Rea Group

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GUEST OBSERVER
When Australian media company Fairfax reported its recent results, the improved performance of its online real estate business, domain.com, appeared to violate a widely held “law” of the digital economy - that digital creates a winner which takes all markets.
After a number of years trailing behind News Corp Australia owned realestate.com.au (REA), domain.com appears to have narrowed the gap with its major rival and its aggressive strategy of growing its user base is translating into improved revenue.
Closer examination however suggests this result might just be a temporary pause in a much more profound transformation taking place for digital in the residential real estate industry. One that is likely to see the emergence of a new set of players.
<h2>Can there only be one?</h2>
It’s become commonplace for observers of the digital economy to claim that digital creates “winner takes all” markets. The classic example is Google’s dominance in the search market. Estimates suggest Google accounts for more than 75% of search, and almost 90% of organic search traffic, with its major rivals, Microsoft’s Bing and Yahoo struggling to get out of single digits. This effectively places Google in a monopoly position and allows it to create enormous revenues through products like paid search and adwords.
Using this example it would be tempting to conclude that REA, having established a healthy lead over domain.com in terms of unique visits and exclusive listings, would pull away from its Fairfax rival and come to dominate the Australian residential real estate market.
Instead, Domain is closing the gap on its rival. In part this reflects domain.com’s aggressive strategy of driving traffic to its site, one that ironically parallels the approach taken by News-owned carsguide.com.au in its battle with caresales.com.au. It also suggests that domain.com’s focus on the user experience is beginning to pay off.
Unlike REA, which has made a virtue out of outsourcing all its development, Domain has retained inhouse development expertise and this has given it the ability to more rapidly add new features that enhance the user experience, such as its mapping functionality.
While there are important lessons here for business about not giving up and continuing to focus on the customer, viewed in longer perspective, it’s hard not to conclude that domain.com’s improved performance might just be a temporary reversal of a much more significant transformation taking place in the domestic real estate market.
There can hardly be a market more ripe for disruption than residential real estate. Australian residential housing stock is worth an estimated A$5 trillion and the market is riddled with the type of information asymmetries and inefficiencies that emerging technologies are ideally suited to address. While REA and domain.com have displaced the listing of properties in newspapers, they have hardly transformed the industry. Rather they seem to offer a digital version of traditional real estate listings with a few additional bells and whistles. Both are underpinned by largely similar revenue models.
<h2>Reinventing the market</h2>
It’s worth remembering that before Google, search was dominated by Yahoo, Alta Vista and Netscape. Google transformed search by developing an algorithm based on relevancy that improved the results users gained from searching the web and by rethinking how it monetised search. Rather than try to keep users on its page and bombarding them with advertising, Google directed users away from its page and towards the pages they were looking for. It’s reasonable to expect that the residential real estate market is likely to undergo a similar transformation over the next few years.
It’s interesting to compare the very traditional approach of realestate.com and domain.com with the radically different business models that are emerging in startups looking to disrupt the residential real estate market.
A good example is openagent.com.au, an Australian-based startup founded by two young women who started their careers in consulting. Recognising the highly localised nature of real estate markets and the importance of agents, openagent.com.au takes advantage of publicly available data sets and user reviews to provide sellers and buyers with reviews and metrics on agents in their local areas.
Rather than attempt to charge users for accessing the information, or agents for better listings, openagent’s revenue comes from the referral fees payable by agents who get listings as a result of the reviews on the site. This is a much purer digital play than either REA or domain.com. By providing them access to data in a usable form openagent.com.au seeks to empower buyers and sellers and increase transparency in this very opaque market.
Perhaps the most important lesson Fairfax could draw from the performance of domain.com is not that the winner takes all logic of digital markets is reversible, but that they should have the courage of their convictions and go all in on digital, in the residential real estate market. Rather than just try to close the gap on REA it should be seeking to build a business that will do away with the need for businesses like domain.com at all. It might just find that if the solution it develops is good enough, the law of winner takes all will reassert itself.
Nick Wailes is associate dean Digital and Innovation, UNSW Business School, UNSW Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/nick-wailes-108369" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Domain versus REA shows it’s time Fairfax went all in on digital

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REA Group Limited has announced that realestate.com.au Pty Ltd has entered into an agreement to buy Hometrack Australia Pty Ltd.
The deal, subject to approval by the ACCC, is believed to be around $130 million.
Hometrack Australia is a residential property data company and a subsidiary of Hometrack Data Systems, which is owned by the UK listed ZPG Plc (Zoopla Property Group Plc).
It was only 15 months ago ZPG bought the research analysis business. They spent £120 million ($218 million).
Hometrack provides instant valuations of properties online without the need for a valuer to asses or visit the property.
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The Hometrack Australia management team will continue to be led by CEO Brendan Darcy.
Hometrack Australia is forecast to deliver revenue between $13 million to $15 million and EBITDA between $6 million to $7 million for their financial year ended 30 September 2018. 
There would also be cost synergies realised in the REA business once the Hometrack business is fully integrated into REA’s platforms.
REA Group CEO Tracey Fellows it represented a natural extension for realestate.com.au. 
"The acquisition allows us to deliver more property data and insights to our customers and consumers.”
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j.ballantyne1990-6AQqhLzZaK

