Two months ago entrepreneur Simon Baker was dumped as CEO of online real estate company REA Group. He tells AMANDA GOME why his sacking had a negative affect on the company, reveals his new born-global ventures, and throws in a few tips on how to sell yo
By Amanda Gome
Two months ago entrepreneur Simon Baker was dumped as CEO of online real estate classifieds company REA Group.
He tells that the way he was sacked has had a negative affect on the company, reveals his new born-global ventures, and then throws in a few tips on how to sell your home.
Simon Baker left online real estate business REA Group after being unceremoniously sacked as its chief executive several months ago.
He has now started a new venture. It is a born-global company that aims to revolutionise the way that real estate agents conduct their businesses.
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Amanda Gome: When you left REA you were pretty pragmatic about it. What are your thoughts since?
Simon Baker: That was early August, and my mindset at that point was I was going to stay until June next year, so I would have done the 2009 financial year. It just happened to bring that decision making process forward rather rapidly. I’m actually fine with it.
The process could have been handled better and for me the major concern around the process is not the impact it had on me, but the impact it had on the business. I think one of the key things for any business that goes from a CEO who has been there for a period of time, and I had been there for seven and a half years.
During that time you saw REA go from 30 people to 750 people?
When I joined it was $4 million in revenue, $6 million in losses, a market cap of $8 million dollars and 30 people focused in Australia. When I left it was revenues of $155 million, EBITDA profit of about $37 million and market cap of $600 million to $700 million, depending on the sharemarket, and 750 people across 10 or 11 countries.
So we had rapid growth in that period of time. The important point is that when you transition from someone who has been there for a long period of time and has a lot of people who have grown up in the business, and you have hired basically all of them, either directly or indirectly, then to a new person that transition moment is incredibly important.
What happened here was that transition moment wasn’t thought about clearly. So it was sort of, ‘cut him off, put a temp guy there until we find someone else’. I’ve not spoken to the new person who runs the business (Greg Ellis from Sensis) but I would have thought that he’d probably want to have a chat with me, just to understand some of the nuances about the business, the people etcetera; so I’ve heard nothing.
I think what ripple effects that has is that people get very nervous in the business, you have potential disruption. The CIO has now left, I know other people who are thinking of leaving, a lot of long-term people who have been there for a while, a lot of institutional knowledge.
Still being a share holder, I would want to make sure that they continue to drive forward and forward aggressively. It is how they make sure that the transition has minimal impact, not major impact in a negative way to the business.
One of the rumours was that you were difficult, you always wanted to go into new markets that the REA board mightn’t necessarily have wanted to have gone into, you moved too fast for them.
I think being entrepreneurial and trying to grow the business quite rapidly, we certainly had a very clear vision. We conducted several strategy sessions with the board over three, four, five months and had agreement with the board about where we were going and what we were going to do in those markets.
The objective is of course, as it always is, is to move into those markets. If you decide you are going to do something, then you should just get on and do it. Our objective has always been to move as quickly as possible and that is how we were able to grow the business from $4 million to $155 million.
But is there a time you should be slowing a little, especially going into this market? Looking back, what was their main point in casting you aside?
Well, you would have to ask them that question. They’ll say that they wanted someone who can manage a global business…
Well, you could. I mean obviously it’s not that, so what else was it?
The culture we created in the business was one of seek forgiveness, don’t beg permission. You’re in a business, you’re in a new environment, the online real estate space is emerging and we have to keep pushing the boundaries to understand what we can be because you are going to keep having competitors come at you, whether it is in the Australian market from a Domain or maybe a free listing player or My Home etcetera. You’ve got to be able to deal in that environment.
You have one sort of culture and I think the board had a different culture, which is maybe more of a traditional business culture and I had to bridge those two. I think eventually, where my true passion lies, is more in the ‘how do I grow a business rapidly’ type environment, and get out there and deliver the results.
You almost typify the entrepreneur dilemma at the moment for those leaders who have more conservative boards, operating in a downturn. What advice have you got for entrepreneurs like you that are dealing with boards that have been supportive in the boom but are now very nervous, and looking at replacing them with people that are slower and not as aggressive?
I think have open and honest conversations with the board, and make sure they’re having open and honest conversations with you about how they’re feeling. Listen to them, but at the same time you’ve got to deliver the business.
