Following a period of consolidation, the property portal sector seemed to have settled into a duopoly between first mover Rightmove and the ‘we try harder’ newer arrival, Zoopla Property Group.
However, the last few months have seen the announcement of new competition – Agents’ Mutual and Property Mutual – motivated by concern at the duopoly’s influence over the market. Is this the beginning of a fight-back?
Pricing is estate agents’ biggest gripe with what Rhys Davies, COO of Propertini, a free-to-list property search engine, calls the “two behemoths.” Agents have seen a stream of price increases from Rightmove, Ed Mead, Director at Douglas & Gordon, says, “Their ratecard has gone up 50 per cent in the last 20 months. Don’t tell me the user experience has improved that amount.” Many agents point the finger at Rightmove’s listed status – it has to make increasing profits to satisfy its shareholders. Zoopla, too, needs profits to attract investment from the stock market; and, with majority shareholder DMGT, has now appointed an investment bank to manage a flotation, which could value it at £1.3bn. There’s not enough competition to keep their prices down.
It’s big business, James Wyatt, Chair of Surrey NAEA and partner at Barton Wyatt, says “Plenty of my members are now paying Rightmove £1,000 a month, and Zoopla the same, that’s £24,000 a year.”
Ed Mead points out that estate agents managing their own media outlet is not without precedent. Central London agents long ago rebelled against London Portrait, “which was trying to charge us two grand a page for advertising. We set up our own London Magazine and even now, years down the line, it only costs us £700 a page.”
But Zoopla robustly defends itself. “Price,” says a spokesman, “is based on the performance we deliver to each customer. Portals provide far greater value than traditional media, and have materially improved marketing efficiency for agents.” Ten years ago portals charged very little and pricing has increased much more slowly than the growth in the portals’ audience.
It’s not just the level of prices that agents complain about; they also take issue with transparency of pricing. Andrew Goldthorpe at Property Mutual, attacks the opacity of Rightmove and Zoopla’s charges. “Transparent pricing isn’t in the interests of a for-profit organisation,” he says, “but it’s in the interests of agents to know they’re paying a fair price.” Currently, agents pay widely divergent prices for the same service. That’s borne out by James Wyatt’s experience, who, a couple of years ago, surveyed members on their payments. Some were handing over £600 a month to Rightmove, but one was only paying £130; the range at Zoopla was even wider, from £20 to nearly £900.
However, it’s fair to see that while portals are a large cost – and an escalating one – they’re certainly not most agents’ major cost; salaries and even company cars come far ahead in the cost stakes. But agents also feel that the major portals favour the larger network, and are unhelpful to the smaller or independent agent.
Mark Hayward says the National Federation of Property Professionals has long warned about the duopoly’s increasing power. In his view, this could lead to “the corporatisation of the residential property market” with a small number of businesses controlling the end-to-end transaction process, it’s not just agents but their clients who would see choice reduced, and that could lead to increased costs.
Some agents also criticise the user experience on the two major portals, in particular the extensive advertising on Rightmove. Rhys Davies says Propertini aims to rebalance the portal’s role, “Estate agents are concerned about the relevancy of the enquiries; poor relevancy can be a significant drain on their time and resources. This is equally true of property search users too.”
There are also anxieties about the big portals taking feeds from online and ‘slim service’ agents or aggregators, which virtually amount to private sales. However, Ed Mead believes this is unlikely to be a major problem; five per cent of sales have always been private, he reckons, and that proportion probably won’t grow – most people still want the hand-holding that an agent provides.
Control of data is also frequently quoted by agents as a major concern; James Wyatt goes as far as saying that “saving money is a by-product. It’s really about control.”
Ed Mead believes that agents made a huge mistake in selling PrimeLocation; “We sold the right to control our data,” he says, and notes that it’s now Rightmove that makes the headlines with its house price index, and not estate agents or NFoPP. (He dislikes what he calls the “irresponsible hype” of an asking-price based index in any case, saying “asking prices are a measure of people’s greed rather than house prices actually being paid.”)
