholder of Shangji. The complaint claims that Shangji enjoyed a right to 17.5% of the equity interest in Beijing 58 held by Mr. Yao as Shangji's nominee prior to December 2009, and alleges that Mr. Cheng entered into an agreement on behalf of Shangji with Mr. Yao in December 2009 terminating Shangji's right to the 17.5% equity interest in Beijing 58 without prior consultation with or notice to Mr. Liu. Mr. Liu is seeking the court's ruling that the termination agreement was invalid and that Mr. Liu be entitled to a 6.3% equity interest in Beijing 58, equivalent to what he believes is his indirect pro rata share of Beijing 58. We and Mr. Yao believe that Mr. Liu's claim to be registered as a shareholder of Beijing 58 is baseless and without merit and intend to contest it vigorously. Our PRC counsel, Han Kun Law Offices, advises us that based on the evidence presented in the complaint to date, applicable PRC law, including the PRC judicial interpretation, there are meritorious defenses to Mr. Liu's claims. See "Business—Legal Proceedings" for further details on Mr. Liu's complaint and our PRC counsel's analysis.

        However, there is no assurance that there would be no new facts presented in the case and if new facts were to be presented, how such facts could affect the court's decision. Moreover, since PRC courts have significant discretion in interpreting and implementing statutory and contractual terms, it is inherently difficult to predict the outcome and duration of court proceedings in China. Please refer to "Risk Factors—Risks Relating to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us." Given PRC courts' significant discretion, we believe that in the event Mr. Liu were able to prevail in his claim, there could be a number of potential remedies, which could include awarding Mr. Liu an interest, whether a direct ownership interest or an indirect interest through Mr. Yao as nominee, in Beijing 58. If he were awarded a direct ownership interest through transfer of Mr. Yao's existing equity interest, such transfer would, according to our PRC counsel, be subject to the right of first refusal by other Beijing 58 shareholders under the PRC Company Law. In the event Mr. Liu were to obtain a direct ownership interest in Beijing 58 and Mr. Liu were unwilling to consent to or join as a party to our contractual arrangements with Beijing 58, he would be entitled to economic and voting rights in relation to such equity interest. If Mr. Liu's interest were to remain outside of the contractual arrangements with Beijing 58, we may not be able to receive all of the economic benefits of Beijing 58 under the contractual arrangements as he would have rights to dividends declared out of Beijing 58's profits. Furthermore, we may be required to amend the contractual arrangements to address Mr. Liu's minority interest as a shareholder. In addition, we cannot assure you that he would not seek further remedies, which may include an attempt to invalidate the contractual arrangements relating to Beijing 58, which if ultimately successful could have a material adverse effect on our business, results of operations and financial condition and cause us to be unable to consolidate the financial results of Beijing 58 and its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.

    We may lose the ability to use and enjoy assets held by our consolidated affiliated entities that are material to the operation of our business if any of such entities goes bankrupt or becomes subject to a dissolution or liquidation proceeding.

        As part of our contractual arrangements with our consolidated affiliated entities, these entities hold certain assets that are material to the operation of our business, including the ICP license, and the domain names and trademarks for which Beijing 58 has exclusive right to use. If any of our consolidated affiliated entities goes bankrupt and all or part of its assets become subject to liens or

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rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. Under the contractual arrangements, our consolidated affiliated entities may not, in any manner, sell, transfer, mortgage or dispose of their assets or legal or beneficial interests in the business without our prior consent. If any of our consolidated affiliated entities undergoes a voluntary or involuntary liquidation proceeding, the unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

    Our contractual arrangements with our consolidated affiliated entities may result in adverse tax consequences to us.

        Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. The PRC enterprise income tax law requires every enterprise in China to submit its annual enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The tax authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent with arm's length principles. We may be subject to adverse tax consequences if the PRC tax authorities were to determine that the contracts between Wanglin, our PRC subsidiary, and Beijing 58, our consolidated affiliated entity, were not on an arm's length basis and therefore constitute a favorable transfer pricing arrangements. If this occurs, the PRC tax authorities could request that Beijing 58 adjust its taxable income, if any, upward for PRC tax purposes. Such a pricing adjustment could adversely affect us by increasing our consolidated affiliated entities' tax expenses without reducing our tax expenses, which could subject our consolidated affiliated entities to late payment fees and other penalties for underpayment of taxes.

    We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet business and companies.

        The internet industry in China is highly regulated by the PRC government and numerous regulatory authorities of the central PRC government are empowered to issue and implement regulations governing various aspects of the internet industry including foreign ownership of and licensing and permit requirements pertaining to companies in the internet industry. See "Regulation." These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainty. As a result, in certain circumstances, it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations. Our consolidated affiliated entities are required to obtain and maintain applicable licenses or approvals from different regulatory authorities in order to provide their current services, including but not limited to the ICP license with electronic bulletin boards service, the Surveying and Mapping Qualification Certificate for internet mapping and the Employment Agency License.

        Furthermore, our consolidated affiliated entities may be required to obtain additional licenses. If any of them fails to obtain or maintain any of the required licenses or approvals, its continued business operations in the internet industry may subject it to various penalties, such as confiscation of illegal net sales, fines and the discontinuation or restriction of its operations. Any such disruption in the business operations of our consolidated affiliated entities will materially and adversely affect our business, financial condition and results of operations.

    Regulation and censorship of information distribution over the internet in China may adversely affect our business, and we may be liable for information displayed on, retrieved from or linked to our website.

        The PRC government has adopted regulations governing internet access and the distribution of information over the internet. Under these regulations, internet content providers and internet

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publishers are prohibited from posting or displaying over the internet content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, or is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide internet content and other licenses, the closure of the concerned websites and reputational harm. A website operator may also be held liable for such censored information displayed on or linked to its website. For a detailed discussion, see "Regulation—Regulations on Value-Added Telecommunication Services" and "Regulation—Regulations on Information Security and Censorship." We have a team within our data security department which implements internal procedures to review the content in our system for compliance with applicable laws and regulations, aided by a program designed to periodically sweep our website and the data being conveyed in our system for sensitive keywords or questionable materials. In spite of this screening system, we may have difficulty identifying and removing all illegal content or transactions involving illegal sales of goods and services, which could expose us to the penalties described above.

    If the PRC government were to deem our membership services or online marketing services as a form of online advertising, our business, results of operations and financial condition may be materially and adversely affected.

        We do not believe our membership and online marketing services are deemed a form of online advertising under PRC laws and regulations. However, there are uncertainties regarding the interpretation and application of current or future PRC laws and regulations. If such services are deemed by the relevant authorities as a form of online advertising, such services will be subject to PRC advertising laws and regulations. Under PRC advertising laws and regulations, advertising operators, including advertising agencies, and advertising distributors, are obligated to monitor the advertising content and examine the supporting documents for advertisements provided by advertisers to ensure that the content is fair and accurate and in compliance with applicable law. There are also specific restrictions, requirements or prohibitions regarding advertisements that relate to certain products. Therefore, if our membership or online marketing services are deemed a form of online advertising, we will be obligated to conduct the examination, review and monitoring of advertising content on our online marketplace as required by PRC advertising laws and regulations, which could be burdensome, and we may be required to edit or delete certain content on our online marketplace. This risk could also apply to other content categories we may from time to time include on our website.

        In addition, foreign investment in advertising services is subject to certain requirements, including the need for foreign shareholders of PRC companies engaged in advertising services to meet certain qualification standards. Our PRC subsidiaries currently are not qualified to conduct advertising services and should any of our services be deemed as online advertising under PRC law, such activities must be conducted through Beijing 58, one of our consolidated affiliated entities, which is qualified to provide adverting services in China. The need to track and potentially shift services, contracts and personnel between our subsidiaries and our consolidated affiliated entities could add further burden and additional cost to our operations. Moreover, if any of our membership or online marketing services are characterized as a form of online advertising, we may be subject to an additional 3% surcharge with respect to the revenues we derive from such services, potentially with retroactive effect, which could adversely affect our financial condition and results of operations.

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Risks Relating to Doing Business in China

    Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.

        The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in China. Our PRC subsidiaries, Wanglin and 58 Technology are foreign-invested enterprises and are subject to laws and regulations applicable to foreign-invested enterprises as well as various PRC laws and regulations generally applicable to companies in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties.

        From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.

    Changes in China's economic, political or social conditions or government policies could have a material adverse effect on our business and operations.

        Substantially all of our assets and almost all of our users are located in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.

        China's economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over the PRC economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

        While China's economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and may slow down in the future. Some of the government measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. Any stimulus measures designed to boost the Chinese economy may contribute to higher inflation, which could adversely affect our results of operations and financial condition. For example, certain operating costs

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and expenses, such as employee compensation and office operating expenses, may increase as a result of higher inflation.

    Under the EIT Law, we may be classified as a PRC "resident enterprise" for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment.

        Under the PRC Enterprise Income Tax Law, or the EIT Law, that became effective on January 1, 2008, an enterprise established outside the PRC with "de facto management bodies" within the PRC is considered a "resident enterprise" for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a "de facto management body" is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, a circular, known as SAT Circular 82, issued in April 2009 by the State Administration of Taxation, or the SAT, specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders' meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued a bulletin, known as SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82 and clarify the reporting and filing obligations of such "Chinese-controlled offshore incorporated resident enterprises." SAT Bulletin 45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters. Although both SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin 45 may reflect the SAT's general position on how the "de facto management body" test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups or by PRC or foreign individuals.

        We do not believe that 58.com Inc., CCNC BVI or CCIC HK meet all of the conditions above thus we do not believe that 58.com Inc., or CCNC BVI or CCIC HK is, a PRC resident enterprise, though a substantial majority of the members of our management team as well as the management team of our offshore holding companies are located in China. However, if the PRC tax authorities determine that 58.com Inc., CCNC BVI or CCIC HK is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we or our offshore subsidiaries will be subject to the uniform 25% enterprise income tax on our world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations.

        Furthermore, although dividends paid by one PRC tax resident enterprise to an offshore incorporated PRC resident enterprise controlled by PRC enterprises or PRC enterprise groups should qualify as "tax-exempt income" under the EIT Law and Bulletin 45, we cannot assure you that dividends paid by our PRC subsidiaries to CCIC HK will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax on dividends, and the PRC tax authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes but not controlled by PRC enterprises or PRC enterprise groups.

        Finally, dividends payable by us to our investors and gains on the sale of our shares may be become subject to PRC withholding tax.

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    We may not be able to obtain certain benefits under relevant tax treaty on dividends paid by our PRC subsidiaries to us through CCIC HK.

        We are a holding company incorporated under the laws of the Cayman Islands and as such rely on dividends and other distributions on equity from our PRC subsidiaries to satisfy part of our liquidity requirements. Pursuant to the EIT Law, a withholding tax rate of 10% currently applies to dividends paid by a PRC "resident enterprise" to a foreign enterprise investor, unless any such foreign investor's jurisdiction of incorporation has a tax treaty with China that provides for preferential tax treatment. Pursuant to a Notice 112 issued by the SAT in January 2008 and the Arrangement between the Mainland China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion, or the Double Taxation Arrangement (Hong Kong), such withholding tax rate may be lowered to 5% if the PRC enterprise is at least 25% held by a Hong Kong enterprise at all times within the 12-month period immediately prior to distribution of the dividends and is determined by the relevant PRC tax authority to have satisfied other conditions and requirements under the Double Tax Avoidance Arrangement (Hong Kong) and other applicable PRC laws. Pursuant to a SAT Circular 601 issued by the SAT in October 2009, non-resident enterprises that cannot provide valid supporting documents as "beneficial owners" may not be approved to enjoy tax treaty benefits, and "beneficial owners" refers to individuals, enterprises or other organizations which are normally engaged in substantive operations. These rules also set forth certain adverse factors on the recognition of a "beneficial owner". Specifically, they expressly exclude a "conduit company," or any company established for the purposes of avoiding or reducing tax obligations or transferring or accumulating profits and not engaged in actual operations such as manufacturing, sales or management, from being a "beneficial owner." Whether a non-resident company may obtain tax benefits under the relevant tax treaty will be subject to approval of the relevant PRC tax authority and will be determined by the PRC tax authority on a case-by-case basis. In June 2012, the SAT further provides in an announcement that a comprehensive analysis should be made when determining the beneficial owner status based on various factors supported by documents including the articles of association, financial statements, records of cash movements, board meeting minutes, board resolutions, staffing and materials, relevant expenditures, functions and risk assumption as well as relevant contracts and other information. Our Hong Kong subsidiary has not applied for the approval for a withholding tax rate of 5% from the local tax authority as our PRC subsidiaries have not paid dividends due to their loss-making status in the past and will not be able to pay dividends in the future until they have achieved accumulated profits. We plan to have our Hong Kong subsidiary assume some managerial and administrative functions, as well as conduct other business functions in the future. Once we implement such a plan, we do not believe that our Hong Kong subsidiary will be considered a conduit company as defined under SAT Circular 601. However, our Hong Kong subsidiary as currently situated may be considered a conduit company and we cannot assure you that the relevant PRC tax authority will agree with our view when our Hong Kong subsidiary applies to obtain tax benefits under the relevant tax treaty in the future. As a result, although our PRC subsidiaries are currently wholly owned by our Hong Kong subsidiary, we may not be able to enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement (Hong Kong) and therefore be subject to withholding tax at a rate of 10% with respect to dividends to be paid by our PRC subsidiaries to CCIC HK.

    Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.

        In connection with the EIT Law, the Ministry of Finance and the SAT jointly issued a SAT Circular 59 in April 2009, and the SAT issued a SAT Circular 698 in December 2009. Both SAT Circular 59 and Circular 698 became effective retroactively on January 1, 2008.

        According to SAT Circular 698, where a non-resident enterprise transfers the equity interests of a PRC "resident enterprise" indirectly by disposition of the equity interests of an overseas holding company, or an Indirect Transfer, and the overseas holding company is located in a tax jurisdiction

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that: (1) has an effective tax rate less than 12.5% or (2) does not tax foreign income of its residents, the non-resident enterprise, being the transferor, must report to the relevant tax authority of the PRC "resident enterprise" this Indirect Transfer. Using a "substance over form" principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC withholding tax at a rate of up to 10%. SAT Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC "resident enterprise" to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction. In addition, the PRC "resident enterprise" is supposed to provide necessary assistance to support the enforcement of SAT Circular 698.

        There is little guidance and practical experience as to the application of SAT Circular 698, and it is possible that the PRC tax authorities would pursue our offshore shareholders to conduct a filing regarding our offshore restructuring transactions where non-resident investors were involved and would request our PRC subsidiary to assist in providing such disclosures. In addition, if our offshore subsidiaries are deemed to lack substance they could be disregarded by the PRC tax authorities. As a result, we and our non-resident investors may become at risk of being taxed under SAT Circular 698 and may be required to expend valuable resources to comply with SAT Circular 698 or to establish that we should not be taxed under SAT Circular 698, which may have a material adverse effect on our financial condition and results of operations or the non-resident investors' investments in us.

        By promulgating and implementing these circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise. The PRC tax authorities have the discretion under SAT Circular 59 and SAT Circular 698 to make adjustments to the taxable capital gains based on the difference between the fair value of the equity interests transferred and the cost of investment. Although we currently have no confirmed plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. If we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustments under SAT Circular 59 or SAT Circular 698, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.

    PRC regulations establish complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

        Six PRC regulatory agencies promulgated regulations effective on September 8, 2006 that are commonly referred to as the M&A Rules. See "Regulation." The M&A Rules establish procedures and requirements that could make some acquisitions of PRC companies by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. In addition, national security review rules issued by the PRC governmental authorities in 2011 require acquisitions by foreign investors of domestic companies engaged in military-related or certain other industries that are crucial to national security to be subject to prior security review. Moreover, the Anti-Monopoly Law requires that the Ministry of Commerce shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. We may expand our business in part by acquiring complementary businesses. Complying with the requirements of the M&A Rules, security review rules and other PRC regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

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    PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries' ability to increase their registered capital or distribute profits to us, limit our ability to inject capital into our PRC subsidiaries, or otherwise expose us to liability and penalties under PRC law.

