The Great Debate over the charges levied on agents by portals and the huge profits that Rightmove and Zoopla make has now reached The Times - with the paper saying agents let large fortunes slip from their grasp.
In a lengthy piece the newspaper’s financial editor, Patrick Hosking, explains how portals work and refers particularly to Rightmove’s pricing power as “Herculean” because it is so hugely more embedded with consumers as well as agents than even the second placed portal.
Hosking also sets out the vast profits made by Rightmove in particular, describing it as “a cash-generating gorilla” valued on the stock market at £5.3 billion - vastly more than the floated estate agencies such as Foxtons, Countrywide and Purplebricks combined.
But in a telling paragraph he adds: “Yet it’s the estate agents’ own fault that they are not wallowing in all this fabulous gravy themselves. They sold their birthright … as if it were no more valuable than a damp basement in a deeply insalubrious postcode.”
In an analysis that will be familiar to older agents but is perhaps less well known amongst younger ones, the articles goes on to say that Rightmove was founded and originally owned by estate agents, who spent a total of £10m starting it almost 20 years ago.
“It never needed another penny in capital. Rightmove survived and then prospered by merging with other portals in the frantic phase of consolidation that followed the dotcom bust. But the agents decided to float it in 2006 and sold off their holdings then or soon after.”
The piece goes on to say: “[The agents] had already made one fortune at the float. If they held on, though, they would have made a further capital gain of 18 times their money, as well as being paid about £1 billion in dividends.”
Hosking then talks of the OnTheMarket origins as a mutual before it, too, floated. He cites the challenger portal’s chief executive, Ian Springett, boasting of improved brand awareness, more agents converting from cheap fees to market rate, and agent leads being better value for money than the two bigger rivals.
“It all sounds promising except for one thing” says Hosking - “the stock market doesn’t believe the story.”
He then goes on to say that OTM’s share price has been floating downwards “for weeks” and falling 33 per cent since August alone.
He adds that while OTM insists it has enough money to continue until break even in the future, that depends on Rightmove and Zoopla doing nothing to retaliate. “If either starts to feel threatened, they surely will turn up the advertising taps a bit or respond with price cuts.”
The article is behind The Times’ paywall but for readers who can access it, the story is here.