When Norwegian media group Schibsted had its IPO in 1992, Brian Fallon, one of the founders of property website Daft.ie, was ten-years-old. His brother Eamonn Fallon was aged 15 at the time and it would be nine more years before the pair had the very bright idea of establishing Daft, just as Ireland’s property boom started to accelerate at the turn of the new century.

Now the brothers have thrown in most, though not all, of their lot with the Norwegians. In 2011, Schibsted entered the online classifieds market in Ireland with the purchase of DoneDeal.ie, making that site’s founder Fred Karlsson a very rich man. The DoneDeal operation is now being merged with Daft and another Fallon venture, Adverts.ie, on a 50/50 basis in a new company, Digital Media Ventures.

Donedeal's Fred Karlsson

Exiting the scene is American private equity firm Tiger Global, which held a 26% stake in Distilled Media Group Ltd, the operating company for Daft.ie and Adverts.ie. Schibsted may have an option to buy out the Fallons at a later date, as that’s the way big companies operate.

In Association with

Classified Assets

Schibsted is an interesting example of an old-world newspaper company that is determined not to be left behind in the digital era. It was a family-owned business with newspaper interests in Norway and Sweden from 1839 until going public in 1992. Print activity is still the mainstay but in recent years the group has been building up a collection of online classified assets outside its home market.

They garnered revenues of €520m in 2014, or 30% of group turnover of €1.65 billion. The online play hasn’t done much to stem decline in Schibsted’s operating profit – €56m in 2014 compared with €160m in 2011 – but the die is cast and chief executive Rolv Erik Ryssdal is going for it.

Schibsted’s Rolv Erik Ryssdal: he’s done another Irish deal

Daft.ie started to take off in 2006, when the company booked a net profit of €340,000. The following year the operating profit was €1.6m and there was €1.9m cash in the balance sheet at the end of 2007. Even as the property market turned in 2008, operating profit increased to €2.5m and the brothers rewarded themselves with a €1.4m share buyback.

Daft Dividends

Hefty dividend payouts followed in 2010 (€2.9m) and 2011 (€4.5m). When Daft Media was consolidated into a new company, Distilled Media Group, at the end of 2011, the value placed on the business by the directors was €28m.

By that stage, Distilled Media also included Adverts.ie, which was launched in 2010. This classifieds site operates a free listing model for items valued up to €30 and a €3 charge if the item is sold for over €100.

Distilled Media invested €200,000 to seed the business, €360,000 in 2011, €970,000 in 2013 and €930,000 in 2014. The investment seems to have worked, with operating profit at Distilled Media Group nearly doubling to €1.7m through 2013 on turnover of €8.4m.

At the very least, Adverts.ie had become an annoyance for Schibsted, which has been investing heavily in branding DoneDeal. The Norwegians paid €10m to buy a 50% stake in DoneDeal initially and perhaps coughed up the same again when they purchased the balance of the equity from Karlsson in 2014.

Market Concentration

With two of the largest classifieds platforms under the one roof, Ryssdal can look forward to streamlining the pricing model. The merger will give Digital Media Ventures a majority share of Ireland’s online classifieds market, so perhaps the Competition Commission will take a look.

The Fallons’ deal with Schibsted doesn’t include their other online properties, TheJournal.ie and Boards.ie. Journal Media Ltd booked a loss of €930,000 in 2013 and owed a Fallon company, DML Capital, €3.5m at year-end. Journal Media ended 2013 with a negative net worth of €3.3m.

That outcome meant Eamonn (38) and Brian (33) would have been stretched to buy out their Tiger VC partners in Distilled Media, perhaps presenting an opportunity for Schibsted to double down. The Fallons will surely get their money back at least with The Journal, given its standing in the news marketplace. But it may never be as bountiful a money-spinner as their original Daft idea.

Eamonn Fallon, co-founder of Daft.ie