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Purplebricks praised for being unbeatable 'with a vast budget for risk'

One of the world’s leading PropTech analysts says Purplebricks has turned the UK online/hybrid estate agency business into “a one horse race”.

More than that, Purplebricks has the advantage over online and traditional rivals because of its “investment risk tolerance” - a vast budget and, even more importantly, a willingness to invest tens of millions of pounds year after year in a bid to build market share. 

These are the views of Mike DelPrete, the former head of strategy at the property portal Trade Me in New Zealand and now a respected international real estate consultant.

In his latest analysis of the UK online/hybrid market, DelPrete says that what marks Purplebricks out from its opponents is that it has the backing and budget of Axel Springer, the $6 billion European media house.

DelPrete says many of the largest real estate portals around the world are owned by a small collection of international media companies, in particular News Corp, Schibsted, Naspers and Axel Springer - the latter owning major portals in France, Germany, Belgium and Israel. 

“But of them all, only Axel Springer has taken the step of investing in a potential sector disruptor: the online hybrid agent” he says.

DelPrete has analysed Axel Springer’s latest presentation to its investors and “hybrid agents are included as a top priority for the core classifieds business which generated revenues of over €500 million in 2017.”

He says that one fascinating aspect of Axel Springer’s involvement with Purplebricks is that on the one hand its portals outside the UK attempt to give traditional agents the maximum number of leads, while in the UK - and those other markets where Purplebricks operates - the emphasis is on disrupting traditional agencies.

“Axel Springer is wonderfully upfront about its motivations. Its move into the hybrid agent space is designed to tap into a much larger revenue pool: agent commissions” says DelPrete.

“Continuing to serve your customers while entering into direct competition with them is a delicate balancing act. It's a move reminiscent of Amazon promoting its own products in direct competition with many of its sellers.”

DelPrete says that this ruthlessness, playing two ends of the estate agency business, makes Purplebricks a fascinating business model.

“There is no first mover advantage in these markets (Purplebricks was not the UK's first online hybrid agent). Rather, there is a rich first mover advantage: the business with the deepest pockets generally wins” he says, adding that Axel Springer allows Purplebricks the budget to build market share whatever the short term loss.

“Axel Springer and Purplebricks are quickly building a potentially insurmountable lead in the online hybrid agent space globally. There is no runner-up in the sector; it's a one horse race” says DelPrete.

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