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The former chief of an online estate agency says the top three surviving firms in the sector must merge if they are to survive.
Russell Quirk, the founder and former chief executive of Emoov, makes the call for consolidation in a video interview; and in an article he has written on the same theme, he makes the claim that over £150m has been spent by online firms on TV, radio, Google, Facebook and outdoor advertising - all for a market share that remains well down in single figures.
Both the video interview, with respected industry consultant Chris Watkin, and the article written by Quirk himself have been exclusively shared with Estate Agent Today readers.
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The article is a critique of how and why the UK’s online sector soared and then collapsed, partly because of what can retrospectively be seen as over-enthusiasm by participants - including Quirk himself - but also because the data suggested the market would end up much larger than has turned out to be the case.
“Between 2011 and 2015 Emoov doubled in size each year. As did the likes of House Network, House Simple, etc. Then in early 2014 along comes Purplebricks and duly quadruples in size in its second year as a consequence of good marketing and a humungous ad spend. Then they double the next year and so on. The logical conclusion? That the prospect for the growth of the online model was massive” he writes.
Buoyed up by seeing the sector receive millions of pounds of investment by well-known individuals including Neil Woodford, Charles Dunstone and Sarah Beeny, and simultaneously hundreds of millions from organisations such as Tosca Fund, Savills, LSL Property Services and the Daily Mail Group, the individual agencies on the ground then went marketing crazy.
However, he admits that by last year it was apparent that marketing - like every other spend - is subject to the law of diminishing returns.
This was exacerbated by:
- too many competing online agencies (55 at one point);
- Google “ramping up the click cost month by month”;
- traditional agencies fighting back on fees and by criticising upfront charges;
- and importantly “the realisation that the cheap-fee online proposition had a ceiling amongst consumers. ‘Too cheap’ is not for everyone, psychologically.”
But Quirk - now the co-owner of a Keller Williams agency service in Essex, and the founder and head of property-focused PR company Properganda - saves his most withering criticism for Purplebricks and its current management.
In the article, which will shortly be published on LinkedIn, he says: “The PurpleBricks journey is like the Apollo 13 mission. It blasted off brilliantly albeit very expensively. It flew toward the stars guzzling fuel as it went but nonetheless mesmerising onlookers and giving its passengers a wild ride for a while.
“But then it went wrong and its destination became a hard bang down to earth instead of a moon-shoot. It too is dangerously low on oxygen as was a fate that befell the 1970 version. In my analogy the pilots have long since bailed out, landing softly in Hollywood. Literally.
“The Bruces' stunt-double, Vic Darvey, has a job on his hands. He needs to make things look good and so, almost understandably, is reassuring investors, staff and customers that he can steer PurpleBricks to a 10 per cent market share and certain prosperity now that the ballast of the US and Australian operations have been cast aside.
“The problem with this is that PurpleBricks currently sits at less than a four per cent market share nationally which … equates to an improvement in listings/revenue of 150 per cent.
“Back in time, say in 2015, that would have looked easy. But in the past two years their growth trajectory has resembled the ordinary rather than the stellar. In their most recent numbers, UK listings were only 10 per cent higher than the year before and so this means that at this new rate it will take approximately 10 years to reach their stated goal which I suspect is somewhat longer than Mr Darvey was inferring.
“Put simply, if your trajectory is too low and you’ve spent all of your money on fuel and you can’t go any faster, what do you think happens? I’d say they’ve dropped a Clanger.”
Quirk pursues a similar theory in a new video interview with industry consultant Christopher Watkin: again, we are grateful to Chris for offering it first to EAT readers.
In the video Quirk repeats his critique of Purplebricks’ limited growth potential but is especially critical of another online agency - Housesimple - for its recently-announced initiative to offer free listings.
“Just to rely on eventual commission on a 15 or 20 per cent conversion rate in things like conveyancing and mortgages … the unit economics just does not stack up. That business does not work.”
He says that with at least one investor having a stake in both HouseSimple and the other leading online firm - Yopa - the time has come to recognise that losses will mount for all three top online companies unless they join forces.
As ever, it’s an engaging and provocative five minute watch, and exclusively for our readers.
Here's a thought: None of those mentioned has any clue what the term 'message' means! It doesn't matter how much money is spent if the marketing doesn't connect emotionally with a vendor.
It's time Russell Quirk learnt that spending money doesn't equal success.
