Show notes
This has been a significant week for the biggest Australian media company that you probably haven’t heard of. Headquartered in Perth and with more than 100 staff, The Market Herald has completed a $27m fund raising to buy classified sites Gumtree, Carsguide and, Autotrader.The Market Herald is parent company of the Hot Copper trading forum and the new acquisitions will catapult it the front row of the classified media battle. TMH is the seventh largest media company (of seven) listed on the ASX.In the Unmade interview, TMH’s CEO and founder Jag Sanger explains the company’s business model, and reveals his plans to launch a new national weekly business newspaper alongside a push into lifestyle publishing and a 24 hour business news streaming channel.Today's episode of the Unmade podcast was edited by Abe's audio.TranscriptTim Burrowes:I'm talking today to the founder and CEO of the biggest Australian media company that you've probably never heard of. Jag Sanger is the boss of The Market Herald, who surprised the market by announcing that they were buying Gumtree, Carsguide and Autotrader. The move makes them a big player in the classified advertising space. The Market Herald itself is a publication focusing on business news in both written and video form. Tim Burrowes:They've got big ambitions including a new weekly national business newspaper and a 24-hour business channel. The company also owns the gossipy investor forum, Hot Copper. I began by asking Jag how the company got to this point.Jag Sanger:Well, thank you. That's a good question. Right now we're at about 110 people split between Australia and Canada. I think one of the reasons why we're somewhat under the radar is in Australia, we're based in Perth, which is perhaps not known as a hotbed of media, and in Canada we're based in Vancouver.Jag Sanger:I think one of the things that has happened, and it hasn't been a deliberate plan on our part, is that because we've built an audience which is in Australia and it's in Vancouver, but it's also... Sorry in Canada, but it's also very much a global audience and we're building some activities which are outside of Australia, people haven't noticed who we are. In Nielsen always though, as a finance play, we've always been number one for impressions.Jag Sanger:We always are delighted about the success of our legacy competitor, the AFR. I think because there is a misunderstanding sometimes of business media, people don't quite understand that we're here, but we're here and we're growing very fast.Tim Burrowes:Well, in a moment we'll talk about The Market Herald now and let's talk about the wider portfolio as well. You're also... I'm not sure if the right phrase is to be owner of a community, but let's say it is. You're also the owner of probably the best-known finance community in Hot Copper. How do you think about that within the portfolio?Jag Sanger:Sure. I think this is a very important part of our journey and a very important part of how we think media organisations are evolving. If we look at how media business has worked, that once upon a time you would have, let's say a newspaper and then you would have classifieds and then by accident you had a community. Classifieds made all the money, community were people who sent you letters and your reason for being was the front page.Jag Sanger:We are that almost in opposite. We have built digital communities. Here in Australia, Hot Copper is easily the largest community for stock market investors. In Canada, Stockhouse is easily the largest community for stock market investors as well, so we own two of the largest communities. We're in that process of acquiring classifieds. We're bucking the trend there. It's a very important part of our business, and the punchline is that we will be releasing broadsheet national business newspapers, in this country and in other countries.Jag Sanger:It will be the first launch of a national business newspaper in this country since what? 1962. There's only two national newspapers in this country. We hope to be the third. This community is incredibly important for us because, one, it gives us readers, it allows us to turn some of the economics of journalism on its head and I'm happy to talk about how that works.Jag Sanger:But it's where we find out what people want to read, we want to find out what people want to view, and that community is a source of petabytes of data for us, which drives our data-led journalism.Tim Burrowes:Well, there's several interesting things there that I'll try and unpack, particularly the launch of a news master head in print form I think you're saying. Let's just talk for a moment about The Market Herald and that model because I'm amused with your labeling the AFR as your legacy competitor but fair enough. How do you think about your publishing ethos for The Market Herald?Jag Sanger:Well, firstly, just to talk about the Financial Review, I used to work for Fairfax. I used to run media and strategy there, a huge affection for the AFR and all its people and as they write about us often I suspect that we're forever in their thoughts as well, so we love to bits.Tim Burrowes:You're referring there to your occasional appearances in