‘An Odd Collection Of Unrelated Assets’ – Is The Age Of Portal Empire Building Over?

In 2019, activist investor Elliott Management wrote a letter to eBay’s board in which it referred to the company’s classifieds division as “an odd collection of unrelated assets”. The letter foreshadowed a shift in the industry.

Before it was written, the market seemed to approve of consolidation, and several online classifieds operators had built up sprawling global empires of brands and websites.

The prevailing wisdom was seemingly that centralised management and investment would add value not only to the portals themselves but also to the owners’ market cap. The likes of Prosus, Adevinta, EMPG and Lifull Connect seemed to hoover up portal assets around the world as though the deadline for starting any new brand or business model had already come and gone.

Fast forward six years, and Adevinta is looking to sell off its Spanish assets for a reported €2 billion, the latest in a protracted series of divestments symptomatic of a larger trend.

Our archives reflect a shift that has been mentioned in passing during Property Portal Watch presentations. Since 2020, stories of divestments or shutdowns of portals outnumber those of true cross-border expansion by eighteen to five. Portal assets around the world are being sold off to more local interests or written off entirely.

A Divestment Deluge

In 2020 the activist investors got their way, and eBay’s classifieds division (including assets such as Kleinanzeigen, Mobile.de, Gumtree and Kijiji) was sold off to Adevinta. Since then, Adevinta has not made a single purchase. Instead, its once sprawling online classifieds empire has dwindled to a (mostly) European rump as the private equity opportunists have capitalised on the erosion of the theory behind that empire’s creation.

But it’s not the only example. There is the often-cited case of Lamudi, which launched real estate portals in emerging markets around the world in the mid-2010s, only to run up against local nuances and sell off its remaining assets to EMPG (now Dubizzle Group) in 2020. EMPG subsequently withdrew from all the assets it had acquired in Southeast Asia and Latin America.

The headlines have come in a steady stream… PropertyGuru got out of Indonesia, Frontier Digital Ventures has pulled out of the Philippines, Nigeria and Ghana and is looking to sell in Latin America, Lifull sold its entire Overseas business, and DCG went bust trying to make it work in countries as diverse as Bangladesh and Papua New Guinea.

Dutch media giant Prosus has held on to most of its assets over the period. It did, however, sell off the Latin American portal group Properati in 2022 and was forced to sell the leading Russian generalist brand Avito later that year.

Many of these instances are simply companies making rational decisions to get rid of underperforming assets. For example, Darius Cheung, the CEO of 99 Group, recently told the PPW Podcast that he’d have done the same and shuttered PropertyGuru’s Indonesian operations if he were in his rival’s shoes back in 2023.

But in the case of Adevinta, many of the portal businesses it has disposed of were profitable. Why would a multinational conglomerate with no big debt problems sell off assets that were making money?

The Argument Against Empires

The answer is that big classifieds operators are often worth less than the sum of their parts.

In 2022, analysts at AVI Global Trust flagged a forty per cent gap between what Schibsted (and by extension, its offshoot Adevinta) was worth and its net asset value. That same year, Adevinta reported a staggering €1.7 billion impairment loss mainly related to the decreasing value of the eBay assets it acquired two years previously.

The theme is repeated elsewhere. When Frontier Digital Ventures announced its intention to spin off its Latin American business in 2024, it did not do so because the segment wasn’t performing well. It did so because it knows that its profitable Latin American segment (360 LATAM) would be more valuable as a standalone business, one that does not require Australian investors to understand Latin American real estate.

“Having spoken with investors from around the world, it has become clear that to unlock the vlaue of 360 LATAM, we need to be engaging with groups that have proximity to and a deep understanding of the region.“

“When we listed FDV on the ASX in 2016, close to two-thirds of our revenue came from Asia. Today, two thirds of our revenue is generated in Latin America, but we remain listed on the ASX.“

“The Board believes that FDV’s current market valuation does not reflect the combined value of its three operating regions: 360 LATAM, MENA Marketplaces Group (MMG) and FDV Asia.”

