Contact:Scott Denne
News Corp has picked up online realty company Move Inc at 37% above the company’s 30-day stock price average. Despite the premium, the media company could have more of a fixer-upper on its hands than the price would suggest.
At $950m net of cash, the purchase values Move, which operates REALTOR.com, at 4x trailing revenue. That’s almost twice the value that competitor ZipRealty fetched earlier this year, although that company’s topline had been shrinking for some time, while Move is posting single-digit annual growth.
Although the price itself isn’t so much of a head-scratcher, the rationale is wishful thinking. News Corp rightly points out that online realty companies like Move have only captured a fraction of the real-estate marketing spend, but Zillow and Trulia are poised to capture most of that potential growth. Those two companies are each posting about 70% annual growth, and when the recently announced merger between the two closes, the combined company will have revenue that’s roughly double Move’s.
News Corp’s plan for ramping up Move’s growth is to use its media properties to help market Move’s listing services and realtor lead management tools. News Corp’s own results, however, suggest that its advertisements aren’t driving that much value: the company’s advertising revenue dropped 8% in its recently closed fiscal year.
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