        The PRC State Administration of Foreign Exchange, or the SAFE, promulgated in October 2005 a SAFE Circular 75 that requires PRC citizens or residents to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas equity financing involving a roundtrip investment whereby the offshore entity acquires or controls onshore assets or equity interests held by the PRC citizens or residents. In addition, such PRC citizens or residents must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to increases or decreases in investment amount, transfers or exchanges of shares, mergers or divisions, long-term equity or debt investments, external guarantees, or other material events that do not involve roundtrip investments. Subsequent regulations further clarified that PRC subsidiaries of an offshore company governed by the SAFE regulations are required to coordinate and supervise the filing of SAFE registrations in a timely manner by the offshore holding company's shareholders who are PRC citizens or residents. If these shareholders fail to comply, the PRC subsidiaries are required to report to the local SAFE branches. See "Regulation—Regulation on Offshore Financing." If our shareholders who are PRC citizens or residents do not complete their registration with the local SAFE branches, our PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiaries. Moreover, failure to comply with the various SAFE registration requirements described above could result in liabilities for our PRC subsidiaries under PRC laws for evasion of applicable foreign exchange restrictions, including (1) the requirement by SAFE to return the foreign exchange remitted overseas within a period specified by SAFE, with a fine of up to 30% of the total amount of foreign exchange remitted overseas and deemed to have been evasive and (2) in circumstances involving serious violations, a fine of no less than 30% of and up to the total amount of remitted foreign exchange deemed evasive. Furthermore, the persons-in-charge and other persons at our PRC subsidiaries who are held directly liable for the violations may be subject to criminal sanctions.

        These foreign exchange regulations provide that PRC residents include both PRC citizens, meaning any individual who holds a PRC passport or resident identification card, and individuals who are non-PRC citizens but primarily reside in the PRC due to their economic ties to the PRC. We have requested PRC residents holding direct or indirect interest in our company to our knowledge to make the necessary applications, filings and amendments as required under SAFE Circular 75 and other related rules. To our knowledge, all of our shareholders who are PRC citizens and hold interest in us, have registered with the local SAFE branch as required under SAFE Circular 75 and are in the process of amending certain applicable registrations with the local SAFE pursuant to SAFE Circular 75. We would expect these shareholders to also amend their registrations after the completion of this offering as required by PRC law. However, we cannot assure you that they can successfully amend their foreign exchange registrations with the local SAFE branch in full compliance with applicable laws after this offering. In addition, we may not be informed of the identities of all the PRC residents holding direct or indirect interest in our company, and we cannot provide any assurances that these PRC residents will comply with our request to make or obtain any applicable registrations or comply with other requirements required by SAFE Circular 75 or other related rules. A failure by our PRC resident shareholders or future PRC resident shareholders to comply with the SAFE regulations, if SAFE requires it, could subject us to fines or other legal sanctions, restrict our cross-border investment activities, limit our PRC subsidiaries' ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

        Furthermore, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. We cannot predict how these regulations will affect our business operations or future

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strategy. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, either we or the owners of such company, as the case may be, may not be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

    Failure to comply with PRC regulations regarding the registration requirements for employee share ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

        In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules, replacing the previous rules issued by SAFE in March 2007. Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. The participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. See "Regulation—Regulation on Employee Stock Option Plans." We and our PRC employees who have been granted share options and restricted shares will be subject to these regulations upon the completion of this offering. Failure of our PRC share option holders or restricted share holders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limited our PRC subsidiaries' ability to distribute dividends to us, or otherwise materially adversely affect our business.

    PRC regulation of direct investment and loans by offshore holding companies to PRC entities and governmental control of currency conversion may delay or limit us from using the proceeds of this offering to make additional capital contributions or loans to our PRC subsidiaries.

        Any capital contributions or loans that we, as an offshore entity, make to our PRC subsidiaries, including from the proceeds of this offering, are subject to PRC regulations. Under PRC laws and regulations, we are permitted to utilize the proceeds from this offering to fund our PRC subsidiaries only through loans or capital contributions, subject to applicable government registration and approval requirements. None of our loans to a PRC subsidiary can exceed the difference between its total amount of investment and its registered capital approved under relevant PRC laws, and the loans must be registered with the local branch of SAFE. The difference between total amount of investment and registered capital is US$4.4 million for Wanglin and US$12.75 million for 58 Technology, respectively. Our capital contributions to our PRC subsidiaries must be approved by the Ministry of Commerce or its local counterpart. We cannot assure you that we will be able to complete the necessary registration or obtain the necessary approval on a timely basis, or at all. If we fail to complete the necessary registration or obtain the necessary approval, our ability to make loans or equity contributions to our PRC subsidiaries may be negatively affected, which could adversely affect our PRC subsidiaries' liquidity and their ability to fund their working capital and expansion projects and meet their obligations and commitments.

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        In August 2008, SAFE promulgated a SAFE Circular 142 regulating the conversion by a foreign-invested enterprise of foreign currency registered capital into Renminbi by restricting how the converted Renminbi may be used. SAFE Circular 142 provides that the Renminbi capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and unless otherwise provided by law, such Renminbi capital may not be used for equity investments in the PRC. The business scopes of Wanglin and 58 Technology include research and development of online classified information technology and software systems, transfer of proprietary technologies, information technology consulting, technical services, computer technology training, marketing, sales and promotional services, enterprise management services, business consultation and personnel management services. Each of Wanglin and 58 Technology may only use Renminbi converted from foreign exchange capital contribution for activities within its approved business scope. In addition, the use of such Renminbi capital may not be altered without SAFE approval, and such Renminbi capital may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been used. Violations of SAFE Circular 142 could result in severe monetary or other penalties. If we convert the net proceeds we receive from this offering into Renminbi pursuant to SAFE Circular 142, our use of Renminbi funds for general corporate purposes will be within the business scope of our PRC subsidiaries. However, we may not be able to use such Renminbi funds to make equity investments in the PRC through our PRC subsidiaries.

        Furthermore, SAFE promulgated in November 2010 a SAFE Circular 59, which requires the relevant government authorities to closely examine the authenticity of settlement of net proceeds from offshore offerings and the net proceeds to be settled in the manner described in the offering documents. SAFE also promulgated a SAFE Circular 45 in November 2011, which, among other things, restricts a foreign-invested enterprise from using RMB converted from its registered capital to provide entrusted loans or repay loans between non-financial enterprises. SAFE Circular 142, SAFE Circular 59 and SAFE Circular 45 may significantly limit our ability to use Renminbi converted from the net proceeds of this offering to fund establishment of new PRC subsidiaries by Wanglin and 58 Technology to invest in or acquire any other PRC companies, or to establish new consolidated affiliated entities in the PRC.

    PRC regulation of loans by offshore holding companies to PRC entities and governmental control of currency conversion may limit our ability to fund the operations of our consolidated affiliated entities.

        Due to the restrictions imposed on loans in foreign currencies extended to any PRC domestic companies, any loans from our Cayman Islands holding company or other offshore entities to PRC domestic company shall obtain certain approvals from local SAFE and complete record-filling procedures with local SAFE on an item-by-item basis. Therefore, we are not likely to have our Cayman Islands holding company or other offshore entities to use the proceeds from this offering to extend loans to Beijing 58, our consolidated affiliated entity, or its subsidiaries, each of which is a PRC domestic company. Meanwhile, we are not likely to finance the activities of our consolidated affiliated entities by means of capital contributions due to regulatory restrictions relating to foreign investment in PRC domestic enterprises engaged in value-added telecommunications services. In addition, due to the restrictions on a foreign-invested enterprise's use of Renminbi converted from foreign-currency registered capital under PRC regulations, including SAFE Circular 142, SAFE Circular 59 and SAFE Circular 45, as described under the foregoing risk factor, our PRC subsidiaries, Wanglin and 58 Technology, may be unable to use the Renminbi converted from their registered capital to provide loans or financial support to our consolidated affiliated entities. We currently do not plan to use the proceeds from this offering to fund the operations of Beijing 58, our consolidated affiliated entity, and its subsidiaries. Additionally, our PRC subsidiaries are not prohibited under PRC laws and regulations from using their capital generated from their operating activities to provide entrusted loans or other forms of financial support to consolidated affiliated entities. We will assess the working capital requirements of our consolidated affiliated entities on an ongoing basis and, if needed, may have our

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PRC subsidiaries to use their capital from operating activities to provide financial support to our consolidated affiliated entities.

    Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements.

        We are a holding company incorporated in the Cayman Islands. We may need dividends and other distributions on equity from our PRC subsidiaries to satisfy our liquidity requirements. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our PRC subsidiaries may also allocate a portion of its after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends. As of the date of this prospectus, our PRC subsidiaries have been in accumulated loss and did not pay dividends to us. Further, if any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us, which may restrict our ability to satisfy our liquidity requirements. As of June 30, 2013, our PRC subsidiaries', namely Wanglin's and 58 Technology's, registered capital was US$95.5 million and US$8.5 million, respectively. See "Regulation—Regulation on Dividend Distribution."

    Discontinuation of any of the preferential tax treatments and government subsidies or imposition of any additional taxes and surcharges could adversely affect our financial condition and results of operations.

        The EIT Law and its implementing rules have adopted a uniform statutory enterprise income tax rate of 25% to all enterprises in China. The EIT Law and its implementing rules also permit qualified "high and new technology enterprises," or HNTEs, to enjoy a preferential enterprise income tax rate of 15% upon filing with relevant tax authorities. The qualification as a HNTE generally has a valid term of three years and the renewal of such qualification is subject to review by the relevant authorities in China. Beijing 58, one of our consolidated affiliated entities, obtained its HNTE certificate in May 2009 and renewed its HNTE certificate in May 2012 with a valid period of three years. Wanglin, one of our PRC subsidiaries, obtained its HNTE certificate in November 2012, which is valid for three years. Therefore, Beijing 58 and Wanglin are eligible to enjoy a preferential tax rate of 15% until the end of 2014 when they have taxable income under the EIT Law, as long as they maintain the HNTE qualification and obtain approval from the relevant tax authority. If Beijing 58 or Wanglin fails to maintain its HNTE qualification or renew its qualification when its current term expires, its applicable enterprise income tax rate may increase to 25%, which could have an adverse effect on our financial condition and results of operations.

        In addition, our PRC subsidiaries and consolidated affiliated entities have received various financial subsidies from PRC local government authorities. The financial subsidies are discretionary incentives and policies adopted by PRC local government authorities. Local governments may decide to change or discontinue such financial subsidies at any time. The discontinuation of such financial subsidies or imposition of any additional taxes could adversely affect our financial condition and results of operations.

    Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.

        Substantially all of our revenues and expenditures are denominated in RMB. As a result, fluctuations in the exchange rate between the U.S. dollar and RMB will affect the relative purchasing power in RMB terms of our U.S. dollar assets and the proceeds from this offering. As the functional currency for our PRC subsidiaries and consolidated affiliated entities is RMB, fluctuations in the exchange rate may also cause us to incur foreign exchange losses on any foreign currency holdings they

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may have. In addition, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us.

        The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China's political and economic conditions and China's foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. However, the People's Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates and achieve policy goals. During the period between July 2008 and June 2010, the exchange rate between the RMB and the U.S. dollar had been stable and traded within a narrow range. However, the Renminbi fluctuated significantly during that period against other freely traded currencies, in tandem with the U.S. dollar. Since June 2010, the Renminbi has started to slowly appreciate against the U.S. dollar, though there have been periods recently when the U.S. dollar has appreciated against the Renminbi. It is difficult to predict how long the current situation may last and when and how the relationship between the Renminbi and the U.S. dollar may change again.

        There remains significant international pressure on the PRC government to adopt a flexible currency policy. Any significant appreciation or depreciation of the Renminbi may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we receive from this initial public offering into Renminbi to pay our operating expenses, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, a significant depreciation of the Renminbi against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ADSs.

        Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

    The approval of the China Securities Regulatory Commission may be required in connection with this offering under a regulation adopted in August 2006, and, if required, we cannot assure you that we will be able to obtain such approval.

        Six PRC regulatory agencies, including the China Securities Regulatory Commission, or the CSRC, promulgated the Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, which became effective on September 8, 2006 and was subsequently amended. This regulation, among other things, requires offshore special purpose vehicles, or SPVs, formed for the purpose of an overseas listing and controlled by PRC companies or individuals, to obtain CSRC approval prior to listing their securities on an overseas stock exchange. The application of this regulation remains unclear. Our PRC counsel, Han Kun Law Offices, has advised us that, based on their understanding of the current PRC laws, rules and regulations, we are not required to submit an application to the CSRC for its approval of the listing and trading of our ADSs on the NYSE because:

    the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this prospectus are subject to this regulation; and

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    Our PRC subsidiaries were established by foreign direct investment, rather than through a merger or acquisition of a domestic company as defined under this regulation, and that no provision in this regulation clearly classified contractual arrangements as a type of transaction subject to its regulation.

        There is uncertainty as to how this regulation will be interpreted or implemented. If it is determined that the CSRC approval is required for this offering, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek the CSRC approval for this offering. These sanctions may include fines and penalties on our operations in the PRC, delays or restrictions on the repatriation of the proceeds from this offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiaries, or other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable to us, to halt this offering before the settlement and delivery of the ADSs that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the ADSs we are offering, you would be doing so at the risk that the settlement and delivery may not occur.

    Our failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.

        Companies operating in sChina are required to participate in social insurance and housing fund plans. We have not fully contributed to such plans as required by applicable PRC regulations. As of June 30, 2013, with regards to the outstanding contributions, including historical underpayments to such plans, we made a provision of RMB36.2 million (US$5.9 million), which is reflected in our audited financial statements included in this prospectus. While we believe this provision is adequate, our failure to make sufficient payments to such plans does not fully comply with applicable PRC laws and regulations and we may be required to make up the contributions for such plans as well as to pay late fees and fines.

    The audit report included in this prospectus is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and, as such, you are deprived of the benefits of such inspection

        Auditors of companies that are registered with the US Securities and Exchange Commission and traded publicly in the United States, including our independent registered public accounting firm, must be registered with the US Public Company Accounting Oversight Board (United States), or PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. Because our auditor is located in the Peoples' Republic of China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the PRC authorities, our auditor is not currently inspected by the PCAOB. In May 2013, PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the CSRC and the PRC Ministry of Finance, which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by PCAOB, the CSRC or the PRC Ministry of Finance in the United States and the PRC, respectively. PCAOB continues to be in discussions with the CSRC and the PRC Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered with PCAOB and audit Chinese companies that trade on U.S. exchanges.

        This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating audits and quality control procedures of any auditors operating in China, including our auditor. As a result, investors may be deprived of the benefits of PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor's audit procedures or quality control procedures as compared to auditors outside of China that

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are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

    Proceedings instituted recently by the SEC against five PRC-based accounting firms, including our independent registered public accounting firm, could result in financial statements being determined to not be in compliance with the requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

        In December 2012, the SEC instituted administrative proceedings under Rule 102(e)(1)(iii) of the SEC's Rules of Practice against five PRC-based accounting firms, including our independent registered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC's rules and regulations thereunder by failing to provide to the SEC the firms' work papers related to their audits of certain PRC-based companies that are publicly traded in the United States. Rule 102(e)(1)(iii) authorizes the SEC to deny any person, temporarily or permanently, the ability to practice before the SEC if found by the SEC, after notice and opportunity for a hearing, to have willfully violated any such laws or rules and regulations. While we cannot predict the outcome of the SEC's proceedings, if the accounting firms, including our independent registered public accounting firm, were denied, temporarily or permanently, the ability to practice before the SEC, and we are unable to timely find another registered public accounting firm which can audit and issue a report on our financial statements, our financial statements could be determined to not be in compliance with the requirements for financial statements in connection with this offering under the Securities Act of 1933, as amended, or the Securities Act, or those of public companies registered under the Exchange Act after our completion of this offering. Such a determination could ultimately lead to the delay or abandonment of this offering, or, after the completion of this offering, delisting of our Class A ordinary shares from the NYSE or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.

Risks Relating to Our ADSs and This Offering

    An active trading market for our ordinary shares or our ADSs may not develop and the trading price for our ADSs may fluctuate significantly.

        We have applied to list our ADSs on the NYSE. Prior to the completion of this offering, there has been no public market for our ADSs or our Class A ordinary shares underlying the ADSs, and we cannot assure you that a liquid public market for our ADSs will develop or be sustained after this offering. If an active public market for our ADSs does not develop following the completion of this offering, the market price and liquidity of our ADSs may be materially and adversely affected. The initial public offering price for our ADSs will be determined by negotiation between us and the underwriters based upon several factors, and we can provide no assurance that the trading price of our ADSs after this offering will not decline below the initial public offering price. As a result, investors in our securities may experience a significant decrease in the value of their ADSs.