the Rear Window column of the AFR.Jag Sanger:You know one day I'll break out of Rear Window and they'll celebrate what we're doing somewhere else in the book and it'll be a happy day for us all. But no, no, we like them and we think they're doing good work. In terms of The Market Herald, just repeat the question. What was the question for The Market Herald?Tim Burrowes:Yeah. The Market Herald, what's your publishing ethos for The Market Herald?Jag Sanger:Sure. One of the things that we think is really important as a news outlet and as a media proposition in a world which is very noisy, with many audiences and huge fragmentation, all the stuff that we know, is to have a very, very clear sense of who your reader or viewer is to understand why they want to read and view you and then make a very, very quick decision, are you in the utility news business or are you in the must-know news business?Jag Sanger:We think utility users is going to a handful of publishers worldwide. There'll be this global giant, but in this must-read world, what we do is help people make decisions in a short period of time without all the information with a financial consequence and we give them that information quickly. Our classic reader is a... And to be horribly gendered for a second, a 55-year-old man who wants to buy a $10,000 worth of Telstra stock. Should I do it? Should I not do it?Jag Sanger:In that moment, we provide the information to them. But again, to be horribly gendered, the other kind of buyer we have is an equally intelligent and often smarter 25-year-old woman who's thinking about spending 10 grand on a used Chanel handbag. She also has information needs, she also needs to know in real time and we serve both those audiences.Jag Sanger:By giving people information they need when they're in state, and this is a very specific language that we use, we're ultimately a data business, when we track this degree of almost psychological arousal for why they must know, we are there and that's what The Market Herald is about.Tim Burrowes:This is both in the written word and in video?Jag Sanger:Absolutely. I think video is very interesting for us. We are easily one of the largest standalone streamers in this country of broadcast quality content. We are running at around nine to 11 million streams a month here in Australia and elsewhere. To understand how people consume media, how they consume video, how they consume the written word, that's something we spend a lot of time in actually working out but that's what we get from the communities we own.Tim Burrowes:Now, something you just mentioned was that you plan on launching a financial broad sheet, which was new information for me. I probably missed an announcement at some point. What is your plan there?Jag Sanger:Sure. We said this right from the beginning that we consider ourselves a newspaper and that we consider there is a viable business model for something we think is as beautiful and as amazing as a newspaper. We think as a product, as a cultural artefact, as a revenue stream, as a reason for being, it's really important to us and it's something we will be launching soon.Tim Burrowes:That's as a daily offering?Jag Sanger:No. I think if you look at the way the business meter is running around the world, it is let's say a Monday through Thursday digital offer, which is what most even print newspapers are doing. Then the weekend offer, which is a very interesting revenue earner and a very different proposition at the weekend for most of the big business press, that will be in print.Jag Sanger:It will be something which will have the cover mounts and the inserts that you have in traditional business news but the two will complement each other. We think a business audience at the weekend looks, feels, consumes differently and we'll serve them as well.Tim Burrowes:This will be available nationally?Jag Sanger:It will be available nationally. We're working out our print runs and our plans right now. We've been talking about this several times and I think it's an important part of the portfolio that we have. We believe here in Australia, we're already number one for online finance news. We are easily number one for business finance, TV streaming news and print is an amazing complement to both of them.Tim Burrowes:Fascinating. Last question on that one, have you yet set a cover price?Jag Sanger:It's a very interesting series of conversations that we're having. All I can say is it will definitely be at a premium.Tim Burrowes:Okay. Now, I suppose one of the other things which interests me about the business model for your portfolio is that some of the business model includes taking effectively shares in some of your advertising clients as they grow their businesses. How does that side of things work?Jag Sanger:There's two ways to look at it. We have a small amount of what exactly what say News Corp does or Seven West does, which is contract. You want to buy X, well, we'll do it in this way. Some of it is that kind of conversation.Tim Burrowes:This for instance would be like where Seven West ventures had stake in Airtasker for instance?Jag Sanger:Correct. They had a stake in Airtasker, they had a stake in... Or they've