Every poll had Clinton in front and everyone thought she would win – and then the other candidate won. In the same hour it was clear who had won the U.S. presidential election, Germany’s Scout24 Group released its results for Q3 of FY2016.
It was difficult to ignore the other similarity: Everyone thought Immobilienscout24 (IS24) would again be the star performer in the Scout24 portfolio – as it had been for so many years – and then the results turned out all different.
In the first nine months of FY2016 Autoscout24 (AS24) was the shining star in the Scout24 Group portfolio of sites, while IS24 turned into the problem child. Well, almost. Why we say “almost”, will be clear lower down.
The table below shows the financial performance in Q3 and in the first nine months of FY2016.
The numbers in bold are “group-wide” numbers. You’ll notice IS24 and AS24 contributed 99 percent of group revenue of €110.5 million ($122 million U.S.) in Q3 and 99 percent of group revenue of €326.3 million earned in the first nine months of FY2016.
The rest of the revenue came from Financescout24, Local24 and Stuffle.it. And from license fees paid by Match.com, CareerBuilder Germany and Triplemind for using the brands Friendscout24, Jobscout24 and Travelscout24 respectively.
From the table, it is clear that AS24 has had a particularly good run in the first nine months, while IS24 delivered a rather “pedestrian” performance. IS24 grew faster than the inflation rate of around 2 percent. But, this is the internet and a young market, and one expects a more exciting growth rate than 7.4 percent for revenue in the first nine months of FY2016.
Such as the growth rates produced by, for instance, Autoscout24 in the first nine months of FY2016: Revenue up 26.5 percent, operating EBITDA up 36.1 percent and EBITDA margin up 3.1 percentage points to 43 percent.
What is holding IS24 back? No doubt, the introduction of the so-called “Bestellerprinzip” in June last year has hit IS24 hard. Probably harder than the management had expected.
For instance, IS24 lost 13.3 percent of its so-called core agents (bigger spenders) from 20,041 in Sept. 2015 to 17,369 in Sept. 2016. It’s too early to say whether this was a permanent (structural) change in the IS24 market, or a once-off hit. Should IS24 continue to lose core agents, it may well turn into a problem child.
(But, don’t panic: With an EBITDA margin of 63.1 percent, IS24 is still the second most-profitable real estate site in the world, after Rightmove! At least, according to this very interesting analysis by Mike Delprete of PropertyPortalWatch, which compares the profitability of five of the world’s biggest real estate sites.)
From the reasons given by management for the drop in core agents, it seems the bleeding doesn’t have to be permanent. The drop was said to be caused by “churn”, “shift to our main competitors”, “smaller agents shifting from the core-agent group to the non-core agent group”, “agents going out of business because of the Bestellerprinzip” and “market conditions in Germany”.
All these factors could, theoretically, be turned around to work in IS24’s favor.
And the reasons behind Autoscout24’s strong performance? The Q3 report explained: “Revenue increased by 26.4 percent in the first nine months of FY2016, driven by the roll-out of the visibility products and ongoing expansion of the core-dealer base.”
It wasn’t quite clear what part the recent business model modification played in AS24’s good run. You’ll remember AS24 went from a you-list-and-sell model to a model which gives users the option to list-and-sell (to private or professional buyers), or go the “express sale” route, where an AS24 team helps you to sell your auto to the highest bidding professional buyer.
We asked AS24 to tell us more about the “visibility products” and the role the business model modification played in the strong performance. We’ll report soonest.