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.
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.