You don't have to be a media expert to know that the newspaper industry is in troubled waters, only a few newspapers have managed to go from strength to strength by transitioning onto a website platform.
The News Corp (ASX: NWS) and Fairfax Media Limited (ASX: FXJ) newspapers have lost a majority of their advertising revenue because all the main classified sections are now online.
REA Group Limited (ASX: REA) and agents like McGrath Ltd (ASX: MEA) can now sell property without needing newspapers at all.
REA Group isn't the only business to thrive online, here are two other classified businesses that could be worth a buy:
Seek Limited (ASX: SEK)
Seek is Australia's largest job portal site with a market capitalisation of $5.1 billion. It also has major stakes in market leading websites in 13 other countries, mostly situated in Asia. The size of the population in Asia is vast compared to Australia, so there is a big opportunity for Seek to grow for a long time to come as those countries become more digitally focused.
It managed to have a good FY16, growing revenue by 15%, even though the Australian and global economies are quite sluggish. This is a good sign that even if there were to be a recession, Seek could have a good chance of minimising the damage.
As Seek has the most popular website more jobseekers will look there first and therefore the most employers will go to where there are the most applicants.
Seek is expected to grow earnings per share by 21.4% during FY17, meaning that it's trading at 23.3x FY17's estimated earnings with a grossed up dividend yield of 3.97%.
Carsales is Australia's largest car selling website with a market capitalisation of $2.5 billion.
The share price hasn't moved much over the last three-and-a-half years, but that doesn't mean the business can't grow from here.
During FY16 Carsales reported net profit after tax growth of 6% and revenue growth of 10%, which isn't terrible in this low growth era.
The main reason Carsales may be able to grow strongly from here is its international division. It recently acquired an 83% stake in Chileautos and a 65% stake in SoloAutos in Mexico. The international business grew revenue by 54% in FY16 to $4.4 million.
Carsales is expected to grow earnings per share by 8.96% in FY17 meaning that it's trading at 21.6x FY17's estimated earnings, with a grossed up dividend yield of 5.17%.
Time to buy?
Both of the above businesses' share prices have dropped off a bit in recent months, which I think presents an opportunity to buy at cheaper prices.
Out of the two I'd buy Seek at the current price because it's showing more potential for growth and Carsales' domestic business seems to have run out of growth for now.