REA Group seeks to buy Hometrack Australia 

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REA Group has announced its industry event series, Prop20, will be transformed into a digital experience for thousands of property professionals to benefit from.
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The new <a href="https://www.proprea.com.au/what-is-prop20/" target="_blank">Prop20 </a>virtual experience will deliver property industry insights, education and training online.
The reimagining of Prop20 followed government COVID-19 restrictions which introduced a ban on events and social distancing measures.
Prop20 offers property professionals insights from industry experts and the opportunity to learn about consumer trends and ways to position a property business for future success.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/5/6/17_REA%20GROUP%20PROP20.jpg" alt="">
REA Group Chief Sales Officer, Kul Singh, said customers can access the entire Prop20 event agenda online with the full suite of presentations now available.
“From a customer perspective, our priority in responding to COVID-19 has been to offer the right support measures and new products and features to help ensure they continue to operate effectively,” Kul said.
“Taking Prop20 digital is another way we’re overcoming the challenges created by COVID-19 and minimising any impacts on our customers.
Prop20 speaker and CEO of Banter Group, Valentina Borbone, said seeing Prop20 go virtual is extremely beneficial.
“There is so much value in the recorded and re-playable sessions. Re-watching the presentations I’ve heard things for the first time all over again, as my attention switches from one key moment to the next. Now is your chance. Learn, fail, learn, explore and evolve. It's our way forward,” Valetina concluded.
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REA Group takes Prop20 event digital

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REA Group has reported a full-year underlying net profit after tax of $185.4 million, up 24% on a year ago, with revenues up 20% to $523 million.
Ad sales were slightly below consensus forecasts of $528 million, as were net profits, which analysts had forecast at $192 million, according to Bloomberg.
The shares, which got to a year high of $51.28 in February, are trading at around $41.20.
REA Group chief executive Tracey Fellows told investors and analysts on a conference call the business had "achieved 20% revenue growth despite listing volumes in the Australian market being down 4%" for the year ended June 30. 
"Listing volumes recovered in June and this recovery has continued into July; giving us some indication of improving market conditions for the first half," Ms Fellows said.
“We’ve accomplished this by providing our customers more choice and better value and by giving the 3.4 million people who use our sites monthly an exceptional experience.
“Our strategy to take our expertise both internationally and to new markets gathered pace this year.
"We have expanded into the world’s largest property market, the US with Move; as well as one of the fastest growing regions through our iProperty investment in Asia.
“And we launched our utility connections service that is helping movers compare and connect services to their property, such as gas, electricity and subscription TV."
Australian revenues increased by 21% to $472.8 million this year.
Its agent customers increased by 5% to 9,922 for the year ended 30 June 2015.
Average monthly visits to realestate.com.au main and mobile sites grew 26% with the average number of monthly page views on realestate.com.au at around 991 million, that REA claims is some six times higher than the number two site, Domain.
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REA Group sees emerging higher property listing revenues - and utility connections 

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Sky News have teamed up with REA Group to televise Saturday auctions as part of a new TV partnership.
The two companies believe that people who trawl the REA Group website www.realestate.com.au will be the majority viewers of the 8am to 2pm Saturday slot.
According to Sky News Australia chief executive Angelos Frangopoulos it will be the people who sell the properties who could prove to be the real interest.
"Our great strength is live coverage and telling stories as they happen," he said.
"It's a great opportunity for REA and Sky News to leverage each other's strengths"
REA chief executive Tracey Fellows agreed by suggesting the partnership takes Sky News programming and broadcasting expertise and combines it with their insights and knowledge.
Anchored by host Bridie Barry, the broadcast will also offer advice for homeowners and investors and will roll out this month.
Each Saturday Sky News Business (Channel 602) becomes Sky News Real Estate featuring live auctions, expert advice for home buyers, sellers and investors, home improvement, technology, architecture and dream homes.
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jrobinson-rf4aSBido9

Sky News and REA to broadcast live auctions

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The property website REA Group has bought Australia’s largest share accommodation website, Flatmates.com.au for $25 million.
The move sees REA, which operates Australia’s largest property portal Realestate.com.au, buy 100% of the Australian business.
It has also agreed to an earn-out with its founders based on an international expansion.
REO Group CEO Tracey Fellows said there was enormous growth in the sharing economy.
"The share accommodation segments in the Australian property market with traffic across the sector growing at over 50 year-on-year." 
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REA buys flatmates.com.au

