Telstra (ASX: TLS) is embracing the online digital age with both arms by moving toward bundling moble, pay TV and internet for consumers through its 50% ownership in Foxtel. Together with Twenty-First Century Fox (ASX: FOX) it plans to keep its lead as the telecommunications services industry market share leader.
Outside of Australia, it is already in the Chinese digital space, where it has a 71.5% majority ownership of China's largest car sales website, Autohome. This month it was announced that the website would be an IPO on the New York Stock Exchange.
Initial valuation estimates for the website are up to $1 billion, which would mean Telstra's stake could be worth between $500-700 million gross. Using comparisons of other Chinese websites that have listed in the US, some analysts see comparable values reaching up to $2 billion.
The IPO market has heated up in the US with the S&P 500 Index (NYSE: SPX) making new all-time highs recently, so it would be an opportune time for Telstra to take it to market. The number of cars sold in China is expected to grow from 14.2 million in 2012 to 20.7 million in 2015.
If you are looking for something similar yet here at home, online car sales website Carsales.com (ASX: CRZ) is the one for you. It is currently valued at $2.4 billion by market capitalisation, and in 2013 raised its net profit after tax by 16.6% from $71.6 million to $83.5 million.
Its business performance has been fantastic, with a net profit margin of 38.8% and earnings per share average growth rate of 23.9% annually over the past three years. As the leading car sales website in Australia, it can establish itself similar to online jobs website Seek (ASX: SEK) and realestate.com.au, which is owned by REA Group (ASX: REA).
Foolish takeaway
Pure online companies potentially have the world to compete with, but the most successful ones carve out a niche, and become synonymous with the service. This is how they can establish themselves as the go-to business in their sector, and eventually, by the sheer numbers of users, they create almost a market monopoly for that service.
They can control pricing, and don't have to race to the bottom with competitors. That makes it a healthy business into the future.