Strategies And Competitive Advantages

The Brazilian technology market has significant and promising growth potential. Locaweb believes it is well positioned to successfully take part in this growth, mainly due to its strong brand, its consolidated leadership in the Hosting market, a broad portfolio of products and services with high cross-selling and up-selling potential and a solid, loyal and diverse client base.

The main components of Locaweb’s strategy are:

The Company intends to work harder on seizing cross-selling and up-selling opportunities with its current base of approximately 350,500 active clients, boosting the sales of existing products and services, through (i) migration of clients to higher value-added services; (ii) intensification of the effort to identify complementary products and services that may be offered to customers; (iii) closer relationships with partner developers to identify client needs in a faster and more agile way; and (iv) optimization of the online order flow to encourage the sale of complementary products and services. 

The Company believes that this segment fulfills the basic needs of any retail business pursuing success in the digital world, while offering the best value for money, which is why it intends to continue anticipating trends and market demands through the development and expansion of innovative products and services in the Commerce segment.

Due to the successful acquisitions made by the Company since 2012, always consistent with the sustainable growth strategy and based on the principles of recurring revenues, cost synergy, retention of existing talents, consolidation of the product and service portfolio, and cross-selling and up-selling opportunities, Locaweb will continue to seek opportunities for acquisitions in the Brazilian technology industry that increase or complement its current portfolio of products and services. As examples of future acquisition possibilities, in addition to acquisitions aimed to expand its current products and services, the Company can highlight the following markets of interest, without being limited to them: Enterprise Resource Planning tools – ERP integrated with the Commerce segment for small and medium-sized companies, expansion of Yapay services and tools for Customer Relationship Management – CRM and customer acquisition for Small and Medium‑sized Businesses – SMB.

 

The Company’s main competitive advantages are:

 

In the first half of 2019, Locaweb was the undisputed leader in the Brazilian Hosting market for small and medium-sized businesses, with a 26.2% share of this extremely fragmented market (more than 30 companies provided this service in Brazil in that period), according to the IDC Brazil Semiannual IT Services Tracker study for the first half of 2019. The Company believes its leadership position stems from the quality and variety of its portfolio of products and services, featuring efficient and easy-to-implement technological solutions that have comprehensive after-sales support.

The Locaweb brand, used since 1998, is strong and consolidated in all the markets where the Company operates, especially the digital presence market, maintaining a prominent position vis-à-vis its current and potential new competitors. The quest to expand the Company’s product and service portfolio, combined with operational excellence, innovation, high quality, reliability and outstanding and comprehensive after-sales support, is also helping keep the Locaweb brand strong. The Locaweb brand has a solid reputation, great credibility and acceptance among its clients, developers and suppliers, being a benchmark for quality in technology services in Brazil, bordering on metonymy, thus helping the Company drive its growth and reduce its CAC, mainly due to the reduced need for investments in media campaigns.

A large share of the Company’s revenue comes from a business model based on automatic renewal subscriptions, which can be renewed on a monthly, quarterly, annual or triennial basis. This characteristic, present in most of the Company’s contracts, reduces client default, being an important driver of Locaweb’s consistent growth history. 

None of the Company’s competitors offers a portfolio of technological products and services as diversified and integrated as Locaweb’s, thanks to its proven ability to innovate and develop internally, or to acquire from third parties, new products and services that complement those already offered. Locaweb’s business model also creates a synergistic environment with high cross-selling potential between the Be Online/SaaS segments and the Commerce segment. 

The Company has approximately 400,000 loyal and diversified active clients, consisting of self-employed people and companies of all sizes from different sectors of the economy. In addition to building customer loyalty by offering quality products and services and excellent after-sales service, it is worth highlighting the risks and costs involved in migrating from one technology solution provider to another, which considerably decrease the clients’ inclination to make such a change. Locaweb also has a solid partnership with more than 19,000 developers who are now served by the Locaweb Pro business unit and who advertise the Company’s brands and sell their products and services to their respective customers, creating an additional channel to attract new clients for Locaweb. 