    The trading prices of our ADSs are likely to be volatile, which could result in substantial losses to investors.

        The trading prices of our ADSs are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. In recent months, the widespread negative publicity of alleged fraudulent accounting practices and poor corporate governance of certain U.S. public companies with operations in China were believed to have negatively affected investors' perception and sentiment towards companies with connection with China, which significantly and negatively affected the trading prices of some companies' securities listed in the U.S. Once we become a public company, any similar negative publicity or sentiment may affect the performances of our American depositary shares. A number of PRC companies have listed or are in the process of listing

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their securities on U.S. stock markets. The securities of some of these companies have experienced significant volatility, including price declines in connection with their initial public offerings. The trading performances of these PRC companies' securities after their offerings may affect the attitudes of investors toward PRC companies listed in the United States in general and consequently may impact the trading performance of our ADSs, regardless of our actual operating performance.

        In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations, including the following:

    the financial projections that we may choose to provide to the public, any changes in those projections or our failure for any reason to meet those projections;

    variations in our net sales, earnings and cash flow;

    announcements of new investments, acquisitions, strategic partnerships, or joint ventures;

    announcements of new services and expansions by us or our competitors;

    changes in financial estimates by securities analysts;

    additions or departures of key personnel;

    release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities;

    detrimental negative publicity about us, our competitors or our industry;

    potential litigation or regulatory investigations or other proceedings involving us; and

    fluctuations in market prices for our products.

        Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade.

    If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline.

        The trading market for our ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade our ADSs, or publish unfavorable research about us, the market price for our ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ADSs to decline.

    Our dual class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.

        Immediately prior to the completion of this offering, our ordinary shares will be divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled to ten votes per share, with Class A and Class B ordinary shares voting together as one class on all matters subject to a shareholders' vote. We will issue Class A ordinary shares represented by our ADSs in this offering. All of our outstanding shares will be redesignated as Class B ordinary shares immediately prior to the completion of this offering. Due to the disparate voting powers attached to these two classes of ordinary shares, we anticipate that our existing shareholders will collectively own approximately 84.6% of our outstanding ordinary shares immediately after this offering, representing 98.2% of our total voting power, assuming (1) the underwriters do not exercise their over-allotment option to purchase additional ADSs and (2) we issue and sell 1,935,484 Class A ordinary shares in the private placement to DCM Hybrid RMB Fund concurrently with this offering, assuming an initial offering price of US$15.50 per ADS, the mid-point of the estimated initial public offering price range shown on the

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front cover page of this prospectus. Currently, our founder, chairman and chief executive officer, Mr. Jinbo Yao, together with our three largest private equity investors beneficially own an aggregate of 90.8% of our outstanding shares. Upon the completion of this offering, they and their affiliates will beneficially own an aggregate of 78.1% of our outstanding shares, or 76.5% if the underwriters exercise their over-allotment option in full, assuming that we issue and sell 1,935,484 Class A ordinary shares in the private placement to DCM Hybrid RMB Fund concurrently with this offering, assuming an initial offering price of US$15.50 per ADS, the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus.

        As a result of the dual class share structure and the concentration of ownership, our existing shareholders have substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. They may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our ADSs. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares and ADSs may view as beneficial. For more information regarding our principal shareholders and their affiliated entities, see "Principal Shareholders."

    The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.

        Sales of substantial amounts of our ADSs in the public market after the completion of this offering, or the perception that these sales could occur, could adversely affect the market price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. The ADSs sold in this offering will be freely tradable without restriction or further registration under the Securities Act, and shares held by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. There will be 11,000,000 ADSs (equivalent to 22,000,000 Class A ordinary shares) outstanding immediately after this offering, or 12,650,000 ADSs (equivalent to 25,300,000 Class A ordinary shares) if the underwriters exercise their option to purchase additional ADSs in full. In connection with this offering, we, our directors and executive officers, and our existing shareholders have agreed not to sell any ordinary shares or ADSs for 180 days after the date of this prospectus without the prior written consent of the underwriters. However, the underwriters may release these securities from these restrictions at any time, subject to applicable regulations of the Financial Industry Regulatory Authority, Inc. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ADSs. In addition, at any time beginning six months after the completion of this offering, all holders of our preference shares prior to the completion of this offering will have the right to cause us to register the sale of a total of 87,566,599 shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of these registered shares in the public market, or the perception that such sales could occur, could cause the price of our ADSs to decline. See "Underwriting" and "Shares Eligible for Future Sale" for a more detailed description of the restrictions on selling our securities after this offering.

    Because the initial public offering price is substantially higher than the pro forma net tangible book value per share, you will experience immediate and substantial dilution.

        If you purchase ADSs in this offering, you will pay more for each ADS than the corresponding amount paid by existing shareholders for their ordinary shares. As a result, you will experience

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immediate and substantial dilution of approximately US$13.47 per ADS (assuming that no outstanding options to acquire Class A ordinary shares are exercised). This number represents the difference between our pro forma net tangible book value per ADS of US$2.03 as of June 30, 2013, after giving effect to this offering and the assumed initial public offering price of US$15.50 per ADS, the mid-point of the estimated initial public offering price range set forth on the front cover of this prospectus. See "Dilution" for a more complete description of how the value of your investment in our ADSs will be diluted upon the completion of this offering.

    We may be classified as a passive foreign investment company for United States federal income tax purposes, which could result in adverse United States federal income tax consequences to United States investors in the ADSs or ordinary shares.

        Depending upon the value of our assets, which may be determined based, in part, on the market value of our ordinary shares and ADSs, and the nature of our assets and income over time, we could be classified as a "passive foreign investment company," or PFIC, for the current taxable year or for any subsequent taxable year. Under United States federal income tax law, we will be classified as a PFIC for any taxable year if either (i) at least 75% of our gross income for the taxable year is passive income or (ii) at least 50% of the value of our assets (based on the average quarterly value of our assets during the taxable year) is attributable to assets that produce or are held for the production of passive income. Based on our current income and assets and projections as to the value of our ordinary shares and ADSs following this offering, we do not expect to be classified as a PFIC for the current taxable year or in the foreseeable future. While we do not anticipate being a PFIC, changes in the nature of our income or assets or the value of our assets may cause us to become a PFIC for the current or any subsequent taxable year.

        Although the law in this regard is not entirely clear, we treat Beijing 58 as being owned by us for United States federal income tax purposes, because we control its management decisions and we are entitled to substantially all of the economic benefits associated with it, and, as a result, we consolidate its results of operations in our consolidated U.S. GAAP financial statements. If it were determined, however, that we are not the owner of Beijing 58 for United States federal income tax purposes, we would likely be treated as a PFIC for our taxable year ending December 31, 2013 and for subsequent taxable years. Because of the uncertainties in the application of the relevant rules and because PFIC status is a factual determination made annually after the close of each taxable year on the basis of the composition of our income and the value of our active versus passive assets, there can be no assurance that we will not be a PFIC for our taxable year ending December 31, 2013 or any future taxable year. The overall level of our passive assets will be affected by how, and how quickly, we spend our liquid assets and the cash raised in this offering. Under circumstances where revenues from activities that produce passive income significantly increase relative to our revenues from activities that produce non-passive income or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase.

        If we were to be or become a PFIC, a U.S. Holder (as defined in "Taxation—Material United States Federal Income Tax Considerations—General") may incur significantly increased United States federal income tax on gain recognized on the sale or other disposition of the ADSs or ordinary shares and on the receipt of distributions on the ADSs or ordinary shares to the extent such gain or distribution is treated as an "excess distribution" under the United States income tax rules. Further, if we were a PFIC for any year during which a U.S. Holder held our ADSs or ordinary shares, we generally would continue to be treated as a PFIC with respect to such U.S. Holder for all succeeding years during which such U.S. Holder held our ADSs or ordinary shares. Each U.S. Holder is urged to consult its tax advisor concerning the United States federal income tax consequences of purchasing, holding and disposing of ADSs or ordinary shares if we are or become treated as a PFIC. For more information, see "Taxation—Material United States Federal Income Tax Considerations—Passive Foreign Investment Company Considerations."

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    You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

        We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Law of the Cayman Islands (2013 Revision) and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

        The Cayman Islands courts are also unlikely:

    to recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and

    to impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.

        There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

        As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Law of the Cayman Islands (2013 Revision) and the laws applicable to companies incorporated in the United States and their shareholders, see "Description of Share Capital—Differences in Corporate Law."

    Judgments obtained against us by our shareholders may not be enforceable.

        We are a Cayman Islands company and all of our assets are located outside of the United States. Substantially all of our current operations are conducted in the China. In addition, a majority of our current directors and officers are nationals and residents of countries other than the United States. Substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the United States federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands and China, see "Enforceability of Civil Liabilities."

    We have not determined a specific use for a portion of the net proceeds from this offering, and we may use these proceeds in ways with which you may not agree.

        We have not determined a specific use for a portion of the net proceeds of this offering, and our management will have considerable discretion in deciding how to apply these proceeds. For more information, see "Use of Proceeds." You will not have the opportunity to assess whether the proceeds

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are being used appropriately before you make your investment decision. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. We cannot assure you that the net proceeds will be used in a manner that would improve our results of operations or increase our ADS price, nor that these net proceeds will be placed only in investments that generate income or appreciate in value.

    The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to vote your Class A ordinary shares.

        As a holder of our ADSs, you will only be able to exercise the voting rights with respect to the underlying Class A ordinary shares in accordance with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will vote the underlying Class A ordinary shares in accordance with these instructions. You will not be able to directly exercise your right to vote with respect to the underlying shares unless you withdraw the shares. Under our amended and restated memorandum and articles of association, the minimum notice period required for convening a general meeting is ten clear days. When a general meeting is convened, you may not receive sufficient advance notice to withdraw the shares underlying your ADSs to allow you to vote with respect to any specific matter. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to vote and you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.

    We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

        We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 for so long as we are an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.

        The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. However, we have elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

    We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.

        Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

    the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission, or the SEC, of quarterly reports on Form 10-Q or current reports on Form 8-K;

    the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;

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    the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

    the selective disclosure rules by issuers of material nonpublic information under Regulation FD.

        We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the NYSE. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely as compared to that required to be filed with the SEC by United States domestic issuers. As a Cayman Islands company listed on the NYSE, we are subject to the NYSE corporate governance listing standards. However, NYSE rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the NYSE corporate governance listing standards. Although we do not currently plan to utilize the home country exemption for corporate governance matters, to the extent that we choose to do so in the future, our shareholders may be afforded less protection than they otherwise would under the NYSE corporate governance listing standards applicable to U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a United States domestic issuer.

    The depositary for our ADSs will give us a discretionary proxy to vote our Class A ordinary shares underlying your ADSs if you do not vote at shareholders' meetings, except in limited circumstances, which could adversely affect your interests.

        Under the deposit agreement for the ADSs, if you do not vote, the depositary will give us a discretionary proxy to vote our Class A ordinary shares underlying your ADSs at shareholders' meetings unless:

    we have instructed the depositary that we do not wish a discretionary proxy to be given;

    we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;

    a matter to be voted on at the meeting would have a material adverse impact on shareholders; or

    the voting at the meeting is to be made on a show of hands.

        The effect of this discretionary proxy is that if you do not vote at shareholders' meetings, you cannot prevent our ordinary shares underlying your ADSs from being voted, except under the circumstances described above. This may make it more difficult for shareholders to influence the management of our company. Holders of our ordinary shares are not subject to this discretionary proxy.

    You may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.

        The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on Class A ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not feasible to

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distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of our ADSs.

    You may not be able to participate in rights offerings and may experience dilution of your holdings.

        We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third parities, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.

    You may be subject to limitations on transfer of your ADSs.

        Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

    We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an "emerging growth company."

        Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and NYSE, impose various requirements on the corporate governance practices of public companies. As a company with less than US$1.0 billion in revenues for our last fiscal year, we qualify as an "emerging growth company" pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company's internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

        We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. After we are no longer an "emerging

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growth company," we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

        In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company's securities. If we were involved in a class action suit, it could divert a significant amount of our management's attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND INDUSTRY DATA

        This prospectus contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

        You can identify these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "likely to" or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

    our goals and strategies;

    our future business development, financial condition and results of operations;

    our ability to retain and grow our user base and network of local merchants for our online marketplace;

    the expected growth of, and trends in, the markets for our services in China;

    our expectations regarding demand for and market acceptance of our brand and services;

    competition in our industry in China;

    our ability to maintain the network infrastructure necessary to operate our website and mobile applications;

    relevant government policies and regulations relating to our corporate structure, business and industry; and

    our ability to protect our users' information and adequately address privacy concerns.

        You should read thoroughly this prospectus and the documents that we refer to in this prospectus with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this prospectus include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

        You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

        This prospectus also contains statistical data and estimates that we obtained from industry publications and reports generated by government agencies and third-party providers of market intelligence, including a report that we commissioned from iResearch for purposes of this offering. These industry publications and reports generally indicate that the information contained therein was obtained from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. Although we believe that the publications and reports are reliable, we have not independently verified the data.

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USE OF PROCEEDS

        We estimate that we will receive net proceeds from this offering of approximately US$154.7 million, or approximately US$178.5 million if the underwriters exercise in full their option to purchase additional ADSs, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. In addition, we expect to receive net proceeds of approximately US$15.0 million from the concurrent private placement. These estimates are based upon an assumed initial offering price of US$15.50 per ADS, the mid-point of the range shown on the front cover page of this prospectus. A US$1.00 change in the assumed initial public offering price of US$15.50 per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease the net proceeds of this offering by US$10.2 million, or approximately US$11.8 million if the underwriters exercise their option to purchase additional ADSs in full.

        We plan to use the net proceeds of this offering primarily for general corporate purposes, which may include investment in product development, engineering capability, sales and marketing activities, technology infrastructure, capital expenditures, improvement of corporate facilities and other general and administrative matters. We may also use a portion of these proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any acquisitions or investments.

        The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus.

        Pending any use as described above, we plan to invest the net proceeds in short-term financial instruments or demand deposits.

        Under PRC laws and regulations, we are permitted to utilize the proceeds from this offering to fund our PRC subsidiaries only through loans or capital contributions, subject to applicable government registration and approval requirements. We cannot assure you that we will be able to meet these requirements on a timely basis, if at all. See "Risk Factors—Risks Relating to Doing Business in China—PRC regulation of direct investment and loans by offshore holding companies to PRC entities and governmental control of currency conversion may delay or limit us from using the proceeds of this offering to make additional capital contributions or loans to our PRC subsidiaries." We currently plan to use a substantial portion of proceeds from this offering to increase the registered capital of Wanglin and 58 Technology and will apply to obtain approval from the Ministry of Commerce or its local counterparts for such increases and register the changes with the State Administration for Industry and Commerce and the SAFE or their local counterparts. We currently do not plan to use the proceeds from this offering to fund the operations of Beijing 58, our consolidated affiliated entity, and its subsidiaries.

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DIVIDEND POLICY

        We have not previously declared or paid cash dividends and we have no plan to declare or pay any dividends in the near future on our shares or ADSs. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

        We are a holding company incorporated in the Cayman Islands. We rely principally on dividends from our PRC subsidiaries for our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. See "Regulation—Regulations on Dividend Distribution."

        Our board of directors has discretion as to whether to distribute dividends, subject to applicable laws. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend on our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our board of directors may deem relevant. If we pay any dividends, we will pay our ADS holders to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See "Description of American Depositary Shares." Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

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CAPITALIZATION

        The following table sets forth our capitalization as of June 30, 2013:

    on an actual basis;

    on a pro forma basis to reflect the automatic conversion of all of our outstanding series A, series A-1, series B and series B-1 preference shares into 87,566,599 Class B ordinary shares immediately prior to the completion of this offering; and

    on a pro forma as adjusted basis to reflect (1) the automatic conversion of all of our outstanding series A, series A-1, series B and series B-1 preference shares into 87,566,599 Class B ordinary shares immediately prior to the completion of this offering, (2) the sale of 22,000,000 Class A ordinary shares in the form of ADSs by us in this offering at an assumed initial public offering price of US$15.50 per ADS, the mid-point of the estimated range of the initial public offering price shown on the front cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us (assuming the over-allotment option is not exercised) and (3) the issuance and sale of 1,935,484 Class A ordinary shares in the private placement to DCM Hybrid RMB Fund concurrently with this offering, assuming an initial offering price of US$15.50 per ADS, the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus.

