Have the property portals reached saturation point?

20 years ago, the first property portals arrived. Many more followed – and disappeared. Now, says Andrea Kirkby, three giants battle for business and stock market position.

Agents on chess board image property portals

It’s now over ten years since Zoopla was founded. Rightmove is still in its teens (just), but the property portal market has changed markedly since the early days. Email4property, Findaproperty, Zoomf, Globrix – they’ve all gone. The sector has shrunk to just three major players: Rightmove, Zoopla, and OnTheMarket.

At the same time, the portals have become dominant; 95 per cent of property searches now begin online. The numbers are mind-boggling. David Anderson, Rightmove’s Agency Director, says on average there are 139 million visits to Rightmove, and people spend over 1.1 billion minutes on the portal, each month. The portals are still growing. Zoopla boosted its revenue 24 per cent in 2017 (the last full year for which we have financial figures), though organic growth was only 9.4 per cent once the impact of acquisitions was taken into account. Rightmove increased its revenues 10 per cent in the first half of 2018.(Figures compare to UK economic growth of 1.5 per cent for 2018.)

Saturation point?

However, Mike DelPrete, an independent analyst of the property portal space, has a warning. “Portals have reached customer saturation.” He believes that the portals are going to have to struggle for market share, and the only way to escape stagnation is “to build in new services and increase their engagement in the property transaction.”

The stock market doesn’t seem to have taken his warning on board, even though Rightmove’s share price (PER) has fallen, it’s market capitalisation is £4.2bn, with a 28.7x price earnings ratio, showing analysts think it will continue growth. (For those not versed in investment terms, a PER of 28.7 times means you’d have to hold the stock more than 28 years for the company to earn what you paid for it.) Zoopla, number two to Rightmove, was valued at £2.2bn when it was acquired by a private equity company in May last year.

David Anderson, Rightmove’s Agency Director, says on average there are 139 million visits to Rightmove and people spend over 1.1 billion minutes on the portal, each month.

OnTheMarket, though, is valued at under £60m. It hasn’t yet turned a profit and comparing the price to forecast revenues, it’s clear that the market isn’t convinced it’s catching up. Rightmove is valued at 16x to next year’s revenues, and globally, publicly quoted portals are valued at 8x; OnTheMarket sells at 4x.

That reflects profitability, which is largely driven by average revenue per agent (ARPA), and that in its turn is largely driven by market share. Rightmove is getting close to £1,000 an agent, Zoopla about a third of that, and OnTheMarket is the backstop at just over £150 in its last financial figures.

OTM has grown the portal’s scale rapidly, with 12,500 contracted branches at the end of January. Fiona Orford-Williams, Director, Media at Edison Investment Research, says OTM has done well to attract so many branches, but, she says, “The challenge now is to convert these agents to paying clients”. Since the prices charged by the established portals have continued to move ahead, OTM has a lot of wiggle room; and it can make a profit at much lower levels of pricing, given that Rightmove is making a 75 per cent margin. Her view is that the portal should move into profit in 2021.

New ways to growth

OTM won’t be pushing up listing fees in the near future. It’s looking for growth from increased market share and new market segments like new homes, but if Mike DelPrete is right, ARPA growth (and the rate of price increases) is going to slow at the two larger portals – as it is in many of the global markets. Rightmove’s ARPA grew at 16 per cent in 2013, but that fell to 10 per cent last year: Zoopla was growing ARPA by 17 per cent, but his estimate it’s now boosting it by just four per cent.

Rightmove underground advertising imageIt’s interesting that the portals have now developed very keenly differentiated strategies. Rightmove has focused single-mindedly on property, and concentrated on creating more value for agents in order to boost its sales of value-added packages. It’s been incredibly successful at doing so; while in 2010 only four per cent of estate agency branches spent more than £1,000 a month, over half of them do now.

David Anderson points out the value of Rightmove’s higher value options. “On average,” he says, “an agent’s brand on the Optimiser package is seen 36 more times by home-hunters on Rightmove than an agent’s brand on the Essential package.” For market leading agents, or for those who want to break into market leadership in a new patch, that’s well worth the investment.

