Media company Fairfax Media Limited (ASX: FXJ) is showing how important it is to expand its property listings website domain.com.au. It plans to set up the division as the Domain Property Group and create its own sales force separate from the company's existing one.
It also will set up a separate chief financial officer to focus earnings growth potential. With print media waning, the growth of its web ventures like Domain are crucial, so it must have more focus to maximise the potential expansion.
Some have speculated the move is to beef the division up and prepare it for listing, yet if it is the part with the best growth, wouldn't less profitable divisions be sold off instead? I think that is premature. Companies usually restructure and liquidate non-core assets and businesses.
In the half-year report, print advertising revenue was 29% down and digital revenue was up 29%. Digital revenue was more than twice that of print.
I believe it can move to take back some market share because of its positions in the major capital property markets. It will still have to contend with REA Group Limited (ASX: REA), the operator of the realestate.com.au property listings website. Fairfax is expected by the market to improve, but REA Group has moved far ahead with a buffer of growth and earnings. It is also backed by Rupert Murdoch's News Limited (ASX: NWS), the majority shareholder.
Just as Fairfax Media is teaming up with UK-based jobs aggregator Adzuna to bolster its jobs placement website business to compete with SEEK Limited (ASX: SEK), perhaps it could possibly work with the up and coming iProperty Group Ltd (ASX: IPP) on its property business.
This Australian company operates real estate listings websites covering several South East Asian markets like Malaysia, Indonesia, Hong Kong and Singapore, in addition to having investments in India and The Philippines. The company turned its first profit in 2013 of $1.7 million on $19 million in revenue.
Foolish takeaway
Fairfax can take advantage of strategic alliances as it adjusts its business model to the economic realities of a digital world. It has many years of media and advertising experience that it could apply to ventures in and near Australia.
