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Simon Baker, Investor, Director, and Advisor to the Global PropTech Industry
"As you grow, it's very easy to get distracted by bright shiny lights. There are new opportunities everywhere. But … don't get distracted by them. Just focus on what you're doing, and execute, and then work on executional excellence." — Simon Baker
Today's guest has worked with online marketplaces across multiple countries, and even continents, advising on product development, and successful business models. Joining us for this informative episode on the future of online rental websites is none other than Simon Baker, who has over a 20-year career in online marketplaces, from being CEO of the REA Group to advising market leaders around the world, and investing in 30-plus marketplaces in 15 countries. The list truly goes on and on (and up). In this episode, Simon shares insights into what he has learned to be the most important focal point when it comes to driving and scaling a business, as well as what he looks for in leaders prior to investing. We find out what typically leads to failures in online marketplace and how to ensure the survival and profitability of rental listing websites in the long run! Tune in to discover the nuances and challenges of the online marketplace business, and hear some of Simon's real-life examples of how to overcome hurdles in the space. This is an episode you won't want to miss!
Key points from this episode:
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"SB: The biggest problem with I think a lot of businesses is they don't know what they don't know, and so they guess it or they think they know it or they think they can build it, and they usually make a mistake in that process."
[00:00:37] NS: Welcome back to Sync or Swim. I'm your host Nicolina Savelli. On this podcast, I chat with multifamily and PropTech experts to learn how you can reach more renters, sign more leases, and maximize the value of your assets. Today, I have Simon Baker who has over a 20-year career in online marketplaces, from being CEO of the REA Group through advising market leaders around the world and investing in 30-plus marketplaces in 15 countries.
He is currently the Chair of CAV Investment Group and the Australian Stock Exchange-listed PropTech Group Limited. He is Co-Chair of the NASDAQ SPHC Genesis Growth Tech Acquisition Corp, and a board member of the NYSE listed CIN. He was previously the Chair of ASX listed real estate Investar Limited and Mitula Group Limited. I mean, the list really goes on and on and up.
That was a mouthful, and I've had a lot of guests on the show. But that definitely was the longest list of experiences I've ever had to say, so I'll stop there and first say, Simon, thank you so much for joining me today. I'd really like to have you share how you got involved in online marketplaces and why you're so passionate about this vertical because clearly, you are.
[00:01:59] SB: Nicolina, thank you very much for having me. Okay. How I got involved was quite funny. Back in 2000, so way, way back, a very long time, 20, 22 years ago now, I was working at News Corp in Australia. I was heading out their online strategy. I did the deal for them to acquire a very, very small company called realestate.com.au. They invested all of their $2.25 million in some marketing and bought 44% of this company that was listed at that time on the stock exchange.
I was sort of intrigued because I did the deal. I had to market it to Lachlan Murdoch, get him to say yes, and so on. Then having done that, I then went to the listed company for the chairman and said, "I think I can run this company better than the guy who is currently running it." They gave me the keys to the car, so to speak. This is a property portal. So I got to run it. Then over the next eight years, we took the business from having around 4 million in revenue to 135 million. We went from loss-making to profitable, and we took it from a market cap of $8 million to a billion dollars.
In that process, you learn a lot about what makes these businesses work. We acquired businesses in England, in Italy, in the UAE, Hong Kong, and a couple of other places I can't remember now. So we expanded greatly. I then left and then thought, "Well, after eight years of doing this, and I love what I'm doing, I just want to keep doing it." So I then started to invest in these businesses, advise them. I joined boards. I was the chairman of a listed company called REA Property Group and so on. Through that journey, you get to learn a lot about these companies.
Now, what's interesting is that REA Group today is worth $25 billion. It's a massive company. It owns realtor.com, for example, in the US.
[00:03:52] NS: Okay. I was going to ask, is it associated with realtor.com in the US?
[00:03:56] SB: Yeah, absolutely, because it's new school. Right. Same company. The REA Group owns, I think, 25% of it. Maybe more. I'm not sure. They own market leaders in many countries now, so it's a big player, and it's doing very, very well. So that's how I got involved in this industry.
[00:04:10] NS: Right. Now, this isn't part of my questions, but I'm going to continue to go off script because I think that you'll be fine with me asking things that are off-script. But basically, what would you say were maybe the early lessons or maybe the biggest lessons that you learned in order to kind of drive that company forward? I mean, at the time, I'm sure there wasn't really a playbook for you to go by, as it was probably pretty innovative at the time. So was there anything that you can share that was kind of like, "This is what I need to do, yeah."?