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        You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  As of June 30, 2013  
 
  Actual   Pro forma(1)   Pro forma
as adjusted(1)
 
 
  (in thousands of US$)
 

Mezzanine equity

                   

Series A preference shares (US$0.00001 par value, 27,028,572 shares authorized, issued and outstanding as of June 30, 2013, and none outstanding on a pro forma basis and on a pro forma as adjusted basis as of June 30, 2013)

    9,866          

Series A-1 preference shares (US$0.00001 par value, 19,047,620 shares authorized, issued and outstanding as of June 30, 2013, and none outstanding on a pro forma basis and on a pro forma as adjusted basis as of June 30, 2013)

    12,941          

Series B preference shares (US$0.00001 par value, 26,247,412 shares authorized, issued and outstanding as of June 30, 2013, and none outstanding on a pro forma basis and on a pro forma as adjusted basis as of June 30, 2013)

    57,766          

Series B-1 preference shares (US$0.00001 par value, 15,243,000 shares authorized, 15,242,995 shares issued and outstanding as of June 30, 2013, and none outstanding on a pro forma basis and on a pro forma as adjusted basis as of June 30, 2013)

    64,325          

Shareholders' (deficit)

                   

Ordinary shares (US$0.00001 par value, 4,912,433,396 shares authorized, 44,245,388 shares issued and outstanding on an actual basis, nil Class A ordinary shares and 131,811,987 Class B ordinary shares outstanding on a pro forma basis as of June 30, 2013 and 23,935,484 Class A ordinary shares and 131,811,987 Class B ordinary shares issued and outstanding on a pro forma as adjusted basis)

    1     1     2  

Additional paid-in capital(2)

        144,898     314,615  

Accumulated (deficit)

    (155,733 )   (155,733 )   (155,733 )

Accumulated other comprehensive (loss)

    (517 )   (517 )   (517 )
               

Total shareholders' (deficit)(2)

    (156,249 )   (11,351 )   158,367  
               

Total liabilities, mezzanine equity and shareholders' (deficit)(2)

    70,925     70,925     240,643  
               

Notes:

(1)
The pro forma information and the pro forma as adjusted information discussed above are illustrative only. Our additional paid-in capital, total shareholders' deficit and total capitalization upon the completion of this offering are subject to adjustment based on the actual initial public offering price and other terms of this offering determined at pricing.

(2)
Assuming the number of ADSs offered by us as set forth on the cover page of this prospectus remains the same, and after deduction of underwriting discounts and commissions and the estimated offering expenses payable by us, a US$1.00 change in the assumed initial public offering price of US$15.50 per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease each of additional paid-in capital, total shareholders' deficit and total capitalization by US$10.2 million.

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DILUTION

        Our net tangible book value as of June 30, 2013 was approximately negative US$0.26 per ordinary share and negative US$0.52 per ADS. Net tangible book value per ordinary share represents the amount of total tangible assets, minus the amount of total liabilities, divided by the total number of ordinary shares outstanding. Dilution is determined by subtracting net tangible book value per ordinary share from the assumed public offering price per ordinary share.

        Without taking into account any other changes in such net tangible book value after June 30, 2013, other than to give effect to (1) the conversion of all of our series A, series A-1, series B and series B-1 preference shares into Class B ordinary shares, which will occur automatically upon the completion of this offering, (2) our issuance and sale of 11,000,000 ADSs in this offering, at an assumed initial public offering price of US$15.50 per ADS, the mid-point of the estimated public offering price range, and after deduction of underwriting discounts and commissions and estimated offering expenses payable by us (assuming the over-allotment option is not exercised) and (3) our issuance and sale of 1,935,484 Class A ordinary shares in the private placement to DCM Hybrid RMB Fund concurrently with this offering, assuming an initial offering price of US$15.50 per ADS, the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus, our pro forma net tangible book value at June 30, 2013 would have been US$1.02 per outstanding ordinary share, including Class A ordinary shares underlying our outstanding ADSs, or US$2.03 per ADS. This represents an immediate increase in net tangible book value of US$1.11 per ordinary share, or US$2.20 per ADS, to existing shareholders and an immediate dilution in net tangible book value of US$6.73 per ordinary share, or US$13.47 per ADS, to purchasers of ADSs in this offering.

        The following table illustrates the dilution on a per ordinary share basis assuming that the initial public offering price per ordinary share is US$7.75 and all ADSs are exchanged for ordinary shares:

Assumed initial public offering price per ordinary share

  US$ 7.75  

Net tangible book value per ordinary share

  US$ (0.26 )

Pro forma net tangible book value per ordinary share after giving effect to the automatic conversion of all of our outstanding preference shares

  US$ (0.09 )

Pro forma net tangible book value per ordinary share as adjusted to give effect to the automatic conversion of all of our outstanding preference shares this offering and the concurrent private placement as of June 30, 2013

  US$ 1.02  

Amount of dilution in net tangible book value per ordinary share to new investors in the offering

  US$ 6.73  

Amount of dilution in net tangible book value per ADS to new investors in the offering

  US$ 13.47  

        A US$1.00 change in the assumed public offering price of US$15.50 per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease our pro forma net tangible book value after giving effect to the offering by US$10.2 million, the pro forma net tangible book value per ordinary share and per ADS after giving effect to this offering by US$0.06 per ordinary share and US$0.13 per ADS and the dilution in pro forma net tangible book value per ordinary share and per ADS to new investors in this offering by US$0.44 per ordinary share and US$0.87 per ADS, assuming no change to the number of ADSs offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses. The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ADSs and other terms of this offering determined at pricing.

        The following table summarizes, on a pro forma basis as of June 30, 2013, the differences between the shareholders as of June 30, 2013 and the new investors with respect to the number of ordinary shares purchased from us in this offering and the concurrent private placement, the total consideration

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paid and the average price per ordinary share paid at an assumed initial public offering price of US$15.50 per ADS before deducting estimated underwriting discounts and commissions and estimated offering expenses.

 
  Ordinary shares Purchased   Total Consideration    
   
 
 
  Average Price
Per Ordinary
share
  Average
Price Per
ADS
 
 
  Number   Percent   Amount   Percent  
 
  (in thousands of US$, except share data)
 

Existing shareholders

    131,811,987     84.6 %   117,025     38.7 %   0.89     1.78  

New investors

    23,935,484     15.4 %   185,500     61.3 %   7.75     15.50  
                               

Total

    155,747,471     100.0 %   302,525     100.0 %   1.94     3.88  
                               

        A US$1.00 change in the assumed public offering price of US$15.50 per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease total consideration paid by new investors, total consideration paid by all shareholders, average price per ordinary share and average price per ADS paid by all shareholders by US$11.0 million, US$11.0 million, US$0.07 and US$0.14, respectively, assuming the sale of 11,000,000 ADSs and before deducting underwriting discounts and commissions, and the issuance and sale of 1,935,484 Class A ordinary shares to DCM Hybrid RMB Fund in the private placement concurrently with this offering, assuming an initial offering price of US$15.50 per ADS, the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus.

        The discussion and tables above also assume no exercise of any outstanding share options outstanding as of the date of this prospectus. As of the date of this prospectus, there are 9,841,177 Class A ordinary shares issuable upon exercise of outstanding share options, options to purchase 855,794 ordinary shares have been exercised for which we will issue 855,794 Class A ordinary shares to the option holders after the expiration of the 180-day lock-up period, and there are 2,307,058 or more Class A ordinary shares available for future issuance upon the exercise of future grants under our 2010 Employee Stock Option Plan and 2013 Share Incentive Plan. To the extent that any of these options are exercised, there will be further dilution to new investors.

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ENFORCEABILITY OF CIVIL LIABILITIES

        We were incorporated in the Cayman Islands in order to enjoy the following benefits:

    political and economic stability;

    an effective judicial system;

    a favorable tax system;

    the absence of exchange control or currency restrictions; and

    the availability of professional and support services.

        However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to, the following:

    the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors; and

    Cayman Islands companies may not have standing to sue before the federal courts of the United States.

        Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

        All of our operations are conducted outside the United States, and substantially all of our assets are located outside the United States. A majority of our officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

        We have appointed Law Debenture Corporate Services Inc., located at 400 Madison Avenue, 4th Floor, New York, New York 10017 as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

        Conyers Dill & Pearman (Cayman) Limited, our counsel as to Cayman Islands law, and Han Kun Law Offices, our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:

    recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

    entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

        Conyers Dill & Pearman (Cayman) Limited has informed us that it is uncertain whether the courts of the Cayman Islands will allow shareholders of our company to originate actions in the Cayman Islands based upon securities laws of the United States. In addition, there is uncertainty with regard to Cayman Islands law related to whether a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company, such as our company. As the courts of the Cayman Islands have yet to rule on making such a determination in relation to judgments obtained

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from U.S. courts under civil liability provisions of U.S. securities laws, it is uncertain whether such judgments would be enforceable in the Cayman Islands. Conyers Dill & Pearman (Cayman) Limited has further advised us that the courts of the Cayman Islands would recognize as a valid judgment a final and conclusive judgment in personam obtained in the federal or state courts in the United States under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) or, in certain circumstances, an in personam judgment for non-monetary relief, and would give a judgment based thereon provided that: (a) such courts had proper jurisdiction over the parties subject to such judgment; (b) such courts did not contravene the rules of natural justice of the Cayman Islands; (c) such judgment was not obtained by fraud; (d) the enforcement of the judgment would not be contrary to the public policy of the Cayman Islands; (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands; and (f) there is due compliance with the correct procedures under the laws of the Cayman Islands.

        Han Kun Law Offices has further advised us that the recognition and enforcement of foreign judgments are provided for under PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or in the Cayman Islands.

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CORPORATE HISTORY AND STRUCTURE

        We began our operations in China in 2005 through Beijing 58, a PRC limited liability company, which has become our consolidated affiliated entity through the contractual arrangements described below. Due to legal restrictions on foreign investment in value-added telecommunications services, we operate a portion of our business through Beijing 58. Beijing 58 is licensed to provide internet information services, conduct online advertising business and engage in technology development. We believe that Beijing 58 is in compliance with the business scope specified in its business license.

        In August 2006, in anticipation of a private financing from an international private equity fund, we undertook a reorganization to comply with PRC regulations restricting foreign ownership of an entity with internet content provider license in China, which is necessary for our business operations. After the 2006 reorganization, Mr. Jinbo Yao and several PRC angel investors, or, collectively, the Founding Shareholders, SB Asia Investment Fund II L.P., or SAIF, and an employee of SAIF, established Chengshi Wangxun (Beijing) Information Technology Co., Ltd., or Wangxun, a sino-foreign investment holding company under the laws of the PRC.

        In January 2010, we undertook another reorganization to establish an offshore holding company structure in anticipation of international fundraising activities in the future. CCNC BVI, a holding company established in the British Virgin Islands, was incorporated in January 2010 to be our holding company for fundraising purposes. Subsequently, CCNC BVI established CCIC HK, a Hong Kong limited liability company, as its wholly owned subsidiary. CCIC HK then established Wanglin, as a wholly foreign-owned enterprise in China. Wanglin, pursuant to its business license, is authorized to research and develop internet classified information technology, transfer proprietary know-how and provide information technology support, consulting services and training. We believe that Wanglin is in compliance with the business scope specified in its business license. In connection with the January 2010 reorganization, Wangxun terminated the contractual arrangements with Beijing 58 and its shareholders and Wanglin entered into a series of contractual agreements with Beijing 58 and its shareholders, including the exclusive business cooperation agreement, the equity pledge agreement, the exclusive option agreement and the power of attorney, under which Wanglin exercises effective control over the operations of Beijing 58. The shareholders of Beijing 58 received nominal monetary benefits in return for entering into the contractual arrangements with Wanglin. Beijing 58's shareholders' performance under the contractual arrangements is primarily motivated by the upside potential of their equity interests in our company.

        Our current holding company, 58.com Inc., was incorporated in May 2011 as a limited liability company in the Cayman Islands. We established this new Cayman entity as the listing vehicle for our proposed initial public offering in the United States, because we believe that, compared with the British Virgin Islands, the Cayman Islands enjoys a more well-established corporate governance legal framework that can better protect public shareholders' interests once we become a public company. Furthermore, we believe that U.S. investors are more familiar with the Cayman Islands corporate governance rules as most companies with operations out of China have used a Cayman Islands holding company as its U.S. listing vehicle. Through a share exchange in July 2011, the shareholders of CCNC BVI exchanged all of their outstanding ordinary and preference shares of CCNC BVI for ordinary and preference shares of 58.com Inc. on a pro rata basis and no additional consideration was paid in connection with the share exchange. As a result, CCNC BVI became a wholly owned subsidiary of 58.com Inc.

        In March 2012, CCIC HK established 58 Tongcheng Information Technology Co., Ltd. or 58 Technology, as a wholly foreign-owned enterprise in China. 58 Technology, to operate our customer service operations in China.

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        The following diagram illustrates our corporate structure, including our subsidiaries and consolidated affiliated entities as of the date of this prospectus:

GRAPHIC


Note:

(1)
Jinbo Yao, Lianqing Zhang, Jianbo Su, Beijing Wanglintong Information Technology Co., Ltd., hold 37.8%, 39.8%, 9.0% and 13.4% equity interests in Beijing 58, respectively. Among the shareholders of Beijing 58, Jinbo Yao and Jianbo Su are shareholders of our company. Lianqing Zhang is an employee of SAIF Partners, one of our shareholders. Mr. Yao is the sole director and holds a 16.7% equity interest in Beijing Wanglintong which is jointly owned by Mr. Yao, Mr. Xiaohua Chen, holding 15.92% equity interest, Mr. Jiandong Zhuang, holding 15.8% equity interest, and five other individuals who are employees or ex-employees of our company. Beijing Wanglintong, a PRC domestic company, does not have any business operations or assets other than its equity interest in Beijing 58. The registered business scope of Beijing Wanglintong includes technology promotional services, software development and computer technology training.

(2)
Inactive.

(3)
Inactive and in the process of being liquidated.

*
Beijing Tongchengtong Information Technology Co., Ltd. owns 2.7% of the equity interest in Chengshi Wangxun (Beijing) Information Technology Co., Ltd., which is inactive currently.

        Prior to 2012, we conducted substantially all of our business operations through Beijing 58. Since 2012, we have started to conduct our business operations that are not subject to PRC legal restrictions on foreign ownership through our wholly owned subsidiaries, Wanglin and 58 Technology, to address risks related to the contractual arrangements discussed above and under "Risk Factors—Risks Relating

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to Our Corporate Structure and Restrictions on Our Industry." Currently, we primarily use Wanglin and 58 Technology, rather than Beijing 58, to provide services to our customers, and we have transferred a significant portion of our personnel, including substantially all of our administrative and product development personnel, from Beijing 58 to Wanglin and 58 Technology. As of December 31, 2012, a majority of our assets were held by Wanglin and 58 Technology. Wanglin and 58 Technology collectively generated a majority of our revenues in the six months ended June 30, 2013, and we currently expect that they will continue to generate a majority of our revenues going forward. We further expect Beijing 58's business to be limited primarily to services that are legally required to be conducted through a PRC domestic entity.

    Contractual Arrangements with Beijing 58

        We have entered into contractual arrangements with Beijing 58 and its shareholders described below, through which we exercise effective control over the operations of Beijing 58 and receive substantially all its economic benefits and residual returns. Through the amended and restated exclusive business cooperation agreement between Beijing 58 and Wanglin, Wanglin agrees to provide certain technical and business support and related consulting services to Beijing 58 in exchange for service fees. In addition, pursuant to the amended and restated exclusive option agreement, Beijing 58 is prohibited from declaring and paying any dividends without Wanglin's prior consent and Wanglin enjoys an irrevocable and exclusive option to purchase Beijing 58 shareholders' equity interests, to the extent permitted by applicable PRC laws, at a nominal price from Beijing Wanglintong Information Technology Co., Ltd., or a specified price equal to the loan provided by Wanglin to the individual shareholders. If the lowest price permitted under PRC law is higher than the above price, the lowest price permitted under PRC law shall apply. Through the arrangements, we can obtain all of Beijing 58's income and all of its residual interests, such as undistributed earnings, either through dividend distribution or purchase of Beijing 58's equity interests from its existing shareholders. On the other hand, we will not receive all of Beijing 58's revenues, are not legally entitled to residual interest as a shareholder upon Beijing 58's liquidation, and are not legally responsible for Beijing 58's debts or other liabilities. As a result of the contractual arrangements, we consolidate Beijing 58's financial results in our consolidated financial statements in accordance with U.S. GAAP.