There is also the question of whether it makes sense to put marketplaces in multiple countries on the same tech stack. Over the years, companies such as Lamudi, Prosus, AVIV Group and Adevinta have all attempted to migrate different brands onto the same tech stack.

The logic behind that strategy makes a lot of sense on paper, but there have been varying degrees of success. According to O&C Strategy Consultants Partner Toby Chapman, the level of wisdom in migrating portals operating in different countries onto the same tech stack is still up for debate.

“It was a bit of a U-turn in terms of the philosophy the consortium [Permira and Blackstone] implemented when they took over versus the previous management, which had been pursuing tech integration across parts of the Adevinta group.”

“People have different philosophies on this [tech standardisation across countries] and I don’t think it’s been proven that one answer is correct and one is incorrect. I think the experience of Adevinta shows that it’s much harder than it looks on paper. It takes many years and a lot of money.”

Even if a company manages to integrate its assets across different markets onto the same set of tech, there is the issue of management burnout and distraction.

As Dubizzle Group CEO, Imran Ali Khan candidly told the PPW Podcast, the tech side of the integration was very much the easy part of his company’s brief expansion into Southeast Asia and Latin America.

“There were lots of challenges there, in terms of management, people management, strategy as well. Tech, we solved because we had a single stack running across all geographies, which we scaled into those regions. That was the easier one for us to solve.”

“I remember having a discussion on Mexico and the very next call would be on Philippines, the very next call would be Indonesia. And it was torturous mentally to offload all of that information and then upload the new information.”

With all the valuation issues, operational and tech uncertainty and management focus worries, who would still want to try to build a cross-border real estate marketplace dynasty?

One Boat Sailing Against the Wind

CoStar Group, with its residential overseas expansion to the UK (through OnTheMarket in 2023) and Australia (Domain’s sale is still pending), is the only large operator bucking the trend.

Its outspoken founder and CEO, Andy Florance, is keen to cross borders and believes that his company can take on portals operated by private equity firms that have taken advantage of the Balkanization of the real estate portal industry. In a backstage interview at the European PropTech & Portal Watch event last year, he told Online Marketplaces:

“There are 70-80 portals out there. I am in the minority where most PEs, major investors, and institutions believe that once they have a share, they can never be knocked down and they can do what they want to their customers and the customer can’t do anything. I don’t believe it. My experience is in operating these companies and changing positions and I believe that you can compete and grow.”

“The capital sources in Europe believe this is not the case. They believe market leadership is a coupon, you’re a taxation authority, so once you own Idealista (for example) you have the right to tax all the agents in Spain.”

“I believe that between regulation, government, and customers, you can’t do that forever. Does that translate into being ‘vulnerable’ per se? I don’t know, but I do think there’s a lot of room to grow in this diverse, highly populated marketplace with all these great portals out there.”

Florance was also forthright in his argument in favour of operating portals in several different markets.

“There’s another theory I don’t subscribe to—that there’s no scale advantage, that you cannot move your tech across borders from Luxembourg to France to Portugal to Italy.”

“It’s kind of silly when you say the French market is completely different from the Spanish market when the number one navigation source for the consumer is Google. Google is in France, Google is in Spain. The infrastructure for all these things is multinational.”

Florance’s contrarian statements certainly seem to be challenging a status quo that has set in over the last five years or so, and CoStar Group has form when it comes to putting money behind its theories in the form of bold acquisition plays. The Washington-based company has averaged two acquisitions per year since 1995 and plans to accelerate rather than slow down that rate.

CoStar Group Acquisitions Since 2020

For all the bullish optimism, monetary firepower and history of success that CoStar Group has, building up residential portals will not be without challenges.

The industry will be reading CoStar’s comments and tracking its reporting over the next few years as it takes a swing at debunking the notion that the age of portal empire building has come and gone.