[00:04:41] SB: Yeah. So when you break it down, my background was I spent five years with McKinsey & Company and consulting. So I'd seen a lot of different businesses, and what I did was I took the lessons I learned from those businesses and applied them to this. One of those was 21 people and really the startup culture. The main lessons are around one is focus. As you grow, it's very easy to get distracted by bright shiny lights. There's new opportunities everywhere. But until you've got so much penetration to your core business and that you're really a market leader, don't get distracted by them. Just focus on what you're doing, and execute, and then work on executional excellence.
That's what we did. We had – Actually, I keep saying we – Two people asked me this question is it got very boring for about three years, as we just went around signing up real estate agents with advertising packages, banging on doors, [inaudible 00:05:35]. The second I think is persistence. So you're going to find problems every day. It's how you address those problems. Sometimes, people get, "Oh, my god. This is so big. What am I going to do?" Then sometimes like, "No. Okay, let's break it down into little bits and see if we can solve each little bit. Then we'll get over that hump, and then we can keep accelerating."
I think the third lesson that I learned out of it is you got to manage your stakeholders. Not just shareholders but stakeholders very carefully. It's around communication, setting expectations, not – When you set expectations, try to at least get there or even overachieve them. But there's no use saying, "I'm going to do a billion," and you come in at 100,000. Come on. Right? There's a gap.
I think the last thing is trust in the people around you. Select great people and then trust in them. So we used to have various mantras that we will talk about in the business, everything from just get on with it, right? It's not my job to go, "Yes, do it." It's like I trust you to do it. Get on and do it. Now, I don't expect you to get 100% right. Maybe 7 out of 10 correct decisions would be good, as long as the three [inaudible 00:06:49] aren't really bad, right? So I think that is – The other one is don't let perfection get in the way of better.
[00:06:57] NS: Yeah. I think that's a huge business. For any startup – For the last 12 years, I've worked in startup culture, and that really is something that has always either driven things forward or held people back because they're looking for perfection. They're looking to get – The thing is you have an opportunity when you're a startup to make mistakes, and not that many people are going to notice unless – You can pivot quickly. So when you make those mistakes, you can kind of learn very quickly and make the changes that you need to make without anyone really holding you overly accountable when you're not a public company.
But, yes, I think that the need for perfection is just at the end of the day, you may be wasting time on just not learning when you're trying to achieve perfection. When you learn, you can ultimately achieve what you may think is perfection, but at least it will drive the business forward to a degree. So I think that that's a super valuable lesson to learn at the early stages of any company and probably any rental listing site that's out there right now that might be listening because I know we have a lot of listeners who are actual online marketplaces and owners and founders of online marketplaces.
So kind of moving on from that, and you talked about the lessons and kind of what you learned, what venture would you say was the most challenging for you in online marketplaces? What were kind of maybe the challenges failures that you learned, and what helped you set up so many of these marketplaces for success, which you kind of already said, but if you could say maybe the most challenging for you?
[00:08:37] SB: There have been many challenging ones for very, very different reasons. So I probably can't think of the most challenging, but I'll tell you a quick story about a challenging one and what they did to succeed. So I was a very early investor in a company called Viva Real, which was a property portal in Brazil, and it was set by a guy called Brian Requarth, who's an American, but he was living in Colombia at that point. The first challenge was – I got involved, and I had an investment. As Brian said, he knocked on about 30 or 40 different doors trying to get people to invest, and I was the guy who said yes first, which turned out to be a good thing in the end. But at that time, I had no idea. So I took a punt. I liked the guy. I thought he was smart. I thought he had a good idea what he wanted to do.
The first challenge that they faced was about direction. They were in Colombia. They had the site in Brazil and in Mexico. They were doing a whole range of things. So the first thing is about focus, the point I made earlier, right? So we got into focus, and I remember with them, and we wrote on the board one day AAB, all about Brazil. Why? Because it's massive, and there's a lot of opportunity. The players who were there at that point in time were not very innovative. They were very more corporate in their approach. So they pivoted. We talked about pivoting before or letting perfection get in the way better. They pivoted, focused on Brazil. He moved to Brazil. He got all the team to focus on there, and they grew rapidly.