        Exclusive Business Cooperation Agreement.    Under the exclusive business cooperation agreement between Beijing 58 and Wanglin, as amended and restated, Wanglin has the exclusive right to provide, among other things, technical support and business support and related consulting services to Beijing 58 and Beijing 58 agrees to accept all the consultation and services provided by Wanglin. Without Wanglin's prior written consent, Beijing 58 is prohibited from engaging any third party to provide any of the services under this agreement. In addition, Wanglin exclusively owns all intellectual property rights arising out of or created during the performance of this agreement. Beijing 58 agrees to pay a quarterly service fee to Wanglin at an amount determined solely by Wanglin after taking into account factors including the complexity and difficulty of the services provided, the time consumed, the seniority of the Wanglin employees providing services to Beijing 58, the value of services provided, the market price of comparable services and the operating conditions of Beijing 58. This agreement will remain effective unless Wanglin terminates the agreement in writing or a competent governmental authority rejects the renewal applications by either Beijing 58 or Wanglin to renew its respective business license upon expiration. Beijing 58 is not permitted to terminate this agreement in any event unless required by applicable laws. In order to maintain sufficient working capital in Beijing 58, Wanglin has not yet exercised its right to provide services to Beijing 58 and thus has not yet received any service fee payment from Beijing 58, as of the date of this prospectus. We currently expect Beijing 58 to begin paying a portion of its quarterly profit as service fee to Wanglin once Beijing 58 becomes profitable net of accumulated losses, taking into account Beijing 58's working capital requirements.

        Powers of Attorney.    Pursuant to the powers of attorney, the shareholders of Beijing 58 each irrevocably appointed Wanglin as the attorney-in-fact to act on their behalf on all matters pertaining to

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Beijing 58 and to exercise all of their rights as a shareholder of Beijing 58, including but not limited to attend shareholders' meetings, vote on their behalf on all matters of Beijing 58 requiring shareholders' approval under PRC laws and regulations and the articles of association of Beijing 58, designate and appoint directors and senior management members. Wanglin may authorize or assign its rights under this appointment to any other person or entity at its sole discretion without prior notice to the shareholders of Beijing 58. Each power of attorney will remain in force until the shareholder ceases to hold any equity interest in Beijing 58.

        Equity Interest Pledge Agreements.    Under the equity interest pledge agreements between Wanglin, Beijing 58 and the shareholders of Beijing 58, as amended and restated, the shareholders pledged all of their equity interests in Beijing 58 to Wanglin to guarantee Beijing 58's and Beijing 58's shareholders' performance of their obligations under the contractual arrangements including, but not limited to, the payments due to Wanglin for services provided. If Beijing 58 or any of Beijing 58's shareholders breaches its contractual obligations under the contractual arrangements, Wanglin, as the pledgee, will be entitled to certain rights and entitlements, including receiving proceeds from the auction or sale of whole or part of the pledged equity interests of Beijing 58 in accordance with legal procedures. Wanglin has the right to receive dividends generated by the pledged equity interests during the term of the pledge. If any event of default as provided in the contractual arrangements occurs, Wanglin, as the pledgee, will be entitled to dispose of the pledged equity interests in accordance with PRC laws and regulations. The pledge will become effective on the date when the pledge of equity interests contemplated in these agreements are registered with the relevant local administration for industry and commerce and will remain binding until Beijing 58 and its shareholders discharges all their obligations under the contractual arrangements. We registered these equity interest pledge agreements with Chaoyang Branch of Beijing Administration for Industry and Commerce in July 2013.

        Exclusive Option Agreements.    Under the exclusive option agreements between Wanglin, as amended and restated, each of the shareholders of Beijing 58 and Beijing 58, each of the shareholders irrevocably granted Wanglin or its designated representative(s) an exclusive option to purchase, to the extent permitted under PRC law, all or part of his, her or its equity interests in Beijing 58. In addition, Wanglin has the option to acquire all the equity interests of Beijing 58 for either a nominal price from Beijing Wanglintong Information Technology Co., Ltd., or a specified price equal to the loan provided by Wanglin to the individual shareholders. If the lowest price permitted under PRC law is higher than the above price, the lowest price permitted under PRC law shall apply. Wanglin or its designated representative(s) have sole discretion as to when to exercise such options, either in part or in full. Without Wanglin's prior written consent, Beijing 58's shareholders shall not transfer, donate, pledge, or otherwise dispose any equity interests in Beijing 58. These agreements will remain effective until all equity interests held in Beijing 58 by the Beijing 58's shareholders are transferred or assigned to Wanglin or Wanglin's designated representatives. At the moment, we cannot exercise the exclusive option to purchase the current shareholders' equity interests in Beijing 58 due to the PRC regulatory restrictions on foreign ownership in the value-added telecommunications services. We intend to exercise such option once China opens up these industries to foreign investment.

        Loan Agreements.    Pursuant to the loan agreements between Wanglin and each individual shareholder of Beijing 58, Wanglin provided interest-free loans with an aggregate amount of approximately RMB7.8 million (US$1.3 million) to the individual shareholders of Wanglin for the sole purpose of funding the capital increase of Beijing 58. The loans can be repaid by transferring the individual shareholders' equity interest in Beijing 58 to Wanglin or its designated person pursuant to Exclusive Option Agreements. The term of each loan agreement is ten years from the date of the agreement expiring on December 1, 2021 and can be extended with the written consent of both parties before expiration.

        In the opinion of our PRC counsel, Han Kun Law Offices, these contractual arrangements are valid, binding and enforceable under current PRC laws. However, these contractual arrangements may not be as effective in providing control as direct ownership. There are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. For a description of the risks relating to our corporate structure, please see "Risk Factors—Risks Relating to Our Corporate Structure and Restrictions on Our Industry."

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SELECTED CONSOLIDATED FINANCIAL DATA

        The following selected data of consolidated statements of comprehensive loss and selected consolidated cashflow data for the years ended December 31, 2010, 2011 and 2012 and the selected consolidated balance sheet data as of December 31, 2010, 2011 and 2012 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our audited consolidated financial statements are prepared and presented in accordance with U.S. GAAP. The selected data of consolidated statements of comprehensive loss and selected consolidated cash flow data for the six months ended June 30, 2012 and 2013 and selected consolidated balance sheet data as of June 30, 2013 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair presentation of our financial position and operating results for the periods presented. Our historical results for any period are not necessarily indicative of results to be expected for any future period. You should read the following selected financial information in conjunction with the consolidated financial statements and related notes and the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

 
  For the Years Ended December 31,   For the Six Months Ended June 30,  
 
  2010   2011   2012   2012   2013  
 
  (in thousands of US$, except for share, per share and per ADS data)
 

Selected Data of Consolidated Statements of Comprehensive Loss:

                               

Revenues:

                               

Membership

    3,447     19,654     47,919     19,264     35,461  

Online marketing services

    6,597     15,500     28,509     11,679     22,430  

Other services

    658     6,380     10,694     8,032     952  
                       

Total revenues

    10,702     41,534     87,122     38,975     58,843  

Cost of revenues(1)

    2,330     6,301     10,406     4,911     4,094  
                       

Gross profit

    8,372     35,233     76,716     34,064     54,749  

Operating expenses(1):

                               

Sales and marketing expenses

    16,783     100,134     76,422     40,049     38,088  

Research and development expenses

    2,247     7,784     18,464     7,712     11,852  

General and administrative expenses

    3,170     10,721     13,088     6,514     5,462  
                       

Total operating expenses

    22,200     118,639     107,974     54,275     55,402  
                       

Loss from operations

    (13,828 )   (83,406 )   (31,258 )   (20,211 )   (653 )
                       

Other (expenses)/income, net

    (43 )   4     857     928     938  
                       

Net (loss)/income

    (13,871 )   (83,402 )   (30,401 )   (19,283 )   285  
                       

Accretions to preference shares redemption values

    (860 )   (6,547 )   (10,233 )   (4,983 )   (5,381 )

Deemed dividends to preference shareholders

    (664 )                
                       

Net loss attributable to ordinary shareholders

    (15,395 )   (89,949 )   (40,634 )   (24,266 )   (5,096 )
                       

Net (loss)/income

    (13,871 )   (83,402 )   (30,401 )   (19,283 )   285  

Foreign currency translation adjustment, net of nil tax

    (38 )   2     (48 )   120     (511 )
                       

Comprehensive loss

    (13,909 )   (83,400 )   (30,449 )   (19,163 )   (226 )
                       

Net loss per ordinary share attributable to ordinary shareholders—basic and diluted

    (0.30 )   (2.03 )   (0.92 )   (0.55 )   (0.12 )

Weighted average number of ordinary shares used in computing basic and diluted earnings per share

    50,589,146     44,245,388     44,245,388     44,245,388     44,245,388  

Net loss per ADS(2):

                               

Basic and diluted

    (0.61 )   (4.07 )   (1.84 )   (1.10 )   (0.23 )

Notes:

(1)
Share-based compensation expenses were allocated in cost of revenues and operating expenses as follows.

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  For the Years Ended December 31,   For the Six Months Ended June 30,  
   
  2010   2011   2012   2012   2013  
   
  (in thousands of US$)
 
 

Cost of revenues

    112     26     30     16     24  
 

Sales and marketing expenses

    47     225     270     152     218  
 

Research and development expenses

    429     443     489     259     426  
 

General and administrative expenses

    1,194     1,276     882     482     464  
                         
 

Total

    1,782     1,970     1,671     909     1,132  
                         
(2)
Each ADS represents two Class A ordinary shares.

 
  As of December 31,   As of June 30,  
 
  2010   2011   2012   2013  
 
  (in thousands of US$)
 

Selected Consolidated Balance Sheet Data:

                         

Cash, cash equivalents and short-term investments

    45,655     45,485     35,647     51,626  

Total assets

    51,426     65,994     56,456     70,925  

Deferred revenues

    4,838     15,399     28,955     39,448  

Customer advances and deposits

    507     3,813     11,040     14,135  

Total liabilities

    11,128     50,016     69,003     82,276  

Total mezzanine equity

    65,627     129,284     139,517     144,898  

Total shareholders' (deficit)

    (25,329 )   (113,306 )   (152,064 )   (156,249 )

 

 
  For the Years Ended
December 31,
  For the Six Months Ended June 30,  
 
  2010   2011   2012   2012   2013  
 
  (in thousands of US$)
 

Selected Consolidated Cashflow Data:

                               

Net cash (used in)/provided by operating activities

    (5,922 )   (50,323 )   (4,728 )   (9,270 )   17,898  

Cash used in purchase of property and equipment

    (2,522 )   (5,655 )   (5,227 )   (2,509 )   (1,857 )

Net cash used in investing activities

    (2,522 )   (10,455 )   (27,153 )   (11,978 )   (20,255 )

Net cash provided by financing activities

    53,246     57,110     253     54     290  

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under "Risk Factors" and elsewhere in this prospectus. See "Special Note Regarding Forward-Looking Statements and Industry Data."

Overview

        We operate the largest online marketplace serving local merchants and consumers in China, as measured by monthly unique visitors on our www.58.com website and mobile applications, according to the iResearch Report. Our online marketplace enables local merchants and consumers to connect, share information and conduct business.

        In the second quarter of 2013, our marketplace attracted a monthly average of 129.7 million unique visitors and our quarterly active local merchants were approximately 4.3 million during the same period. Users come to us because of our broad, in-depth, and high quality local information, combined with our easy to use website and mobile interface. Merchants choose us because we offer an affordable and effective marketing channel to reach a broad and targeted local consumer base. Our large and growing user base, merchant network and massive listing content create a powerful network effect that enables us to maintain our leadership position.

        We generate revenues primarily from memberships and online marketing services. Our average quarterly paying merchant members increased from approximately 17,000 in 2010 to approximately 86,000 in 2011, and approximately 187,000 in 2012 and were approximately 273,000 in the six months ended June 30, 2013. Merchants that purchase memberships also comprise our target customer base for our online marketing services, which are typically not included in the basic membership. We believe that our strategy to grow the number of our paying merchant members and increase the adoption of our online marketing services will contribute to the growth of our online marketing services revenue.

        Our revenues experienced significant growth since 2010. Our revenues increased from US$10.7 million in 2010 to US$41.5 million in 2011 and further to US$87.1 million in 2012, representing a CAGR of 185.3%. We recorded revenues of US$58.8 million in the six months ended June 30, 2013. The increase was primarily due to an increase in the number of our paying merchant members, which was driven by our deeper penetration into more locations and newly monetized content categories. Meanwhile, our online marketing services revenues continued to grow during these periods. In the three years ended December 31, 2012 and the six months ended June 30, 2013, our gross profit increased significantly while our gross margin improved in each period, primarily due to economies of scale as we expanded our business.

        We have invested heavily in brand promotion and expansion of our field sales team, particularly in 2011. In 2012, our sales and marketing expenses, as a percentage of our revenues, decreased significantly. We have also invested in building a sizable and capable product development and engineering team. We believe our prior investments will contribute to value creation and significant operating leverage in the long term. We expect our operating expenses will increase in absolute amounts, but will decrease as a percentage of our revenues, in the foreseeable future. We incurred net loss of US$13.9 million, US$83.4 million and US$30.4 million in 2010, 2011 and 2012, respectively, and had a net income of US$0.3 million in the six months ended June 30, 2013.

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How We Generate Revenues

        While many of our users browse and post information on our online marketplace for free, we generate revenues from the following services:

    Membership

        A membership is a basic service package consisting of merchant certification, display of an online storefront on our marketplace, preferential listing benefits such as daily priority listings and higher quota for daily listings and access to our dedicated customer service support team and online account management system. Merchants who subscribe to our membership can enjoy more services and achieve more effective marketing than non-paying merchants on our marketplace.

        We offer memberships of varying lengths across different content categories. Memberships in the yellow pages and jobs categories are primarily 12-month packages. Memberships in the housing category are primarily one- to three-month packages. We acquire a majority of paying merchant members through our field sales team. Our centralized and dedicated tele-customer service team supports our paying merchant members during their membership to enhance the effectiveness of the member's marketing efforts and improve the likelihood of membership renewal. A majority of our paying merchant members are small and medium-sized local merchants. The competitive landscape of such merchants changes quickly and many only have temporary recruiting or marketing needs from time to time. We believe our field sales and customer service teams have been effective in increasing the number of our paying merchant members and retaining high quality existing paying merchant members and increasing spending by our paying merchant existing members, all of which are important to the growth of our revenues.

        Most paying merchant members pay their membership fees in advance. Such advance payments are made to our field sales team or through our membership subscription webpage and are recorded as customer advances and deposits. Once a member completes the purchase of membership, we deduct such amount from the customer advances and deposits account and record it as deferred revenues. The amount of revenues are recognized ratably over the contract period for the membership services.

    Online Marketing Services

        Our online marketing services primarily include listing services, such as real-time bidding and priority listing, and marketing services through collaboration with third-party internet companies in China.

        Merchants can use our real-time bidding services to bid for the most prominent placement of their listings in specific categories and locations on a daily basis. We have developed a user-friendly bidding system, through which merchants can generate text- and graphic-based descriptions for their listings and bid on placements of their listings for the following day. We provide reference bidding prices based on certain metrics, such as traffic, number of clicks generated by precedent placements and the previous day's prices.

        Merchants can also purchase our priority listing services, which place their listings below real-time bidding listings and above paying merchant members' listings. Merchants can purchase listing placements of varying duration from several hours to several days to several weeks.

        We collaborate with third-party internet companies by placing the marketing links of their marketing customers on the relevant listing pages on our online marketplace. We generate revenues based on the number of clicks or cost-per-thousand impressions at pre-determined prices.

        We also provide other online marketing services, such as text- or graphic-based displays and brand promotion services for varying time periods ranging from a day to several months based on the

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duration of services or performance criteria, such as number of clicks, effective phone calls and new user registrations.

        Merchants are required to make payments in advance before purchasing online marketing services. Advance payments made by merchants are recorded as customer advances and deposits. Once a merchant completes the purchase of services, the amount is recorded as deferred revenues. Revenues from time-based services are recognized ratably over the service period. Revenues from performance-based services are recognized when the agreed performance criteria are achieved.

    Other Services

        Revenues from other services are mainly related to group buying services. We began offering group buying services in June 2010 and have significantly scaled back these services since mid-2012. In the past, we also generated other services revenues from traditional offline advertising services. We phased out such services in 2011.

