News Corp has been making significant investments in India over the last year, most noticeably in real estate listings company PropTiger, and the acquisition of news and data business VCCircle. Last week, the company said PropTiger would be listing its Luxury Real Estate Properties on News Corp’s Mansion Global.
Raju Narisetti, senior vice president at News Corp, spoke with MediaNama about News Corp’s strategy in India and their investment in PropTiger in this first part of an interview.
MediaNama: Could you give us an overview of NewsCorp right now and its strategy in India?
Raju Narisetti: The current version of News Corp is just about two years old. The company split into two in June 2013. News Corp decided to keep the original name and focus on news, information, publishing, data, digital real estate and digital education business. And the other company became 21st Century Fox, which has movies, television and in India they ended up with Star.
So that’s the portfolio. Obviously, news is always going to be part of it simply because of our heritage and the fact we have such strong brands in the Wall Street Journal, The New York Post, The Sun, The Times of London.
But the reality is that in our portfolio which has close to $9 billion in revenue, the news businesses are increasingly getting smaller while the other businesses are growing at a higher pace. We’ve also done some acquisitions. So the portfolio is increasingly starting to look like a digital portfolio with a fair amount of commerce and transactional capabilities, and the revenues are starting to shift from primarily focused on advertising to having multiple streams of revenue.
The same thesis is playing out in India. We have two existing businesses in India. Harper Collins India is a growing, strong business. It publishes fiction, non-fiction and it recently started doing college education. That continues to thrive and grow. The other business has been Dow Jones and the Wall Street Journal bureaus. We’ve also invested so far in three businesses. The first one was PropTiger where we initially bought a 25% stake for $30 million and then increased it 30%. And that fits into our global real estate scene where we are significant owners of Real Estate Australia and through that we are owners in iProperty which is a chain of digital sites in Asia. We have strong assets in Italy and we acquired Realtor.com.
MediaNama: News Corp is primarily a content company. What was its thinking when it got into the digital real estate business?
Raju Narisetti: So if you step back, the thinking is this way: A lot of revenue streams which used to be with the news media in terms of classifieds for real estate, jobs, travel or auto essentially migrated out of print platform and became transaction-only digital businesses. Most publishers, instead of seeing where this revenue is going, try to hang on to classifieds desperately. and have lost that battle. Most of these revenues have gone to digital-only businesses.
But if you look at the last 3-4 years we discovered an interesting trend that started to emerge: if you are a transaction only digital business in one of these verticals, your customer engagement becomes very infrequent, customer loyalty is low, your cost of acquiring customers is very high.
I’ll give you an example, if you’re in the real estate business – if you only rely on buying and selling homes – you’ll probably talk to a customer in America once every 5-7 years at best. Which means that’s when people move cities or buy or sell a home. So imagine building a business where your customer’s touch point, which is transaction related, is happening every once five or seven years. You’re spending a lot of energy then to get customers. And you have to spend a lot of energy keeping this customer happy for the next five or seven years so that they come back to you for a transaction.
What the transaction companies have discovered is that the way to increase engagement, brand connect and brand loyalty, is to surround the transaction with a lot of other things. And these other things have become tools, calculators, interesting data etc. But more significantly, they discovered if they provide a lot of content, there is a lot of ongoing engagement which has nothing to do with the transaction itself. But when you’re ready to do the transaction, the customer is ready because they’ve engaged with the brand.
For a real estate site, you’re increasingly giving information about the community, other real estate developments that are coming around: safety, schools, crime rates. So you’re basically giving reasons for me to constantly engage with that site even though I’m not buying or selling. We’re surrounding the transaction with a lot of content and this is happening all over.
If you had heard six months ago, Uber announced that they’re looking for an editorial director. I mean Uber is a taxi company right? But there they are trying to create content. If you go to Realtor there is just a lot of content now. So the big picture thinking for us is very simple which is that we have content in this space because we write about real estate. We also have a lot of B2C customers. The Wall Street Journal alone in its digital network gets about 60-70 million unique visitors a month. And you add up all our individual brands up, you’re talking about 100 million unique visitors in a month.
We have strong B2C selling abilities because a lot of our products have been subscription products so we know how to monetize that. We have strong skills in engagement. The only piece that is missing is transactions. So what we decided rather than sit and see transaction companies come into content and fight that battle again for the attention of audiences, why don’t we acquire transaction capabilities because we think we can do this better. And this is what we’ve done with REA in Australia.
If you go to Proptiger now, every day they put out significant content through prop guide which ranges from a bunch of things like which talks about cities, regulations, architecture, design, furniture and just creating a lot of interest in content around transaction capabilities. So a lot of people ask “What are you doing in real estate?” So there is a bit of a method to the madness.