Zoopla, on the other hand, has become a diversified business. Its websites include uSwitch (utilities) and money.co.uk as well as its property portals, and it partners with Plentific (home improvement) and Moveit (conveyancing) among other sites.

Its acquisition of Hometrack in 2017 also gave it a huge resource of data on the UK property market. While Rightmove gets over three-quarters of its income from listings, Zoopla gets just a quarter of its income from the same source.

According to Mike DelPrete, that’s par for the course. “Runner-ups diversify more, out of necessity”, he says; Domain, the number two portal in Australia, is similar to Zoopla in that regard. “But”, he warns, “adjacent revenue streams are less profitable than listings.”

Meanwhile, he says of Zoopla, “while I’m sure there is synergy between the businesses, it’s not what I would call a runaway cross-sell success.”

More agent services

Charlie Bryant - Zoopla - imageCharlie Bryant, MD, Property, at Zoopla, says, “Not only is Zoopla a listing portal, our remarketing, software, data insights, print, referral and website businesses can be accessed by agents, enabling them to adapt to changing consumer demand and an ever-competitive market landscape.”

Not only is Zoopla a portal, our remarketing, software, website referral, print and data insight businesses can be accessed by agents, enabling them to adapt to changing demand.

OnTheMarket also has differentiators. Agent-led and largely agent-owned, its a far lower price than other portals. Springett points out that this isn’t just a marginal benefit, “It’s a strategic cost reduction opportunity for thousands of agents.”

OTM’s other big differentiator is that it often gets properties 24-48 hours before they go on the other portals. While properties are exclusively listed on OTM, they get a featured listing – that increases the percentage of leads coming to the agent. The portal says there is no charge to agents for this, Ian Springett says, “We are seeing much higher views and leads figures for ‘New & exclusive’ homes in the first 24 hours, compared to other new listings.”

OTM is also generating unique leads for its clients. Chancellors, for instance, says two-thirds of the email leads from OTM are “from a new, discrete audience of property-seekers, rather than duplicating those from other portals.”

The brave new challenger!

Despite all this, new portals still launch. Christopher May launched Commercial People for commercial property in 2014. Since then his team has worked to bring the next generation of proptech to the resi market. “It wasn’t going to be easy operating our model in 50 countries. Residential People is a free-to-list residential site. Listening to agents, there is a massive market for an exceptional free listings site.”

Marketing on the beach imageChris aims to connect people to property whether local or international. “Our USP is that we will possibly be the only free listings site. The market is tough, luckily we are not just in the UK, we wanted to be different to the ‘Top 3’ and really work with agents to offer them something that others are not. “We see the UK as a massive market, I can honestly say that we will be the only one that is free to list. We have already launched and are having great success recruiting agents across the UK, South Africa and UAE, as well as making a promising start in both India and Nigeria.

“Our aim is for agents to list with us based on our merits as a free to list portal with no hidden fees. Advertising is about getting your brand and properties seen and let’s be honest it comes in many forms but rarely free, so what has anyone to lose listing with us?”

Competitive landscape

It’s also interesting to see where buyers are headed. Rightmove and Zoopla aren’t that far apart in terms of the number of home buyers who visit the portals, but in 2018 estate agents’ own sites, online sites and Google all ranked ahead of OTM and Primelocation. (To be fair, OTM has much improved its position since then.)

While the competitive landscape has clearly changed, perhaps the most important change in portals is less obvious. The portal has morphed from a pure advertising platform to a much more important part of agents’ businesses. Back in 2000 or even 2008 the portals’ main business was advertising existing inventory; now, they also generate increasing numbers of leads for valuations and instructions.

We are seeing much higher views and leads figures for ‘New & Exclusive’ properties in the first 24 hours, compared with other newly added properties. Ian Springett, CEO, OnTheMarket.

Ian Springett image
Ian Springett

For instance, OTM offers ‘call to action’ buttons on each property details page leading to a valuation request and runs an advert for valuations across each page of search results. It’s a simple but effective way to target the high percentage of buyers who also have a property to sell.