recently taken a stake in CarExpert, which is a property which we admire greatly and we do some things differently to that but we are kind of in that space. Very similar to that model and it's something that the contra deals people have been doing since the '50s. We get that. We do some of that as well.Jag Sanger:The other thing that we do is because we have a large business audience, one of the areas which we focus on and we see some of our competitors moving into it as well and we think we have different propositions is to provide an opportunity for listed companies and wealth brands to speak to affluent audiences. Now, for these businesses, often which they're smaller, they can be private or they can be listed, we allow them to pay their fees or their cost to ours for billings in stock.Jag Sanger:We don't manage these portfolios. It's not held as a way of making money, just simply a cash flow mechanism for smaller businesses. Sometimes we win and sometimes we lose and every time we're indifferent because it's not about making money on those portfolios, it's just simply a way of reaching different kinds of advertisers who may not yet have funds but who we believe in.Tim Burrowes:Presumably some of this content that you then create for these people is what... The phrase has gone out of fashion a bit, but would've previous been called advertorial or native advertising. How do you ensure the independence of your general reporting on business versus your coverage of those clients?Jag Sanger:One of the things that we do here, which is really interesting is our editorial team and our newsroom, they do not know what is a paying client and what isn't. That's the first thing. The second, when it comes to native, advertorial and sponsored, one of the things that we are almost religiously fixated on is if it's sponsored, it says sponsored at the top in 12-point font, it's orange and it's clear that it's sponsored. Jag Sanger:Our word of sponsored is if we have been paid for it or if there's been any degree of editorial sign-off from a client, then it says sponsored. What we don't do is to do what, for example, Forbes do where I think there is potentially an opportunity to... or a situation where you may begin to devalue some of your trust where sponsored is called something else.Jag Sanger:What we don't do is use the word special report, which again, some of our peers do and what we absolutely don't do, which is what some of our other competitors do, which is to barely mention it at all. The way that we do it is to be very much on the sunny side of the street. We do work with clients, we do advertorial and native sponsorship, but it's say sponsored if it's sponsored.Tim Burrowes:Well, you're about to make, certainly from where I'm sitting, looks like the biggest move in the history of the company so far, which is acquiring Gumtree, Carsguide, Autotrader. Why?Jag Sanger:I think there's a handful of reasons. First of all, the prescription we had for the business media or any kind of media, how it was is you had the front of the... Let's just take a newspaper. You have the front of the book, which is where your reputation sits. You have the back page, which is sports, which is where your readers sit because it's entertainment. But somewhere towards the back you had those traditional rivers of gold, you had those classified sections which paid for the whole shooting match. Jag Sanger:All journalism has always been sponsored, but usually it was sponsored by small ads for cars and houses and jobs. Well known to everybody, everybody knows this, but over the last 10, 20, 25 years, those classified sections have migrated out of newspapers and they become standalone businesses by themselves. You have the very interesting situation where you take for example Nine in this country, which is a $4 billion business-Tim Burrowes:Well, 3.5 these days. They've not had a good couple of weeks.Jag Sanger:I think there are some travails for everybody, but I think we like to go with four. You then look at the largest real estate listing site, the largest car site, the largest job site, and they have an aggregate valuation of $40 billion plus, 10 times bigger than the largest media business. They own no journalists. From our perspective, the largest general classified site in this country is Gumtree. It's a brand which 90% of this country knows. Jag Sanger:There's a degree of affection and warmth to that brand and to build something of that scale and reach would cost us hundreds of millions of dollars. The first thing is we're back in classifieds and we're back in classifieds with a vengeance. Number two, the opportunity to build other products around that audience, especially in terms of streaming video, especially transactional streaming video are huge.Jag Sanger:Great announcement from the news I think this week or last week about in-video commerce and that's something that we are probably going to be natural leaders in. Then the final thing is it gives us scale. Instead of reaching a million, a million and a half, typically male, typically wealth, typically eastern states, we've now got an audience which is almost one in two economically active adults in this country. Jag