Results of Operations

        The following table sets forth our consolidated results of operations for the periods indicated. Our business has experienced rapid growth since inception. We expect our growth to continue as we grow our user base and explore new market opportunities. However, due to our limited operating history, our historical growth rate may not be indicative of our future performance. Therefore, we believe that period-to-period comparison of our results of operation should not be relied upon as indicative of future performance.

 
  For the Years Ended December 31,   For the Six Months Ended June 30,  
 
  2010   2011   2012   2012   2013  
 
   
   
   
  (unaudited)
  (unaudited)
 
 
 
(in thousands of US$)

 

Revenues

    10,702     41,534     87,122     38,975     58,843  

Cost of revenues(1)

    2,330     6,301     10,406     4,911     4,094  
                       

Gross profit

    8,372     35,233     76,716     34,064     54,749  

Operating expenses(1):

                               

Sales and marketing expenses

    16,783     100,134     76,422     40,049     38,088  

Research and development expenses

    2,247     7,784     18,464     7,712     11,852  

General and administrative expenses

    3,170     10,721     13,088     6,514     5,462  
                       

Total operating expenses

    22,200     118,639     107,974     54,275     55,402  
                       

Loss from operations

    (13,828 )   (83,406 )   (31,258 )   (20,211 )   (653 )
                       

Other (expenses)/income, net

    (43 )   4     857     928     938  
                       

(Loss)/Income before tax

    (13,871 )   (83,402 )   (30,401 )   (19,283 )   285  
                       

Income taxes benefits/(expenses)

                     
                       

Net (loss)/income

    (13,871 )   (83,402 )   (30,401 )   (19,283 )   285  
                       

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Note:

(1)
Share-based compensation expenses were allocated in cost of revenues and operating expenses as follows.

   
  For the Years Ended December 31,   For the Six Months Ended June 30,  
   
  2010   2011   2012   2012   2013  
   
   
   
   
  (unaudited)
  (unaudited)
 
   
 
(in thousands of US$)

 
 

Cost of revenues

    112     26     30     16     24  
 

Sales and marketing expenses

    47     225     270     152     218  
 

Research and development expenses

    429     443     489     259     426  
 

General and administrative expenses

    1,194     1,276     882     482     464  
                         
 

Total

    1,782     1,970     1,671     909     1,132  
                         

        The following table sets forth the results of operations for the periods indicated, as percentages of revenues.

 
  For the Years Ended December 31,   For the Six Months Ended June 30,  
 
  2010   2011   2012   2012   2013  
 
   
   
   
  (unaudited)
  (unaudited)
 

 


 

(% of revenues)


 

Revenues

    100.0 %   100.0 %   100.0 %   100.0 %   100.0 %

Cost of revenues

    21.8     15.2     11.9     12.6     7.0  
                       

Gross profit

    78.2     84.8     88.1     87.4     93.0  

Operating expenses:

                               

Sales and marketing expenses

    156.8     241.1     87.7     102.8     64.7  

Research and development expenses

    21.0     18.7     21.2     19.8     20.1  

General and administrative expenses

    29.6     25.8     15.0     16.7     9.3  
                       

Total operating expenses

    207.4     285.6     123.9     139.3     94.1  
                       

Loss from operations

    (129.2 )   (200.8 )   (35.8 )   (51.9 )   (1.1 )
                       

Other (expenses)/income, net

    (0.4 )   0.0     1.0     2.4     1.6  
                       

(Loss)/Income before tax

    (129.6 )   (200.8 )   (34.8 )   (49.5 )   0.5  
                       

Income taxes benefits/(expenses)

                     
                       

Net (loss)/income

    (129.6) %   (200.8) %   (34.8) %   (49.5 )%   0.5%  
                       

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Comparison of the Years Ended December 31, 2010, 2011 and 2012 and the Six Months Ended June 30, 2012 and 2013

    Revenues

        The following table sets forth the principal components of our revenues, both as absolute amounts and as percentages of total revenues, for the periods indicated.

 
  For the Years Ended December 31,   For the Six Months Ended June 30,  
 
  2010   2011   2012   2012   2013  
 
  US$
  % of
revenues

  US$
  % of
revenues

  US$
  % of
revenues

  US$
(unaudited)

  % of
revenues

  US$
(unaudited)

  % of
revenues

 
 
  (in thousands of US$, except for % data)
 

Membership

    3,447     32.2     19,654     47.3     47,919     55.0     19,264     49.4     35,461     60.3  

Online marketing services

    6,597     61.6     15,500     37.3     28,509     32.7     11,679     30.0     22,430     38.1  

Other services

    658     6.2     6,380     15.4     10,694     12.3     8,032     20.6     952     1.6  
                                           

Total revenues

    10,702     100.0     41,534     100.0     87,122     100.0     38,975     100.0     58,843     100.0  
                                           

    Membership

        Membership revenues were US$3.4 million, US$19.7 million, US$47.9 million and US$35.5 million, representing 32.2%, 47.3%, 55.0% and 60.3% of revenues in 2010, 2011, 2012 and the six months ended June 30, 2013, respectively. The increase in our membership revenues was primarily attributable to the increase in the number of our paying merchant members, as a result of our stronger focus on acquiring and serving paying merchant members. Our average quarterly paying merchant members in 2010, 2011, 2012 and the six months ended June 30, 2013, were approximately 17,000, 86,000, 187,000 and 273,000, respectively. We expect our membership revenues will continue to grow as we continue to improve efficiency of our field sales team, which we believe substantially covers key geographical markets in China. In addition, we believe our dedicated customer service team will contribute to membership revenues by helping merchants to optimize their marketing effectiveness.

        Furthermore, paying merchant members also purchase our online marketing services that are not included in the basic membership, to enhance their marketing effectiveness especially after they have experienced the benefits of our membership. We believe that the continued increase in the number of our paying merchant members and their spending will contribute to the growth of our online marketing services revenue, which in turn will drive our overall revenue growth.

        The six months ended June 30, 2013 compared to the six months ended June 30, 2012.    Our membership revenues increased from US$19.3 million in the six months ended June 30, 2012 to US$35.5 million in the same period in 2013, representing an increase of 84.1%. The increase in membership revenues was primarily due to the increase in the number of our average quarterly paying merchant members from approximately 157,000 in the six months ended June 30, 2012 to approximately 273,000 in the same period in 2013. We experienced significant growth across multiple content categories, particularly in our housing and jobs categories, in the six months ended June 30, 2013. We did not experience significant price increases for the membership packages during the same periods.

        2012 compared to 2011.    Our membership revenues increased from US$19.7 million in 2011 to US$47.9 million in 2012, representing an increase of 143.8%. The increase in membership revenues was primarily due to the increase in the number of our average quarterly paying merchant members from approximately 86,000 in 2011 to approximately 187,000 in 2012. We also experienced significant growth across multiple content categories, particularly in our jobs category in 2012. We also established a centralized and dedicated customer services team in Tianjin in 2012, which enhanced our ability to assist customers with monitoring and optimizing their marketing effectiveness.

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        2011 compared to 2010.    Our membership revenues increased from US$3.4 million in 2010 to US$19.7 million in 2011, representing an increase of 470.2%. The increase in membership revenues was primarily due to an increase in the number of our average quarterly paying merchant members from approximately 17,000 in 2010 to approximately 86,000 in 2011. Our field sales team expanded into 13 additional cities in 2010 and 16 additional cities in 2011.

    Online Marketing Services

        Revenues from online marketing services were US$6.6 million, US$15.5 million, US$28.5 million and US$22.4 million, representing 61.6%, 37.3%, 32.7% and 38.1% of our revenues in 2010, 2011, 2012 and the six months ended June 30, 2013, respectively. We continue to enhance our ability to more efficiently monetize our substantial traffic. For instance, in the second half of 2012, we developed a real-time bidding system, which allows users to make daily bids for prominent places on our marketplace. This enables us to generate significantly higher revenues from the same amount of listings. These services have continued to attract more merchants and increase average spend per merchant. We expect our online marketing services revenues will continue to grow as we further develop our online marketing systems, accumulate operational experience and increase our customer engagement.

        The six months ended June 30, 2013 compared to the six months ended June 30, 2012.    Our online marketing services revenues increased from US$11.7 million in the six months ended June 30, 2012 to US$22.4 million in the same period in 2013, representing an increase of 92.1%. In the third quarter of 2012, we began trial launch of our real-time bidding services for certain content categories. Since our nationwide launch in the first quarter of 2013, our real-time bidding services have gained popularity and more customers have participated in the real-time bidding services and various other online marketing services, which contributed to the fast growth of our online marketing services revenues in the six months ended June 30, 2013.

        2012 compared to 2011.    Our online marketing services revenues increased from US$15.5 million in 2011 to US$28.5 million in 2012, representing an increase of 83.9%. In 2012, we attracted significantly more online marketing services customers and improved customer engagement, partially due to trial launch of our real-time bidding services in selected locations and categories in the third quarter of 2012, which in turn contributed to the growth of our online marketing services revenues in 2012.

        2011 compared to 2010.    Our online marketing services revenues increased from US$6.6 million in 2010 to US$15.5 million in 2011, representing an increase of 135.0%. The increase was primarily driven by increased traffic on our marketplace, which contributed to increased revenues from performance-based services.

    Other Services

        Revenues from other services were US$0.7 million, US$6.4 million, US$10.7 million and US$1.0 million, representing approximately 6.2%, 15.4%, 12.3% and 1.6% of our revenues in 2010, 2011, 2012 and the six months ended June 30, 2013, respectively. Revenues from other services mainly relate to group buying services. The group buying revenues were US$0.3 million, US$6.4 million, US$10.7 million and US$1.0 million in 2010, 2011, 2012 and the six months ended June 30, 2013, respectively. We began offering group buying services in June 2010 and significantly scaled back these services since mid-2012. We also generated revenues from traditional offline advertising services in 2010 and prior years which were phased out in 2011. We expect other services revenue will be insignificant in future periods.

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    Cost of Revenues

        Cost of revenues consists primarily of business taxes and surcharges, bandwidth costs, rental costs, equipment depreciation associated with website operation, salaries, benefits and share-based compensation for our personnel responsible for website maintenance and operation. We expect that our cost of revenues will increase in absolute amounts as we further grow our user base and expand our revenue-generating services. Our cost of revenues includes share-based compensation charges. See "—Critical Accounting Policies—Share-Based Compensation" for more information.

        The six months ended June 30, 2013 compared to the six months ended June 30, 2012.    Our overall cost of revenues decreased from US$4.9 million in the six months ended June 30, 2012 to US$4.1 million in the same period in 2013, representing a decrease of 16.6%. The decrease in cost of revenues was primarily attributable to the decrease in business tax. In the cities where the value-added tax, or VAT, pilot program is launched, our revenues are subject to VAT instead of business tax. We adopted gross accounting treatment for business tax and net accounting treatment for VAT. As such, business tax has been included in cost of revenues while VAT has not, but instead has been netted off from revenues.

        2012 compared to 2011.    Our overall cost of revenues increased from US$6.3 million in 2011 to US$10.4 million in 2012, representing an increase of 65.1%. The increase in cost of revenues was primarily attributable to increases in business taxes as a result of the increase in revenues. The increase in cost of revenues was also attributable to increased depreciation expenses and bandwidth costs to support the expansion of our online marketplace.

        2011 compared to 2010.    Our overall cost of revenues increased from US$2.3 million in 2010 to US$6.3 million in 2011, representing an increase of 170.4%. The increase in cost of revenues was primarily attributable to increases in business taxes as a result of the increase in revenues. The increase in cost of revenues was also attributable to increased bandwidth expenses and text message expenses we incurred for member communication to support the expansion of our online marketplace.

    Gross Profit

        We expect our gross profit to increase as our revenues expand. The following table sets forth our gross profit and gross margin for the periods indicated.

 
  For the Years Ended December 31,   For the Six Months Ended June 30,  
 
  2010   2011   2012   2012   2013  
 
   
   
   
  (unaudited)
  (unaudited)
 
 
  (in thousands of US$, except percentages)
 

Gross profit

    8,372     35,233     76,716     34,064     54,749  

Gross margin

    78.2 %   84.8 %   88.1 %   87.4 %   93.0 %

        The six months ended June 30, 2013 compared to the six months ended June 30, 2012.    Our gross profit increased from US$34.1 million in the six months ended June 30, 2012 to US$54.7 million in the same period in 2013, representing an increase of 60.7%. Gross margin increased from 87.4% to 93.0% during the same period. The increase in gross profit was primarily attributable to the significant increase in membership revenues as well as online marketing services revenues during the same period. The increase in our gross margin was primarily attributable to the reduction of the PRC business tax in both our revenues and the cost of revenues. As the VAT pilot program rolled out in more cities, most of our revenues in the first half of 2013 were subject to VAT, rather than business tax. Please refer to "—Critical Accounting Policies—Revenues" for more details. Our improved economies of scale as we continued to grow our businesses also contributed, to a lesser extent, to the growing gross margin.

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        2012 compared to 2011.    Our gross profit increased from US$35.2 million in 2011 to US$76.7 million in 2012, representing an increase of 117.7%. Gross margin increased from 84.8% to 88.1% during the same period. The increase in gross profit was primarily attributable to the significant increase in membership revenues as well as online marketing services revenues during the same period. The increase in our gross margin was primarily attributable to our improved economies of scale as we continued to grow our businesses.

        2011 compared to 2010.    Our gross profit increased from US$8.4 million in 2010 to US$35.2 million in 2011, an increase of 320.8%. The increase in gross profit was primarily attributable to the significant increase in membership revenues as well as online marketing services revenues during the same period. The significant increase in gross margin resulted from our strategy to phase out lower-margin traditional offline advertising services.

    Operating Expenses

        Our operating expenses consist of sales and marketing expenses, research and development expenses and general and administrative expenses. The following table sets forth our operating expenses, both as absolute amounts and as percentages of our revenues, for the periods indicated.

 
  For the Years Ended December 31,   For the Six Months Ended June 30,  
 
  2010   2011   2012   2012   2013  
 
  US$
  % of
revenues

  US$
  % of
revenues

  US$
  % of
revenues

  US$
(unaudited)

  % of
revenues

  US$
(unaudited)

  % of
revenues

 
 
  (in thousands of US$, except for % data)
 

Sales and marketing expenses

    16,783     156.8     100,134     241.1     76,422     87.7     40,049     102.8     38,088     64.7  

Research and development expenses

    2,247     21.0     7,784     18.7     18,464     21.2     7,712     19.8     11,852     20.1  

General and administrative expenses

    3,170     29.6     10,721     25.8     13,088     15.0     6,514     16.7     5,462     9.3  
                                           

Total operating expenses

    22,200     207.4     118,639     285.6     107,974     123.9     54,275     139.3     55,402     94.1  
                                           

        Our sales and marketing expenses, research and development expenses and general and administrative expenses include share-based compensation charges. See "—Critical Accounting Policies—Share-Based Compensation" for more information.

    Sales and Marketing Expenses

        Sales and marketing expenses consist primarily of advertising, salaries, benefits, commissions and share-based compensation for our sales and marketing personnel, promotion expenses and other operating expenses that are associated with sales and marketing activities. Because the online marketing industry in which we operate was still at a nascent stage of development, we invested aggressively in promoting public awareness of our online marketplace, particularly in 2011. We engaged third parties to promote our brand image through various advertising channels, including advertising on internet search engines, websites and other traditional off-line media. We do not plan to maintain the high level of advertising spending we had in 2011. We expect our sales and marketing expenses (excluding advertising expenses) will moderately increase going forward as we have substantially completed the deployment of our nationwide field sales team. Our advertising expenses as a percentage of revenues decreased in 2012 as compared with 2010 and 2011.

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        The following table sets forth our advertising expenses, sales and marketing expenses excluding advertising expenses and total sales and marketing expenses, both as absolute amounts and as percentages of our revenues, for the periods indicated.

