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Moving target

OTM website imageIt’s now nine months since agency-owned portal OnTheMarket (OTM) launched, aiming to wreck what it saw as a cosy Rightmove-Zoopla duopoly. It has certainly had some impact on the market – but not, perhaps, quite what it intended.

OnTheMarket’s “only one other portal” rule was intended to ensure OTM didn’t just get added as a third also-ran option by agents who wanted to have it all. OTM hoped it could lever open the duopoly by forcing agents to choose between Rightmove and Zoopla. In the event, though, it seems to have strengthened Rightmove’s position as the great majority of agents decided that Zoopla was the portal to be dropped.

The impact

Zoopla SmartMaps imageZoopla saw a massive impact. In its figures for the six months to March 2015, it showed a 16 per cent reduction in total advertising members, from over 19,000 to just over 16,000, and lost nearly a quarter of UK members. Rightmove, on the other hand, has actually grown its agency side, with a two per cent increase (to 17,122) in offices listing on the portal.

However, the negative impact on Zoopla seems to have been temporary; the company’s most recent trading statement shows churn substantially reduced, and net growth of 213 branches in the period from April to July. That is a quite successful fightback, though there’s still some shortfall to be made up.

Looking at the number of members as the main criterion of success is actually quite flattering to OnTheMarket, as it seems to have made less impact on the public than on agents. OTM’s Comscore page impressions now nearly equal PrimeLocation’s, but are nowhere near Zoopla’s or Rightmove’s; and Rightmove’s audience growth has been strong, with 110m visit a month, and an annual 17 per cent growth rate to June (though of course that does include six months before OTM launched).

Delivering the goods

Rightmove School Checker website imageRightmove claims that in June it accounted for 82 per cent of traffic to the top four portals, against 77 per cent in June 2014. Again, it seems the arrival of OTM may have actually strengthened Rightmove’s position. Zoopla has been less successful, but even so, hasn’t seen the sort of impact on audience that it has on agency members.

Only members of Agents Mutual know how well OTM is delivering on leads. However, both Rightmove and Zoopla include this analysis in their figures, and they seem to be progressing despite the arrival of competition; Rightmove’s leads increased 14 per cent to 4.2m a month in the half year to June, while Zoopla claims to have more than doubled its leads in the first half of this calendar year. That’s good news for agencies remaining with Zoopla – more leads shared between fewer branches.

Stocks and scares

Since Rightmove and Zoopla are both quoted on the stock exchange, it’s interesting to see what City analysts have to say about their prospects. The Rightmove share price tells its own story – it’s nearly doubled in the last year despite the OTM launch – but Liberum Capital still thinks the shares could rise further. Others, like Roddy Davidson at Westhouse Securities, think Rightmove is slightly overvalued, but given the company’s record for innovation, he still puts a hold recommendation on the shares. Meanwhile Jonathan Helliwell, analyst at Panmure Gordon, sees Zoopla’s portal business as “resilient”, and believes OTM’s growth has probably stalled.

Most observers reckoned that OTM would either sink without trace, or make a major impact. In fact, so far, it’s not changed things dramatically.

Certainly, even if OTM has taken the bloom off Zoopla’s membership stats, it hasn’t so far had any impact on the major portals’ pricing or profitability. Both Rightmove and Zoopla have continued to see ARPA (average revenue per advertiser) rise steadily. Rightmove increased agency ARPA 10 per cent in the year to June 2015, to £703 per office per month, while Zoopla’s agency ARPA increased from £311 to £353 in the six months to March, with the company saying that it was mainly low-paying customers who had left. (Again, those figures come with the caveat that they include periods before the launch of OTM.)

OnTheMarket still has a long way to go before it becomes a major threat to the big portals’ audience share. Its 5.4m visits in August is a drop in the ocean compared to Rightmove’s total 110m a month or Zoopla’s 50m in January, though it’s not a bad achievement from a standing start.

And the others…

Houser website imageOTM’s failure to really crack the market so far raises the question of whether there’s room for anyone else. There have been a number of recent launches, such as free listings provider Houser, which like OTM launched in January, and Lookingforahouse. Houser says it’s totally different – but its free listings screen-scrape model looks very like that employed by existing portals Nestoria, Trovit, and Mitula.

Lookingforahouse has a disappointing selection of properties, with only South Wales represented. (It’s also interesting that neither owns the relevant .com domain. You’d have thought Houser founder Rocky Mirza, who made his fortune acquiring domain names, would have got that right.)

Arguably, Houser has some interesting ideas, such as an algorithm predicting when a house might next come on the market, and software that enables users to make appointments with several agents simultaneously. However, estate agents may not be thrilled that when someone makes an appointment to view one of their properties, they’re being steered towards other agents as they do so. And Houser’s “freemium” model, free to use but with paid upgrades to come later, doesn’t look like making it much money in the short term.

OTM has taken Houser seriously, anyway. According to OTM, Houser counts as “one other portal”, so members need to ensure their listings are removed from the site. That undercuts Houser’s promise to show 100 per cent of all UK property listings (though from a vendor’s perspective, it’s odd that their agent is refusing to allow them to take advantage of free publicity).

The niche

Where there does seem to be room for new entrants is in niche areas. Often, that involves portals in covering areas which agents simply don’t provide for, such as flatshares, which London2let shows alongside more conventional rentals. StuRents, which targets student properties, has identified another niche market, and again, offers services agents would be hard pressed to provide, allowing students to find and search properties with other sharers.

It’s difficult for the major portals to address these niches without diluting their key business, which leaves room for the niche portals to succeed. On the other hand, new homes and overseas property have been well addressed by the major portals – it’s difficult to see a niche portal making much impact there.

Pring website imageRecently launched Pring hopes to address the market for investors in residential property. Unlike consumer-orientated portals, it includes data on potential yield, mortgage cost, return on investment and rental value, as well as location and price. The key is that investors should be able to search properties by, say, their likely rental yield, rather than having to run a spreadsheet to do the calculations themselves on every property they look at. Investors can input the amount of deposit they expect to put down, as well as other criteria, to work out their likely mortgage costs and net yield.

Pring is claiming 100,000 visits a month – a drop in the ocean compared to the big portals, but that doesn’t necessarily matter if the conversion rate is high. Such niche areas might make a good living for the smaller portals, but won’t provide a large enough market for portals to challenge the Big Two (or Three). And it’s not just the new entrants who are innovating – the major portals are continuing to roll out new functionality in order to stay ahead.

What’s next?

Rightmove will be bringing out a major redesign soon, which might reflect a desire not to have OTM breathing down its neck, but is largely driven by the fact that 60 per cent of searches now use mobile devices. It should make access via mobile much more feature-rich, rather than being a poor relation of the desktop version of the site.

At the same time, Rightmove has been thinking about what matters to homebuyers, and has released a School Checker, as well as a valuation range app. Meanwhile, on a slightly different tack, Zoopla has acquired price comparison site uSwitch, delivering an income stream that’s not property related (investors will like that), but potentially also giving consumers the benefit of being able to manage utilities through the same site they used for purchasing their property. It will be interesting to see how Zoopla integrates the two services.

Most observers reckoned OTM would either sink without trace, or make a major impact. In fact, it’s not changed things dramatically, so far. That’s borne out by the fact that the Competition and Markets Authority has confirmed it’s still monitoring the portals. Currently, there’s no reason for it to intervene – but it obviously feels that the market strength of the major portals constitutes a good reason for it to keep its eyes trained on the market, just in case.

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