Let’s roll back the clock to the Sydney Olympics in September 2000. Not only was it a time that Australia partied hard but it was the last time that domain.com.au had more unique visitors than the REA Group’s realestate.com.au. In the last 12 1/2 years, a lot has happened. The REA Group is now valued at over $3.4 billion while Fairfax, the owner of domain.com.au, is valued at just $1.3 billion – and that includes all its print assets.
Those results indicate that the game may have been run and won. However Fairfax should not give up hope, as there is still potential to give the REA Group a run for its money in the Australian online real estate market.
Before looking at what Fairfax should do, it is important to understand what happened between September 2000 and today.
The history of the Australian online real estate market is littered with missed opportunities – especially when it comes to Fairfax.
In early to mid 2000, Fairfax had the opportunity to take an equity stake in realestate.com.au Ltd (now known as the REA Group Ltd). The business was on its knees, fast running out of money and desperate for new funds. It had burned through almost all the money raised at the float, it had gone through several management teams, its burn rate continued to remained high, and it had a lack of focus in executing what was a confusing business plan.
However, Fairfax missed this opportunity to take a stake in realestate.com.au and consolidate the market due to a lack of desire to pay what they thought was too much for the asset. In reality it was probably a combination of over confidence in their ability to execute its online strategy, a lack of understanding of the power of market consolidation, and a few too many egos at play. The same story can be seen for Fairfax with its chance to take a stake in both seek.com.au and carsales.com.au.
Funnily enough, News Corp acquired its 42% stake in realestate.com.au in late 2000 for just $2.25 million in cash and $8m in marketing contra. An absolute bargain!
Secondly, Fairfax missed the opportunity to acquire property.com.au in 2003 when the realestate.com.au acquired the company for just $9m. Once property.com.au was merged with realestate.com.au, it further extended its lead in the Australian market. If Fairfax had acquired property.com.au, it would have significantly closed the gap that existed between domain.com and realestate.com.au at that time. The result would have been a duopoly rather than a realestate.com.au lead market.
Lack of Focus
The second difference between the domain.com.au and realestate.com.au was focus. During the period 2001 through 2004, realestate.com.au focused almost solely on signing up real estate agents onto subscriptions. This single focus made it easy for all employees and customers to know exactly what realestate.com.au stood for.
In contrast, it appeared that domain.com.au was unsure as to whether it was a property portal and thus attacking print or the first line of defense for the protection of print. Either way, this lack of focus and lack of clarity in mission, meant that the REA Group was able to significantly out perform and out execute domain.com.au.
It is through this superior execution that the gap between real estate.com.au and domain.com.au expanded month after month. Once momentum was built, it was hard to turn back the clock.
Differences in Strategy
From the realestate.com.au perspective, it was hard to understand what domain.com.au was doing. For realestate.com.au, there was a clear view that it needed to get every agent and developer in Australia onto the site and it was through this approach that content would be built. Once you had content, the consumers would come. The focus was on not only agents and developers, but also building data feeds into the business.
Domain.com.au, on the other hand, seemed to be focusing on building its audience and brand awareness in the hope of attracting agents and developers to advertise. Clearly this approach is flawed as without content, consumers wont come back.
The final area of difference between realestate.com.au and domain.com.au was around how the companies operated. Realestate.com.au was a separate company and operated independently of its major shareholder, News Corp. It is through this separate operation, the company was able to act in a highly entrepreneurial manner.
Some of the areas in which realestate.com was able to outperform domain.com.au included:
- offering equity to its employees either directly through options or indirectly through their ability to acquire shares on market
- innovative staffing packages due to no need to follow any corporate guidelines
- ability to attract quality staff who wanted to work in an entrepreneurial environment
- the ability to make fast decisions and implement the without multiple signoffs
- the ability to retain quality resources by creating an environment that was too attractive to leave.
Tomorrow we will look at what Fairfax and domain.com.au could do to change the game and provide stronger competition for the REA Group.
Simon Baker is the former CEO and MD of the REA Group. In 2000 he did the deal for News Corp to take at 42% stake in the REA Group. Between 2001 and 2008 he was responsible for turning the business around growing revenues from $4m to $155m, turning a $6m loss to a $35m profit, and growing market cap from $8m to a high of just under $1bn.
Today Simon invests in and provides strategic and operational advice and guidance to a range of property portals around the world. He can be contacted at [email protected]