Over half a billion pounds spent / invested in online agents in the UK.
Profit ZERO.
Reason - the cost of capturing a new client and running the online model costs 23% - 32% more than the fee being charged.
That is why Purplebricks have just hiked their fees up by another £100 a unit, closing the gap between online fees and traditional fees.
All online agents continue off the back of upfront fees and referral fees, sale or no sale, those online agents seeking no fee or no upfront fee will be out of cash within 12-months. Traditional agents are still mainly going down the no sale no fee route.
Personally if I set up again today, I would go the 'charge the client for the service provided' route with regular monthly payments for work done so far.
£x for listing, £x for exposure on websites, £x for viewings, £x for agreeing a sale, £x for qualifying buyer, £x for dealing with sale up to exchange - which in terms of hours is most costly part of process, £x for exchange, £x for aborted sale. So as the weeks tick on - the vendor is incentivised to reduce price, if the property has been fully and professionally marketed without a buyer being found.
This would mean agents could charge 'lower' fees as they would be invoicing all vendors, rather than just invoicing the 50% of vendors who get to exchange and building in the cost of the 'other' property that they marketed but failed to sell.
Eg, you list 10 at £400,000 at 1% = 10 x £4,000 potential fee or £40,000. You sell subject to contract 7 and 2 fall through before exchange, so you invoice 5 at £4,000 = £20,000. So you have shouldered the cost of marketing the other 5, and got no money from the vendor as a fee.
In the alternative version you list 10 at £400,000, and you charge all 10 a fee based upon the work you actually carry out. 12 viewings, one aborted sale and then a re-sale, 30 hours of sales progressing etc.
Five sales go through and five do not, but because every vendor is paying something then the fee to all could be less, so instead of 1% payable to the 5 who exchange, you charge in real terms 0.6% to all 10, so that is 10 x £4,000 x 0.6% = £24,000 income in and each vendor as an average is paying 40% less than the a 1% fee.
Happy vendors and more income in, as well as a steady income flow, if all vendors are billed on a monthly cycle, much better than waiting five months for a fresh instruction to become a paid for invoice.
An admirable proposition and one I have considered over the years but I have concluded that the public won’t buy it, they won’t be able to make a comparison between you and your competitors and I am not sure it would pass TPO requirements for letting customers know the full cost of your proposition.
I cant see the day that any vendor would be happy to pay on a monthly basis, the argument would always be, 'the longer it takes you to sell it the more it cost me' Good agents do a great job, getting the best price in what is a very challenging market. I agree that the sales chasing process is far too long and takes up time that could be best spent selling. Vendors need to be educated that the real work starts when its sold.
This guy does my head in...
Says:
traditional agencies fighting back on fees and by criticising upfront charges;
As one of the reasons online will fail.
But:
is especially critical of another online agency - Housesimple - for its recently-announced initiative to offer free listings.
So upfront paynents are bad but if you try and do something different you get slated by the online expert.
Also Russell... do you remember what happened when you merged with Tepilo.
You got to love RQ.
If I were to be crowned as the "Worst Businessman of the Decade", I'd keep my head down and avoid the press. But I'm not a man like RQ, apparently, as he self-appointed himself to lead the "future of the industry" think tank. If I could short KW, I'd do it now
My point, Russell, was that the marketing wasn't "subject to the law if diminishing returns" - it was crap. Had it been half-decent, then online had a better chance.
Your point seems to be that no amount of ad spend could have made online work.
Why does the press keep giving this guy airtime? Failed entrepreneur of a failed agency, who lost a huge amount of other people’s money and is now only good for taking pot shots at firms who are carrying on after he lost it. The fact that his firm failed due to poor management doesn’t mean others are destined for the same. There is room for hybrids/online and traditional in the market and agents supposedly in the same category are not necessarily comparable - in terms of scale and reach Yopa and PB are hardly comparable. I don’t know a huge amount about Vic Darvey, but from the outside looking in, calling him the Bruces’ stunt double seems offensive for the sake of it and wide of the mark given Mr Darvey’s background at money supermarket et al. Not sure I’d be so ready to bet against him and PB’s strategy unless I was just promoting my own agenda. Hmmmmmm...
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Here's a thought: None of those mentioned has any clue what the term 'message' means! It doesn't matter how much money is spent if the marketing doesn't connect emotionally with a vendor.
It's time Russell Quirk learnt that spending money doesn't equal success.
