Industry sources believe that the REA Group (ASX:REA) may have its sights set on Brazil and is looking at entering the market via a joint venture with a large local franchise group.
This play is believed to involve the launch of a new site that leverages the significant investment already made in the REA Group’s platform, its online property portal skills, and the local market expertise of their joint venture partner.
The Brazilian market is highly attractive. There are a high number of agents and developers who are already familiar with online marketing. The consumer appetite for online property searching is also growing rapidly as can be seen by the strong growth of sites such as VivaReal, Zap and Imovelweb.
Australian online businesses have a love affair with Brazil. In November 2008, Seek Limited (ASX:SEK) acquired a 30% interest in Brasil Online Holdings Cooperatief UA ("Brasil Online") the owner of the two leading employment sites in Brazil. In June 2013, Carsales (ASX:CRZ) acquire 30 per cent of WebMotors in Brazil.
If the REA Group does enter the Brazilian market, it will be the first new market for the REA Group for 5 years and marks a departure from its previous acquisitive market entry approach. Between 2005 and 2008, the REA Group entered the UK, European, Middle Eastern, and Asian markets with a series of acquisitions. Since then, they have exited their UK and Middle Eastern investments and closed down operations in New Zealand.
However, entry to the market will not be simple. There are already a high number of well-funded established players. The market has three clear leaders – Zap Imoveis, VivaReal (who recently raised a significant amount of money) and Imovelweb, (who is backed by Navent and Tiger Global). Recently it was reported that VivaReal had moved into second place in the Brazilian market.
A green fields launch into a new market is always challenging. There is not only the need to become familiar with local market conditions, there are also language barriers and timezones to deal with. Brazil is also a massive country, being larger than Australia and having nearly 10 times the population. It has a numerous large cities that each need to be serviced with a combination of an on-the-ground and telephone sales force.
It will be interesting to see if the team at the REA Group do take up the challenge and enter the Brazilian market with a new site.
Simon Baker is the former CEO and MD of the REA Group and an investor in VivaReal, one of the leading Brazilian property portals.
Brian Requarth, the CEO and Founder of VivaReal, will be a guest speaker at the Property Portal Watch Conference in Barcelona in November.