It is now 24 years since online estate agents first arrived on the internet and despite the hundreds of millions of pounds spent on the 200 or so hybrid and online agents in business today, they still only hold 7.5% of the market by listings.
And only 1% of the UK’s 20,000 agents would describe themselves as solely online or hybrid.
Online estate agents had a slow start. Houseweb launched in 1996 and is still going today. The next to launch were The Little House Company, which was founded by former policeman Nick Marr as well as Smove.com, which was started by entrepreneurs Nancy and Jim Cruickshank.
The next to join the fray was HouseLadder.co.uk which is also going today, although it has become a ‘free-to-let’ site used mostly by online and hybrid agencies such as HouseSimple and ExpressEstateAgency.
All these early sites claimed varying levels of success but were handicapped by the appalling broadband speeds the UK suffered at the time as well as the difficulty of taking payments online and the small number of people with access to the internet.
Also, most property vendors had no idea how to ‘sell their own home’ nor a desire to do it, something online and hybrid agents still struggle with today.
They were also relatively down-market in their branding; anyone with an up-market house looking to attract prime buyers was unlikely to use the early sites.
Smove gained some traction but eventually closed whereas The Little House Company did better, growing organically rather than via venture capital cash, and carries on today albeit as a ‘property marketplace’ and with a different name, TheHouseShop.com.
It recently tried to raise £500,000 on fundraising platform Crowdcube.com but had to pull its cash-call after only raising £250,000.
But this early cohort did achieve one thing – to prompt intense debate among estate agents about ‘for sale by owner’ or FSBO sites, as they were called.
Dozens started up and then faded away but the most famous was Sarah Beeny’s Tepilo, which was founded by the TV presenter in 2009 as an FSBO site, relaunching in 2013 as one of the first high-profile online estate agents.
The other was HouseSimple, which was launched by Alexander Gosling and Sophie Cronin in 2007 with financial backing from Carphone Warehouse founder Charles Dunstone. The year before that Hertfordshire estate agent Adam Day launched Hatched.co.uk.
These well-funded start-ups prompted an extended period of tech investment in this sector. Online CRM systems began to be developed that enabled online agents to offer a digital sales progression, online payments and ‘moving updates’ dashboards, and many entrepreneurs including Russell Quirk of (the old) eMoov were able to get venture capital backing to build their own systems.
Watching all of this investment, tech innovation and media coverage were Michael and Kenny Bruce, brothers who had a background in high street agency and believed they had spotted the key that would unlock the online sector and make it a force within the market.
As well as tech, that ‘key’ was to go hybrid and mix sophisticated technology with negotiators on the ground getting listings plus a large call-centre team helping vendors get top completion. Or at least that was the idea.
Early purple success
Many people wonder why Purplebricks did so well where others didn’t. All the evidence points to two factors. The first is that it had huge financial backing from several private investors including Paul Pindar, the former Chief Executive of Capita Plc, and millions of pounds from Neil Woodford and his now infamous Woodford Equity Income fund, which specialised in backing high risk, high-growth businesses like Purplebricks.
This enabled the company to afford the saturation marketing effort that usually only the big property portals can afford. Print, online, radio and TV were assaulted lavishly. The company’s ‘commisery’ ads garnered much agent gnashing of teeth and several referrals to the Advertising Standard Authority.
But it worked – within a year they had overtaken their nearest rival, eMoov, and eventually took 4% of the overall property sales market.
The other factor in the Purplebricks story is the Bruce brothers, who created a famously gung-ho culture within the company during the early days, and nurtured talent. The most successful Local Property Experts who helped it grow during the early days were soon promoted to senior positions in the company.
Online estate agents
But Purplebricks has stalled since the heady days of 2015-2017 when, it seemed to them, they could do no wrong. The folly of its doomed launches in the US and Australia were regrettable, but more importantly distracted the Bruce brothers away from the profitable UK operation.
And while Purplebricks faltered, its competitors have been in much greater trouble. Emoov went into administration but has now been relaunched by Mashroom; Hatched was closed down after being bought by Connells and easyProperty has been sold and relaunched after failing to make headway in partnership with The Guild.
The commonly-heard prediction within the industry is that the market will boil down to two main hybrid agents – Purplebricks and one other. Despite Purplebricks CEO Vic Darvey’s belief that his company can alone capture at least 10% of the sales market, it looks like traditional estate agents will still hold 85% for the foreseeable future, mainly because investor’s enthusiasm for another multi-million pound hybrid launch is now greatly diminished.
The exceptions to this rule are Accommodation.co.uk which is hoping to achieve in lettings what Purplebricks achieved in sales, and Doorsteps, which has achieved significant listings by offering a no-frills, virtually un-branded service.
But while many of the cash-burning national hybrids may eventually evaporate, a more subtle trend is emerging. Many local agents with one or two main territories are either starting up their own ‘mini hybrids’ or converting existing businesses into one.
One example is HouseFox.co.uk which was started up in 2017 by a former high street branch manager in Somerset. It apes many of Purplebricks’ ideas including self-employed local agents, and does not have a high street presence.
The business is profitable largely because it doesn’t have the costs of a branch or employees, but it is very likely to be the direction that the industry will travel in over the next decade. Online agents will continue to be a feature of the property industry in one form or another for decades to come.