If all we’re talking about is listings details and a few photographs, then it’s difficult to sympathise. But David Carlisle, PR and social content manager at Property Network, says if agents really ‘got’ Big Data, and the way data can be used to identify target markets and customers, they’d realise what they are missing out on. Other sectors are far ahead in making data work for them, he says. And while agencies might not see the value of their data now, they are right to be concerned about retaining control of it. However, agents will still pay Agents Mutual to take their data. Rhys Davies says if they really valued their data, they wouldn’t be doing so. “We value this data,” he says, “and we believe that paying us to reproduce it is a broken, outdated model.” A fair point.
He still thinks the closed portal is the wrong model, what consumers want is an unbiased, comprehensive search engine rather than“news paper ads on the internet”. That, he says, is where Google was right and AOL was wrong in the search engine space, and that’s why he believes the paid model is not sustainable. (Unfortunately, the history of the UK free portals so far hasn’t been on his side.)
Rightmove and Zoopla now have over 60 per cent of all online property traffic. Do the new arrivals stand a chance – or are agents going to have the same grumbles all over again in ten years’ time?
When it comes to industry support, so far Agents Mutual is doing well. It signed up 1,000 gold member offices by October 2013, reaching its first funding milestone of £3.6m, and now has over £6m in the war chest. It has the backing of major players, including SpicerHaart and Xperience, as well as NFOPP, which killed off its own portal PropertyLive.
Ed Mead says, “We’re seeing 20 agents a day signing up for Gold membership. We’ve got to £6m a year already, so there will be lots of money out there for advertising,” which will be crucial in getting customers to use the portal. He points out that Zoopla went from zero to 30 per cent of the market in just a few years, so there’s no reason Agents Mutual shouldn’t make a splash.
Seeing that it’s handicapped by the duopoly’s market share, Agents Mutual will allow members to advertise on only one other portal. The company has obviously taken advice on whether the exclusion clause will work legally; given its zero market share and the fact that 60 per cent of the market is controlled by the two majors, it’s unlikely that the OFT would support a complaint about uncompetitive behaviour.
Agents who join up have to take a gamble; they’ll have to drop either Rightmove or Zoopla, in favour of an as yet untested portal. Alex Chesterman of Zoopla is amazed that this could be considered as being in an agent’s interest, explaining, “It prevents an agent from optimising their marketing spend.”
It might also stop agents being able to place their properties on specialised portals, for instance for overseas property. Though there will be cost savings, a single commission lost through not representing the property on one or another portal could more than offset that saving. Zoopla believes that agents need to be able to act in the client’s best interests, and limiting where else an agent can advertise prevents them from doing so.
Andrew Goldthorpe also worries about exclusivity, “It puts agents into the position where they have to tell clients where they can and can’t advertise,” which may result in more consumers heading for online agents – the reverse of the portal’s intention.
Ed Mead doesn’t think the gamble is a big one. “Our experience is that there’s a lot of duplication,” he says, most applicants search more than one portal – if Agents Mutual works, “why would agents want to drop one of the big portals when they can drop both and save the money?” (His assertion on duplication might be correct in London, but according to internet auditor Nielsen, 80 per cent of users nationwide in December 2012 visited one, but not both major portals.)
James Wyatt doesn’t think it’s a gamble at all. “If you drop one of the big portals the effect on your business is zero.” Some local NAEA members actually did so, he says, “and it had no impact on their business whatsoever.” He also points out that agents have until the end of this year to decide which of the other portals to drop.
THE NEW LANDSCAPE
To some extent, we’ve seen it all before, PropertyLive launched six years ago, as an agent-owned counterweight to the big portals. So what’s different? Andrew Goldthorpe says PropertyLive’s big mistake was keeping free listings which were seen as a benefit of NAEA membership. That starved it of money, exacerbated by most of its development spend going into IT. “What they didn’t do was spend on marketing properly to the destination.”
James Wyatt too believes PropertyLive’s strategy meant it was underfunded. “We begged them to commercialise it or even flog it,” he says, “apart from that, the fundamentals were quite sound. But £150 a year isn’t enough to fund a proper portal.”
