Domain’s new owner targets realestate.com for ‘shaking down’ Australians

3 weeks ago 3

Domain’s new owner has attacked realestate.com for “shaking down” Australians and trying to “squeeze” home buyers for every last dollar, in a scathing attack on the News Corp-owned platform.

Just two days after taking ownership of Domain, Andy Florance, the enigmatic founder and CEO of its US parent company, CoStar, says he intends to offer more innovation, transparency and lower prices to buyers and sellers in an Australian market.

Andy Florance, the founder and chief executive of Domain’s US parent company, CoStar, has attacked News Corp’s REA Group.

“I look at REA Group as a machine that grabs people by the heels and shakes them up and down to make everything pop out of their pockets. That doesn’t really appeal to me,” Florance tells this masthead, outlining his bullish intent on taking on the Murdoch company after completing the $3.2 billion takeover on Wednesday.

“How do we compete against them? We compete by providing value that people like, and not trying to squeeze every last penny out of everybody.”

Florance says Australia’s real estate market is five years behind the times, and 10 years behind the technology on offer. It has been held back by companies like REA and Domain failing to reinvest in innovation that actually helps home buyers, he says.

“We plan to come in and really provide a wealth of different products and solutions, and we’re not in a position where we have to try to squeeze every last profit dollar out of every quarter. We tend to think a little bit longer term.”

REA was contacted for comment.

Andy Florance, founder and CEO of CoStar, took ownership of Domain this week.

Domain was, until Wednesday, majority owned by Nine, which also owns this masthead.

Florance points to underquoting as one of the main issues he’d like to address and says CoStar’s vast array of tech products can give people greater transparency over pricing.

“Pricing is not perfect, but the consumer has a right to have a little more visibility into what they should expect. You shouldn’t play games with people struggling to afford a property,” he says.

“Pricing can be difficult to peg down, but you should be fair with the consumers, and the consumers will reward companies that give them more and better information.”

During Nine’s ownership of Domain, a gap had opened up between it and REA Group, its main competitor, with the latter now about 10 times Domain’s size. In May, Australia’s competition watchdog, the ACCC, launched an investigation into REA over accusations it is abusing its effective monopoly by price gouging vendors and real estate agents.

Andy Florance says CoStar’s vast array of tech products can give people greater transparency over pricing.

On Wednesday, the day the deal closed, Florance spent 4½ hours in an all-staff meeting in Domain’s Pyrmont offices, taking his new employees through 590 slides of information about CoStar and its various technology products. He was flanked by 18 different senior product specialists who flew in with him to help educate staff.

While that is quite the contingent, it helps that CoStar has its own private jet, in which Florance has spent more than 200 hours, flying between the United States and Australia this year alone in pursuit of closing the deal.

Florance’s private jet, parked at Sydney Airport earlier this year.

During one of those trips earlier this year, he edited CoStar’s main US portal homes.com’s Super Bowl advertisement featuring Morgan Freeman on his laptop, a spot during the NFL’s biggest game usually costing about US$8 million ($12 million) for 30 seconds. It helps that CoStar has an annual marketing budget of $1.3 billion, Florance says, which is growing by 10 per cent each year.

“I was flying back from Australia, and they gave me three or four cuts and a bunch of outtakes. Morgan Freeman’s a great actor, and I was just trying to put together what I thought were his best lines into one piece.”

The main task for the new Domain boss is making up lost ground to REA Group, a task he says he relishes. To achieve that, Florance has rehired the man who led Domain for 6½ years, and only left the company in February – Jason Pellegrino.

Former Domain chief executive Jason Pellegrino is back in charge of the business under CoStar’s ownership.

While some at Nine have questioned why Florance would rehire the executive who oversaw years of a famously underperforming product, Florance says Pellegrino was operating in a difficult construct, which exists for a technology company under a newspaper company with different priorities.

“Jason couldn’t thrive in the environment ... It was sort of the worst of all worlds because you were majority owned by a newspaper [Nine], and then the component that wasn’t owned by a newspaper had no say over the direction. What was missing was the right strategy to be successful in the market. I think I am a better partner to Jason than the two or three different boards he had to deal with,” Florance says.

“Nine is a great company and Matt Stanton is a great new CEO, but if I’m in his position, I want to focus on what’s important to Nine today and not trying to be fighting a two-front war.”

Asked if he has the stomach to take the fight to the Murdochs, Florance responds, “who are they?”, with a grin poking through his face, before following up with: “You know I do.”

Florance has a well-documented history of facing off against the News Corp-aligned realtor.com in the US. He claims realtor.com lost revenue, traffic and swung from a “decent profit to a significant loss” since his homes.com mounted its challenge.

“The Murdochs have been nothing but kind to me, and despite the fact that I may annoy Robert Thomson [News Corp CEO], I actually really like him as a human being. I’m sure he finds me annoying.”

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