Sanger:We think we have great editorial opportunities with that and it gives us classifieds, it gives us what we need structurally and it gives us huge reach. That's why we did it.Tim Burrowes:Obviously that plays you into a couple of classified verticals. Are there others you'd be interested in acquiring or launching into? I guess I'm thinking about jobs in real estate, which are obviously lucrative but also quite competitive.Jag Sanger:That's a really good question. I think there are one or two categories where we are very, very well-positioned, and one of those is autos. Against Carsales who we admire and who we like and who we know very well, against Carsales, we now have similar traffic. Over recent years, the business... This is the Gumtree business, has consolidated the second, third and fourth largest competitor to Carsales. One of those is Carsguide, which I was on the board of, and we know it very well and we think we have a red hot chance in cars.Jag Sanger:To put this in context, we've got similar traffic for private party, cars, people selling their own cars. We're bigger than Carsales. For some aspects of dealer, we're kind of at the similar level. Some of the things structurally we're in possibly a better position for... Carsales is a $6/7 billion business so we think there's a huge amount of opportunity there. Jag Sanger:For some other areas, I'm not sure if the brand travels naturally, so we won't push it, but because we're number one in general classifieds, we actually aggregate several thousand categories and within those categories there are always some gems and we'll put our time and effort into those.Tim Burrowes:Now, you're also looking to play yourself into the, I suppose, consumer lifestyle space with the launch of Market Herald Fancy. How are you thinking about that?Jag Sanger:If you look at how business media used to work, and this is the Wall Street Journals, the New York Times, the Financial Times, let's say the AFR here, if you pick up the newspaper on a Friday or a Saturday, the book will have 48 pages, 52 pages, and it will have maybe two or three ads. We like to think that business newspapers took the ads out to make them easier to read. Jag Sanger:But on a Saturday or a Sunday, that same book will have three inserts in it and there will be 74/76 pages and they will be 60% full page, full colour, glossy and they're carrying ads for high ticket consumer, high-engagement but infrequent purchases. It's travel and jewellery and luxury and all that kind of thing. Fancy is in the same vein of that, probably the closest comp would probably be How To Spend It, which is from the Financial Times. How To Spend It is now probably 30% of the EBIT of the entire Financial Times business. Jag Sanger:If you look at the Wall Street Journal, they have Penta, if you look at... Sorry, yeah, they have Penta, the New York Times has the T Magazine. It's very similar. It's a way of selling product and introducing very, very affluent audiences which are hard to reach, to high-end brands. That's something we're doing.Tim Burrowes:Now, you are also looking ever more closely at the streaming space as well, 24 hours streaming with your ambitions for The Market Herald with TMH One. How will you go about that?Jag Sanger:One of the things that we do very well is... And this is something that we talk about and we're very open about and is very much hidden in plain sight, is we've created a different kind of multi-platform journalism and everybody says that, but our newsrooms look different, they act different and they're run different. We begin at the plumbing layer. We are ultimately plumbers. We have built and plumbed a different kind of newsroom, not hired for a different kind of newsroom.Jag Sanger:We're multiplatform from the beginning. Our workflows editorially link into our news gathering and production for video. Our video streaming, we're one of the largest streaming publishers in Asia Pacific. Certainly we're told that by our streaming partners and we built our own play out. What that basically means is we can produce high quality broadcast quality content. We're not terrestrial, but we can do it maybe at 20% of the cost of terrestrial.Jag Sanger:Now, that ability to take that infrastructure and apply it to different kinds of business and then lifestyle programming absolutely is something that we're focused on and is something we'll be talking about more in the next few months. We've committed to launching a streaming channel called TMH One. We're definitely on track and we look forward to getting that out of the tracks very soon.Tim Burrowes:Would you see that as a potential competitor to the likes of Ausbiz for instance?Jag Sanger:I think, Kylie, we have a huge affection and time for. I think that she's-Tim Burrowes:She's Kylie Merritt me who runs Ausbiz?Jag Sanger:Correct. Yeah. I think, look, it's very interesting. Most of the business TV experiments in this country have failed. If you look at CNN Digital, which it was touted as being one of the biggest changes to CNN for many, many years. They spent two years on it, they spent $300 million and they pulled it after six weeks. If you look at the failed experiments in the UK right