How News Corp Aims To Increase Its Digital Real Estate Services Revenues
The Digital Real Estate Services segment accounts for more than 35% of News Corp‘s (NASDAQ:NWSA) valuation, in our estimation, and this segment derives revenues by selling online advertising services on its residential real estate and commercial property sites. The company is looking to grow in the property and home services category in Australia and a step towards this goal was its acquisition of 25% stake in tradie search site hipages. [1], which helps people find electricians, plumbers and other home related services. While this is a small stake in a start up, it can complement News Corp’s residential real estate advertising business and is an indication of a larger strategy of increasing focus on the digital real estate business. A major acquisition of iProperty by News Corp’s REA, ((News Corp owned REA acquires iProperty for $414M, medianama.com, November 2015)) which is likely to be completed by the first quarter of 2016, could be the key driver of global revenues for this segment.
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Digital Real Estate – Key Growth Driver
In September 2014, News Corp acquired Move, Inc., the company that operates the widely used realtor.com in the U.S. Given Move’s content advantage, the company felt that it was well-positioned to capitalize on the fast growing U.S. online real estate sector. News Corp’s Digital Real Estate business saw a 71% increase in its top line for Q1 FY 2016, including revenues realized through Move Inc. We expect revenues of this segment to increase from nearly $0.65 billion in 2015 to more than $1 billion by the end of our forecast period. The company is looking for avenues to grow this revenue aggressively and the latest investment in hipages seems to be part of this strategy. In addition to Australia (News Corp has a 61.6% stake in REA Group Limited operator of the Australian residential property website, realestate.com.au) and the U.S. (acquisition of Move, Inc.), the company is looking to expand its digital real estate business globally. In November 2014, News Corp acquired a 25% stake in the parent company of PropTiger.com, a digital real estate marketing platform in India, for $30 million. [2] The Indian Real Estate market is expected to reach $180 billion by 2020. [3], and the acquisition of PropTiger.com has given News Corp entry into this growing market.
News Corp believes that the REA group will drive its earnings in the future and the management has aggressively shifted its focus to the digital real estate services business. [4] News Corp’s strategy to grow in this market includes acquisitions large and small. Among the former are those of large players in new geographies; among the latter are tuck-ins designed to expand its existing real estate services businesses. Once results of these acquisitions are visible, we believe there should be a significant increase in the top-line of this segment.
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- News Corp takes stake in tradie website, skynews.com.au, December 7, 2015 [↩]
- News Corp Press Release, November 24, 2014 [↩]
- Sectoral Report, IBEF, August 2015 [↩]
- News Corp to focus on real estate business, Thenewdaily.com.au, November 6, 2015 [↩]