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If you want to buy the best house in a desirable neighbourhood, you can make a discreet approach and even put notes through the door, but an occupier who does not wish to sell will ignore you. The same applies to Rightmove, the UK’s leading property listings group.
Rightmove this week spurned a £6.1bn bid by REA, its equivalent in Australia, which is majority owned by Rupert Murdoch’s News Corp. It was REA’s third takeover approach to Rightmove this month, showing the appeal of classified advertising to publishers, long after they controlled the business. Small ads for jobs and property that once had to be placed in papers now appear online.
News Corp’s stake in REA contributed 70 per cent of the US company’s market value of $15.4bn this week, far outweighing its more famous assets, from Dow Jones to the book publisher HarperCollins. A tiny investment made by Lachlan Murdoch about 25 years ago has come to dominate the business in the view of shareholders, if not of its 93-year-old patriarch.
Perhaps this will count in favour of Lachlan, now chair of News Corp, in a succession battle under way in a probate court in Nevada. Rupert Murdoch wants to alter a family trust to hand his eldest son full control after his death, which is contested by three of his other children. He hopes for Lachlan’s right-wing views to prevail at Fox News and property ads could seal the deal.
News Corp is one of many media groups finding that online classified ads carry more financial clout than news. The German billionaire Mathias Döpfner last week struck a €13.5bn deal with the private equity firm KKR to break up Axel Springer, which publishes the German newspapers Bild and Die Welt, as well as the US news sites Politico and Business Insider.
He will run Axel Springer’s media business, which was valued at €3.5bn, while KKR will be the majority owner, with an investment partner, of its €10bn classified business. This includes the European property listings group Aviv and the job recruitment site StepStone. “I am a firm believer in the future . . . of journalism,” Döpfner declared, but KKR is a firm believer in asset values.
It is hard to build a strong online classified business but it keeps becoming more profitable once it dominates a market. Unlike news publishers, platforms such as Rightmove do not need to pay for content: they are paid by agents to list homes for sale or rent, and to show them prominently. This gives them data on home buyers and sellers that they can exploit in other ways.
REA runs the biggest home listings site in Australia and also owns one of the leading mortgage brokers. It uses artificial intelligence to personalise homepages so potential buyers will spend more time online, filling in details that help agents target them better. It also has a data platform that banks and lenders use to value property. The more data it gains, the more it can also sell.
This enables the value of leading classified businesses to carry on growing. Auto Trader, the UK vehicle listings site, is worth more than three times as much in inflation-adjusted terms as when Guardian Media Group sold its 50 per cent stake in 2014. Like Axel Springer, GMG took the money to bolster its news business: with hindsight, patience would have produced more.
News Corp has taken the opposite approach by retaining its holding in REA despite pressure to spin it off from activist investors, including the fund Starboard Value. The holding would have been diluted had Rightmove accepted REA’s offer, but it would still have been a pivotal moment. News Corp’s main UK asset would have become a listings site rather than news titles such as The Times and The Sun.
This would not have been as strange as it sounds. Despite News Corp’s roots as an Australian newspaper publisher and Rupert Murdoch’s fondness for news, it has stealthily been shifting towards data. It acquired the US real estate listings site Realtor.com, in which REA holds a minority stake, a decade ago. It has since added specialist businesses including Opis, an energy industry data provider, to Dow Jones.
They are less exciting than the New York Post, let alone the tensions within the Murdoch family. But they show the direction in which things are going in the information industry. Publishing businesses that were led by news and supported by print classified and brand advertising have changed. News is more precarious online and advertising data is more precious.
That makes Rightmove desirable and leaves News Corp with an image problem. Time for an investor-friendly rebrand: Data Corp, perhaps?
https://www.ft.com/content/e0797d30-fa01-4952-a986-d9904b408d49
