Is mobile the future of online classifieds?

Will the online sites suffer the same fate as newspapers

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While investors love to hear how much profit a company has (or hasn’t) made in an annual result presentation, it is often the guidance and strategy for the upcoming financial year that really grabs their attention.  Information provided on a company’s future direction can be valuable for investors making decisions on whether to buy, hold or sell shares in the company.

This was emphasised with the annual result announcement of New Zealand based online auction site Trade Me Group Limited (ASX: TME) which saw a share price fall of 3.5%, despite announcing net profit after tax (NPAT) 10% higher than forecast at $75.6m and a 15% increase in dividend.  The profit increase was partly the result of acquiring vehicle listing aggregator AutoBase, but investors picking Trade Me as a young ‘growth’ company didn’t seem confident future organic growth would be as bright in a tough economic climate.  It was Trade Me’s inaugural result after being spun off from parent print and media company Fairfax Media Limited (ASX: FXJ) in 2011, which still maintains a 51% shareholding.

Investors had the opposite reaction when it came to fellow online classified company Limited (ASX: CRZ), sending the share price 8% higher to $6.90 on the back of its result announcement which featured a 23% increase in NPAT to $71.6m and the declaration of a special dividend on top of their fully franked final dividend.  Guidance from CEO Greg Roebuck suggested solid growth continued over the first six weeks of the new financial year in spite of increased aggression by competitors.

Both Trade Me and have highlighted their increasing focus on mobile apps for smart phones and tablets going forward. mobile app was expected to surpass 1 million downloads last week, while Trade Me CEO Jon Macdonald noted that “mobile now accounts for 8% of sales in our General Items business” and the company has released several applications to take advantage of the growth.  Online job classified company Seek Limited (ASX: SEK) also trumpeted its increased focus on mobile access, reporting 6 million monthly visits, or 30% of its monthly traffic, was now coming through mobile devices.

Foolish Takeaway

The focus on mobile device access as an area of growth going forward for the online classified companies is encouraging.  However investors will want to be sure applications are ‘monetised’ and support revenue growth without cannibalising other revenue streams, such as advertising yields from views on their main websites  or they may face the same fate as their elder cousins who didn’t fare well in the migration from print to online

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Motley Fool contributor Regan Pearson doesn’t own shares in any of the companies mentioned in this article.  The Motley Fools purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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