Over the next probably four years, so this was back 2008, 2009. This happened. Then about the next four or five years, they worked through various hurdles of growing the business, and then they became equal market leaders. So then they faced the next hurdle. What do I do now? The next hurdle was how do I convince the other guy to merge? Because if you take market leader A, people market leader B, put them together, you get a much bigger company. That market leader was called ZAP, ZAP [inaudible 00:10:33], right? For a lot of negotiations, which they did not make, they merged and created Grupo ZAP, and they ended up with roughly 50 odd percent each, one going a bit more or less.
With Grupo ZAP, which is a large media company in Globo. It was a large media company in Brazil, as the other shareholder. That then created a whole bunch of new problems, is how do you bring two different companies together, different cultures, different work ethics, different approaches to the market, different – Everything was completely different. Then I spent another chunk of time with them, hands-on everything from sales to marketing, to product. Just really working through how do you bring these together in a way that is going to create value for the visitor to the portal and the agent or the advertiser on the portal?
They went through the process of merging and growing. After about two to three years of going around in circles sometimes, but they eventually got this huge leadership position over what now a number of a different number to play. Then they faced another hurdle is OLX, the large, multinational classifieds player who said, "Well, we want to buy you." So then how do you negotiate a deal with OLX, where you maximize the value for everyone involved? In a market where the Brazilian Real is decreasing in value versus the US dollar, and your shareholders are in the US. There's all the political nuances and so on.
That was it. That's an interesting story of hurdles and how you overcome them. At the core of all of this was focus, was having a strong leader, so Brian and Lucas, who was the CEO at that point. Brian was the chairman. Very good leaders, very strong, very clear at what they're trying to do. They articulated it well to all parties, stakeholders, all stakeholders, the employees, the shareholders, and so on. They ended up with a very good outcome for everyone. So I think there are some very strong lessons learned how you overcome these sorts of hurdles.
[00:12:37] NS: Is there a skill that you notice or you've experienced in your investing career as leaders that you think that you look for, and you make sure that the leaders kind of possess before you get invested or get involved? Can you share kind of what that skill is?
[00:12:57] SB: Yeah. I'd call them characteristics more than skills.
[00:13:00] NS: Sure, that's fair.
[00:13:02] SB: These characteristics probably fit into a number of categories. The first is clarity in what they're trying to do. I mean, they've really got to pass the elevator test. Get in and you've got to – I understand the industry. I've seen so many of these models. It's crazy. You should be able to say, "I'm doing X, Y, and Zed. This is how I'm going to make money. Here's my target audience. By the way, thanks for the 15-second elevator ride or the 32-second elevator ride." These aren't complex businesses. It's about how you execute.
The second thing I look for is determination. So sometimes, I just won't return their calls, and I want to see how often they chase me down. Are they persistent? You've asked me for money. You've asked me for help. But do you actually follow up? Or are you just there to get the check and then disappear? The third is realistic valuations and projections. I'm not an idiot. I know what a hockey stick looks like. I know what's plausible. I'll get it. I want to get it right. I can sniff what's overly enthusiastic. You're lossmaking, lossmaking, lossmaking, massive profit year four. Just invest today. Come on. It never works that way. The last thing is they're going to pass the beer test. The beer test is I've got to be able to have a beer with them.
[00:14:21] NS: Okay, that's – It meant literally what it said.
[00:14:25] SB: Yeah. It literally means the same thing. It means I've got to be able to sit down with them over a beer and just chat. But there's a reason behind this, right? The reason is are they there just for an outcome? Or are they there to actually learn and develop? Because if over that beer, you're having a conversation, you want to see how – What sort of questions, are they personable? Do they care anything about you as a person? Because if they don't care about me as a person, are they going to care about an employee in that process?
[00:14:57] NS: Well, that's what I was going to say. It's an indication of what the culture they're running as well, right? If they don't care about people, if they don't show empathy.
[00:15:05] SB: Exactly. If I look back at my successful investments and my absolute disaster investments where I've written off money, and there's been a few, the ones I've written off money have one thing in common, is I couldn't stand the guy. I just couldn't stand – In hindsight.
[00:15:21] NS: That's fair.
[00:15:23] SB: I invested for the wrong reasons. So in hindsight, you've got to pass the beer test.
[00:15:27] NS: Yeah. So there needs to be a relationship. There needs to be something there, a connection that kind of pulls you both into saying you want this to be mutually successful and not one-sided. Absolutely.
Now, is there any of those failures in the online marketplaces? You said that it was because you didn't really like them. Is there anything in their business that were like very not in line with what – Was there anything that you can share that might be like, "You know what? That was a bad business move," and you know this is kind of what led to maybe not getting your money back?
