The real estate portal industry is going through a period of unprecedented consolidation. Just in the last few weeks, the industry has seen the number of players on the Latin American chessboard shrink as QunitoAndar bought out Navent and Lifull Connect snapped up Properati.
Even fierce rivals like PropertyGuru and iProperty can surprise by putting aside their PR battle and joining forces if the numbers are right as they did in Malaysia last year.
If anything is a given, it’s that bosses at portal operating companies are out there assessing their next M&A target. Together with OnlineMarketplaces.com founder and veteran of many portal M&A deals, Simon Baker we thought we’d have a go at predicting a few…
Does a newspaper really have the expertise to run a real estate portal? There are reasonably big portals out there that are run by newspaper companies, none of them is as big or important as Indian market-leader MagicBricks.
The Indian market is still fragmented both at the agency level and at the portal level, but that is changing.
REA Group first invested in India in 2016 with the acquisition of challenger portals Housing.com and Makaan along with brokerage firm PropTiger. 2021 saw REA take a controlling stake in those businesses and rebrand the group to REA India.
After years of ‘amazing potential’, REA’s patience and investment in India looks set to take off. Its portals have grown and are now challenging MagicBricks and 99acres for top spot according to Similarweb.
A deal to buy MagicBricks would consolidate the market just as a critical mass of its agents become sophisticated enough to have online marketing budgets and its users increasingly go online to hunt for a new place to live.
Simon Baker's verdict: “The Indian market is rapidly growing and very attractive. Portal plays such as 99acres and Magicbricks dominate the eyeballs in the Indian market however monetisation through advertising models has always been challenging. Digital transaction businesses, such as Square Yards, are likely to be the future of real estate marketing in emerging markets."
"For that reason, MagicBricks would be a good acquisition for REA India - primarily as a lead source for the PropTiger business. Perhaps Square Yards should look at the Magic Bricks business as it would be good for generating leads for its sales business.”
atHome Group runs minor property portals in France, Germany and Belgium and is the market leader in Luxembourg.
AVIV Group is the division of German publishing giant Axel Springer that operates its real estate classifieds portals. It already has Luxembourg based atHomeGroup in a geographical sandwich between SeLoger (French market leader) and Immowelt (German #2).
AVIV has spent the last 12 months hiring almost an entire new C-suite and selling off the vacation rentals business of SeLoger but it has been very quiet on the M&A front, preferring to invest in disruptive PropTech businesses through its VC arm. Could now be the time to move into Luxembourg and add a market leader to the portfolio? It’s not like Axel Springer doesn’t have the money…
Simon Baker's verdict: “The atHome Group is a small but attractive business operating in the greater Luxembourg region. Back in 2006/7, when I was CEO of the REA Group, we bought the business because it had the characteristics we liked: a dominant, profitable player in an attractive market. It would make a great addition to the AVIV Group.”
If the rumours are to be believed then diversified Indian real estate marketplace business Square Yards is planning to go public and is looking to raise 1,000 Crore INR (around $134 million) in doing so.
That looks like a lot of ammunition for a company that has been very trigger happy with its M&A business over the last 12 months having acquired Azuro, a rental and property management platform in 2020, followed by data intelligence, asset management, and real estate services firm, PropsAMC.
Square Yards is an up and coming company with a rising EBITDA margin and it operates in a maturing market that is ripe for consolidation.
Nestaway is an Indian curated rentals specialist that has been renting out homes since 2015 (long before the model took off in the USA). The company is perhaps running low on funds - according to Crunchbase, the last funding event was a Series D in 2019.
With its recent acquisitions, Square Yards has shown that it is not afraid to branch out and diversify while Nestaway is still operating in a competitive market against the likes of NoBroker and OYO (the Indian hotel booking portal about to IPO at a $9 billion valuation) and could use a boost.
Simon Baker's verdict: “I really like the Square Yards business. It operates in the digital real estate transaction space and accesses the commission revenue stream. I believe that this is the future of online real estate marketing and the traditional marketing businesses, like REA and 99acres, will either move into the transaction space or will become less relevant.
"Acquisitions like Nestaway could increase Square Yards presence in online transactions by accessing the highly attractive rentals segment making it easier for the rentals and sales segments to work closely together.”
It’s no secret that the Chinese real estate portal FangDD (NASDAQ: DUO) is having big problems on the NASDAQ and if it doesn't revive its share price soon it is in danger of being struck off the index. No point in letting a good portal domain go to waste, right?
Fang.com (no relation, NYSE: SFUN), is also a publicly listed Chinese portal company that is also struggling to keep its share price above water. The NYSE laid down the law to the company back in November for not filing its numbers for 2021 on time.
Ever since Chinese real estate developer Evergrande nearly defaulted on its debts in the Autumn of 2021, the Chinese market has been suffering. Only the strong with truly deep pockets will survive.