Zoopla also generates instruction leads, but it approaches the task rather differently, leveraging its huge amount of unique data to create leads. That’s something Bryant believes differentiates the portal, “Consumers come to research data on house prices and local housing market activity,” he says, so that Zoopla “can capture vendors in the early stages of their thinking.”

Rightmove provides a different style of valuation too, a Local Valuation Alert product which, David Anderson explains, gives potential vendors the chance to ask up to five estate agents for a valuation. But that’s not all. “We’re always looking for new and innovative ways to help agents generate more instructions,” he says, “in 2017 we launched Rightmove Discover. This uses predictive analytics to identify the most likely potential sellers in a local area within the next six months and markets to them on behalf of an agent.” That’s an interesting use of Big Data and it seems to be working well; leads from both products increased nearly 30 per cent in the first half of 2018 compared to the same period in 2017.

Market intelligence

Portals also deliver marketing intelligence that can help agents improve their operations. “OnTheMarket Expert” reports portal activity and lead generation at property level; agents can also set up alerts to see all new instructions in their area. OTM is now working on developing a range of supplementary, value-added back office products.

Portal marketing imageRightmove Plus allows agents to track their market share, and delivers a best price guide and identification of opportunities and lead reports. David Anderson says “Our marketing report lets an agent track the interest of their properties compared to similar properties in the area;” that keeps them up to date and helps them see if they need to advise vendors to reduce a price. Other reports include a time on market report, letting agents see if their properties are selling in line with the average for the area, and price reductions reports.

Zoopla has a similar set of tools, ZooplaPro, ranging from comparable and marketview reports to show agents how they’re performing in their local market, to property valuation reports which Charlie Bryant says, “can help them demonstrate their local expertise and win instructions.” Zoopla is still developing new functionality, such as the recently launched Zoopla UK Cities Price Index.

The cloud on the horizon

While some agents like to complain about the portals’ rising prices, there’s no doubt the portals are working hard to improve the value they offer. But according to Mike DelPrete, there’s a big cloud on the horizon. “In their efforts to diversify revenue streams,” he says, “real estate portals are moving closer to the transaction and doing more of the transaction – potentially displacing agents.”

For the moment, though, that’s certainly not on the cards. The portals might be powerful, but they’re not powerful enough to try to replace their customers.

They do, however, charge high fees for their services. And if like many Rightmove customers you’re spending more than a grand a month, you’ll want to make the best use of your investment.

For David Anderson, there are several ways agents can get the most out of Rightmove. They can use the portal’s training webinars, for instance, to learn how to identify “hidden” vendors and landlords in the Rightmove Plus lead reports. They can use a Rightmove market share certificate to demonstrate their credentials to vendors. Or they could use the Rightmove Best Price Guide to justify their property valuation to vendors. “This report is run 900,000 times every month by agents,” he says, so it must be useful.

You pay for it: use it to the max!

The portals started as an online version of newspaper ads. They now offer so much more, both to agents and property buyers. The question, for agents, is not so much whether they’re paying too much for their mix of portals – it’s whether they’re ready to use their functionality to the max.

One Comment

  1. An interesting piece, I think that Zoopla will allow vendors to self list within the next 18 months and this will change the whole game. On the face of it that would be commercial suicide as agents would be up in arms if they were competing with vendors that they would want to have marketing through them on the same website. But, due to the relatively low cost of being on Zoopla, sometimes a third of the monthly charge of Rightmove, I think many agents would eat the fact that Zoopla allowed self listing by vendors as the agents still get great exposure at a really value for money price. In a way the market for self listing is already proved, Purplebricks is to an extent a self listing service, in the sense that self employed Local Property Experts go out and list property, and it appears on portals. There are no sales offices, no full time negotiators or managers co-ordinating the selling strategy, no list of applicants that sales teams contact and sell to, instead it all generates from the portals. Rightmove are in a weaker position, as if they went to the agents and said we are going to let the public self list, due to the eye watering charges, lots of agents would probably walk. Anyone like to take a bet?

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