Magicbricks was at the heart of a discussion in Info Edge’s earnings conference call (Q3 FY17). Info Edge owns 99Acres while the Times Internet owns Magicbricks and are rivals in the online real estate listings space. The two, in the past, have argued over which site is the biggest, based on traffic data. The Economic Times (owned by the Times of India) recently published data which said that in Q3, when the real estate sector was impacted by demonetization, MagicBricks reported revenues of Rs 37 crores for the quarter,  up 43% year-on-year, and of Rs 96.6 crore for the first 9 months of this 2016-17 fiscal year.

When asked about this, Info Edge CEO Hitesh Oberoi chose to compare 9-month revenues. “Two-three points”, he said:

“One, if you sort of go by that release in their newspaper, what they have said is that they have collected about Rs 97 crores in the first nine months of this year. So if you look at our numbers (Editor: check the chart above: totals to Rs 84.8 crore for nine months) and our collections, we were sort of almost equal to them or maybe slightly higher till the first six months of the year. (Editor: MagicBricks was Rs 59.6 crores versus Rs 58.7 for 99Acres in the first six months)

“It is only in Q3 that they are claiming that they have grown at 43% and there are maybe two or three reasons for it and our view; one, of course, we could have grown little faster or little higher than what we have grown at if we had agreed to collect payments in old currency, which we refused.”

“Secondly, part of the growth for Magicbricks, they have strived to, sort of had, the shopping festival or the Google shopping festival they ran. So far we have stayed away from running such events on our site because when we run such events, we often end up committing to your customers on what we can deliver, and we have tried to stay away, we do not think such revenue is very high-quality revenue.”

“Thirdly, we will have to see whether the revenue of Magicbricks includes revenues of combo deals which they do with the newspaper, revenue from treaties where they sort of pick up flats or equity in return for advertising on their platforms. I do not know, so I do not have the breakup for that. But yes, we can increase our revenue growth in 99acres if we, for example, agree to do partner deals where we sort of take property in lieu of advertising the platform and we could have increased our revenue growth if we had agreed to take old currency notes which we sort said no to.”

Let’s see if MagicBricks responds to this. Thankfully the discussion has moved on from traffic to revenues. Maybe some day they’ll compare profitability. But, I guess 99Acres has to be profitable first.

“In the nine months of the financial year, the EBITDA level loss in 99acres has declined to Rs 39 crores from Rs.80 crores in the first nine months of last year mainly due to decrease in ad spend and increase in revenues,” Oberoi said.

Consolidation in the real estate classifieds space

There is consolidation in the offing in the online real estate business, Oberoi also said on the earnings conference call:

“With Proptiger, which had bought Makaan about two years ago, announcing to acquire Housing.com, there is a consolidation taking place in the space and we continue to keep an eye on the competition.” Sanjeev Bikhchandni, Executive Vice Chairman at the company added that while competitive activity has declined in the business, and some consolidation has taken place, “we do not know the intention of those who consolidated, we do know they have hefty pockets.” Newscorp owned Proptiger, and Softbank backed Housing.com

Newscorp-owned Proptiger, and Softbank backed Housing.com had merged earlier this year, with an additional investment of $55 million.

Sanjeev Bikhchandni, Executive Vice Chairman at the company added that while competitive activity has declined in the business, and some consolidation has taken place, “we do not know the intention of those who consolidated, we do know they have hefty pockets.” He was fairly non-plussed about competition from Commonfloor: “…CommonFloor was a strong player only in Bangalore, they did not really have a large presence all over the country and Q3 was hit by demonetization, so it is very hard
sort to figure out what really happened, but we have not seen from CommonFloor any significant expansion in their operations outside Bangalore.”

Policy changes are expected to impact the market as well: Oberoi said that the demand for new homes in generally weak, and “unfinished projects and inventory overhang continuing in the market the sector will take some time to rebound. Further, as provisions of the Real Estate (Regulation and Development) Act (RERA), come into effect in various states are to notify rules under the act, we believe cleanup in the real estate industry will occur over the next few years…” This, according to Oberoi, may hurt the business in the short term, but in the long term, “will benefit 99acres and make the market a safer place for all buyers.”

Impact of Demonetization: fell short of target by Rs 10-11 crores

“…people were in no mood to buy property”

Info Edge cut advertising during the quarter, because of the impact of demonetization on 99Acres. The real estate classifieds business “failed to meet internal targets during the quarter, largely owing to demonetization: “On the whole, our estimates are that demonetization impacted our top line by about Rs 20-25 crores in Q3 compared to a target we had set for ourselves internally”, The impact was felt most by their real estate portal 99Acres. “In terms of collection growth we came in about Rs 10 or Rs 11 crores short in 99acres, we think we lost about Rs 8 to 10 crores of business in Naukri and maybe we lost about a crore maybe in Jeevansathi and Shiksha”…”in 99acres we were growing at 23% till Q2 and suddenly our collections growth was actually negative in Q3. So these are based on sort of some of the targets that we had set for ourselves. But whether demonetization will continue to impact in Q4? It is hard to say. Certainly, what I can tell you is that in terms of traffic, almost all our sites have recovered, so we are back to pre-demonetization levels in traffic and therefore I expect that even revenue growth will follow, there could be a lag of a couple of months between traffic recovery and revenue recovery but ultimately that should happen as well.” Oberoi also added that demonetization had led to “overnight drop of about 40-45% in traffic in Q3”.

Shift in focus towards larger customers

Info Edge isn’t focusing on adding too many new customers for 99Acres. On being asked on the call about the fact that they’re no longer disclosing number of paid transactions for 99Acres, Oberoi said that “we have been focusing more on the larger sort of customers and the smaller customers actually are the ones who have been impacted a lot more by the changes we are seeing in the Real Estate market. So as a strategy, we are not focusing on adding too many new customers in 99acres but trying to figure out how to upgrade the customers especially the large ones.”

The company reported around 42,000 paid transactions for the nine month period, but added that “these are invoices issued, these are not anything to do with actual transaction on the site.”

Interestingly, this number was down almost 50% year-on-year.

Oberoi explained: “There is always a lot of churn at the bottom. In our sort of view, some of the guys at the bottom are not very profitable customers for us to have. So increasing the focus of our sales system is more on working with the top-10,000 15,000 customers and sort of figuring out how we can upgrade them, how we can help the platform better, how we can generate more response for them, because these are the guys who have the big budgets, these are the guys who pay us much more in the longer.”