Publishers Blog: SUBSCRIPTION MODEL vs PAY-PER-LEAD?

Last week we interviewed Trebor South, a former senior executive at a large corporate agency.  He was on his way to play golf in Portugal in his helicopter at the time – he must have sold a few houses then!  We were lucky enough to chat to him on what he sees happening for estate agents on the internet.

We got back in touch this week to ask if we could bend his ear for 5 minutes.  He took time out from fishing from his boat off St Ives to chat to us about that racy topic: Portal Business models.  He’s given us his take on this before, but we were keen for the update.


Nat Daniels:
Hi Trebor, how are you?

Trebor South:
I’m well thank you Nat, you?

Nat Daniels:
Very good thank you.  Could we pick up on that topic we were chatting about last week?

Trebor South:
Sure, hang on a tic, just got to reel in.

Ok, shoot.

Nat Daniels:
What is best model for agents, pay per lead or subscription?  Agents we speak to seem to like the subscription model as they can budget effectively.

Trebor South:
The subscription model is very, very firmly the largest model in the market.  Nearly all of Rightmove's revenues, all of FindaProperty, PrimeLocation, and probably the vast majority of Zoopla (PropertyFinder) are taken in subscriptions.

Pay-per-lead is really only in its infancy.  It's only really had PropertyIndex (I forgot them from the list we discussed last week), Fish4, Zoopla and Homeflow's network and none of them are at scale with the model yet.

Nat Daniels:
Property Index – yes – they did do a lot of work pushing that model a year or two ago, you did forget them last time.

Trebor South:
Yes, and?

Nat Daniels:
Anyway, pay per lead...

Trebor South:
As you know, I think it’s interesting.  It offers a far more efficient and accountable model for agent's advertising, though it is poorly understood by agents on the whole.  That lack of understanding comes through in fear, rejection, etc. but it’s mostly just fear of change and having to get your head around what it needs.  Having players in the market sending near spam quality of leads to agents doesn’t help either, but that will just take time to work through as agents work out what is quality and what isn’t.

What I find most interesting is that it is in none of the big guys interest to promote it or draw attention to it, as it could be highly disruptive to their legacy business models if it achieves scale.  It could pose a serious threat to Rightmove and bring agent’s marketing costs down by an order of magnitude.

Nat Daniels:
Should a lead for a property worth 1m be priced at far more than one at 100k?

Trebor South:
Well of course it “should” be valued more highly - as if it converts it's worth a LOT more.  I don't think any of the current crop of Pay-per-lead advocates offer different prices for different leads.  It's probably hard enough to explain the basic concept, let alone getting into variable lead pricing.

Increasingly it seems like people are also offering hybrid models.  For example with Zoopla, you can have subscriptions, or you can have pay-per-lead.  In that instance, why wouldn't you go pay-per-lead, then switch to the fixed price model (or take advantage of cap offers) if it really takes off.  Indeed agents on the fixed price model I’ve spoken to have saved costs by switching to pay-per-lead.  That way you have the efficiency and lower cost model, AND the benefit of budgetary planning certainty that you described a minute ago?

Plus don’t forget the “Free” model (supported by display advertising).  And the Free to list, pay to enhance models.

Nat Daniels:
Of course – what’s the scoop there?

Trebor South:
Well I think when Globrix fell from independence and the public’s attention (remember when we all thought it was a great white knight riding in to save us from the clutches of Rightmove) that somewhat damaged those models.

That said, I don’t think it was just Globrix.  I would observe that it is VERY hard to build a portal to scale (hence all the failures every year) and doubly hard to do so if you are essentially not charging for the heart of your operation.  I mean, that hardly feels like sensible practice.  I never sold houses for free in return for doing the HIP!  (RIP).

Maybe Google could support free for a while, though when I read the naivety of most agents to the fact that if Google achieved scale we would have created a monster far more powerful and efficient at extracting our cash than Rightmove, I don’t know whether to chuckle or cry.  Actually, I think I’m glad I’m retired, I prefer my Mackerel.

Nat Daniels:
What about Property Live?  They’re free – and association supported.  Could that save agents?

Trebor South:
Don’t get me started.

Nat Daniels:
Please, go on?

Trebor South:
No, Elizabeth will get upset.  She’s concerned about my blood pressure.

Nat Daniels:
Er, ok. What do you think of the concept of agents as shareholders in a portal? What would you say to that?

Trebor South:
The concept of member shareholder organisations for agents in the UK is as old as the hills.

Historically agents would club together in associations and buy contracts for local print magazines to help them contain the rates of their local newspaper.

More recently both PrimeLocation and Rightmove took investments from many agents (CLEA and the big multis) to devastating effect.  Many of those agents earned a LOT from those investments, many others felt cheated, leaving a peculiar and long legacy of agent shareholding in the UK agent psyche.

And even very recently we see the advent of Radar Homes - making a bit of headway in the SouthWest on an internet re-incarnation of that time tested newspaper model.

Why doesn't EAT have a crack, you’ve got a massive following?

Nat Daniels:
Ok so an agent just starting up or reviewing ALL their on and offline marketing  - what advice would you give them?

Trebor South:
Balance.  Nothing radical.

They should spend some on tried and trusted offline press for instructions and branding.  Some on a direct to client strategy (newsletters, emails, local flyers, boards of course) and most importantly their own site.  Perhaps a little on Google adwords to drive traffic to their site.

Clearly they need to be on Rightmove (unless they are lucky enough to be in a region where Rightmove isn't a necessary tax on trading in order to win vendors), then I would argue they should support a few of the upstarts that they think look promising (no need to spend much to do this and it gives them increasing ammunition with vendors - who typically won't have a clue of the relative importance of different websites).

Finally, they should take advantage of the numerous free options they have at their disposal.  The National Association, Globrix, and various other portals.  Partly because all news is good news, and what harm can it do, some have some appreciable traffic, and partly for the argument about vendors not being able to differentiate.

In sum:  Balance.

And:  Measure - but that's a whole different subject.  One for another day perhaps?

Nat Daniels:
You mention PropertyLIVE, some agents are still not taking advantage of this even if they ARE members...

Trebor South:
Like I said, don’t get me started, or I’ll turn back to my fishing! Just because I don’t think it’s working for agents at the moment, doesn’t mean I don’t think they should support it.  Plus it’s my old beef about vendors not really having much sense (and why should they) of which portals matter.  If you can tell them you’re on another portal, and it helps win the instruction...

Nat Daniels:
Go on.

Trebor South:
Where’s my rod?