now, which have been GB News and a handful of others.Tim Burrowes:Well, in defense of GB News, they are beginning to find an audience now, I think.Jag Sanger:You are correct, there are some programs and some slots which have more than zero views, which was a challenge for them for some time. I give you that. They have got at least one view for most of their slots now. Took a while. I think that we've learned a lot from those failed experiments and I think that that model which was embodied in so many people, which was a terrestrial workflow but somehow tweaked for streaming, we don't believe that works. We think a ground-up integrated workflow is the way to do it.Tim Burrowes:Presumably the rise of connected TVs is one of the factors that makes this the timely moment to do so.Jag Sanger:I think that the opportunity for connected TV is both much greater than people think, but will take much longer to get there. I think that the ability to wrap an idea of programmatic TV, which is how advertisers think about connected TV or always on TV or TV everywhere, doesn't quite match the reality of how people engage with that content. Jag Sanger:One of the really interesting opportunities and realities of business television on big screens, especially streaming business television, is more business TV is walked past in lobbies than watched in seats. We're there. We're thinking about it closely. We have learned a lot from the failed experiments of many of the other terrestrial to streaming formats and we hopefully will get it right and we're going to find out very soon, but we're very confident.Tim Burrowes:You're raising something like $27 million at the moment from your existing shareholders. I noticed there's a slight delay in getting that stock back up and trading on the ASX, certainly as we're talking. I think it was about now we were expecting, but maybe there'll be another week's delay or so. What's the reason for that change in timings?Jag Sanger:First of all, the rights... Sorry, the rights issue was incredibly well supported. We have had all of our existing shareholders take it up, especially institutional shareholders. We'll be announcing who some of those are very soon, which will be very interesting because some of them move past certain thresholds. There was the unfortunate death of a monarch this week, which doesn't happen often and that has delayed our timings. Jag Sanger:Then there's this big kicking and jumping game that happens in Victoria. For those two reasons, the timings were pushed out very slightly but we are hugely pleased by how successful the raising was. There are a number of other things that we have to do to finance this transaction but everything is on track.Tim Burrowes:Now, the organisation has a turnover approaching 30 million. The normalised EBITDA I seem to remember as being about 5 or 6 million. In your last annual report, current debt was about 7 million. Usually the markets like the ratio of the debt to be below the EBITDA. After the raising, where are you expecting your debt to sit?Jag Sanger:I think that we put forward a pro forma in our raising documents and we expect to be about $120-ish million revenue. We expect to be at around 20 million dollars EBITDA. Excuse me. We're not giving guidance on either. We are raising debt and there's a number of different things that will come into play there. It's also worth saying that typically for a media business in the growth phase that we're in and we're growing incredibly quickly each year, the ratio of debt to our market cap is often more significant. Jag Sanger:It'd be fair to say that we are somewhat undervalued at this moment. We're very conscious of that, and the reason for that is that we're very tightly held. One of the things that's happened in this rights issue is most of our shareholders... Well, nearly all of our additional investments come from existing shareholders, which means there's not a lot of stock in the market. For all kinds of reasons, as we grow that will change, our valuation will change.Jag Sanger:Clearly we're not making any forward-looking statements, but I think a rerate would possibly be on the card at some point. At that point we do things differently.Tim Burrowes:Let's talk a little bit more about your background. You've touched on some of this already. You actually found your way into the media with ITV, which is the biggest commercial broadcaster in the UK, back in 1989, which would've been before it was one ITV I guess. What was it that interested you in media in the first place?Jag Sanger:That I think is really interesting. First of all, LWT is I think one of the most interesting broadcasters in the world at the time, and certainly was. It was absolutely that kind of stepping stone between this post-war Reithian public service and the brave new world of selling things. There are so many innovations that happened there that a lot of traditional TV around the world learnt from what happened at LWT but nobody's heard about LWT because it's such a long time ago because I'm so old.Tim Burrowes:London Weekend Television.Jag Sanger:Once upon a time you only saw it at weekends. No, I was incredibly fortunate at that time to get a great job, which