Most investors are aware of the outstanding success the following three early movers into the online classifieds space have achieved – primarily at the expense of Fairfax Media Limited (ASX: FXJ) and News Corp (ASX: NWS).
The three companies I am referring to are of course Carsales.com Limited (ASX: CRZ), REA Group Limited (ASX: REA) and SEEK Limited (ASX: SEK). From standing starts these three online businesses have grown into companies with market capitalisations of $2.6 billion, $6.4 billion and $5.9 billion respectively.
Plenty of investors (myself included) are kicking themselves that they either did not foretell the level of profitability these three online businesses would achieve or refused to pay-up for the growth and quality.
So far it has been a “winner takes most” situation with Carsales.com, REA and SEEK all dominating their respective Australian markets where they had an early mover advantage. SEEK has also aggressively moved offshore to markets where it hopes to replicate its domestic employment classifieds success. By doing so, SEEK has avoided letting any Australian-based companies getting the jump on its international expansion ambitions.
iCar Asia currently has a market capitalisation of $120 million and operations in the populous nations of Malaysia, Indonesia and Thailand. While iProperty Group’s market capitalisation has exploded to nearly $600 million and the firm has operations in Malaysia, Hong Kong, Indonesia and Singapore with further investments in India and Philippines.
Carsales.com, REA and SEEK were all small companies once upon a time. The massive market potential of an online classifieds business that achieves a “winner takes most” position in just one country, let alone in a number of countries is enormously valuable. While iCar and iProperty may look expensive on traditional metrics, they could very easily come to look very cheap in hindsight if they successfully execute their business plans.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.