Estate agents who dislike the exclusion clause or distrust its potential effect on their business have the option of heading for Property Mutual. That’s not the only difference between the two portals, though. Goldthorpe criticises Agents Mutual for having different categories of membership and a multi-tiered capital structure, which results in some members getting more out of the portal than others. At Property Mutual, “Every subscribed office pulls its weight equally and benefits equally.” Property Mutual already runs 5,000 agent feeds, criticising his rival as raising “a war chest for vaporware.” That will enable the portal to guarantee that 50 per cent of its total spend goes on marketing the portal to consumers. “It’s all out there already, “ he says, “anyone can look at it and say yes or no.” He targets 2,000 members at £1,000 a member. “That would give us £1m to spend on marketing overnight.”
Agents Mutual and Property Mutual aren’t the only challengers. The portal space continues to attract entrepreneurs; WhatHouse has a new homes portal and is moving into resales. Needaproperty.com partnered with Hearst Magazines and Express Newspapers, giving access to a female demographic via websites such as Cosmopolitan and Country Living.
Propertini, a property search engine rather than a portal, also entered the UK market, the first US player to do so. (It’s interesting that few foreign owners have come into the UK: one that did, the REA Group, sold out to Zoopla.) But one portal already has fallen by the wayside. Nethouseprices announced its own low- cost agent-owned portal in June last year, but after seeing the support Agents Mutual was getting, pulled out of the market. (Its house price website continues.)
It’s going to be tough to match the big portals’ spending. Property Mutual’s £1m marketing budget and Agent Mutual’s £6m a year income pale into insignificance beside Rightmove’s £30m operating costs – though larger than PropertyLive’s spend, which Andrew Goldthorpe says was only £2m over 4 years. But it could be Zoopla that is the biggest loser, mainly because of Agent Mutual’s exclusion clause. James Wyatt guesses slightly more agents will drop Zoopla, because it’s No. 2, his experience is that its referrals are less relevant to his business than Rightmove’s, but, “Zoopla’s performance has dramatically changed. A year ago there would have been no question which to drop, now that’s not the case.” Ed Mead also says its a trickier decision than it might have been a year ago, and asks, “Who has improved their game? Zoopla.”
If Zoopla did lose significant ground, unless Agents Mutual were to gain massive market share, that would leave Rightmove in an even more dominant position than it is now – in which case Agents Mutual’s intervention in the market would have been completely counterproductive.
Some aspects of today’s scene seem very familiar. Several of the founders behind Agents Mutual – Savills and Knight Frank, for instance – were involved in PrimeLocation, which sold out to the Daily Mail group and was then sold on to Zoopla; and PrimeLocation founder Ian Springett is back in charge. Meanwhile, two of the founders of Rightmove – Connells and Countrywide – are now shareholders in Zoopla. Ironic really.
THE BIGGER PICTURE
But in all the excitement over portals, it is possible that estate agents are missing the elephant in the room – the arrival of social media and Big Data, the increasing interconnectedness of data. David Carlisle says “There’s no consumer model [in the new portals] that is any different from Rightmove or Zoopla, which already work very well at what they do” – they may aim at changing the balance of power in the industry, but they don’t give users a significantly different experience.
Property Network aims to change this. It’s not a portal but a market intelligence tool, which compares listings and house prices with information from Facebook, Twitter, government statistics and other data to create neighbourhood profiles that are more detailed than standard ACORN classifications. Property Network can also pick up signs that people may be thinking about moving from Facebook – getting engaged or announcing a new job – enabling them to place advertising where it’s most likely to be clicked on and alert agents that there’s a prospect for them.
“The data side is absolutely massive,” Carlisle says, “I’d be very surprised if Rightmove and Zoopla aren’t working on it, because it is the future.” Data can be to create an in-depth demographic of the area, generating a prediction of what the area will look like in two or five years’ time.
Whatever the future looks like, it’s not going to arrive imminently. David Carlisle thinks it will take a couple of years for estate agents to enter the ‘Big Data’ world and start using the full array of technologies available to them constructively, and Agents Mutual won’t actually launch its site till the beginning of next year. Until then, however much industry support it garners, we won’t know how consumers will react.
The game has begun. But it’s all still to play for.