MediaNama: How would you stack Proptiger against a 99Acres, Magicbricks or Housing.com?
Raju Narisetti: When you look at the digital real estate business in India, there are only two or three companies which only focus on broker listings. Their customer is the broker, and he gets a package of something like Rs 10,000 for 50 listing every month. And the listings are put on the site and the company spends a lot of money trying to bring people to it. Customers, if they like a listing and tap on the lead, and then you get a lot of these calls trying to sell you property. And that’s the listings business where a lot of the incumbent players like Magicbricks, 99 acres and Housing are in that space.
The reason we thought of a different approach in India is two-fold. Firstly, the brokerage business in India is not licensed and not regulated. There’s a lot of bait and switch. Somebody will tell you that they have a 3BHK in Panchsheel for Rs 1.2 crore in a listing, and when you call them, they actually don’t even have that and then they’ll try to sell you something else and say that it was just sold but we have this other property instead.
Our view was that until there is regulation and licensing, we don’t think that business is going to solve any real customer problem. So we saw what Indians were doing in real estate and discovered that India is still a very big primary market. We looked at developers who have a good track record and management, and that’s how we landed on PropTiger.
PropTiger’s differentiation was that they were only on new homes. They provide a lot of information about developers and their track record. And then match a customer’s need to a bunch of developers and say look “if you’re looking for a 3BHK with these kind of requirements in Noida, and here are five properties that are coming up and here is their track record”. Maybe the last time a developer said we’ll build it in 18 months and but took 36 months. And then PropTiger walks you through the process and take you to site visits. A simple problem like site visits, if you’re a brokerage and they’ll ask you come at 4 pm and they never show up on time. So at PropTiger, there’s a relationship manager who’s handles your account and they’ll show you a few places. And then when you close the transaction, they make money from the developer’s marketing dollars.
But at the end of the day we also felt like that there’s an opportunity to provide end-to-end solutions, so that’s why they bought Makaan.com which is a listings business. So we’ll provide listings and hopefully we’ll solve the broker issue in India.
So that’s the big picture thinking. Typically people think all digital real estate companies in India are the same and there is not enough differentiation. But we spent a lot of time looking at the models globally and hopefully we’ll be able to able convince the Indian government that they need to regulate the brokerage system.
Our view is very long term. We see that the fundamental demand for homes. Whether you disagree at the pace at which it happens, or what the end usage might be, I don’t think anybody disagrees more Indians will live their lives on digital and primarily mobile. If that’s the case, over time in the digital real estate business for example, all of the search journey will start online and a portion of the search journey and an increasing portion of the search journey will end online as well.
MediaNama: You mentioned that you’re looking for an end-to-end solution for real estate, as part of your acquisition strategy would you also look at websites which can help with furnishing? How does it work?
Raju Narisetti: There are already players in the market and I think PropTiger has relationships with some of them in terms of the services they provide. But it’s an interesting example. A lot of new homes in India, typically when you put a down payment it probably takes almost three years till you get it. So it sounds pretty good with marketing buzz, but the reality is that at the beginning of your journey, you’ll already want to pick your furniture.
Rather than push that out artificially as part of your business, you want to be in a place where people can at some point in the journey when they’re ready to furnish the kitchen, we’ll give them some options and they can go elsewhere as well.
There is a lot of hype in the real estate business and people talk as though they are the unique selling proposition but when you look at consumer behaviour, the reality is very different. So our view is that you can provide the services, but you don’t need to buy a furniture company.
MediaNama: So what kind of tie-ups is PropTiger looking at which could complement its business?
Raju Narisetti: We (News Corp) are the largest single shareholder, and I’m personally involved with the management and on the board. But we don’t run the company. The reason we invested in this company and we believe that Dhruv Agarwal, the CEO and co-founder of PropTiger. So those decisions about partnerships and all, while the board is very active, the management has to come to us for help.
In our case, we have a lot of expertise in Australia, or in the US where we can help behind the scenes and provide knowledge and systems for PropTiger. But you’ll see a lot more deals that way. We’ve already done two deals. We bought Makaan and a 3D visualization company. And you’ll see more of that.
Our belief is that space is crowded and there has to be some consolidation and I think the way we’re looking at is that the people with good management and execution skills, a long term view and those who are well funded will prevail. Not those who raise a lot of money and then burn a lot of money by putting up billboards all over the country and behave irrationally, I think they’ll continue to be in trouble. Because you can’t forever keep raising money on promises on the future.
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