[00:16:05] SB: Yeah. I didn't get my money back. I think I was sent back on a few of them. I'm looking not a one in particular but in general. The not passing the beer test, not standing the guys, is an indicator of how they make decisions internally. When you boil it all down, they're often making incorrect decisions internally. When you look at why they failed, well, they over-invested in marketing, for example, too early. They invested in product. Maybe their product was fantastic, but they didn't invest in sales and marketing, right?
Often the tech guys love beautiful products, but we have that marketing and sales thing. Sales and marketing leaders, they go, "I don't care about the product," or whatever. It just works, right? But they then don't check what's happened.
[00:16:49] NS: There needs to be a fine balance, yeah.
[00:16:51] SB: You got to have that skill set that transitions from product, ideas, fit for market. Can we build it? Is it going to be good? Right through to are we communicating and supporting the product, having done the sale? When I look back, as the beta is failing, people are the ones who were very caught up in their own world about what's the way to do it. That's not saying I had a better answer. I don't have better answers. I have an answer. I have a perspective, right? But the whole point is if you're – I'll go back to this Brian Requarth, who did Viva Real. He would ask 20 people for their opinions on how to do something.
[00:17:35] NS: There you go. Yeah.
[00:17:37] SB: Because he's trying to triangulate in, "Am I doing the best? What works? What doesn't work?" He's taking that knowledge set to help him project his business forward. So I think that's when I think about – So I like to be with Brian and some of these other guys. In hindsight, if I'd followed my gut instinct upfront, which sometimes I didn't do, I do better nowadays, I would not have made the investment. But you win some. Hopefully, you win more than you lose in this whole process, and you get to enjoy the journey.
At the end of the day, we're all going to one place. That's guaranteed. But it's about enjoying the journey with these guys as well. I got to say I made some very good friends from the investments, and they call. They said, "Hey, Simon. What's your view on X?" I say I don't know. But I do know someone who may be able to help you. Talk to someone else, this other guy." Then I'll just do the intro. Let them talk. That's what it's all about. People who reach out who want to learn I think is a good indicator of someone who's got a much better chance of success than someone who's caught up in their own world and own view of what's right and what's wrong.
[00:18:47] NS: Right. No, absolutely. Now, has there been any regret or missed opportunities in investing in online marketplaces? Any – No? Or you've done all the good ones?
[00:18:55] SB: Thousands.
[00:18:57] NS: Thousands of thousands, thousands.
[00:19:00] SB: Of course, there's always. Hindsight is wonderful.
[00:19:02] NS: Of course, of course.
[00:19:04] SB: We're all massively successful in hindsight. It's foresight. That is the most important one, and that's where it's hard.
[00:19:12] NS: Of course, yes. I mean, I'm sure, yeah, you can count the list of missed opportunities. But I think that goes for any vertical, any industry. There's always opportunities there, and you just kind of have to take what comes, and you can only take on so much sometimes, right? So yeah.
Now, obviously, rental listing sites are a super competitive space. If you were giving advice to someone who owned, operated a rental listing site right now, what would you tell them they need to do to kind of future-proof themselves and kind of ensure profitability? Because a lot of these rental listing sites are getting, and I had this conversation in my last episode that they are getting this bad rep of being antiquated. Even though that people need them, they're not really progressing. So what would you kind of tell someone in this space to kind of look forward and make sure that they're future-proofing this kind of channel?
[00:20:29] SB: The way I view this, if you're a listing site, you are part of yesterday. You have to be focused on the transaction, and the transaction in rentals is I have someone who wants to rent something at its core, and they're going to rent it for a day, a week, a month, a year, whatever, a period of time. My job as the matchmaker is to ensure that the renter is a bonafide person. They've got the money. They're not going to do any damage. They've got a job, whatever. At the other end is that what they're renting is also a bonafide, right? It's that it is a legitimate property. It's well-maintained. Whatever the landlord is promising, whether it's furnished, unfurnished, whatever, is true. My job is to make that transaction of bringing these two together to be super smooth, super-fast, risk-free for both parties.
Now, if I can deliver that, I'm changing the way the industry works. So I'm not just a search engine. That's just the starting point. Here's a property. Oh, I like that property. Click, apply. How do I apply it? Fill out this form. Click. Then automated credit checks, automated tenant checks are done, for whatever that tenant looks. It should be all AI-driven. Tick, done. Perfect. You are suitable. At the other end, "Oh, I'm putting on a new property. I need some mechanism." They show you. The landlord hasn't got any issues. There's not someone who's going to demolish the place. There is no roadworks occurring at the front for the next six months or whatever. I've got to make sure that I am renting what I'm – [inaudible 00:22:13]. Then I'm just going to match the two together. Here are some contracts. I will try to move in. Thanks very much.
