The REA Group, an online real estate advertising company based in Australia, is proving that while real estate is local, significant global growth is possible for an online advertising business.
The company, known for operating the property listings site realestate.com.au in Australia, in the past few years has grown its legs in several additional countries and territories across the globe, including United Kingdom, Hong Kong, New Zealand, France, Germany, Belgium, Italy and Luxembourg.
REA Group most recently entered Dubai and the United Arab Emirates, with a 51 percent acquisition of AlBabWorld.com, Dubai’s largest real estate advertising magazine and a leading Web site.
REA Group said it is paying an initial $1 million (USD) for the ownership stake and will pay an additional $2.1 million (USD) during the current financial year. Swiss Media Group, the founding publisher of Albabworld, will retain 49 percent of the shares and the current management team will remain in place.
REA Group plans to immediately re-brand the Dubai site as propertyfinder.ae in a move that aims to build on the popularity of REA Group’s propertyfinder.com in the United Kingdom, which reportedly is where a significant number of Dubai’s foreign investors come from.
The purchase sets up REA Group for future growth in the fast-developing Gulf region, according to Simon Baker, REA Group’s CEO and managing director. “Acquiring a strong local player with an existing brand and good market position gives us the opportunity to capture a major part of that growth,” he said.
The deal comes just weeks after REA Group purchased Hong Kong publisher, Square Foot, and follows other big purchases in northern Europe this year.
“The more we grow internationally, the bigger the advantage we have over competitors who tend to operate only within individual countries,” Baker said.
The company’s international expansion in recent years has positioned it to operate 18 real estate advertising Web sites in 10 countries today. The strategy appears to be working, as REA Group’s revenues have climbed from $4 million (AUD) five years ago to $108 million (AUD) in fiscal 2007 ($1 AUD = 89 cents USD). In the same period, the number of employees has grown from 30 to 550, Baker said.
The company gets an average of nearly 8 million unique visitors per month to sites across its network, according to an Internet ratings agency. Its net profits climbed 83 percent to $15.1 million, according to the company’s fiscal 2007 earnings report.
REA Group’s overall growth is driven by growth within its current markets and also its appetite for entering new markets, according to Baker. He cautions, however, that “not all these businesses are profitable. Some are losing money.”
How does the growing international company make money? Unlike the United States, Baker says, consumers and real estate agents in the rest of the world pay to advertise their listings on sites such as the ones operated by REA Group.
Advertising costs vary from country to country, Baker said, but in Australia, for example, a listing advertisement costs between $15 and $20. The company accepts residential and commercial property listings.
REA Group also recently launched a vacation rental Web site in Australia, realholidays.com.au, and a contact management technology platform similar to Move’s Top Producer, a widely used system by agents in the United States, Baker said.
About 19,000 agents advertise listings on REA Group Web sites.
Asked how the network of Web sites across foreign borders works together, Baker said a listing that goes into one site is inserted into all the sites across the network. The proposition expands the potential pool of buyers for a listing to reach all 8 million people visiting the sites each month.
REA Group claims it is the only online real estate company to build a global network of property advertising sites.
The company also provides software and Web design services to real estate agents through its subsidiaries, HubOnline (Australia and New Zealand) and Altowin (Belgium). REA Group publishes print real estate publications in the United Kingdom, Belgium, Luxembourg and Australia.
In addition, another principle business for REA Group is to sell display ads to non-real-estate customers, including major financial companies, consumer product distributors and manufacturers.
The REA Group launched in 1995 as realestate.com.au in Australia. Sales in Australia today account for about 80 percent of the company’s total revenues.