Hey, Chris - that's the point of the entire article and video. Do try to keep up at the back there!
Over half a billion pounds spent / invested in online agents in the UK.
Profit ZERO.
Reason - the cost of capturing a new client and running the online model costs 23% - 32% more than the fee being charged.
That is why Purplebricks have just hiked their fees up by another £100 a unit, closing the gap between online fees and traditional fees.
All online agents continue off the back of upfront fees and referral fees, sale or no sale, those online agents seeking no fee or no upfront fee will be out of cash within 12-months. Traditional agents are still mainly going down the no sale no fee route.
Personally if I set up again today, I would go the 'charge the client for the service provided' route with regular monthly payments for work done so far.
£x for listing, £x for exposure on websites, £x for viewings, £x for agreeing a sale, £x for qualifying buyer, £x for dealing with sale up to exchange - which in terms of hours is most costly part of process, £x for exchange, £x for aborted sale. So as the weeks tick on - the vendor is incentivised to reduce price, if the property has been fully and professionally marketed without a buyer being found.
This would mean agents could charge 'lower' fees as they would be invoicing all vendors, rather than just invoicing the 50% of vendors who get to exchange and building in the cost of the 'other' property that they marketed but failed to sell.
Eg, you list 10 at £400,000 at 1% = 10 x £4,000 potential fee or £40,000. You sell subject to contract 7 and 2 fall through before exchange, so you invoice 5 at £4,000 = £20,000. So you have shouldered the cost of marketing the other 5, and got no money from the vendor as a fee.
In the alternative version you list 10 at £400,000, and you charge all 10 a fee based upon the work you actually carry out. 12 viewings, one aborted sale and then a re-sale, 30 hours of sales progressing etc.
Five sales go through and five do not, but because every vendor is paying something then the fee to all could be less, so instead of 1% payable to the 5 who exchange, you charge in real terms 0.6% to all 10, so that is 10 x £4,000 x 0.6% = £24,000 income in and each vendor as an average is paying 40% less than the a 1% fee.
Happy vendors and more income in, as well as a steady income flow, if all vendors are billed on a monthly cycle, much better than waiting five months for a fresh instruction to become a paid for invoice.
An admirable proposition and one I have considered over the years but I have concluded that the public won’t buy it, they won’t be able to make a comparison between you and your competitors and I am not sure it would pass TPO requirements for letting customers know the full cost of your proposition.
I cant see the day that any vendor would be happy to pay on a monthly basis, the argument would always be, 'the longer it takes you to sell it the more it cost me' Good agents do a great job, getting the best price in what is a very challenging market. I agree that the sales chasing process is far too long and takes up time that could be best spent selling. Vendors need to be educated that the real work starts when its sold.
This guy does my head in...
Says:
traditional agencies fighting back on fees and by criticising upfront charges;
As one of the reasons online will fail.
But:
is especially critical of another online agency - Housesimple - for its recently-announced initiative to offer free listings.
So upfront paynents are bad but if you try and do something different you get slated by the online expert.
Also Russell... do you remember what happened when you merged with Tepilo.
Sour grapes is what springs to mind
You got to love RQ.
If I were to be crowned as the "Worst Businessman of the Decade", I'd keep my head down and avoid the press. But I'm not a man like RQ, apparently, as he self-appointed himself to lead the "future of the industry" think tank. If I could short KW, I'd do it now
My point, Russell, was that the marketing wasn't "subject to the law if diminishing returns" - it was crap. Had it been half-decent, then online had a better chance.
Your point seems to be that no amount of ad spend could have made online work.
Why does the press keep giving this guy airtime? Failed entrepreneur of a failed agency, who lost a huge amount of other people’s money and is now only good for taking pot shots at firms who are carrying on after he lost it. The fact that his firm failed due to poor management doesn’t mean others are destined for the same. There is room for hybrids/online and traditional in the market and agents supposedly in the same category are not necessarily comparable - in terms of scale and reach Yopa and PB are hardly comparable. I don’t know a huge amount about Vic Darvey, but from the outside looking in, calling him the Bruces’ stunt double seems offensive for the sake of it and wide of the mark given Mr Darvey’s background at money supermarket et al. Not sure I’d be so ready to bet against him and PB’s strategy unless I was just promoting my own agenda. Hmmmmmm...
This guy Quirk is a nut and just won't go away. He tells lies still like he did with Emoov. Quirk is a conman and a crook.
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