 
  For the Years Ended December 31,   For the Six Months Ended June 30,  
 
  2010   2011   2012   2012   2013  
 
  US$
  % of
revenues

  US$
  % of
revenues

  US$
  % of
revenues

  US$
(unaudited)

  % of
revenues

  US$
(unaudited)

  % of
revenues

 
 
  (in thousands of US$, except for % data)
 

Advertising expenses

    8,232     76.9     68,510     164.9     25,063     28.8     15,685     40.2     10,290     17.5  

Sales and marketing expenses excluding advertising expenses

    8,551     79.9     31,624     76.2     51,359     58.9     24,364     62.6     27,798     47.2  
                                           

Total sales and marketing expenses

    16,783     156.8     100,134     241.1     76,422     87.7     40,049     102.8     38,088     64.7  
                                           

        The six months ended June 30, 2013 compared to the six months ended June 30, 2012.    Our sales and marketing expenses decreased from US$40.0 million in the six months ended June 30, 2012 to US$38.1 million in the same period in 2013, representing a decrease of 4.9%, primarily because our advertising expenses decreased from US$15.7 million to US$10.3 million during the same period, representing a decrease of 34.4%. The increase in sales and marketing expenses excluding advertising expenses was due to increased salaries, benefits and commissions for our sales and customer services personnel, partially offset by the reduction in payroll expenses as a result of our scale-back of the group buying business in the second half of 2012.

        2012 compared to 2011.    Our sales and marketing expenses decreased from US$100.1 million in 2011 to US$76.4 million in 2012, representing a decrease of 23.7%, primarily because our advertising expenses decreased from US$68.5 million to US$25.1 million during the same periods, representing a decrease of 63.4%. As a result of our prior investments in brand promotion, user experience and customer service, our 58.com brand has gained strong recognition and we have reduced the level of spending on brand advertising starting from the second quarter of 2012. The increase in sales and marketing expenses excluding advertising expenses was due to higher salaries, benefits and commissions for our sales personnel, primarily as a result of an increase in our field sales headcount. Our field sales headcount increased significantly in 2011 and was further expanded in the first quarter of 2012, following which we have gradually reduced headcount as we scaled back our group buying business in the second half of 2012.

        2011 compared to 2010.    Our sales and marketing expenses increased from US$16.8 million in 2010 to US$100.1 million in 2011, representing an increase of 496.6%. This significant increase resulted from our strategy in 2011 to aggressively promote our brand, expand our field sales team to extend our leadership position, and increase our paying merchant members and users. Our promotional activities included large investments in a combination of online and offline advertising campaigns to increase awareness of the online marketing industry and our leading position within the industry. Our advertising expenses increased from US$8.2 million in 2010 to US$68.5 million in 2011. The increase in sales and marketing expenses apart from advertising expenses was due to higher salaries, benefits and commissions for our sales personnel, primarily as a result of increased headcount in 2011 as we expanded into more cities and started our group buying business.

    Research and Development Expenses

        Research and development expenses mainly consist of salaries, benefits and share-based compensation for product development and engineering personnel and other operating expenses such as rental and depreciation of equipment that are associated with product development and engineering

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activities. We expect our research and development expenses to increase on an absolute basis as we intend to hire additional research and development personnel to develop new features, applications and services for our online marketplace and further improve our technologies and infrastructure.

        The six months ended June 30, 2013 compared to the six months ended June 30, 2012.    Research and development expenses increased from US$7.7 million in the six months ended June 30, 2012 to US$11.9 million in the same period in 2013, representing an increase of 53.7%. The increase is primarily due to increased salaries and employee benefits as a result of our hiring additional research and development personnel for the development of new features and services.

        2012 compared to 2011.    Research and development expenses increased substantially from US$7.8 million in 2011 to US$18.5 million in 2012, representing an increase of 137.2%. The increase is primarily due to increased salaries and employee benefits as a result of our hiring additional research and development personnel for the development of new features and services.

        2011 compared to 2010.    Research and development expenses increased substantially from US$2.2 million in 2010 to US$7.8 million in 2011, representing an increase of 246.4%. The increase is primarily due to an increase in salaries and benefits mainly as a result of increased research and development headcount.

    General and Administrative Expenses

        General and administrative expenses consist primarily of salaries, benefits and share-based compensation for our general and administrative personnel, general office expenses and fees and expenses for third-party professional services. We expect our general and administrative expenses to increase in the future on an absolute basis as our business grows and we incur increased costs related to complying with our reporting obligations after we become a public company under U.S. securities laws.

        The six months ended June 30, 2013 compared to the six months ended June 30, 2012.    Our general and administrative expenses decreased from US$6.5 million in the six months ended June 30, 2012 to US$5.5 million in the same period in 2013, representing a decrease of 16.1%. Such decrease is primarily driven by our bad debt provision for prepayment to group buying merchants in the first half of 2012.

        2012 compared to 2011.    Our general and administrative expenses increased from US$10.7 million in 2011 to US$13.1 million in 2012, representing an increase of 22.1%. Such increase is much slower than our revenue growth of 109.8% from 2011 to 2012 as a result of our increased operating efficiency. The increase in general and administrative expenses was primarily due to higher salaries and benefits for our employees primarily as a result of increased headcount to support our business expansion, partially offset by a decrease in share-based compensation expenses from US$1.3 million to US$0.9 million in the same period. We added general and administrative headcount during 2011 to support our expansion into more cities; and in 2012, our general and administrative headcount remained relatively stable.

        2011 compared to 2010.    Our general and administrative expenses increased from US$3.2 million in 2010 to US$10.7 million in 2011, representing an increase of 238.2%. This is primarily due to an increase in salaries, benefits and general office expenses for our employees mainly as a result of increased headcount to support our business expansion and, to a lesser extent, increased average salaries and employee benefits per headcount. We increased our general and administrative personnel headcount to support our expansion into more cities.

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Selected Quarterly Results of Operations

        The following table presents our unaudited condensed consolidated quarterly financial information for the quarters in the period from January 1, 2012 to June 30, 2013. You should read the following table in conjunction with our audited and unaudited consolidated financial statements and related notes included elsewhere in this prospectus. We have prepared the unaudited condensed consolidated quarterly financial information on the same basis as our audited consolidated financial statements. This unaudited condensed consolidated quarterly financial information includes all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair representation of our financial position and operating results for the quarters presented.

 
  For the Three Months Ended  
 
  March 31,
2012
  June 30,
2012
  September 30, 2012   December 31, 2012   March 31,
2013
  June 30,
2013
 
 
  (in thousands of US$)
 

Revenues

                                     

Membership

    7,992     11,272     13,470     15,185     14,891     20,570  

Online marketing services

    4,974     6,705     8,057     8,773     8,313     14,117  

Other services

    4,253     3,779     1,910     752     525     427  
                           

Total Revenues

    17,219     21,756     23,437     24,710     23,729     35,114  

Cost of revenues(1)

    2,153     2,758     2,802     2,693     1,953     2,141  
                           

Gross profit

    15,066     18,998     20,635     22,017     21,776     32,973  

Operating expenses(1):

                                     

Sales and marketing expenses

    21,856     18,193     18,372     18,001     18,574     19,514  

Research and development expenses

    3,549     4,163     4,896     5,856     5,784     6,068  

General and administrative expenses

    2,966     3,548     3,504     3,070     2,559     2,903  
                           

Total operating expenses

    28,371     25,904     26,772     26,927     26,917     28,485  
                           

(Loss)/Income from operations

    (13,305 )   (6,906 )   (6,137 )   (4,910 )   (5,141 )   4,488  
                           

Other income/(expenses), net

    1,052     (124 )   (198 )   127     470     468  
                           

(Loss)/Income before tax

    (12,253 )   (7,030 )   (6,335 )   (4,783 )   (4,671 )   4,956  
                           

Income taxes benefits/(expenses)

                         
                           

Net (loss)/income

    (12,253 )   (7,030 )   (6,335 )   (4,783 )   (4,671 )   4,956  
                           

Note:

(1)
Share based compensation expenses are allocated in cost of revenues and operating expenses as follows:

 

Cost of revenues

    8     8     9     5     12     12  
 

Sales and marketing expenses

    76     76     83     35     109     109  
 

Research and development expenses

    121     138     150     80     212     214  
 

General and administrative expenses

    246     236     231     169     231     233  
                             
 

Total

    451     458     473     289     564     568  
                             

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        The following table sets forth our historical unaudited consolidated selected quarterly results of operations for the periods indicated, as a percentage of total revenues.

 
  For the Three Months Ended
 
  March 31,
2012
  June 30,
2012
  September 30, 2012   December 31, 2012   March 31,
2013
  June 30,
2013

Revenues

                                   

Membership

    46%     52%     58%     61%     63%     59%

Online marketing services

    29%     31%     34%     36%     35%     40%

Other services

    25%     17%     8%     3%     2%     1%
                         

Total Revenues

    100%     100%     100%     100%     100%     100%

Cost of revenues(1)

    13%     13%     12%     11%     8%     6%
                         

Gross profit

    87%     87%     88%     89%     92%     94%

Operating expenses(1):

                                   

Sales and marketing expenses

    127%     83%     78%     73%     78%     56%

Research and development expenses

    20%     19%     21%     24%     25%     17%

General and administrative expenses

    17%     16%     15%     12%     11%     8%
                         

Total operating expenses

    164%     118%     114%     109%     114%     81%
                         

(Loss)/Income from operations

    (77)%     (31)%     (26)%     (20)%     (22)%     13%
                         

Other income/(expenses), net

    6%     (1)%     (1)%     1%     2%     1%
                         

(Loss)/Income before tax

    (71)%     (32)%     (27)%     (19)%     (20)%     14%
                         

Income taxes benefits/(expenses)

    0%     0%     0%     0%     0%     0%
                         

Net (loss)/income

    (71)%     (32)%     (27)%     (19)%     (20)%     14%
                         

Note:

(1)
Share based compensation expenses are allocated in cost of revenues and operating expenses as follows:

 

Cost of revenues

    0.05%     0.04%     0.04%     0.02%     0.05%     0.03%  
 

Sales and marketing expenses

    0.44%     0.35%     0.35%     0.14%     0.46%     0.31%  
 

Research and development expenses

    0.70%     0.63%     0.64%     0.32%     0.89%     0.61%  
 

General and administrative expenses

    1.43%     1.08%     0.99%     0.68%     0.97%     0.66%  
                             
 

Total

    2.62%     2.10%     2.02%     1.16%     2.37%     1.61%  
                             

        We have experienced continued growth in our quarterly total revenues for the six quarters in the period from January 1, 2012 to June 30, 2013. During these quarters, we experienced continued increases in revenues from membership services driven by the continued increases in the number of our average quarterly paying merchant members and revenues from online marketing services. The number of our paying merchant members was approximately 143,000, 172,000, 204,000, 228,000, 249,000 and 298,000 in the three months ended March 31, 2012, June 30, 2012, September 30, 2012, December 31, 2012, March 31, 2013 and June 30, 2013, respectively. The nationwide launch of our real-time bidding services contributed to the significant increase in the online marketing services revenues in the second quarter of 2013. Other services revenues continued to decrease as a result of our scale-back of group buying business since the second half of 2012.

        Our results of operations are subject to seasonal fluctuations. For example, our revenues are relatively lower during the holidays in China, particularly during the Chinese New Year period which occurs in the first quarter of the year, because many businesses are either closed or substantially reduced the level of their activities during the Chinese New Year holiday. Also, certain business activities, such as recruitment, tend to slow down towards the year end, which might impact our

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revenues in the fourth quarter of the year. This seasonality of our business, however, was not apparent historically due to the rapid growth in revenues that we experienced in recent years.

        Our gross profits have grown largely in line with increases in our revenues during these quarters. Our gross margins have continued to increase as a result of the reduction of business tax in both our revenues and the cost of revenues in the first half of 2013, as most of our revenues began to be subject to VAT, rather than business tax. Please refer to "—Critical Accounting Policies—Revenues" for more details. Our improved economies of scale as we continued to grow our businesses also contributed, to a lesser extent, to the growing gross margin.

        Our operating expenses in absolute amounts have largely remained flat in these quarters. Our advertising expenses were US$10.2 million, US$5.5 million, US$5.0 million, US$4.4 million, US$5.8 million and US$4.5 million in the six quarters from January 1, 2012 to June 30, 2013. As our brand has gained strong recognition in China as a result of prior investments in brand promotion, user experience and customer service, we have reduced the level of advertising spending starting from the second quarter of 2012. Our operating expenses excluding advertising expenses have been largely stable as they were mainly driven by the employee numbers. Our total employee numbers slightly decreased in these quarters, largely driven by the scale-back of our group buying business.

    Taxation

    Cayman Islands

        We are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gains. Additionally, upon payments of dividends to our shareholders, no Cayman Islands withholding tax will be imposed.

    British Virgin Islands

        We are exempted from income tax in the British Virgin Islands on our foreign-derived income. There are no withholding taxes in the British Virgin Islands.

    Hong Kong

        The operations in Hong Kong have incurred net accumulated operating losses for income tax purpose. The corporate income tax rate in Hong Kong is 16.5%.

    PRC

        Pursuant to the EIT Law, which became effective on January 1, 2008, foreign-invested enterprises and domestic companies are subject to enterprise income tax at a uniform rate of 25%. In addition, HNTEs will enjoy a preferential enterprise income tax rate of 15% under the EIT Law. Beijing 58, our consolidated affiliated entity, and Wanglin, one of our PRC subsidiaries, qualified as HNTE under the EIT Law, are eligible for a preferential enterprise income tax rate of 15% for the period from 2012 to 2014, so long as they obtain approval from relevant tax authority if they are profitable during the period.

        As we had net operating losses for the years ended December 31, 2010, 2011 and 2012, we have not incurred any PRC income taxes for those periods.

        Prior to January 1, 2012, pursuant to Provisional Regulation of China on Business Tax and its implementing rules, any entity or individual rendering services in the territory of PRC is generally subject to a business tax at the rate of 5% on the revenues generated from provision of such services. Our PRC subsidiaries and consolidated affiliated entities were subject to business tax at the rate of 5% for the membership and online marketing services. Since January 1, 2012, the PRC Ministry of Finance and the State Administration of Taxation have been implementing a Business Tax to Value-Added Tax Transformation Pilot Program, or the Pilot Program, which imposes VAT in lieu of business tax for

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certain industries for certain industries in certain regions, including Beijing and Tianjin. VAT is or will be applicable at a rate of 6% in lieu of business tax for the membership and online marketing services rendered by our PRC subsidiaries and consolidated affiliated entities after the Pilot Program is being implemented in their respective region. VAT payable on goods sold or taxable services provided by a general VAT taxpayer for a taxable period is the net balance of the output VAT for the period after crediting the input VAT for the period. Hence, the amount of VAT payable does not result directly from output VAT generated from goods sold or taxable services provided. With the adoption of the Pilot Program, our revenues that are subject to VAT can now recognized net of VAT and related surcharges.

Liquidity and Capital Resources

        Our primary sources of liquidity have been private sales of ordinary shares and preference shares, yielding aggregate net proceeds of US$114.5 million since 2008. We used US$1.7 million of the proceeds from these sales to repurchase some of our ordinary shares in 2010, and the remainder to fund our operations. We incurred net loss of approximately US$13.9 million, US$83.4 million and US$30.4 million in 2010, 2011 and 2012, respectively, and had net cash used in operating activities of US$5.9 million, US$50.3 million and US$4.7 million in 2010, 2011 and 2012, respectively. The significant net cash outflow from operating activities in 2011 was primarily due to our advertising campaigns for business expansion in that year. We had a net income of approximately US$0.3 million in the six months ended June 30, 2013 and net cash provided by operating activities of US$17.9 million in the same period. As of June 30, 2013, we had US$8.7 million in cash and cash equivalents, which primarily consisted of cash, demand deposits and highly liquid investments placed with banks or other financial institutions that have original maturities of three months or less, and US$42.9 million in short-term investments, representing investment funds placed with banks with terms less than one year. Excluding deferred revenues and customer advances, our total current assets were adequate to cover the remaining current liabilities as of June 30, 2013. We believe that our available cash and cash equivalents, short-term investments, cash generated from operations will be sufficient to meet our working capital requirements and capital expenditures in the ordinary course of business for the next twelve months. We also believe that if necessary, we can obtain sufficient funding through external borrowing to finance future capital commitments or operating expenses in the foreseeable future.

        Under PRC laws and regulations, we are permitted to utilize the proceeds from this offering to provide funding to our PRC subsidiaries only through loans or capital contributions, subject to applicable government registration and approval requirements. We cannot assure you that we will be able to meet these requirements on a timely basis, if at all. See "Risk Factors—Risks Relating to Doing Business in China—PRC regulation of direct investment and loans by offshore holding companies to PRC entities and governmental control of currency conversion may delay or limit us from using the proceeds of this offering to make additional capital contributions or loans to our PRC subsidiary."

