Fairfax creates new Domain real estate business entity
Fairfax Media is embracing the Victorian partnership model with real estate agents to control 50 per cent of a newly created property business on a national basis.
The move to the new model comes just a month after the publisher bought out the remaining half of Metro Media, the Victorian-based publishing group started by the head of Domain Anthony Catalano which pioneered the joint ownership model.
It will comes as Fairfax looks to beef up its property offering, one of its most lucrative revenue streams, to compete with News Corp backed rival REA Group, which has a market capitalisation of $6.49bn, compared to Fairfax’s $2.08bn.
Speculation has been rife Fairfax could float Domain as a separate entity, although CEO Catalano was quick to pour cold water on that suggestion, telling Mumbrella: “It’s a question that I get asked a lot but It’s not part of my business plan, it’s not part of any business plan I have presented to the Fairfax board and is not part of any conversation I have had with the board.”
The new entity takes up the Metro Media model and will include a new product that will be 50 per cent owned by agents with the remainder to be held by the Domain Group and its parent Fairfax.
Catalano would not be drawn on how many agency partners would be accepted, or how much they would be asked to put into the new model, but said it was a logical conclusion to the original Metro Media Publishing venture. Expressions of interest have already been sent out to agencies in NSW and Queensland today.
While Catalano would not be drawn on how much would be spent on marketing the new product it is understood a war chest of around $30m has been budgeted nationally.
On the question as to whether there would be a conflict of interest in the model, with agents becoming the publisher that benefits from their clients’ ad spend, Catalano said the Victorian example again proved the case that the shared model was a win for everyone.
“If you bring about competition in the marketplace you improve the market. When I launched the magazine in Melbourne with the agents we had one very simple philosophy: we and to be bigger better and cheaper than our competitors and we produced a bigger distribution magazine, a better quality editorial product at a cheaper price. So where’s the conflict there?” he said.
When asked what the move meant for the REA group Catalano said he was focussed on Domain achieving market share and providing value for its customers, not what his competitors thought of the new venture.
“By having this industry participation model, agents can help improve the competition in the marketplace; the industry wants it and the consumers want the competition. It is only when the industry participates with a media company that they can bring true competition to the marketplace. It doesn’t matter who owns it, it’s that the consumer is better off.”
Robert Burton-Bradley
*A previous version of this story incorrectly stated that real estate agents would take 50 per cent of the existing Domain business.
An interesting new publishing business model, which if the reports are to be believed will have made Mr Catalano a very wealthy young man. I wonder if this is a model that could be applied to the rest of the Fairfax Media divisions that might then provide Gina Rinehart (or other potential investors) confidence that Fairfax has a plan for the future.
As a footnote, Mr Catalano must be the only executive to have been retrenched during the McCarthy era to have multiplied his payout multiple times by setting up as a competitor and then selling back to the company that dispensed with his services.
Cat, you’re a genius! I am simply in awe…..
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Interesting move, but utterly ridiculous…
I used to work closely with real estate agents in an advertising capacity. Most of them have NO concept of how to advertise their properties, they only know how to sell houses!
We would advise and their ‘strategy’ was to pit the two dominant property sites against each other for cheaper listings, then complain why Domain never had as much reach….And you are going to let these guys have a 50% stake in how things are run?!
Desperate times call for desperate measures.
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Smart. Disrupting the model. REA is a absolute giant and Domain doesnt have anything to lose. Catalano has recruited a strong team around him and having watched him for years at The Age, I don’t think anyone should underestimate this man. He’s clearly not doing it for the money. Interesting to watch.
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Slowly but surely people are listing their own properties for sale on the internet and doing away with real estate agents altogether.
Gumtree has released a 14% year on year increase in private house for sale listings.
Capable people who read this article will understand the implications of the Fairfax-Agent co-op model (yes it is a conflict of interest regardless of the outcome).
Food for thought….Domain accepts private listings while REA does not. So could Catalano’s plan be to work with the agents (making truckloads of cash along the way) and at the same time knowingly fueling the private listing market? Is Cat that clever at playing the long game?
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@Bill… Domain can lose more of their (2%) market share?
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Not sure what you mean Cheeky? Seems you’re reading some propaganda?
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>> Discerning Hipster – only a few agents know how to sell property. Most of them only know how to get listings – usually by cutting their sales comm/fees to the bone. Very few actually market the properties.
Once they get the vendor signed up they’ll take a few photos and get “the girl” to get the card for the front window created and the copy for the portals etc sent off. You can tell that most of the “creatives” are done by people who left school with a very poor grasp of English grammar and spelling just by reading a few listings at random.
I’ve talked to a few REA principals about this – they admit they are in the thrall of the portals and their ever increasing fees but are at a loss to know what they can do except cop it.
Google has made it very hard for individual REAs to get their sites on the first page of the SERPs because the portal listings dominate the top 10 results.
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If Fairfax shareholders and ACCC do not climb into this with microscopes both deserve what follows.
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