Simon Baker pulled realestate.com.au out of a death dive and is now targeting revenue of half a billion dollars. He is unfazed by new competition from PBL’s My Home. By EMILY ROSS
Summary: Leading business from near-death into the current phase of significant organic growth and aggressive acquisition has been quite an experience for the man at the helm of realestate.com.au
By Emily Ross
Simon Baker became chief executive of the publicly listed realestate.com.au in 2001. He first encountered the company in late 2000 in his new business development role at News Interactive, a division of News Corporation.
He persuaded News to buy a 58% stake in the business which, at the time, was capitalised at $8 million but burning cash so fast it had a life expectancy of only about four weeks.
Baker, who spent more than four years with McKinsey & Company and has also worked as chief technology officer in a failed US dot-com, saw great potential in realestate.com.au.
He decided he was the best man to run the company so took a proposal to the realestate.com.au board and was appointed chief executive.
Through a combination of cost cutting, content building, improved sales techniques and subscriber initiatives, Baker has led the business from near-death into the current phase of significant organic growth and aggressive acquisition.
The REA Group now operates five major websites in Australia, Italy, New Zealand and Britain, and is capitalised at $655 million.
The realestate.com.au site is the leading real estate site in Australia; sales in 2005-06 topped $61 million, with $13.1 in profits – up 88% on the previous year. The key revenue stream for realestate.com.au is a subscriber fee from agents, who pay to list their properties on the site.
Baker has a busy year ahead: more acquisitions, a revenue target of $100 million and presentations at major global events such as the forum for the leading figures in real estate, technology, new media and marketing, RealEstate Connect, in New York City in January 2007.
SmartCompany: On Monday 26 February, PBL will launch MyHome in direct competition with realestate.com.au. Are you concerned that MyHome will dilute profits?
Simon Baker: If I had a dollar for every time one of those new sites emerged … In terms of MyHome, they might be able to throw money at it, but I think new players think it is easier than it is.
The real game is volume of listings. If you are a consumer and you want to get engaged with the website, you need volume of listings. If you don’t have more listings why would someone switch?
We have 90% of the agents using us and we have 3.2 million users. They have a long way to go to close the gap.
Why is the RealEstate.com.au brand stronger than its competitors and recognised globally?
In Australia we are strong because we work like mad, we have an obvious URL and we have invested a lot over the years in getting the content on board. We got in first and we have the brand recognition, like Colgate toothpaste.
What was on your “to do” list when you started in the chief executive role at realestate.com.au?
- Reduce product on the site to what mattered.
- Focus the sales team.
- Get some quality people on board.
I applied the theory of simplicity of offer and clarified who we are selling to [agents]. I set clear targets and clarified how staff are expected to perform.
We kept a close eye on where we were spending the money. It was a case of ‘use one piece of toilet paper at a time’. We were very open about how we were going financially.
I showed staff the revenues, explained what the costs were and how the money was being spent. I said to them, ‘If we keep spending like this, no one is going to put any money into us’, and that really engaged people in the future of the business.
There were 30 people when I joined. We took it down to 28; of those 28, 20 are still working with us.
What is the current ownership of realestate.com.au?
News Corporation has 58%; real estate company Ray White has 12%; real estate agent John McGrath – also chairman of REA Group – has 1.3%; and I have 3.4%.
As a shareholder, how do you think it affects the way you manage as CEO, with so much skin in the game?
For me the shareholding is by the bye. What is fun is in seeing how far I can go. Can we make this into a $1 billion business? This financial year we forecast revenues of more than $100 million. I am thinking about how can I get to half a billion in revenues. That is my five-year target.
Can you give your potted version of the story of realestate.com.au before you came on the scene?
Karl Sabljak and Marty Howell started the business in a garage in Doncaster [Melbourne]. They bought the URL, started a website and Macquarie Bank invested in the business.
The company listed on the Australian Stock Exchange in 1999, months before the dot-com crash. New management was put into the business and they blew a lot of money very quickly.
It almost went out of business. We have spent six years digging ourselves out and growing a global company.
How do you learn about web innovation; how have you kept ahead of trends in such a rapidly changing industry?
I don’t have a life. I spend way too much time travelling – 15 or so trips a year. When you do that, you find out what is happening in the market, and you talk to a hell of a lot of people.
I would have met recently 30 CEO equivalents. I call them up, and tell them what we’re doing. It is amazing how many people have heard of realestate.com.au.
Australia is not the game; Australia is the stepping-stone. It has given us the right to grow. I could never have half a billion in revenues by staying local so I have to go into other countries.
At this stage I am not sure which single other country will be the golden egg so we are going into multiple countries.
How do you make sure you stay in touch with your customers?
If you don’t understand the people who write the cheques and read the webssite, the danger is you become distant form your customers.
That is why we have real estate blogs, I deal with agents, my telephone number is accessible, I go to conferences and I also take clients out and get them drunk. You have to shut up and listen and make them feel comfortable.
What is the best advice you ever got?
The best thing I ever did was spend time at McKinsey & Company. You get to see dumb businesses, all the ways not to do things.
RealEstate.com.au will be featured in 100 Great E-Businesses and the Minds Behind Them by Emily Ross and Angus Holland, (Random House, September 2007).