And if you are an equity owner in that business, you want to make sure that you’re maximising the wealth for everyone, which is a very important thing to do. I think it’s only by having those open conversations and having clarity in what you want to do and why you want to do it, and taking onboard the comments of those around you is very, very important.
Some of those things I did well, some of those things I could have done a lot better in hindsight. But I also think it’s a two way street, and that’s where if you’re delivering the results then I think you also deserve the respect for having delivered those results.
You had a 3% shareholding. You’ve still got all your shares? You’ve sold down a little bit?
I’ve sold off a little bit of my shares (10%) because I think that holding most of your asset value in one business that now you don’t have control over is risky, and you want to defray your risk around that. I think that short term the business is in a good position. It’s the market leader in Australia, that’s the main driver of value across the business. It should be undergoing continued rapid growth or strong growth in the Australian market.
And is it?
I don’t know, I’m not there.
I’m sure you watch it.
I certainly do watch what’s happening. I do listen to what the agents are saying because I’m friends with a lot of those guys. At the moment I think short term the business will be fine. I think the real challenge for the business will be long term and whether they can make the projections that we were working towards come true.
What projections were they?
I can’t say what they were.
OK, so what are you doing now?
I still like the online real estate space and I think that anything you do has to be global in nature. So we’ve created a business called Classified Adventures.
You left in August, did you take a break at all?
Not really, no, as they say a change is as good as a holiday. And the good thing is my lifestyle is very much my own, what I do and when I do it.
So there’s a few of us, we’ve got together to create a business called Classified Adventures. And what we’re very much doing is targeting initially the online real estate space around three things; inform, innovate and invest.
We want to be the voice of online real estate globally. So everything’s got a global perspective. And we’ve got two businesses in that. One is called Property Portal Watch, which is a business-to-business publication for people who run property portals around the world. It’s about bringing them together around common issues that they face and helping provide them with news and information, views and opinions about what’s happening.
We then become the hub of knowledge around that market. And there are 600 to 700 property portals around the world. And that becomes important as you’ll see in a minute.
The second one under the inform category is Property Ad Guru, and we’re just about to launch it. That is a B2B publication but targeting real estate agents, franchises and brokers around the world. And that’s around helping them optimise or maximise the value that they get from their online real estate spend or marketing spend.
That once again is born-global because the issues that they face in all these countries are the same; you know, like ‘what portal sites should I be advertising on?’, ‘how should I maximise my return?’, ‘how should I pitching online advertising to the vendor?’ and so on and so on.
Both of them will have subscription components to them that allows us to generate revenue from them.
The second category is around innovation. We’ve identified three or four applications that are complimentary to existing portal sites around the world and as we build out these applications, for example that help real estate agents get greater efficiency in their marketing spend and their advertising and making sure that they understand what’s happening there, we can then launch those products through Property Ad Guru or Property Portal Watch, depending on the segment that we’re targeting. So we have the distribution to market channel.
And then the final category of investment is where we’re looking around the world at emerging markets, and we’ve seen a number of businesses in those emerging markets that would like us to invest. Not just because we’ve got access to some money but also we’ve got access to knowledge and we know how to do it. And what’s important for us is that Property Portal Watch allows us to understand who those characters are and understand the competitive markets that they work in, so that we can then make good investment decisions.
It sounds to me like you’ve got four businesses that you’re basically setting up from the start. Some of them are independent, observers and consultants and others are players in the market. Are there conflicts of interest? It’s tricky, isn’t it?
No, we don’t think it’s tricky. It’s a market that we know very well. So we know who the property portals are around the world, they know who we are most importantly. We know a lot of the agents around the world at least how they operate and we know how to get to that market.
A lot of the risks you have when starting a business we have de-risked. So we understand how to develop the products because the ex-CIO of realestate.com.au is part of the business, so we can build our products quite clearly and we understand how they should work, because over seven years you learn a lot.
And then in terms of doing deals, well when we were at realestate.com.au I did 15 or 16 investment deals around the world, so we’ve done those sort of things before. So we’re really leveraging what we’ve done before into areas that allow us to create new things that don’t exist today but have an opportunity to thrive, because of just the sheer size of the online advertising market in real estate.
