Property website allowing private sales claims to be valued at £10m

A clunky awkward website which refers any potential vendors to YOPA (partner). There's one overpriced property for sale within 5 miles of my office.

There is a simple calculation for this business model which I overlooked in the initial dotcom boom. Over the last two decades I have seen companies constantly fail because of miscalculating this too....

...it's the rather dull, but important "cost of customer acquisition", how much does it cost to get a customer to the site and them to generate revenue.

Most companies seriously underestimate this and when your main income derives from referral fees, it is a vital number. It also increases rapidly with competition and as soon as anyone thinks your onto something copy cats will appear quicker than a long lost relative after a lottery win.

In the late 90's when Amazon was really making a grab for customers, it was spending £70 per new customer.... which at the time seemed insane... the good thing was they had the cash to do it.... but more importantly, their shoppers repeat purchase year after year.

That is unlikely to happen here.

There is also another issue, one stop shops rarely work well, especially in one large transactions. They work better for lots of little purchases which don't warrant spending the time shopping around.

Being heavily reliant on third parties to deliver the service to the consumer creates a fundemental flaw too. As soon as you do that you move the relationship to the supplier.... next time that person needs that service again.... they go straight to the supplier... cutting you "the introducer" out in most cases. So you lose the Amazon style repeat purchases.

In most industries specialist and niche players are the ones that make the profit.

It does raise an interesting question though which is worth a ponder with all low cost players.... which helps to prove/disprove the low fee and PB myth....

If an agent or a website like PB or YOPA were to offer their services totally for free, would their market share increase dramatically, would they dominate?

If the answer is no, then it disproves their model. If the answer is yes, then we are all doomed!

I reckon the answer is a resounding NO.

The reason as we all know is, sellers in their hundreds of thousands, don't see fee as being the main motivator for using an agent and indeed see the opposite. It's about VALUE.

Here is another one to ponder when you're walking to your car in the rain today.....

Why was it last week that the seller of "Portrait of an Artist" by the painter David Hockney chose to pay a multimillion pound commission to Christie's Auction House to acheive the record beating £70m price tag for a living artist, rather than whack it on Ebay or Gumtree for a very low fixed fee?

The principle answers to that is also why good agents charging % fees will probably be around for another few decades yet.