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Purplebricks is a huge success in the UK insists top PropTech analyst

A top PropTech analyst says Purplebricks is as much an advertising firm as an estate agency but is nonetheless a huge success in the UK. 

Mike DelPrete - former head of strategy at the property portal Trade Me in New Zealand and now a respected international real estate consultant - says that a key measure of Purplebricks success is the effectiveness of its advertising and marketing spend, as much as other more conventional estate agency measures.

Having analysed the company’s most recent figures, DelPrete says: “For every £1 spent on marketing, Purplebricks generates revenues of £3.60 in the U.K., £0.92 in Australia, £0.36 in the U.S., and £4.38 in Canada.”

DelPrete says Purplebricks’ figures released last week - and which appeared to prompt a further fall in the agency’s share price - are actually not as bad as they looked at first sight; the firm admitted it lost £27.3m over the first half of the year and modestly down-scaled its full year expectations.

“Purplebricks' core UK market continues to grow and is meaningfully profitable, proving that the model works. Key performance indicators in its other three markets reveal a deeper story of investment, growth, and challenges” says DelPrete, who also insists that the recent collapse of Emoov does not indicate a fatal flaw with the online model.

“Purplebricks is an international collection of businesses at various stages of growth. In the UK, Purplebricks' most mature market, it continues to grow revenues and operating profit. At maturity and scale the business model absolutely works; there is no evidence to support otherwise...Yes, growth is slowing in the UK. But at nearly 80,000 instructions per year it can't be expected to keep growing at historic rates. The key is that even in a challenging economic climate, growth continues.”

The analyst also says that problems in Purplebricks’ other markets outside the UK should not make onlookers believe the model does not work.

For example, DelPrete - who some months ago said he had “a small part” in Purplebricks’ entry into the Canadian real estate market - says the agency’s problems in Australia can only be properly assessed in six months’ time once a turnaround plan and new pricing strategy have been given time to work. 

And he says Purplebricks’ problems in the US mean the firm needs to go from 200 to 650 instructions per month to reach breakeven with its sales and marketing costs.

Notwithstanding such problems, DelPrete insists that Purplebricks’ business model - “and profitability at scale” - remain sounds. 

“The market failure of smaller players, or the fact that Purplebricks is deeply investing in new markets, doesn't diminish that fact” he says.

“From a competitive standpoint, the most dangerous thing about Purplebricks is its investment risk tolerance. It is willing to invest tens-of-millions of dollars year after year to build market share,  incurring big losses along the way. If you're a traditional real estate agency, or a listed company, are you willing to do the same?” he asks.

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    "A key measure of Purplebricks success is the effectiveness of its advertising and marketing spend"

    Most of their success is down to spending millions on lying to the public in their advertising and getting away with it.

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    How can a £27,000,000 loss for the first 6 months of the year NOT BE BAD.

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    I take it that their SUCCESS is measured in how much money they get from customers. Not how many SALES they make nor How much UNDER MARKET VALUE they sell the properties

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    You cant have a high growth company without incurring substantial debt at the start, it is all about positioning the company for profitability at scale. For example, Uber burns through 1billion a year over the last 9-10years and still doesn't turn a profit yet there aren't many who would question if Uber are a success.

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    Blimey, really? A company can be successful even though it fails to make a profit? Next you'll be comparing Purplebricks to Amazon.

     
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    @propertypundit yes I stand by my comment. Are you saying that Uber is not a successful company because they have returned repeated losses? They employ millions of people globally, their staff get paid and they are the biggest car service globally but according to you, they are not a success because they post losses year on year!

     
  • Tony Sinclair

    'DelPrete - who some months ago said he had “a small part” in Purplebricks’ entry into the Canadian real estate market...'

    I wonder how much he was paid to spin that little fairy tale?

  • Steve James

    I'm bet that this guy DelPrete either has a large holding of PB stock or he is connected in some way. Seems awfully bullish. Hi profile does show he's a big technology fan too. Thing is the technology PB has is minimal. Take the app for example is just rubbish. The search feature for properties doesn't work and customers can't look at their messages and it's been like that for two years +

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    Funny to think all these new companies metric for success is simply employing people and not profit. Sounds more like a charity. The doners doing it just to keep people employed. Not sure my bank manager would agree.

  • Bob Morris

    Andrew V: It would depen on your definition of success. Is uber making losses year on year?

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