Well that leads us to that next question of real estate. There are global investors in real estate but pretty much it is a local business. With this global perspective you’re taking, how then are you going to localise your offering?
First of all, the local component is usually at the consumer end. Portal sites are a classic example that consumers look in a suburb and agents advertise in that suburb. The products we’re looking at are targeting agents only.
But many of the agents too can be local.
Sure the agents operate locally. A classic case is plumbers operate locally but they all use Quicken. So Quicken doesn’t have to worry about customising except for the country that it operates in. And that is the way I think about it.
OK, so they’ll be country localised.
But even then, if I go to a real estate agent in Britain, the question they’ll ask is which one of the following five property portals should I really be advertising on. And then, I go to another real estate agent in Australia and I say which of the following three property portals should I be advertising on. The only difference is the portals; the questions are the same.
What are the applications you are going to launch and what problems are they going to solve?
I can’t tell you the applications in detail, but the real objective is to help real estate agents allocate their marketing spend more effectively – I’ll probably leave it at that.
Who will that put out of business?
It doesn’t put anyone out of business. It’s actually very complimentary. It’s complimentary to the existing players. It will help demystify some of the marketing that’s around there and will allow the agents to really understand a couple of things.
One is, if they want to advertise across multiply markets, we can help them do that. If they want to actually understand the effectiveness and efficiency of their spend, then they can do that. They can then do a lot of analysis, so think that these tools will help people in real estate agencies and franchisee groups make better decisions in now what is a one plus billion dollar business, which is the online real estate advertising business.
So the incumbents that are doing the advertising at the moment will be a lot more accountable through some of the applications you’ll be selling?
I think to a certain extent there will be more transparency about efficiency and effectiveness.
Many smart companies are setting themselves up as thought leaders, you’re setting yourself up as a global thought leader, to launch this global business.
And of course you have been a player in this global market for years. Is that going to be enough to market the business, to get the attention that you want and grow it fast?
Sure; in terms of things like Property Portal Watch, targeting the property portals and talking to them, everyday I will get emails from around the world. I had a classic email the other day from Nigeria, from a guy who wants to sell the first property portal targeting that market, asking for advice. The reputation of what we did with realestate.com.au or the REA group, has certainly permeated the world.
How many property portals are there around the world?
We think between 600 and 800. Some markets have got a lot, like Britain has heaps. Others there only a few players. And the question is, how small do you go. And we are very much focusing at the top end, as you would expect. Then how do you get to market in the agency side?
Well the good news is out there; whether it is the realestate.com.au’s or the Rightmove’s, they all have directories of all the agents out there, so understanding who are the agents in the world is pretty easy. And then the beauty of the internet is that you can just use email marketing to target those guys with a clear offer that is very relevant to their business.
What other ways will you use communication channels like the internet, blogs, papers – what else will you do?
For us the internet itself is the core of the business. The applications we’re building are web-based applications, the communication to all the agents is very much web-based communication, we are very much into leveraging our RSS feeds, and we’ll be leveraging social networking where we can, that is not really that relevant in this industry. Certainly blogs and forums that allow people to share and communicate are very, very important. The cold hard reality is that real estate agents do like some paper stuff as well, so we are looking at producing a book or two and things around tips and techniques to help agents become just more efficient and effective in their marketing.
How do people measure their effectiveness in print advertising?
I don’t know and don’t care.
What, print is dead?
I think at the end of the day the agents, the people who advertise in print, are wedded to print and if they really cared about the effectiveness, they would just ask a couple of questions and work out very quickly whether or not it is effective.
Which you are saying is not effective?
If you just talk anecdotally, go to the US for example, and research by the National Association of Realtors indicates that 75% of all leads that real estate agents receive come from the internet. Australia is probably in the 60% to 70% range, Britain has similar sorts of numbers.
But there is so much print advertising for real estate.
There is, but once again because we take a global view on this, rather than the local view on it, moving outside of Australia to Britain, print has been decimated over there by…
Well, not online so much but literally the contraction of the market, contraction of the number of agents advertising, the amount they’ve got to spend, and they are dropping print before they drop online.
So in this downturn, you would expect that deterioration of print advertising to increase?
Yeah, absolutely. If I were running a real estate agency, I would seriously consider how much I’ve spent on print.
