Investment analyst's pessimism over OnTheMarket customer base

Global investment bank RBC Capital Markets says OnTheMarket has the potential to undermine the pricing power of Rightmove and ZPG - but probably lacks the ability to build a sufficient customer base to make that happen.

In a note to investors about ZPG, RBC Capital Markets says: "If OnTheMarket successfully grows its market presence by investing sufficiently in brand awareness and building its customer base, the property portal may succeed in undermining the pricing power of ZPG and Rightmove. However, we lack confidence in OnTheMarket’s ability to do this, particularly because it lacks a differentiated proposition to consumers or estate agents.”

There is still no news on the date for Agents’ Mutual - OnTheMarket’s parent company - to be floated on the London Stock Exchange. Some insiders have suggested to Estate Agent Today that the float may now wait until after next week’s set of results from ZPG, which are expected to show continued support from agents for Zoopla and PrimeLocation.

Meanwhile RBC’s note says that acquisitions have diversified ZPG’s revenue mix as it now offers software, website, print and data services in addition to marketing

The bank says MoveIT - a ZPG digital platform for agents to generate additional service revenues - has the highest potential revenue upside.

RBC claims: “At present, a handful of agents are generating £3,750 per month from referrals, more than covering the subscription cost of their software.”