Agents' Mutual vs Rightmove
Agents hate Rightmove. But is that enough for Agents’ Mutual to succeed? Ian Springett thinks bigger is better. He could be right, says Rayhan Rafiq Omar of Wigwamm (https://wigwamm.com)
The UK is a property-driven nation. According to the ONS, just over 8.3m households rent[1] with a whopping 15m homes occupied by their owners[2]. Saying that, we’re in the middle of a dip in home ownership as the government moves in to subsidise private landlords in-lieu of building new social homes.
All of the above adds up to the need for these homes to be distributed (for sale or rent), an area where agents truly do control the UK landscape: every high-street is graced with estate and lettings agents as a testament to the British lust of home ownership.
Rightmove, the portal that dominates online searching for property, has 18,270 member branches. And before anybody suggests ‘dominate’ is a subjective word, the market speaks by gracing Rightmove with a share price which is 37x greater than their earnings[3]. Why does the market have confidence in Rightmove? The three largest estate agency groups[4] and the ever-powerful Daily Mail have, after all, backed Zoopla heavily.
Yet Rightmove has continued to increase earnings thanks to (its own number) 82% of property portal page views in the UK. Many big property portals lose money[5], while Rightmove maintains incredible margins[6]; substantially higher than even Australia’s REA Group[7]. As far as the market is concerned, Rightmove is winning and winning convincingly.
But Rightmove have been winning for a while now, so how is it increasing revenue year-on-year? There are two ways to look at this: Rightmove (and other portals) started cheap and now they add more value deserve to be paid more. Or, they have agents by the short and curlies (read: control more of an agent’s business) and are imposing annual price hikes to please the (stock)market. Either way, the objective point is Rightmove have nowhere to grow, so has to increase prices to maintain its share price.
And here is why agents are angry. What was once a cheap marketing expense is now still cheap (at an average of £529, that’s less than half a member of staff per branch), but not as cheap as it used to be[8].
Most agents quietly pony up to Rightmove because it does what they need it to: cost-effectively supply leads to their classified adverts from the most visited UK property website. However, Rightmove's property classifieds are just road signage. Agents are the ‘front door’ to the property market. Online agents exist, so landlords and vendors do have (direct) access to Rightmove, yet traditional bricks-and-mortar agents are who the vast majority use to sell/let their property. Arguably, agents have been hurt more by the halving of sales volumes since the ‘credit crunch’ in 2007/08[9]. You could say there’s been no credible competitor to Rightmove because the pain hasn’t been great enough.
Till now, when a few of London’s more reputable estate agents finally put plans into action[10]. Feeling that Rightmove could squeeze them (for more money) indefinitely, they needed a man with the right plan (sorry Neil Clough[11]). Enter Ian Springett, who led the last successful agent co-operative portal: Primelocation[12]. The plan is to build a portal owned by agents, exclusively for the use of traditional agents (online agents not included).
Ian’s strategy is simple: Agents commit to only advertise on one or other of Rightmove and Zoopla (alongside Agents’ Mutual’s portal). The hope is this would leave Agents’ Mutual with all the properties. Bigger, in the minds of consumers, is always better. But just to be sure, Ian has a clear plan for massive, competitive advertising to make sure everyone in the UK knows and recognises the brand he is yet to create.
There are safeguards so that agents own, but cannot sell, their new portal. Agents fundamentally compete with each other, but for the time being are joining forces to ward off a perceived common enemy. If they achieve success, Ian doesn’t want another scenario where his work gets sold off. A man with a better plan.
This Ian Springett interview on Estate Agent Today details some of the mechanics relevant to agents who might want to sign up: https://www.estateagenttoday.co.uk/oldeat_news_features/Q—and—A-with-Ian-Springett-Blog.
But what about consumers? Well, Agents’ Mutual is a five year project that hasn’t yet heard the starter gun (1,000 branches need to sign up and commit a loan to seed fund the project). Ian is right to not want to risk new, untried technology or try and be too innovative. His reasoning is Rightmove works, as evidenced by people flooding it with page views every day. Just copy that and have all the property listings direct from agents.
Attending an Agents’ Mutual meeting was interesting, yet one quote from the Q&A session stuck with me: “It’s our data and they (Rightmove) are charging us for it.” Maybe it’s the cynic in me, but I immediately thought it’s the landlord/vendor’s data, and agents charge them for it.
And that is the elephant in the room agents are content to ignore: if Rightmove is what landlords and vendors want, and agents look to kill Rightmove, what stops Rightmove from welcoming landlords and vendors directly? And if such a thing happens, what will become of 18,000+ UK agency branches?
