Whenever a huge new player enters a market, it’s sure to shake up the existing competition. That’s never been more true in the real estate world than it was this week, following the news that Rupert Murdoch’s NewsCorp will buy Move Inc., the independent corporation that runs Realtor.com. Buried within the announcements of the deal were some intriguing hints that NewsCorp may intend to bring some Australian flavor to the American real estate search business – and agents may have to hang onto their wallets.
Though NewsCorp is perhaps best known in the U.S. for its media outlets, which include Fox News and the Wall Street Journal, the $9.1-billion company owns a variety of other properties, including a majority stake in REA Group, an Australian company that has a near monopoly on real estate searches on the web in that country. Under the terms of the $950 million deal, NewsCorp will purchase 80 percent of Move Inc., with a 20 percent stake owned by REA. In a conference call with media, Robert Thomson, chief executive of NewsCorp, was effusive in his praise of REA’s leadership and the experience they could bring to reviving Realtor.com, saying that “eminently successful” REA’s experience in software and products would help NewsCorp to immediately “turbo-charge” Move’s growth.
Murdoch’s Long And Sticky Reach
That experience, however, may be very different from the one American real estate agents are used to. While Move is projected to make approximately $250 million in revenue this year, its Australian counterpart generated over $400 million (U.S.) in 2013 – despite the fact that the Australian real estate market is only about one-tenth the size of the U.S. market. It’s able to generate such outsize returns by squeezing Australian agents’ pockets much harder than its American counterparts – while Zillow generates approximately $320 per month per agent advertising on its site, REA collects more than $2,000.
That’s largely because, unlike in America, there is no MLS system in Australian real estate, and REA has established itself as the preeminent source for online real estate there. (There are other fundamental differences as well – buyer’s agents are extremely rare, average commissions are much lower and auctions are much more popular as a home sale method.)
There were some unsubtle remarks in Thomson’s presentation that indicate he thinks Move has a chance to move in a similar direction, if it’s able to successfully leverage the power of NewsCorp’s media properties to gain more exposure for its listings. In total, U.S. real estate agents earn about $60 billion in commissions each year, of which they spend approximately $14 billion on marketing. Move currently gets only a 2 percent slice of that very big pie, and Thomson said he thinks it can be much, much bigger.
“We believe there is much room for that percentage to grow, because the market is in the middle of secular shift to digital advertising,” he explained.
The sentiment echoes remarks made by Zillow’s chief, Spencer Rascoff, who has repeatedly said that as more and more real estate searches shift online, agents will be willing to pay up to 40 percent of their commissions for highly qualified leads.
It’s unclear whether NewsCorp and REA have set their sights quite that high as they aim for agents’ wallets. Agents will have to hope that the National Association of Realtors’ blessing of the deal will enable their trade group to exert some influence on how the new Realtor.com flexes its marketing muscles.
Email: csullivan@thewarrengroup.com
