Today he talks about keeping up with 14 different companies, how the classifieds sector is changing and why he only needs one of his investments to come off.
I think the last time we caught up with you, you had invested in online auto classifieds business called car advice. How big is the Baker empire now?
We have two companies, there's CAV Investment Holdings and then there's Classified AdVentures. The CAV Investment Holdings business has made nine investments. That includes everything from Car Advice through to Quickflix, iProperty, an investment in Japan, one in the US – so they're all in the online classifieds area and we're happy with most of those investments, but like always some are good, some are not so good. So that's all going very well.
Our other business, which is Classified Ad Ventures, is really focusing on building our five new products, we think of it as an incubator. We've identified five products that we think are interesting in the market and they include things like listing syndication, we've got a web design business, we've got a whole range of stuff. Each has got an underlying mantra, which hopefully makes money while we sleep; it's born global; it has inherently high EBITDA margins and is relatively difficult to knock off once you have momentum around.
And are all those businesses focused in the classified area?
Yes. We just like the classifieds area and so we're building those out. So you've got nine investments which are into established companies that run by themselves with CEOs and boards, etc. And the other side is we've got an incubator where we are actually building from scratch.
There seems to be a distinct strategy of not having all the eggs in one basket.
Are you going into this with what has traditionally been more of an American philosophy that some of these will work and some of these just won't?
Absolutely. If I look at the investment side, there's two or three I know that are probably not going to work out and there are two I think that are going to be really good. I just need one of them to come off and I'll be happy.
And in terms of the incubator side, definitely there are two I'm highly excited about, two I'm probably moderately excited about and one I'm going 'what the did I do?' Well, it's not quite that bad, but it's got hope.
So I'm a firm believer in knowing not everything's going to work, we don't have to be perfect in everything we do, we just have to do it, learn, redo it again better and better each time.
With the different investments and the different assessments you've just made of them there, how do you figure out which one gets your time? Do you divide them equally or do you have to be careful that the ones that you think are winners don't dominate too much?
The way I like to approach this is (we'll just talk about the incubator businesses) just making sure that they are properly staffed, they have a CEO, they have access to resources, cash, etc, to be successful. And then I work with the leaders of those businesses to really ensure that there's clarity and vision and that we're all aligned, that they approach things as simply as possible.
Sometimes they want to know what do we do in this situation, we try and work ways to try and cut corner. Whatever we can do to get something to market so that we can then hopefully try it in the real world and if the customers like it, we can then accelerate, if not we'll modify, come back and go out again and so on.
So what that leads to is that you end up investing your time not in the business but in the people who are running those businesses, so that you give them comfort that they're heading in the right direction and that they feel empowered to deliver great results. And they all have equity in those businesses. So that structure seems to be working very well for us.
And with the investments, how hands on are with their boards and management?
It varies. I'm on the board of about three or four of them but some of them are quite small or they're not like public company boards so your reporting requirements aren't as stringent, they're small private companies. In those businesses you have far more focused operations discussions off the tongue.
So I'd probably end up spending half my time working on the investment and half my time working on the incubators. But it's not just me. The Classified Ad Ventures head office team is eight of us, so we get to work across each one of those businesses, and then the broader group is about 25.
Starting to get pretty sizeable.
Yeah, we've just got to make sure that we don't get ahead of ourselves. I think the beauty for us is we've got this much to invest, we know what we want to do, let's go after it. And so we try not to leave anything underinvested or not given the opportunity to be successful.
How do you think the online classified sector has come through the GFC? It's always a testing time for companies in any sector, but have those businesses come out a little stronger having proved their mettle?
I guess the overall characterisation globally is I'd rather be online classifieds than traditional classifieds, that's the first point. The second is traffic numbers and in most cases revenue numbers have held up around the world. Then you can get more specific. For example, online real estate Australia versus say online real estate in France, well they're different beasts in some ways. Although there are a lot of similarities, still there are differences. So if you just look at the Australian market you'd have to say that real estate has done very well, cars have done okay and jobs are certainly bouncing back. But I would still rather have online classifieds than not. And the people who invested in, especially in the REA Groups, the Seeks and the Carsales in the early days have done very, very well. And the traditional media guys that didn't, haven't.
Very true. Are there any emerging trends in the classified space? Is there more convergence with social media that we might see in the near-term?
I think first of all there are probably three major ones.
First Google is focusing more and more on this space, from a classified perspective that will create a little pressure for people out there. Although it doesn't necessarily mean they'll be successful, it just means there will be nervousness because of who they are. So they'll probably get smarter on how they portray classifieds on their sites and integrate them and such.
The second trend is mobile. That's certainly on the rise and becomes more and more relevant as the devices become more and more ubiquitous, and more importantly the 3G network speeds become better.
And then finally yes, social media is there, but depending on which classified segment you're in really tends to lead to a question about whether social media truly has an impact on them or not. And I think it probably doesn't have a major impact, although it will become a way of driving traffic to the traditional classified segments. I think a lot of people think that social media is going to change the world in 10 different ways but I just don't believe it will.