Over the last week we have looked at how casa.it in Italy has been using pop-under banners to drive traffic. And while these have enabled it to claim "leadership" based on unique visitors, the real leader in the Italian market is Immobiliare. What make this scarier for the REA Group is that casa.it was the clear leader in the Italian market and they let this leadership position slip to a well executed strategy by the Immobiliare team. The question now is a simple one - what should the REA Group do?
First and foremost they have to realise that managing a business in an overseas market is very tough - especially when you own 100% of it. They exited New Zealand, the UK and the UAE rapidly (and leaving significant value on the table), and recently they have given up on the Hong Kong market, selling their Squarefoot business into the iProperty Group for equity. This last transaction was the most well thought out exit from an existing investment and creates the potential for upside.
Secondly, they have invested into the iProperty Group (at a rather healthy AUD 3.50 while the shares are currently trading at AUD 2.80) and now have a 19.4% stake. The smart move here would be to let the current iProperty management team run the business and seek peripheral synergies from the investment. For example, up-selling Australian agents to advertising on the iProperty network and sharing this revenue with iProperty. While some people speculate that a take over of the iProperty business is on the books, this would probably be a poor decision as the REA Group has not executed international management well, has lost much of the entrepreneurial DNA that the iProperty Group still requires, and they run the risk of losing the management of iProperty as there is no equity upside and they are former REA.
The REA Group should have acquired Immobiliare when the opportunity presented itself. This opportunity has passed and even a very high offer to acquire Immobilaire will probably not make sense as the core Immobiliare DNA would cash out and leave the REA Group in the same position - remotely managing a large business 8 time zones away.
Given the above, the answer about what to do with Italy is a rather obvious. The REA Group should roll casa.it into Immobiliare for equity and then let the proven Immobiliare team run the combined (and clearly dominant) Italian business. One day they will list the business and every one will benefit.
From an outside in perspective, there is really no other credible option. However, would Immobiliare really want to buy casa.it? Perhaps not. They are executing a great strategy that is seeing their only true competitor slowly die. One thing is for sure, if there is any negotiation, the Immobiliare team will hold most of the cards.