3 Reasons News Corp Bought Realtor.com's Parent Move
At the end of September, media giant News Corp agreed to purchase Realtor.com's parent company Move for a price of $950 million. News Corp has trailing 12-month trailing revenue of more than $8.5 billion. With Move's revenue in the same period being less than $250 million, investors shouldn't expect the acquisition to have an immediate impact on News Corp's top and bottom lines. That said, taking the long-term approach there are three reasons why News Corp made this move.
Worldwide digital real-estate presence
Not many people think of News Corp as a leader in digital real-estate platforms, as the company is best known for cable programming and its ownership of the Wall Street Journal. However, the diversified media giant actually has a solid footprint in digital real-estate, and the acquisition of Move makes that print even larger.
News Corp owns more than 60% of the digital advertising business REA Group, which owns and operates realestate.com.au and realcommercial.com.au. These two sites are Australia's largest residential and commercial property websites, respectively. In addition to a controlling interest in REA Group, News Corp also has a 17% stake in iProperty Group, who operates similar sites in Hong Kong, India, and Singapore among others.
In News Corp's most recent fiscal year it generated $374 million in revenue from digital real-estate assets. Therefore, Move fits nicely into New Corp's portfolio, and gives it a U.S. platform. Realtor.com had more than 31 million average monthly users during the second quarter.
In other words, the acquisition of Move makes News Corp one step closer to having a worldwide presence in digital real estate, an approach that Priceline has implemented in the online travel site via acquisitions, which has been largely successful.
Using News Corp as a marketing platform for Move
That said, investors can't deny that in the U.S., Move is a distant third to Zillow and its recent acquisition, Trulia. Combined, Zillow and Trulia had nearly 70 million active users as of June, and represented 71% of ComScore's real-estate market estimates. Move faces an uphill battle to become a market leader in the U.S.
But it does have two things going in its favor. First, Move has an agreement with the National Association of Realtors, giving it access to 800 property listing services to provide up-to-date information. Second, thanks to News Corp's acquisition, Move now joins a highly reputable digital network that creates about half a billion page views each month, according to News Corp executive Robert Thompson.
Thompson went on to say, "every single one of these pages will be a marketing opportunity for Move." In other words, News Corp plans to grow Move's online presence by leveraging its network of digital customers. This means that Move has upside revenue potential, or that News Corp will try and grow Move significantly larger with this approach.
Exceptional opportunity in online real estate
All things considered, one of the biggest reasons that News Corp may have purchased Move is because it has barely scratched the surface of its revenue potential. As of now, Move's biggest site, Realtor.com, creates the majority of its revenue with advertisements. However, News Corp's Australian assets create revenue by providing real estate agents with advertising solutions to sell or rent their properties, much like Zillow and Trulia.
As a result, News Corp might very well try a similar approach with Move, selling advertisements to real estate agents like Zillow. If so, the revenue growth potential could be enormous. For example, research firm Canaccord estimates that only 53,000 of the 675,000 plus real estate agents who have profiles on Zillow pay for advertisements on the site. Canaccord also estimates that Zillow and Trulia combined capture just 2% of advertising budgets within the real-estate market.
Given the fact that Zillow and Trulia have generated a combined $464 million in trailing 12-month revenue, and have grown revenue in excess of 50% year over year, investors can conclude that the revenue potential for digital real-estate platforms is huge and that agents are gravitating toward such platforms. It's no wonder that News Corp saw the opportunity and was willing to pay nearly a billion dollars for Move.
With all things considered, News Corp's acquisition of Move makes sense. News Corp already has a leading portfolio of worldwide digital real-estate assets. The company clearly believes it can grow Move's business through its large distribution channels, and the revenue market for digital real-estate platforms is still very much in its infancy. As a result, Move may not contribute a meaningful slice of News Corp's overall business in the next year or two, but long-term Move might prove to be a very important acquisition to News Corp's future revenue.
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The article 3 Reasons News Corp Bought Realtor.com's Parent Move originally appeared on Fool.com.Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Zillow. The Motley Fool owns shares of Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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