How is what people do, the traditional nice little house or property in print, how should that translate online, what works best?
If I were selling a house, I wouldn’t put it into print, I would just sell it online. And I’d be selecting a number of portal sites to sell it across and I would make sure that I was the first one seen, which is at the top of the search. Those simple steps are going to have far more effectiveness than anything else. Don’t worry about video, I don’t think that makes much of a difference; virtual tours, I wouldn’t really waste my time.
Really? There you go readers who are going to sell your houses, don’t do a virtual tour…
I would make sure I have some really good quality photographs of it.
How many, and what do you take? Bathroom, kitchen?
Yeah, because that is what people make decisions about. What you want is that the people that walk through the door are the people who want to buy it, and will buy it fast. And I would make sure I had a good description and the address was in there so I could plot it on Google maps and I’d make sure that my agent answered the emails rapidly.
What are the projections for your business, how big is it going to be? Are you going global from day one?
We’re not putting out projections at this point in time. What we do know is where we start is not where we’ll finish. The business will take a number of turns as we learn more and more about what we do as we go.
And that is the beauty of this. What we have identified out of clear needs in the market today, things that we know will pay for itself. And then having pushed that through as we learn more and more about what we do and gain momentum, we can then identify which opportunities are real opportunities as opposed to false opportunities and then keep going. That is the art of building a business.
You only learn that patience through doing it though.
Correct, and we get two choices. As an ex-management consultant, I could have sat down and written a big study about what I wanted to do and still be writing that now and not be having this conversation. I said, day one, ‘let’s start doing it’. And we even said we want to create a website which is allowing property portals to talk to each other, well let’s build the application, we thought, ‘no I’ll just go get a blog from WordPress’, and I had it up and running in 40 minutes. And then started publishing to it.
And then we just said well that template looks okay, and honestly it is not very pretty but it is out there and it is working. And that has meant that I have now had two months of traction and we are getting picked up by The Times in London and we are getting picked up by other blogs out there. We are doing this sort of interview stuff; stuff that wouldn’t have occurred if I had waited until something was developed.
So who have you got in there? You’ve got five people.
At the moment it is five but we’ll have 10 by the end of November.
And who have you got from REA?
The ex-CIO has come across from there, and there are another couple of people who are not out of realestate.com.au who have joined already. Then there are some other folks who are joining from various other paths and they are just working out their termination periods as we speak. And there are a range of skills.
Really, you are building a big global business with three or four…
Well really, it is going to be a small global business…
Well you haven’t told us your projections yet so how will we know?
The thrust in terms of size to me is about people. We don’t want to get a massive team because I don’t think you need a massive team. You want to be able to create things that are easy to sell, and I think B2B is a bit easier than B2C, and you want to make sure that the return on that investment is quite a good return on that investment.
What we are focusing on is a small team of quite highly motivated people. We don’t all come to the same office and work, we are actually quite happy for people to work from home, that is quite easy to have it happen, and then we’ll just keep pushing those products globally. And if we have to set up offices somewhere else we will, but it will probably be on a regional basis not on a country-by-country basis.
How have you put that team together; which skill have you brought in?
The skills you need are pretty much the core skills that you need in any business; finance skills, technology skills, sales and marketing skills, and product development skills.
So you are bringing technologies in-house?
Most of the technology will be developed externally. What we will do is control the specification internally. And the good news is working with Chris Vulovic, who is the exCIO of realestate.com.au, she’s got extensive experience working with both internal teams and external teams and knows how to manage that communication relationship. I don’t mind where the guys are coding as long as it comes back the way I want it to come back. That is the approach we are taking with this one.
So that will be outsourced, could be to India or anywhere?
It will probably be a team in India we’ve known. Chris used to work with the guy who runs it back in the US. So long experience, personal contacts and a lot of trust.
So, what are the risks, the challenges building this kind of business?
The challenges are that you have got the wrong offer for the market but until you go out there and try it, you never know. The second sort of risk is that you try and do too much at once and thus defray your effort, which is why we have segmented each of the things we are doing.
We’ve got people project leading them, so we have got very much like people project teams, with trying to get to one person, one focus, one mission in life. The reason we call the business Classified Adventures is we want to make this an adventure, we want to have fun, we want to see what we can do. Worst case is that I could get a job!
This is an edited transcript