Thursday 28th February 2019
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Trade Me chief executive Jon Macdonald isn't phased by NZME's foray into online real estate listings and sees scope to convince more agents and vendors to ditch print in favour of digital.
The country's biggest online marketplace generates about 58 percent of its revenue from classified advertising, the domain that was once the cornerstone of newspaper publishers. Property listings revenue grew 23 percent in the six months ended Dec. 31, on a 7.7 percent lift in listing volumes.
The Wellington-based company largely competes in the online space with Real Estate Institute-owned realestate.co.nz for property listings, although both are scooping up advertising spend from newspapers.
The New Zealand Herald newspaper publisher NZME has been lured into the online market and is optimistic about the gains it's made so far. Launching its OneRoof portal in March last year, NZME generated $700,000 from the new platform, of which $500,000 came in the fourth quarter.
The Herald is Auckland's flagship newspaper. With the country's biggest city accounting for about a quarter of all residential house sales, NZME counts real estate as its biggest revenue vertical, with print listings still popular despite the structural decline in hard-copy advertising.
Macdonald says the migration from print to online offers room for all digital players to boost their revenue from real estate listings.
"People selling houses still spend a lot of money for advertising in newspapers, and our view is that the vast majority of buyers are online," he told BusinessDesk. "That migration of spend means that there's a lot of opportunity for us.
"We will always welcome competition and new competitors like NZME and OneRoof, but we're really confident around the opportunity we have in front of us regardless."
Trade Me was an early starter for online classifieds in New Zealand and established a dominant presence early on. A change in the software company's listing fees in 2013 rubbed real estate agents up the wrong way and a number of national and regional agencies colluded to pass on the fees to vendors, attracting hefty penalties from the Commerce Commission.
The company is targeting real estate agents and property vendors to shift more of their ad spend online. While New Zealand's housing market activity has slowed down from the giddy heights of a few years ago, Macdonald said volumes are stable enough to support that momentum.
The online marketplace's new 'premium listing' product - which provides greater prominence in search results and better branding for agents - is seen as key to Trade Me growing property revenue. About 15 percent of all listings adopted it in the December quarter, something the company described as outstanding.
Trade Me spent several years investing in its product to avoid becoming stale in an increasingly competitive environment, and Macdonald said that hard graft is paying off now.
"It's really gratifying."
Still, that doesn't mean it's immune to wider market forces and Trade Me noticed a softening in its motor listings, which still recorded an 8.8 percent increase in revenue.
Macdonald said used car sales were tapering off after several years of strong demand. That is in part due to supply chain issues, such as biosecurity scares that have blocked the arrival of thousands of imported cars, and the Takata air-bag recall. At the same time, consumer demand has also dwindled.
"We thought it was a good result in the context of that softening market, but it's a little too early to say what it means," he said.
Trade Me's first-half result yesterday will probably be its last as a listed company. The online auction site is subject to a $2.56 billion takeover by British private equity firm Apax Partners. Shareholders will receive the notice of special meeting to decide its future next month.
The $6.45 per share offer was a substantial premium to the $5.10 the stock was trading at before the buyer interest emerged last year, and still higher than the $6.38 it closed at yesterday.
Macdonald had planned to leave at the end of last year but stayed on to help guide the firm through the transition period. He is unsure how long that will take.
"For me, it was always important to leave Trade Me with the business in good order and at a nice clean point in time," he said.
Until then, Macdonald said it's very much business as usual for Trade Me, which is forecasting annual revenue and operating profit growth of 5-8 percent, implying revenue of $262.9-270.4 million and profit of $101.4-104.3 million in the year ending June 30.
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