Whereas Fang.com is a pay to list business, its similarly named competitor FangDD is a pay-for-performance commission-based operation. It might be that the wealthier Fang.com wants in on the increasingly trendy commission-based model and sees buying a struggling competitor as a great way to do that.
Together they might stand, alone they might fall...
Simon Baker's verdict: “Online real estate marketing and digital sales/rentals is a scale game. The bigger you are, the more chance you have of being profitable and riding out the bumps in any market. Therefore it wouldn’t be that surprising to see more consolidation around the world (antitrust permitting) and Fang.com/FangDD could be one of these mergers.”
Schibsted is the giant Norwegian publishing company that spun off Adevinta and which has the Norwegian classifieds market absolutely sewn up already. Boliga is an independent Danish company that runs several real estate portal sites including #2 portal Boliga.dk.
As media reports from Denmark indicate, this deal has been on the cards for a while. According to MediaWatch.dk, Schibsted’s CEO Kristin Skogen Lund, went as far as to say that she does not rule out further investment in Denmark after the 2021 acquisition of Danish autos vertical Bilbasen.
If you needed another sign that this one might already be being discussed behind closed doors, Boliga actually requested de-listing from the Copenhagen NASDAQ in November of 2021.
While it’s true that big companies like Schibsted might prefer to go after clear market leaders, the Danish market leader (Boligsiden) is owned by an agents association. The next best thing for the Oslo based company is to buy out the #2 and take a shot at maximising revenues by integrating it in its online classifieds empire.
Having looked through them all last year for our Portal Standards Report, we can say with confidence that real estate vertical marketplace sites with good UX and up to date listings in Africa are like humble venture capitalists on Linkedin - very rare.
Nnamdi Chineme and the team at Lexel Digital are to be applauded for having built five such portals across Africa. Despite not having a big name backer, Nigeria Property Centre is the market leader in terms of traffic according to Similarweb - above the likes of Private Property (ROAM), Property24 (Naspers) and PropertyPro (Frontier Digital Ventures).
Nigeria Property Centre has been operational since 2011 and you have to think that soon the company and its investors will be rewarded as the property market matures and EBITDA margins for similar companies in similar markets (such as FDV's West Africa operations shown below) approach positivity.
ROAM (Ringier One Africa Media) already backs Private Property in Nigeria and will doubtless be keeping tabs as will Frontier Digital ventures which already operates in Nigeria and Ghana and Africa’s largest media company, Naspers.
Adevinta has been selling off assets from its ‘Global Markets’ segment for some time. It sold Yapo (Chile), Fincaraíz (Colombia), Avito (Morocco) and Tayara (Tunisia) to Frontier Digital ventures last year and it confirmed in Q3 of 2021 that it would also be divesting from its business in Australia (Gumtree, Autotrader and Carsguide) and South Africa (Gumtree) in early 2022.
Mexican classifieds site Vivanuncios might be next on the chopping block with Adevinta CEO Rolv Erik Ryssdal recently confirming that assets outside the company’s European core markets are “under strategic review”.
The question here looks to be more about price and finding a buyer than it is about whether or not Adevinta wants to sell up. Vivanuncios has been trying to get rid of its dwindling autos business for years and its real estate vertical, although still strong in the provinces, has fallen behind Inmuebles24 in recent times.
Might we see Frontier Digital Ventures step up and acquire another one of Adevinta’s LATAM assets? Or might we see EMPG-owned Lamudi, currently the #3 player in terms of traffic according to Similarweb, step up and consolidate the market?
Simon Baker's verdict: “Mexico, along with Brazil and Colombia, is considered to be one of the most attractive LATAM markets. Therefore Vivanuncios would be a good consolidation move for any of the existing players. The challenge, as always, will come to price and integration. Assuming these can be overcome, don't be surprised to see Vivanuncios with a new owner before the end of the year.”
Mercado Libre is the Argentinian monolith success story that serves as the Amazon.com for much of Latin America. While it has long operated successful generalist online classifieds sites ‘MELI’ is not really into the verticalization of real estate and only operates two true portals in the region (Portal Inmobiliario in Chile and TuInmuebles in Venezuela).
QuintoAndar is the PropTech unicorn darling of Sao Paulo that started off digitizing rentals before moving into sales last year. The company made a big splash in the industry recently with the acquisition of Navent’s real estate portals.
There’s no point in being half-hearted about real estate in 2022, you’re either a specialist or you sell-off. That’s what generalist OLX Group looks to be doing (especially in Latin America), and that’s what MELI might choose to do as well as it turns its attention firmly towards its goal of being a true FinTech Company with its Mercado Pago product.
Whether QuintoAndar, Lifull or anyone else would want to buy anything in Venezuela is doubtful given the troubles there but in PortalInmobiliario.com in Chile, any potential buyer might well be on to a winner as the site has long been a market leader in terms of traffic.