It appears billionaire Mr James Packer has a current fondness for investments in the online space. Fresh from his recent investment in the US-listed property website Zillow, as reported here, comes news that Mr Packer along with SEEK (ASX: SEK) co-founder Mr Paul Bassat has invested in up-and-coming disruptive taxi booking service goCatch.
Packer's move is sure to have the founder of Cabcharge (ASX: CAB), Mr Reg Kermode, looking anxiously over his shoulder. As if it wasn't bad enough for market leader Cabcharge that the Australian Competition and Consumer Commission (ACCC) was keeping close tabs on the super-profitable business, it now has to deal with start-up ventures that are vying for a slice of the profit pie.
According to a report published in the Australian Financial Review, goCatch "provides booking and payment services on smartphones and undermines the 10 per cent surcharge fee charges by Cabcharge." News that goCatch plans to expand its domestic operations and also consider launching operations overseas comes at a time when internet giant Google has just invested over $250 million into US-based taxi app Uber. Uber already has some operations in Australia providing private-hire cars and is likely to also be looking to enter the profitable taxi booking and payment space too.
With a profit margin of 20% it is no wonder competitors are eyeing Cabcharge's dominant position. The increased competition already appears to be having an effect of Cabcharge's business. At its recent full-year profit release Cabcharge reported a 2.2% increase in revenue and a 0.9% fall in profits excluding associates profits which is a marked change from the double digit profit growth in the preceding year.
Foolish takeaway
Mr Packer was insightful enough to invest in online technologies and distance himself from old world media when he saw the structural shifts rolling in. It appears that structural headwinds are now beginning to blow towards Cabcharge, hopefully management will learn from the mistakes of other industries and act fast to adjust to a new world order.
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Motley Fool contributor Tim McArthur owns a share in Cabcharge.