By the way, I want to de-risk this. So you as the landlord, you can have renter's insurance or something, right? Bang, bang, bang. You as the tenant, well, you don't want to put three months' worth of rent into some escrow account or whatever. So here is a deposit bond or a deposit product.
[00:22:42] NS: So reducing any scams and anything that could come from that transaction.
[00:22:48] SB: But it's also reducing the tensions. I've got to find three months of money to put aside. How do I know that I'm going to get it all back anyway? So there's all these services you can put around that smooth the transaction, and it can all be automated. That, to me, is the future, if you can do that.
[00:23:05] NS: If you're a listing site that maybe doesn't have those things, so integrations is probably what you're looking at or at least acquisitions of some kind in order to provide those kind, or building it yourself, which can take a lot of time. Because I know a lot of rental listing sites have operated as more search engine-focused. So if you don't have that in order to really catch up and ensure that people can trust you, then I think that that's probably what you're kind of looking for. I think that's why some of the rental listing sites that used to be, like we had this conversation. I had this conversation last time. Like Craigslist, it was seen initially as something that could be used as rental listings. But then the amount of scams that got brought into that, that it now created the need for actual formalized rental housing sites that actually were controlled and monitored and not just this avenue for scams and poor transactions and anonymous interactions. Because the anonymous part of it made people be able to do whatever they wanted, obviously.
[00:24:16] SB: Yeah. That's the role. The role of the intermediary is to certify everything, and that's where blockchain technology steps in. That's where all the learnings around – Everyone is identified in the process, so you can't get away with it. I'll put a fake listing up and I'll just get someone to send me some money to get a key to go and look at a place that doesn't exist or all those scams that people do. So you've got to just think of what are the ways — So then how do you do it, which was the question I guess?
Really, that comes down to understand what you're strong at. You're strong at getting an audience, and you're strong at getting listings. Fantastic. You're strong at marketing and generating leads. Excellent. What are you weak at? Well, I'm not very good at building on this or I don't have it. So then partnering, I would partner with the view of buying. I will avoid building because that usually ends up being the world's biggest project that lasts far longer than you ever, ever dreamt of. I'm knee-deep in this actual problem at the moment with one of my investments. It's called the PropTech Group in Australia, and we own 43% or so of all sales, CRM systems. We're rolling out property management, CRM systems as a module. So it's not a separate system. You just put it together.
But then the next question is, "Okay, how do I then take that as an underlying system and then automate?" So now we're partnering with people to learn as much about what we don't know, as about what we do know. The biggest problem with I think a lot of businesses is they don't know what they don't know. So they guess it or they think they know it or they think they can build it. They usually make a mistake in that process. So just go, "I don't know, right? I've got to find out."
[00:26:04] NS: Just admit it. Just let the ego slide, and just admit you don't know, and get the people who do.
[00:26:09] SB: Agree. Then just bring them in, partner with them initially because you don't know until you've plugged and played with your system. So if you're a rental portal at the moment, and you want to offer tenant screening, find someone who does tenant screening. Plug and play them in. See what works. Then you go, "You know what? This is working really well. I want an option to buy your business. I'll roll you in. There's equity. There's some sort of upside." Because what everyone wants to get to is scale of their business, right? You want to have large-scale, large revenues, so then you can make mistakes, and you can get away with it.
[00:26:40] NS: Totally. So now, obviously, you've worked with listing sites across multiple countries, even continents. Do any stand out to you in terms of their business model and kind of what they're doing right now?
[00:26:52] SB: Many do but for very different reasons. So I've worked with businesses from literally taking the globe, Peru, this thing from Peru. US, Canada on one side and go around the world. I've probably touched 40 or 50 different countries along the way, until you get to Australia at the other end. Now, that includes everything from Japan through to Russia, through to Ukraine, which is an interesting combination at the moment. Then I've got one of my businesses is dealing with right through to Latin America and Southeast Asia.
The ones that do interesting stuff, the ones that go, "Oh, that's interesting," I sort of watch them. From a rental perspective, I like QuintoAndar, which is out of Brazil. They're very good players in the rental space, and they've aggressively gone after a segment of the market in Brazil that is unique. There's a site called Morada Uno, which I've invested in [inaudible 00:27:43] in Mexico, and they're trying to solve the same issue. It's how do you really simplify this complete rental process.
