Christopher Adams: Xero has the Google factor over MYOB

Xero chief executive Rod Drury. Photo / Dean Purcell

As rivalry between Australasian accounting software foes Xero and MYOB heats up, an investment blog has found a novel method of comparing the two companies' prospects.

Motley Fool Australia analyst Matt Joass, a Xero shareholder, reckons Google search results should raise "a big red flag" for prospective investors in Melbourne-based, private equity-owned MYOB's widely anticipated initial public offering.

His article revisits the battle between social media rivals Facebook and MySpace.

"Once Facebook had overtaken MySpace in Google search term popularity it was already game over for MySpace - in only a matter of months Facebook was also winning on user count and engagement."

According to Joass, Xero overtook its more well-established Australian competitor in New Zealand Google search popularity in mid-2011, while the Kiwi firm has also jumped ahead of MYOB in searches across the Tasman, as well as globally, more recently.

The article came as the two companies traded shots over the annual result MYOB released on Thursday, which included a 16 per cent rise in revenue to A$287 million ($296 million) and a 15 per cent lift in operating profit to A$138 million.

In a somewhat unusual move, Xero dispatched a press release in response to MYOB's result.

The Wellington-based firm's managing director for Australia and New Zealand, Chris Ridd, said MYOB's 16 per cent rate of revenue growth - well below Xero's 82 per cent - highlighted the importance of having a multiple-market growth strategy.

In addition to Australasia, Xero is also pushing into the US and Britain.

The New Zealand company had just 277,000 customers in Australasia at the end of September - compared with MYOB's roughly 1.2 million - but is growing fast.

Ridd said Xero, which last week announced a $147 million capital raising with two North American investors, was adding 300 customers every business day in Australia, with more than 100 of those new users switching over from MYOB.

A MYOB spokeswoman hit back, telling another media outlet that Ridd was comparing companies with very different business styles, while also noting that the Australian firm's cloud user base had grown by 88 per cent over the past two years.

Xero shares closed down 30c at $24.40 last night.