BLOG: REA’s attempt to buy Rightmove is no surprise – here’s why

Rightmove's reliance on monster profits and its relatively weak attempts to be truly innovative have opened the door to real competition, it can be argued.

rightmove rea

Rightmove is facing a takeover bid from its arch nemesis in Oz, the REA Group, which operates the antipodean nation’s largest and most profitable portal.

But whether much comes of this potential takeover is not really the point for many industry watchers.

Yes, REA Group is larger than Rightmove in terms of income and profits but Rightmove’s big city shareholders, who have bathed in the warm waters of unbelievable profits and returns on investment in recent years, are going to take a lot of persuading to approve a takeover. Very few firms pay the dividends that Rightmove has year-in, year-out, it feels like for millennia.

So the wider and more interesting question is why REA Group feels emboldened to have a go at all.

The most apparent reason is that Rightmove has been treading water for at least ten years. It talks a good talk about innovation and dynamism within its annual accounts, but it’s done very little other than jack up charges to agents and developers every year, mercilessly.

In the meantime, REA Group has been busy launching ‘global hackathons’ and the company has spent much time and money in presenting itself as an innovative company constantly coming up with new ideas and products for agents and the wider property sector on its home turf.

For example in June last year it launched Locke, a user authentication platform that provides secure access to 14 million users across realestate.com.au, realcommercial.com.au, property.com.au, Ignite, and Proptrack, it main property platforms.

Killer instinct

On the other hand the main thrust from Rightmove in recent years has been to possess killer instinct – i.e. while some portals might demure at milking customers year in, year out, Rightmove has driven on regardless.

Its only misstep in recent times was the company’s failure to read the room during Covid, and it took a sizeable rebellion among usually compliant agents to persuade them to change direction and reduce its charges by 75% while the pandemic raged and buyers and renters stayed put.

But the portal’s reliance on huge profits – some years 70% or more of its turnover – means innovation has not been its strong suit. Apart from buying a referencing company a few years back and some other minor acquisitions, very little in the way of jaw-dropping tech or business model innovation has occurred.

Unwittingly, this has opened to the door to both CoStar buying OnTheMarket in a bid to topple Rightmove, as well as this latest play by REA Group. The next few weeks will be interesting.


One Comment

  1. Rightmove faces the same existential problem that all portals face, they are a digital advertising billboard, but the second a portal wants to maximise its profits and offer property services it robs its clients of revenue. For example, agents are losing the first bite of the cherry when new applicants register for financial services via a portal upstream of being passed to an agent who listed inventory to capture that new sales lead, and all of the rich data that portals gain is being sold off through the backdoor with none of the revenue going back in the fiscal hopper to the client agents.

    On one level the data rich playground of Rightmove and all portals could go full throttle, but the more they encroach and offer agency services, the more they alienate and choke off the income of their clients. Rightmove’s biggest problem is that it charges far too much for far to little, in comparison Zoopla and OTM charge far too little given the level of ‘new’ services being rolled out.

    To my mind realestate is speeding up so quickly, playing out across a background of digital transformation that the tech savvy and hungry client will soon be ‘doing’ property operations themselves aided by technology, the last refuge for estate agents is that they hold the prize – the inventory – the property asset that the buyers and tenants need, without this would the public interact with agents given the slowness of service in a digital age – unlikely – and the moment the public can do property themselves, self list and self sell and let, well that glittering inventory no longer needs to be listed on propery portals owned by the Murdoch family. The evolution of agency marches hand in hand with the tech led fourth industrial revolution that is touching all of our lives, it may be dystopian and shaped by a handful of people, but it is coming, ready or not.

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