There are a lot of – Some of the rental players around the world are really just bolt on to the sale portals. So the realestate.com.au in Australia are a good example that. Another good player in Japan has called Lifull, L-I-F-U-L-L. They do a very good job in the rental segment because a lot of the Japanese market are rentals. People don't buy or sell as much. They just rent and for long periods of time. So there are lots of very interesting players out there, and all of them have that sort of common attribute of innovation, strong leadership, moving towards the transaction model, right? How do I make sure that every month the tenant puts the rental check into my bank account, and I pay the landlord out of it? How do I bolt-on services? How do I put an app in the hands of the renter, so whenever there's a problem in the housing as well, the electricity is not working, press a button. It comes by me. I outsource it to an electrician that will do the job on time to spec. I make a margin the way through, which is all about service and making sure the service meets whatever expectations are being set in that process. That's what I think the innovating ones are doing around the world.
[00:29:08] NS: It makes sense. Yeah. Now, I know I asked you this question in our prep call, and I kind of want to ask you again. But do you think there's an opportunity for long-term listing sites or historically long-term listing site sites to compete with short-term listing sites like Airbnb? How do you envision this from like a revenue model? If you could share something along those lines, if you think that there is an opportunity here?
[00:29:31] SB: Okay. So the answer to the question is there is always an opportunity, but it comes down to how you execute against it, and it's going to be a market-by-market question. So at the end of the day, can I really compete with hotels? No. Because they got their own booking engines and it's very unique. Someone's renting the room for a night in reality, right? Airbnb, two weeks, three weeks, towards that mid-term rentals, absolutely. There are a lot of players out there who are saying, "How do I get to that segment?" The requirements are different to the longer-term rental because they have to be furnished. If it's two months, no one's going to furnish the place in two months. So how do you make that a seamless process? So there is a possibility.
I think it's easier for the big guys who are doing long-term to come down to short-term than it is for the short-term guys to go up to the long-term. That's because when you go from long-term, you're dealing with – Yeah, it's contracted work. I'm signing a contract for a year. Or I can sign a contract for two months. You're taking a deposit. Well, I can take a deposit for three months, two months, one month. So a lot of the basics are the same.
[00:30:40] NS: You have all the systems already in place for those things. You don't have to build up. You can just build down almost from that process.
[00:30:49] SB: Yeah. The question is then what's the model you adopt? Because one model is you're just a middleman, right? You're just trying to rent out for – Now, if it's long-term, you're always going to be a middleman because you're never going to take on responsibility for a lease, right? You're renting out for two months, and that's done. You're just going to be the guy who services the landlord, services the tenant, and making sure that everything runs smoothly. You'll hopefully take your 8% of the rent per month or whatever it is as commission and make a good margin on it.
As you get to the two-month, three-month, four-month, it has to be furnished. Then the question is, "Well, the problem – In a year –" Let's say it's very hard to fill it 100%. I might get a two-month, four-month, three months. I've got a month left. I don't know what to do, right? So you've got this issue about yield management. So the price is always higher for the shorter rentals because you've got the yield management issue.
Then the challenge is, well, is that the landlord's problem? Or is it my problem? So some people take it on themselves, and they rent the place on a long-term lease for two years, three years, four years. Then they're playing the – What is it? Jenga, right? Or whatever? The blocks that come down and try to twist them.
[00:32:06] NS: Yeah, Jenga. Yeah.
[00:32:06] SB: Jenga, right? So they fill the calendar perfectly. That's the challenge.
[00:32:12] NS: Or Tetris? Is that what you're talking about? Tetris?
[00:32:14] SB: Tetris. Tetris. That's right. That's right. I'm still stuck in a throwback from way, way longer. So that's the game. Who takes the risk in that? Now, the landlord doesn't want to have it unrented, and the portal sometimes takes to get the rent at a low rate. So they go and say, "Well, it's not $100. It's going to be $80. But I guarantee you rental." Then they're trying to rent out for 120, 130, furnished, etc. But then their problem is then they might be running at an 85% utilization rate. So then you do the math. There's just really the nuances and the challenges in this whole model. As you come from the big, it's easy, and it comes more complex as you go down through the process.
[00:32:56] NS: That makes sense. Like I said, because I have an Airbnb, and I had someone come to me and say, "I'd like to rent your place for four months." What that meant for me was having to block off the entire four months on my calendar so that nobody rented it, or else I'd have someone coming in while someone was already there. I don't want that to happen. But then after two months, that person found long-term accommodations. So then I was now two months blocked out of my calendar.