The acquisition of companies is a strategic activity for Locaweb, as, in addition to being a driver of growth, it represents a source of human talent, new products and services and, consequently, new revenue. In the last seven years, the Company has made eight acquisitions, all of which were successful: Tray, All iN, Fbits, Cluster2Go, KingHost, Delivery Direto, Social Miner and Etus. The Company was also able to significantly accelerate the growth of the acquired companies, proving its integration and execution ability.

The Company has a clearly defined pipeline (acquisition process) of opportunities for possible new acquisitions. On the lookout for new acquisitions, the Company focuses not only on good financial results, but also on the following characteristics: (i) mostly recurring revenue; (ii) cost synergy with Locaweb group companies; (iii) great potential for cross-selling other products and services offered by the Company; (iv) talented founders or employees; and (v) products and services already developed or at an advanced stage of development.

Locaweb has a high level of corporate governance that has been improved since its inception. External audit has been carried out by Ernst & Young since 2006 and, in 2009, the Company integrated its departments using the SAP system (Systems, Applications and Products for Data Processing). Since 2012, Locaweb’s founder, Gilberto Mautner, has participated in quarterly reviews of products and services. Locaweb also has a structured process for preparing the annual budget that involves all the Company’s units. It also has semi-annual strategic planning meetings and monthly results monitoring meetings. The Company has four non-statutory committees: (a) Human Resources, which meets monthly and is composed of the Chief Executive Officer, Board members Gilberto Mautner and Flávio Jansen, and the Human Resources manager; (b) Tax/Accounting Audit, which meets monthly and is composed of members of the Board of Directors, an independent external director and the Chief Financial Officer; (c) Ethics and Conduct, which meets when necessary and is composed of the Chief Executive Officer, the Human Resources manager and the Legal manager; and (d) Information Security Risks, which meets quarterly and is composed of the Chairman of the Board of Directors, the Chief Technology Officer, the Be Online/SaaS Business Unit Officer, in addition to the Company’s main technical leaders. Locaweb is listed in the highest corporate governance segment in Brazil, Novo Mercado, and has all the committees and policies required for this governance segment.

The current management team includes the Company’s founders and other experienced professionals who previously held relevant positions in other important companies in their respective segments, some of them in the technology, internet and telecommunications segments in Brazil. Locaweb’s founders have an entrepreneurial and innovative vision of the technology product and service markets in Brazil, being largely responsible for the Company’s development and success over the years, and will continue to be controlling shareholders bound by a shareholders’ agreement. 

In order to retain strategic talents among its employees and management, the Company launched stock option plans, the first of which was implemented in 2009, and has been developing programs such as “I want to be a Dev” and “I want to be a PO” to encourage employees who want to start their careers in the segment. The Company encourages education through partnerships with universities and schools, mapping talents to build a career and succession plan and a leader development program. Locaweb adopts the Y career model, offering professionals the freedom to plan their career and choose the path that meets their desires and needs. Professionals can choose between a management and a technical career path. Locaweb has a Trainee program focused on training recent graduates to empower them to handle complex situations and bring innovative solutions, ensuring the perpetuity of the Company’s business. In addition, Locaweb has highly skilled employees, who are hired after selection processes that demand extensive experience and include group dynamics and interviews with the managers and their teams in the area. Locaweb employees have great satisfaction in working for the Company, a fact confirmed by Guia Você S.A., which ranked Locaweb as one of the 150 best companies in Brazil to work for in 2012 and 2014 to 2018. The Company values ​​diversity and relationships and offers a safe environment so that people can be exactly who they are.

Locaweb believes good customer service is an important competitive advantage. At the Company, customer service is provided exclusively by an in-house team (support analysts), which provides several business benefits, as analysts are closer to the product and engineering teams. These employees also have a career plan that encourages them to always strive for excellence and quality in the provision of services. This structure allows support analysts to identify themselves with and become even more committed to the Company’s internal culture, its indicators and quality goals. Locaweb offers several customer service channels, and the current level of service offered is reflected in the low churn levels. To ensure efficient customer service, the Company uses the Reclame Aqui (RA) portal.