        Although we consolidate the results of Beijing 58, our consolidated affiliated entity, and its subsidiaries, our access to cash balances or future earnings of these entities is only through our contractual arrangements with Beijing 58 and its shareholders. See "Corporate History and Structure—Contractual Arrangements with Beijing 58."

    Anticipated Uses of Cash

        We intend to invest in our product development and engineering capabilities to grow our user base and enhance user experience. We intend to continue to market our services, promote our brand, strengthen our customer service capabilities and enhance monetization. In order to support our overall business expansion, we also expect to make investments in our corporate facilities and information technology infrastructure. We may pursue strategic alliances and acquisitions that complement our online marketplace. We plan to fund these expenditures with cash and cash equivalents that we currently have. We do not have a present plan to pay dividends in the foreseeable future.

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    Cash Flow

        The following table sets forth a summary of our cash flows for the periods indicated.

 
  For the Years Ended December 31,   For the Six Months Ended June 30,  
 
  2010   2011   2012   2012   2013  
 
   
   
   
  (unaudited)
  (unaudited)
 
 
  (in thousands of US$)
 

Net cash provided by/(used in):

                               

Operating activities

    (5,922 )   (50,323 )   (4,728 )   (9,270 )   17,898  

Investing activities

    (2,522 )   (10,455 )   (27,153 )   (11,978 )   (20,255 )

Financing activities

    53,246     57,110     253     54     290  

Effect of exchange rate changes on cash and cash equivalents

    (90 )   324     (14 )   (51 )   135  
                       

Net increase/(decrease) in cash and cash equivalents

    44,712     (3,344 )   (31,642 )   (21,245 )   (1,932 )
                       

    Operating Activities

        Net cash used in operating activities primarily consisted of our net loss adjusted for certain non-cash items, including depreciation and amortization, share-based compensation, impairment and disposal of property and equipment and foreign exchange loss and further adjusted by changes in operating assets and liabilities, such as accounts receivable, accounts payable, deferred revenues, accrued expenses and other liabilities and prepaid expenses.

        Net cash provided by operating activities was US$17.9 million in the six months ended June 30, 2013. Our net cash provided by operating activities in the six months ended June 30, 2013 reflected a net income of US$0.3 million, adjusted for non-cash items of US$3.3 million and changes in operating assets and liabilities of US$14.3 million. Non-cash reconciling items mainly included depreciation and amortization expenses of US$2.3 million and share-based compensation expenses of US$1.1 million. Changes in operating assets and liabilities mainly represented an increase in deferred revenues of US$10.5 million, increase in customer advances and deposits of US$3.1 million, decrease in amounts due from related parties of US$1.8 million, and increase in accrued expenses and other current liabilities of US$1.2 million, partially offset by a decrease in accounts payable of US$2.1 million and increase in accounts receivable of US$0.7 million. Deferred revenues increased as our membership revenues and online marketing services revenues grew rapidly. The decrease in amounts due from related parties was primarily due to the repayment from an investee entity.

        Net cash used in operating activities was US$4.7 million in 2012. Our net cash used in operating activities in 2012 reflected a net loss of US$30.4 million, adjusted for non-cash items of US$6.7 million and changes in operating assets and liabilities of US$19.0 million. Non-cash reconciling items mainly included depreciation and amortization of US$3.9 million and share-based compensation expenses of US$1.7 million. Changes in operating assets and liabilities mainly represent an increase in customer advances and deposits of US$7.2 million and an increase in deferred revenues of US$13.6 million, offset by a decrease in account payable of US$9.1 million. Customer advances and deposits and deferred revenues increased as our membership revenues and online marketing services revenues grew rapidly. The decrease in accounts payable was primarily attributable to the scaling-back of group buying services in 2012. Other factors impacting operating cash flow included an increase in salary and welfare payable due to increased headcount.

        Net cash used in operating activities was US$50.3 million in 2011. The main reason for the cash outflow was the significant investment in advertising campaigns for our business expansion. Our net cash used in operating activities in 2011 reflected a net loss of US$83.4 million, adjusted by the

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reconciliation of non-cash items of US$3.9 million and changes in operating assets and liabilities of US$29.2 million. Non-cash reconciling items mainly included share-based compensation of US$2.0 million, and depreciation and amortization and impairment of property and equipment of US$1.7 million. Changes in operating assets and liabilities mainly represented an increase in customer advances and deposits of US$3.3 million, increase in deferred revenues of US$10.6 million and increase in accounts payable of US$18.4 million. The increases in customer advances and deposits and deferred revenue primarily related to our overall customer and business growth. The increase in accounts payable was primarily attributable to the introduction of group buying services in June 2010.

        Net cash used in operating activities was US$5.9 million in 2010, primarily attributable to a net loss of US$13.9 million, adjusted for certain non-cash items such as share-based compensation of US$1.8 million and the working capital account impact which mainly includes increases in deferred revenue and salary and welfare payable of approximately US$5.6 million.

    Investing Activities

        Net cash used in investing activities primarily consists of capital expenditures, mainly for purchases of servers and other equipment and investment in short-term financial instruments to optimize the interest income for our excess cash from operating activities. We expect that our capital expenditures will increase as we purchase additional equipment and servers and expand our technology infrastructure to support the growth of our business.

        Our net cash used in investing activities were US$2.5 million, US$10.5 million, US$27.2 million and US$20.3 million in 2010, 2011, 2012 and the six months ended June 30, 2013, respectively. Our cash used in investing activities in 2010, 2011, 2012 and the six months ended June 30, 2013 included nil, US$28.1 million, US$212.8 million and US$135.4 million that we used to purchase short-term financial instruments, which was partially offset by nil, US$24.4 million, US$190.9 million and US$117.0 million of proceeds from maturity of short-term investments, respectively. We used US$2.5 million, US$5.7 million, US$5.2 million and US$1.9 million to purchase property and equipment in 2010, 2011, 2012 and the six months ended June 30, 2013, respectively.

    Financing Activities

        Net cash provided by financing activities primarily consists of net proceeds from the issuance of ordinary and preference shares, net of the repurchase of ordinary shares from certain shareholders.

        Our net cash provided by financing activities in the six months ended June 30, 2013 and in 2012 was US$0.3 million and US$0.3 million, respectively, primarily attributable to the proceeds from exercises of stock options. In 2011, our net cash provided by financing activities was US$57.1 million, which included the net cash proceeds from the issuance of series B preference shares of US$2.1 million in March 2011 and the issuance of series B-1 preference shares of US$55.0 million in August and September 2011. In 2010, our net cash provided by financing activities was US$53.2 million, primarily attributable to the net cash proceeds from the issuance of series B preference shares of US$44.9 million, series A-1 preference shares of US$8.5 million and convertible notes of US$1.5 million. We used US$1.7 million of the proceeds to repurchase our ordinary shares from certain shareholders.

Commitments and Contingencies

        We lease our facilities and offices under non-cancelable operating lease agreements. Certain of these arrangements have renewal or expansion options and adjustments-for-market provisions, such as free or escalating base monthly rental payments. The lease for our headquarters in Beijing runs through 2027.

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        We use third-party services for server custody and bandwidth. The contracts are typically 12 months in duration. We typically contract these services according to the traffic level of our online marketplace and the respective server storage and bandwidth required to support the traffic.

        In 2012, we engaged third parties to promote our brand image through various advertising channels, including advertising on internet search engines, websites and other traditional off-line media. The amount of advertising commitment relates to the committed advertising services that have not been delivered and paid.

        As of December 31, 2012, future minimum commitments under non-cancelable agreements were as follows.

 
   
  Year ending December 31,    
 
 
  Total   2013   2014   2015   2016   2017   Thereafter  
 
  (in thousands of US$)
 

Operating lease commitment

    17,448     2,935     1,757     1,208     1,140     1,020     9,388  

Server custody fee commitment

    1,610     1,569     41                  

Advertising commitment

    3,611     3,568     43                  
                               

Total

    22,669     8,072     1,841     1,208     1,140     1,020     9,388  
                               

        As of June 30, 2013, future minimum commitments under non-cancelable agreements were as follows.

 
   
   
  Year ending December 31,    
 
 
   
  Remainder of
2013
   
 
 
  Total   2014   2015   2016   2017   Thereafter  
 
  (in thousands of US$)
 

Operating lease commitment

    16,158     1,393     1,787     1,229     1,160     1,038     9,551  

Server custody fee commitment

    1,013     807     206                  

Advertising commitment

    6,248     4,993     1,255                  
                               

Total

    23,419     7,193     3,248     1,229     1,160     1,038     9,551  
                               

        Other than as shown in the tables above, we did not have any significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2012 or June 30, 2013.

Holding Company Structure

        We are a holding company with no material operations of our own. We conduct our operations primarily through our wholly owned subsidiaries and consolidated affiliated entities in China. As a result, our ability to pay dividends to our shareholders depends upon dividends paid by our PRC subsidiaries. If our PRC subsidiaries or any newly formed PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our PRC subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries and our consolidated variable interest entities in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, each of our subsidiaries and consolidated affiliated entities in China may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds at its discretion. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends. As our PRC subsidiaries and consolidated affiliated entities have incurred losses, they have not started to contribute to the staff welfare and bonus funds. Our PRC subsidiaries have never paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds.

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Off-Balance Sheet Arrangements

        We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder's equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.

Inflation

        Since our inception, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the consumer price index in China increased by 3.3%, 4.9% and 2.6% in 2010, 2011 and 2012, and the year-over-year percent changes in the consumer price index for June 2011, 2012 and 2013 were increases of 6.4%, 2.2% and 2.7%, respectively. Although we have not in the past been materially affected by inflation since our inception, we can provide no assurance that we will not be affected in the future by higher rates of inflation in China.

Critical Accounting Policies and Estimates

        We prepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.

        An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies, and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our consolidated financial statements. We believe that the following accounting policies involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this prospectus.

    Revenue Recognition

        We generate revenues primarily from membership and online marketing services. Revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed or determinable, service is performed and collectability of the related fee is reasonably assured.

        We have adopted the gross presentation for business tax and related surcharges pursuant to ASC605-45, "Revenue Recognition: Principal Agent Considerations". The amount of business tax and related surcharges included in revenues and cost of revenues were US$0.7 million, US$2.6 million, US$4.4 million and US$0.9 million for the years ended December 31, 2010, 2011, 2012 and the six months ended June 30, 2013, respectively. Effective January 1, 2012, the PRC Ministry of Finance and the State Administration of Taxation launched the VAT Pilot Program for certain industries in certain

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regions. According to the implementation circulars released by the Ministry of Finance and the State Administration of Taxation on the Pilot Program, the "Modern Service Industries" includes research, development and technological services, information technology services, cultural innovation services, logistics support, lease of corporeal properties, attestation and consulting services. Accordingly, most of our subsidiaries and our consolidated affiliated entities were in the Pilot Program and subject to VAT. With the adoption of the Pilot Program, our revenues are subject to VAT payable on goods sold or taxable labor services provided by a general VAT taxpayer for a taxable period is the net balance of the output VAT for the period after crediting the input VAT for the period. Hence, the amount of VAT payable does not result directly from output VAT generated from goods sold or taxable labor services provided. As such, we have adopted net presentation for VAT.

        A membership is a basic service package consisting of merchant certification, display of an online storefront on our marketplace, preferential listing benefits such as daily priority listings and higher quota for daily listings and access to our dedicated customer service support team and online account management system.

        Online marketing services.    Our online marketing services include time-based services and performance-based services. Revenues from time-based services are recognized ratably over the service period. Revenues from performance-based services are recognized when the agreed performance criteria are achieved. For service arrangements that include multiple deliverables, revenues are allocated to each unit of accounting based on relative selling price of each unit of accounting according to the selling price hierarchy established by ASU No.2009-13. We use (a) vendor-specific objective evidence of selling price, if it exists, otherwise, (b) third-party evidence of selling price. If neither (a) nor (b) exists, we will use (c) the management's best estimate of the selling price for that deliverable. Selling price is generally determined by vendor specific objective evidence.

    Income taxes

        Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred income taxes are provided using the liability method. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. The effect on deferred taxes of a change in tax rates is recognized in the statement of comprehensive loss in the period of change. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be realized.

        The guidance prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Guidance was also provided on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Significant judgment is required in evaluating our uncertain tax positions and determining its provision for income taxes. We recognize interests and penalties, if any, under accrued expenses and other current liabilities on its balance sheet and under other expenses in our statement of comprehensive loss. We did not have any interest or penalties associated with tax positions as of December 31, 2010, 2011 and 2012 and June 30, 2013. As of December 31, 2010, 2011 and 2012 and June 30, 2013, we did not have any significant unrecognized uncertain tax positions.

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        In order to assess uncertain tax positions, we apply a more likely than not threshold and a two-step approach for the tax position measurement and financial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.

    Share-Based Compensation

        All share-based awards to employees and directors, including share options and ordinary shares awards, are measured at the grant date based on the fair value of the awards. Share-based compensation, net of forfeitures, is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. We used the Binominal option pricing model to determine the fair value of share options and account for share-based compensation expenses using an estimated forfeiture rate at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. Share-based compensation expenses were recorded net of estimated forfeitures such that expense was recorded only for those share-based awards that are expected to vest. Historically, our share-based compensation expenses were relatively low. Due to the options granted on July 13, 2013, our share-based compensation expenses will increase significantly.

        We adopted an employee stock option plan, or the 2010 plan, in March 2010. The maximum number of shares in respect of which share awards may be granted under the 2010 plan is 20,173,225. The 2010 plan will terminate automatically 10 years after its adoption, unless terminated earlier by our shareholders' approval.

        We adopted a share incentive plan, or the 2013 plan, in September 2013. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2013 plan, is 2,800,000 shares as of the date of its adoption. The number of shares reserved for future issuances under the 2013 plan will be increased by a number equal to 1.5% of the total number of outstanding shares on the last day of the immediately preceding calendar year, on the first day of each calendar year during the term of the 2013 plan beginning in 2015, or such lesser number of ordinary shares as determined by our board of directors. As of the date of this prospectus, no awards have been granted under the 2013 plan.

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        A summary of our share option activities is presented below (share and per share information is presented to give retroactive effect to the share splits that we have conducted so far).

 
  Number of
Options
Granted
  Exercise
Price
  Fair Value of
the Options as
of the Grant
Date
  Fair Value of the
Underlying Ordinary
Shares as of the
Grant Date
  Intrinsic
Value as of
the Grant
Date
 
 
   
  US$
  US$
  US$
  US$
 

September and October, 2010(1)

    1,669,140     0.195     0.691     0.844     0.649  

September 1, 2010(1)

    240,192     0.195     0.698     0.844     0.649  

September 1, 2010(1)

    1,286,296         0.844     0.844     0.844  

February 1, 2011(1)

    240,000     0.525     1.009     1.376     0.851  

February 1, 2011(1)

    92,000     2.064     0.739     1.376      

April 1, 2011(1)

    300,000     2.064     0.827     1.577      

April 1, 2011(1)

    10,000     2.064     0.850     1.577      

April 1, 2011(1)

    100,000     2.064     0.814     1.577      

May 31, 2011

    2,388,339     2.220     1.193     2.155      

July 31, 2011

    60,000     0.525     1.850     2.311     1.786  

July 31, 2011

    20,000     2.220     1.170     2.311     0.091  

November 30, 2011

    598,000     2.300     1.250     2.232      

March 31, 2012

    479,000     2.300     1.310     2.379     0.079  

May 31, 2012

    342,000     2.300     1.320     2.379     0.079  

August 31, 2012

    35,500     2.300     1.320     2.379     0.079  

November 30, 2012

    264,000     2.300     1.330     2.484     0.184  

December 31, 2012

    192,000     2.300     1.340     2.484     0.184  

January 1, 2013

    1,187,000     2.300     1.340     2.484     0.184  

July 31, 2013

    1,900,000     2.500     3.500     5.286     2.786  

September 17, 2013

    30,000     2.500     3.500     5.286     2.786  

Note:

(1)
Options with different vesting schedules and terms result in different fair value in the same issue date.

        In October 2013, our board of directors approved to grant options to purchase a total of 646,000 ordinary shares to certain of our executive officers and employees, with the exercise price of such options being US$5.60 per share, as we are getting close to consummating this offering.

        We estimated the fair value of share options using the binominal option-pricing model with the assistance from an independent valuation firm. The fair value of each option grant is estimated on the date of grant with the following assumptions.