Now, all of a sudden, I had to open up dates. But then that person – Now, I'm kind of hoping that people will come in and rent during that time. Luckily, it happened. But every scenario is going to be different, depending on their location and everything. You could be kind of screwed out of two months of rent if you're operating on trying to do a long-term rental scenario and a short-term rental platform application because it just doesn't – It's not suitable for really that environment because you're operating on the fact that people are coming short-term, and the platform just expects you to do that.
There's a lot of other things with fees related to long-term rentals as well with kind of an Airbnb, where a long-term rental platform probably doesn't take as much of those fees out. So at the end of the day, you're not losing $300 out of your rental rate a month when you're using a listing site that's for, traditionally, long-term rental listing. So there's a lot of things there, and it's also a question for Airbnb to kind of improve what they're doing over there because long-term rentals are very popular for vacation rental properties. People like to now, with remote work, go to and stay at vacation rentals for long-term. They're not just doing two to three days. They're staying for a month, two months, three months. So it's definitely something the industry needs to kind of think about for sure.
Now, I do want to say, I have a couple more questions. But as we see, obviously, leading into the remote idea, as more remote transactions are being made, leasing site unseen, how do you see listing sites becoming more efficient for that? For instance, making the leasing process more efficient, attractive? The things that you've seen or you'd like to see listing sites doing to make that, like you said, as well, more transactional, but maybe just the information, the quality of content, etc. that's being posted and allowed to be included on listing sites.
[00:35:29] SB: Yeah. So it all comes down to trust at the end of the day. All these businesses are about trust. You buy from Amazon because they say they're going to deliver in two days, and 9 times out of 10 they deliver, probably 99 times. I don't know, right? They deliver in two days. It's simple. So the first is trust. The second is simplicity. You use Amazon because it is easy. One-click, you find your thing, and it's well-presented, and it just is easy.
So for sites to be successful, they've got to be trusted, which means they've got to build a brand that's – The brand will stand for, "If you rent through me, you're safe. If you lease your property through me, you're safe. You're going to have great tenant who's going to pay." So the underlying value proposition holds up. If you don't have that, who cares how technologically wonderful you are? No one's going to use you, right?
So then you go to the next step. Once you've built the brand around "you can trust me", then it's about saying, "What's the process, and how do I make that so simple that it's like a five-point checklist on an iPhone, right?" Bang, bang, bang, bang, bang. It's just, "Oh, it just takes me through the process. I don't have to really think." "Oh, I build my tenants form once, and it's kept. It does its credit check and comes back with my credit score of whatever it is." Everything is done. It's simple. So I can reuse that 100 times, 200 times, 300 times if I'm making multiple applications.
Then the process is going to be efficient, right? So how do you make that process super-efficient? So that there's an equivalent app for – There should be an app to rent a place, an app for a landlord, and an app for once you're using the place. Or maybe it's part of the first one, right? So if I've got a problem, "Oh, the plumbing is not working," click. That's all fixed. I don't have to worry. The plumber will be here at five o'clock in the evening. Bang on the door at five o'clock. The plumber turns up.
So if you can build that infrastructure, which therefore goes back to the underlying brand, you end up with, I think, a great outcome. That's what it is. It's just about put yourselves in the shoes. Often I don't think leaders or businesses do this very well, is really putting themselves in the shoes of their customers. They think they do. But how often is it that they go rent a property? The answer is very rarely. I had to rent one for my son.
[00:37:52] NS: They're in the business of buying and renting themselves. They don't need to rent. They're not in the position to rent. Yeah.
[00:38:01] SB: So until you've been through the pain as either a renter or as a landlord. I'm a renter at the moment because my son is at college and is renting a place. So I've been through that pain, and it was a painful process, right? It was not easy, right? It was a site unseen. But we really had no idea what he was getting, and I didn't really care anyway. It's not me.
[00:38:23] NS: At that point, it doesn't – Right. Right.
[00:38:27] SB: Then I've got a couple of properties I rent. As you've experienced, it can be a painful process as a renter. Then the problem is being the landlord is you get the call. The electricity is not working. The pump is not working. Something's not working. You've got to somehow fix it, and you may not even be near the property. So what do you do?