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REA Group had another record year for revenues and profitability, as it plays a key role in News Corp's establishment of the world’s leading digital property business.
The real estate website REA Group has posted a full year profit of $214.5 million, up 16 percent on last year.
But the company said uncertainty surrounding the July Federal election outcome contributed to July listings being down 11 per cent compared to July last year. 
The bulk of its revenues came from its two Australian websites - $555 million out of group revenues of $630 million. Its European websites had revenues of $51 million and the Asian websites $24 million.
The result followed a 20 percent growth in revenue, with the company recording revenue of $629.8 million, REA group CEO, Tracey Fellows said indicating its international expansion was a key factor.
<img src="https://d1pet9gxylz2tx.cloudfront.net/uploads/2016/08/REA-financial-results-468x89.png" alt="REA financial results" width="468" height="89">
The results followed further global expansion with its acquisition of iProperty Group in South East.
"We also launched the global property network giving consumers access to more than three million listings from 56 countries.
“We have also further cemented our leadership position in Australia on the back of record audience engagement.
"This is particularly pleasing given residential listing volumes were lower in the second half.”
Its international digital real estate websites delivered a 71 percent improvement in earnings before interest, depreciation and amortisation to $344 million – which included a $US122 million gain from a court settlement against Zillow, a competitor to News Corp's Move business.
<a href="https://www.propertyobserver.com.au/images/2016/08/09/Screen%20Shot%202016-08-09%20at%2011.46.32%20am.png" target="_blank">Realestate.com.au's page figures</a>
<img src="https://www.urban.com.au/images/2016/08/09/Screen%20Shot%202016-08-09%20at%2011.46.32%20am.png" alt="" width="404" height="193">
The News Corporation chief executive Robert Thomson has tipped real estate businesses, led by REA, Move and iProperty, to become the biggest driver of earnings.
Thomson said that digital real estate is "reshaping the growth profile of News Corp." 
REA Group is majority owned by News Corp and operates the realestate.com.au and realcommercial.com.au websites. 
<a href="https://www.propertyobserver.com.au/images/2016/08/09/Screen%20Shot%202016-08-09%20at%2011.48.27%20am.png" target="_blank">Realestate.com.au offers the most properties</a>.
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The REA Group also owns a 21 per cent stake in iProperty Group, a stake in myfun.com, online real estate websites in France, Italy, Germany and Luxembourg, and equity in two US real estate websites, including a 20 per cent stake in Move Inc.  
Fairfax Media, who recently reorganised its financials so it could details on Domain revenue, reports its update this week too.
It revealed last week Domain revenues were $223 million in 2014-15 and $113 million in 2013-14. 
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jonathanchancellor-7SQnKwU6yx

Realestate.com.au revenue up 20 percent despite fewer local listings

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REA Group has constructed a technology and invention space in Melbourne's Richmond to create, trial and launch the newest technologies for consumers to experience property.
REALABS will house a range of new technologies such as virtual reality, augmented reality, drones and robotics and will become the training centre for the Group’s global graduates, design engineers and product teams. 
Nigel Dalton, chief information officer has been appointed chief inventor.
The role of chief engineer role will replace that of the chief information officer, with a global search to fill the role underway.
REALABS will officially open in November 2016. 
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Former REA Group CIO Nigel Dalton named chief inventor, gifted tech think tank

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Two of India's online real estate service providers are merging with REA Group investing some US$50 million in the new company.
Once merged, the two portals, PropTiger.com and Housing.com, will become the only player in India offering the full range of online and offline real estate services.
PropTiger is the largest online residential real estate brokerage firm, with Housing.com an online platform for buying and selling homes.
News Corp remains the largest shareholder of PropTiger, and also owns 61.6 percent of REA Group. Representatives of REA and Softbank will join the board of the joint entity, which will continue to be chaired by a News Corp representative.
The board will include Henry Ruiz, chief digital officer, REA Group, Simon Barnett, sales director, News Corp and Jonathan Bullock, managing director, Softbank Group International will join Raju Narisetti (chair), Ravi Adusumalli from SAIF Partners and Prashanth Prakash from Accel Partners as investor directors on the board of the joint entity. 
Dhruv Agarwala, co-founder and CEO of PropTiger, will serve as CEO of the joint entity. Jason Kothari, CEO of Housing.com will move on.
Tracy Fellows, REA Group chief executive officer said India is an important part of their international growth strategy.
"We believe in the potential of the Indian real estate market. REA invests in companies that are leaders in their markets. The joint entity will have access to REA Group’s expertise and know-how from its operations across the globe,” she said.
Robert Thomson, News Corp chief executive said with 1.2 billion people and a rapidly growing economy and middle class, India’s future as a real estate powerhouse is exceptionally bright.
"Clearly there is a compelling commercial purpose to the deal, but we also firmly believe in providing transparency, analysis and insight so that all Indian families, regardless of traditional background or means, will have a better understanding of the property market,” he said.
Jonathan Bullock, managing director, Softbank Group International said PropTiger has already created a great transaction engine.
An affiliate of Softbank Group Corp is investing US$5 million. 
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REA Group invest US$50 million in Indian property portal

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REA Group has agreed to sell its European businesses for $189.7 million to the UK's Oakley Capital Private Equity.
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The digital real estate advertising company, which owns Australia's realestate.com.au website, will sell atHome Group S.a r.l. and REA Italia S.r.l. which operate in Luxembourg, France, Germany and Italy.
REA Group said the sale will yield a profit of $168 million.
The announcement said it will allow the company to sharpen its focus in key growth markets in Australia, Asia and North America.
Oakley Capital has digital interests and a geographic focus in Italy, including Facile.it, a Milan-based price comparison website.
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