Two of the most influential figures behind the PropTech sector have run a microscope over Rightmove’s business model and technology - and are warning that its current extraordinary success might not last forever.
“Rightmove is widely recognised as one of the best businesses in the world ... The portal has delivered exceptional results for its customers and shareholders while forging a brand reputation amongst consumers that is unrivalled in the property industry” say James Dearsley and Eddie Holmes, the founders of consultancy PropTechConsult.
However, the pair then measure what they describe as the portal’s “formidable position” against The Innovator’s Dilemma - a theory which suggests that even outstanding companies can lose their competitive advantage if they do not innovate.
The theory suggests companies go through a three-stage process.
Firstly they will be in ‘The Innovation Window’ - having optimised the revenue from their original strategy, they then devise a new growth strategy to increase revenue further.
Secondly, they have a large customer set broadly content with the service.
Thirdly, the investors behind a company are likely to be accustomed to excellent financial performance and consistently good - that is, increasing - returns on investment:
Dearsley and Holmes then highlight some difficulties Rightmove may have when seen through the prism of The Innovator’s Dilemma.
For starters, they say Rightmove has a little over 20,000 agency advertisers according to its latest figures, with a potential market size only slightly larger at 22,000.
“There is very little headroom for growth through acquiring new advertisers” the pair say, adding that even if new advertisers can be acquired, the annual growth rate appears to be slowing, and both financial performance and returns to investors have been slowly accelerating their growth since 2012.
“It is plain to see from this analysis that Rightmove ticks the three boxes of the Innovator’s Dilemma” the pair suggest.
They then play out scenarios in which Rightmove’s advertisers - almost wholly agents - might themselves go through digital transformations which discover new forms of promotion which in turn may make them less reliant on traditional portals.
“Rightmove fundamentally offers the same product to consumers and customers as it did when it began trading in 2000. To date, where it has innovated – through commercial or overseas property, for instance – it has not found returns anything like as profitable as its core business” say Dearsley and Holmes.
The pair then suggest Purplebricks and similar platforms may become a threat to Rightmove.
Put simply, they say: “Where most agents are customers ... and are unlikely ever to adopt any other relationship, Purplebricks (or indeed another, potentially as yet unknown technology-driven agent) have the potential to gain so much market share as to make their own brand well enough known in the eyes of potential property purchasers to draw traffic from Rightmove. If the site loses consumer traffic it will be less attractive to advertisers.”
The analysts then say that portal survival in a world of more technology-driven experts could happen through a more diverse offer than that so far adopted by Rightmove.
“Zoopla have recently pivoted away from focusing purely on search and now offer consumers and advertisers a range of products across the property lifecycle. This diversity under one brand may result in Zoopla simply offering a more compelling proposition to all parties” they add.
It’s a fascinating piece and you can see it on the PropTechConsult website here.
James Dearsley, founder of the Digital Marketing Bureau, is a regular contributor to Estate Agent Today and you can see his latest column here.