was carrying bags and getting people's tea and all that kind of thing. But to me it was actually quite fascinating because I remember so vividly at that time, I earned the grand sum of I think about, I don't know, a few hundred pounds a week, and 30 years later a runner in Central London still earns 300 pounds a week, so it's changed and it hasn't.Tim Burrowes:You then went through cable television and also consulting with McKinsey and later with PwC and along the way, as you've already mentioned, two years at Fairfax, which I think was 2006 to 2008, which was probably when things there were at the most panicked and desperate as the newspaper model went away. What did you learn from that?Jag Sanger:Well, look, if I think and reflect on all of those experiences, I began to work first in probably the world's most significant and interesting broadcast, which doesn't exist anymore. Then I worked at Videotron, which was the most important European cable business, which doesn't exist anymore. Then of course CableTel which literally consolidated to European Cable that doesn't exist anymore. Then I came here and worked a bit for Fairfax, which doesn't exist anymore.Jag Sanger:Your conclusion could be you're a desperately unlucky kind of guy, Jag, which would be one conclusion, or I've seen a lot of things and we kind of know what works and what doesn't work and hopefully we're applying some of those lessons.Tim Burrowes:Without giving any forward-looking guidance, what is your take on the economic outlook for media generally at the moment?Jag Sanger:I think that one of the really interesting things is the growth of the streamers and the decline of the streamers, the way that audiences are going to continue to fragment, but media won't care. Then the really interesting opportunity in business media, and clearly I'm talking my own book because we're in business media. We think the growth and the decline of the streamers is that the magnificence of Netflix and then that short period of existential land grab for anybody grossly distorted production around the world.Jag Sanger:We can see that tide flowing out and it will change a lot of things very quickly. Fragmentation of audience, no one's actually going to care because it's as fragmented as it's going to get. There's enough micro audiences and smart people will realise that there's a difference between utility. Everything will be everywhere at the same time and super, super niche and the super, super niche will thrive. Jag Sanger:Then with business, one of the things that we're very conscious of is we attract in large numbers some of the most affluent, influential, engaged, curious and hard to reach audiences on the planet and unlocking that, getting closer to transactional outcomes means good business programming, coverage news will always attract an audience and that audience is more valuable than people think.Tim Burrowes:Just finally for The Market Herald obviously you're doing the big acquisitions now, Gumtree, Carsguide and Autotrader, is that likely to be it for the short and medium term in terms of acquisitions or do you see more down the track as well?Jag Sanger:If you look at my LinkedIn profile, you will see that I say I'm an M&A guy in media, so I would assume that we will do more on both and this is a platform transaction, which as we publicly said, gives us the opportunity and hopefully the right to do more going forward.Tim Burrowes:Look, and I did say it was the last question, but I have thought of just one more actually, which is inspired by you being the M&A guy. I'd love to know what you do think about that wider media landscape on why these big mergers haven't happened yet. Because it felt like two years ago, maybe even just prior to the pandemic, everything was set for some of the big beasts to come together. Has that, well changed or are we still going to see that, do you think?Jag Sanger:Look, I think there's probably two big reasons. Number one is the history of outside in M&A in media is not good. Let's take Australia for a second. If you look at Nine, if you look at Ten, look at Bauer, the winner was the seller. I think that it's an interesting opportunity to better reflect on some of the reasons why. The second is when you look at the shifting priority of non-financial strategic buyers, it's very different.Jag Sanger:Media is not a fast-growth business to some of these people unless you do things very differently. That then means that the future will be driven very much by non-trade financial buyers and those guys are going to be much more operationally focused. They'll look a lot more like we do and we think that that's the kind of player which will begin to consolidate some of these big beasts.Tim Burrowes:Jag, thank you very much indeed for your time.Jag Sanger:No, I appreciate it. Thank you.Tim Burrowes:That's it from the Unmade podcast for today. If you aren't already signed up to the Unmade email, you can do so at unmade.media. Today's podcast was edited by our friends at Abe's Audio. I'm Tim Burrowes and I'll be back with more soon. Toodle-pip.Speaker 4:Unmade. Podcast edit by Abe's Audio. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit unmade.substack.com