Agents' Mutual is a smart, well-reasoned proposition, if it were launching today. As it is years away, Rightmove has the luxury of waiting and outspending Ian Springett's war chest if that time comes. Agents who are angry at being squeezed for more fees each year may just force the dominant consumer brand in property to push estate agency the way of travel agents: most people served online, with a few using specialist agents.
* The author is the founder of Wigwamm (https://wigwamm.com), a company that builds simple apps to help real estate professionals. He has overseen a property management business for 12 years. He has committed his agency to Agents' Mutual for five years and will pay the advance fees and loan funds.
Notes:
1. The lines between private and social renters continue to blur as the UK Housing Benefit budget gets taken over by Local Housing Allowance, a scheme to represent social renters as private renters. Some landlords don’t like this; most, however,realise it is a mass transference of public funds into the pockets of private individuals. There would be no housing ‘crisis’ if the government spent the money earmarked for Local Housing Allowance on building new social homes.
2. UK ownership and renting statistics: https://www.ons.gov.uk/ons/rel/census/2011-census/detailed-characteristics-on-housing-for-local-authorities-in-england-and-wales/short-story-on-detailed-characteristics.html
3. If a PE ratio of 37x isn’t impressive, this Interactive Investor chart of Rightmove’s share price over the last 5 years (from when Zoopla launched) should put to bed any notion that they aren’t dominant: https://bit.ly/1a4uw2u
4. Countrywide, LSL Property Services and Connells own stakes in Zoopla: https://www.zoopla.co.uk/press/releases/083/zoopla-signs-strategic-partnerships-with-the-uks-three-leading-estate-agency-groups/
5. US property portals are growing fast and continuing to lose money https://www.inman.com/2013/08/13/soaring-real-estate-portal-valuations-are-all-about-growth/
6. Half way down the page, comment on Rightmove financial performance: https://www.theguardian.com/business/nils-pratley-on-finance/2013/aug/02/rbs-chief-bonus-hassle
7. Commentary on property portal valuations and profits https://www.propertyportalwatch.com/2013/05/would-you-rather-own-the-rea-group-or-all-us-property-portals/
8. In 2007, Rightmove made an average of £234pm from 18,514 branches (vs £529pm from 18,270 branches in 2013). PDF source: https://plc.rightmove.co.uk/~/media/Files/R/Rightmove/reports-and-presentations/2007/interim-presentation-august-2007.pdf
9. Graph showing UK property sales volumes, thanks to Residential Property Expert Henry Pryor: https://twitter.com/HenryPryor/status/360684866783813632
10. Agents’ Mutual launch PR https://www.chestertonhumberts.com/news/leading-agents-to-launch-property-portal-/
11. Neil Clough was a candidate on the BBC TV show, The Apprentice. He wanted to launch a property portal for landlords that cut out agents; but also wanted agents to advertise there. He was overwhelmingly the best candidate, but wouldn’t back down on a venture he had obviously not researched fully. Therefore, he was the right man with the wrong plan. For anybody feeling they need to start yet another portal, here are Neil’s contact details: https://twitter.com/NeilWClough
12. Primelocation still exists as part of the amalgamted purple beast that is the Zoopla Property Group. A brief history of Zoopla: Founded by Alex Chesterman and Simon Kain, after they sold Lovefilm to Amazon. Made all the right noises of solving the pain of property search, but quickly copied Rightmove after their pay-per-lead model proved to not resonate with agents. Alex, the deal-making machine, then stepped into high gear to buy Zoopla an audience. Starting with Hot Property, then acquiring and retiring PropertyFinder (the first UK portal, started by the venerable Nick Leeming, who recently retired from Zoopla (https://bit.ly/OwjWmU), only to appear as Chairman of Jackson Stops-Staff — which have just signed up to Agents’ Mutual). With a few transactions here and there for more audience acquisition, the big coup came with the Digital Property Group merger (Daily Mail owned group comprising FindAProperty and Primelocation). Leaving Daily Mail with 55% ownership of the newly minted Zoopla Property Group, FindAProperty and Globrix were quickly retired, leaving just the Zoopla name up against the might of Rightmove (with Primelocation playing, for the time-being, a taxi-advertising fueled cameo). This Zoopla Press Release from a few years ago shows the portal landscape that was, denominated by unique visitors: https://www.zoopla.co.uk/press/releases/054/zoopla-increases-market-share-versus-property-portal-rivals/. And for comparison, a Zoopla press release before the DPG merger in 2011 (which was the last release of useful metrics by Zoopla): https://www.zoopla.co.uk/press/releases/zooplacouk-uk-property-website-in-march/. It should be noted that Zoopla powers the online property search for many major newspaper publications and counts the three largest UK estate agencies as significant shareholders.
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