I think if you can make that whole process super easy, super simple, that people just go, "Oh, working with Company X is a breeze. You've got to rent through them." Right? So unless they're buying, they're renting. I've got a feeling over the next little while, people will be renting at a far greater rate than buying. If interest rates are going up, you've got inflation going up, salaries aren't going to go up at the same rate. So they'll be renting. That is when I think you will have – If you can execute well, you will – Having built a fantastic set. Fantastic experience I would say. Besides, it's just part of the experience.
[00:39:20] NS: Yeah. I think that that's the key here is that they should be building more experiences. I don't think that that's necessarily something they haven't thought of. I think that it just needs to be more developed. I think that there's a lot of innovation available that maybe just needs to be integrated, looking at the right people who are making those moves. Like I talked to a large investor a few episodes ago, and a really smart idea that one of the companies he had invested in was rewards for renters. So if they do things like pay their rent on time, do some maintenance around their apartment, they get a reward every single time that they do that, which really makes the rental experience a lot stickier. They want to stay. They know that they're getting those rewards. They're not going to get them anywhere else if they rent elsewhere. Having that technology integrated into the experience is super valuable. So just looking at those opportunities and seeing where it could fit is going to make these businesses really either flounder and go into the Craigslist of the world or really progress.
So my second last question, it's not about rental listing sites. Well, it is a bit but more about who we should have on this podcast that you feel is someone that we would learn or could learn a lot from in the online marketplace for rental listings.
[00:40:47] SB: So I think I would talk to the CEO of QuintoAndar, Gabriel. I think it would be very good. I'll talk to some of the startups like Morada Uno out of Mexico, which I've mentioned before. There's another one that's coming up in Southeast Asia. I think it's Singapore whose name slipped out of my mind. I'll dig it up and send it to you.
[00:41:09] NS: That's all right. Yeah, I'll add it to the show notes.
[00:41:12] SB: The reason I would talk to these guys is because getting experiences from other countries and applying them to your country is super important because at the core of it, it's the same. There's someone who wants to rent something. Now, how they do it, and the requirements, and there's guarantors. There's a bunch of technicalities that will be different by country. But the underlying core is the same.
So what can you learn from these fast-growing businesses? QuintoAndar is a unicorn, so it's worth billions. They're very, very good operators. Just learning and listening for what they're doing and how you can then apply those lessons to your own business I think is the sort of people that they should be listening to.
[00:41:58] NS: Yeah, absolutely. All right. Well, last but not least, Simon, if listeners are looking to connect with you or even maybe attend your conference, where can they find you? Because I know that that's coming up soon as well.
[00:42:10] SB: Yes. So a quick plug, we are running what's called the Global Online Marketplaces Summit in Miami from the 8th to 10th of June. If you'd like to find out more information, go to www.gomsummit.com. GOM stands for Global Online Marketplaces Summit. Or just send me an email at sb, that's S for Simon, B for Baker, @cavig.com. cavig.com.
[00:42:43] NS: Perfect.
[00:42:45] SB: I respond to everyone. I do respond to everyone. Part of what I'm passionate about is just sharing the information I've learned over the last 20-plus years and just helping people because the industry will only get stronger if people share information. Part of the reason we run this conference, by the way, we get – Just to quickly about the conference because I think it is very –
[00:43:04] NS: Absolutely. Yeah.
[00:43:05] SB: We have 250 C-level leaders from everything from like the OLX's of the world, Mercado Libre, and so on, right through to startups. So far, we've got about 15, 18 different countries signed up. So they come from around the world. They came into Miami for three days at sort of a half-day, full-day, half-day. All we do is look at real issues faced by – The CEOs are presenting, right? There's no fluff. There's rah-rah. It's meat and potatoes. These are the real issues. You can go chat to them afterwards. You can ask questions during the sessions. The whole objective is to share information. This is the 35th or 36th we've done. We do three a year. One in Miami. One in Madrid at the end of October if you want to come. We'll have about 500 people to that one. One in Bangkok, which we'll do next year, COVID willing, in February.
[00:43:57] NS: Very cool.
[00:43:58] SB: Yeah. We just love to share the information.
[00:44:00] NS: Yeah. I know our founder wants to attend the one in Miami. But I think the one in Madrid and Bangkok also sound very attractive as well. So any excuse to use those air miles and get somewhere, then, yeah, absolutely. No, that's great.
Actually, I noticed that one of our Canadian marketplaces, REW, is attending the one in Miami as well, sponsoring. So that's very cool. I believe they're one of our partners as well. So that's awesome.
Simon, thank you so much for meeting with me for a second time and for sharing all of your knowledge and taking the time to join me on this episode of Sync or Swim.
Until next time, keep swimming.
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