Simon Baker

We like to regularly check in with internet entrepreneur and investor Simon Baker, the former REA Group chief who now heads up two businesses – Classified Ad Ventures, which focuses on working with real estate companies, and CAV Investments, which holds stakes in 10 internet businesses around the world.

Talking to SmartCompany from Canada, Baker explains why online valuations are soaring, why he loves doing business in South America, and why he’s not bullish on the group-buying phenomenon.

Now, are you in Canada for business, pleasure or both?

Business.

Can you tell us what you’re doing over there?

We’re helping a Canadian company basically build a property portal and we’re doing a lot of that sort of work at the moment.

Is it fair to say there has been a bit of a refocusing of the Classified Adventures business in the last three months?

Yes, there are a couple of things that happened. We started life about 18 months ago as an incubator. We had a number of businesses that were running in parallel. We had a social media business, a web design business, a business called List Globally, one called Modern Search and a few other bits and pieces.

What we found was that some of those businesses came together quite naturally around providing franchise groups, property portals, traditional media companies and key industry players with advice and guidance on how to really get the most from the internet. So we spun that out and we said that’s Classified Adventures, a full-service digital marketing company for the real estate industry. And then we spun out separately List Globally and Modern Search, which then operate as two separate businesses.

So we focussed our efforts around Classified Adventures, continued the investments in the other businesses and we’re now charging ahead on all fronts.

Was the natural incubation period over and you felt you had to make a call which would stand on their own two feet?

I think it’s the natural evolution of the business where we tried some things, some worked, some didn’t work. The things that worked we said ‘let’s do more of that’, those that didn’t we said ‘well, let’s stop doing that’ and that’s allowed us to very much provide a good focus. Because focus is what you need at the end of the day to make any of these businesses work. It’s clear entrepreneurship 101 – focus on something that’s going to create value, and since we’ve done that we’ve uncovered a stack of work all around the world, especially helping property portals, traditional media companies and to a certain extent franchise groups really get the most out of the internet.

Was it hard to manage all those various businesses?

We were working in the area that we knew well but what we did have was a lot of balls in the air. But we knew that to identify where the sweet spot was going to be we had to try a number of things and having tried them we’ve been very quick to analyse. It’s just part of the natural learning process and I remember when REA went through that process about 10 years ago.

You’re now working with businesses around the world. Where are those overseas markets in comparison to Australia? Are they behind where we are or in front?

It’s actually a real combination. We’re helping some companies in Australia in the franchising area just to think about the internet. That’s helping them understand their position in the existing market in Australia, the mature market. We’ve done some work in France which is a mature market but for example Canada, which is sort of an emerging market from an online real estate perspective for a number of reasons which we could spend hours talking about but I’m not going to. So a lot of that’s going back to basics. And then we’re doing some work in very early-stage markets like Peru and Brazil and other exotic places like that which are very early stage. They remind me of Australia 10 years ago. We’re helping the companies shorten that learning cycle so they can be successful in those markets.

Are most markets similar to Australia where there are one of two really big players in each market with others fighting for the scraps?

In general, yes. There are some markets like Spain and Italy where there are sort of two equal-sized competitors and they’re very good at destroying value just by competing like mad. But those markets where you end up with a clear market leader and sort of daylight second, and then a player at sort of half the size, those market leaders do incredibly well. You see that in France, German, UK, Australia and so on.

Do you sense that will change?

I think it tends to be the way it works purely because from a consumer perspective we like marketplaces. We really only want to go to one website that’s got everything, because we want convenience and we become creatures of habit. Amazon does incredibly well, eBay still does incredibly well. They might get nibbled away at the sides because they are so big, but they are still good companies. In the Australian industry it’s Carsales, Seek and REA have done these incredibly good jobs at creating those marketplaces and it’s very hard for other players to come in and tackle them, especially head on. So you have to find creative ways, carving out niches. But that core bit that’s generating a lot of value, it’s very hard to break in to.

With any of the businesses that didn’t make it through your incubation period, were there any that you thought couldn’t compete with established players?

Well, first of all none of them were directly competing in an existing segment, they’ve all had a different purpose in life. What was interesting was none of the things that we were doing we’ve stopped doing. We’ve just found that there were synergies by bringing some of these things together and more importantly you start to get scale which is where you want to be. So we’ve now got for example in Classified Adventures a core group of about 10 clients and that’s growing dramatically. I’m fielding calls out of Russia, the UK and that was just this week.