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TODAY'S OTHER NEWS

Each Purplebricks customer costs £375 for agency to acquire

A leading analyst says Purplebricks has clearly plateaued and will not reach its own target of a 10 per cent market share.

Mike DelPrete - former head of strategy at the portal Trade Me in New Zealand and a long-standing analyst of portals and online estate agencies in the UK, the United States and elsewhere - says the fundamentals of the Purplebricks business model are sound but customer numbers as measured by "instructions to sell” has remained flat over the past two and a half years.

“Overall customer acquisition cost has remained relatively flat at around £375 per customer. This number really hasn’t changed much in over three years. The small fluctuations suggest a business model that has reached peak efficiency for customer acquisition — again highlighting a limiting factor in growing market share” says DelPrete. 

And he adds: “Purplebricks’ revenue growth in the U.K. has effectively stopped. Total revenue is down from the same six month period last year, and the overall growth picture has gone from growth in 2018 to a plateau in 2019 and 2020.”

But the analyst remains an admirer of the agency, which he believes has changed how traditional estate agents are compensated “with a structure more similar to Uber than a traditional real estate brokerage” 

DelPrete’s comments come as the latest figures from the TwentyCi data consultancy shows that online estate agents have taken a 10 per cent share of the lower end of the UK market for the first time.

The claim - in a quarterly market report and applying to the final three months of 2019 - defines lower end as properties for £200,000 or less. 

Online agents were particularly strong amongst lower prices properties in the North West, East Midlands, West Midlands and Yorkshire & The Humber. 

Meanwhile nationwide, online agent market share remained steady at 7.9 per cent for a fourth consecutive quarter.

Colin Bradshaw, chief customer officer at TwentyCi says: “This is a significant win for online agents, yet again demonstrating their appeal to the lower-value end of the housing market, however for Purplebricks to achieve their stated goal of 10 per cent market share, a significant penetration into other regions of the UK and for properties greater than £200k is essential.”

  • Chris Arnold

    If there is a need to quickly scale the business, cost of acquisition will undoubtedly be high. However, now that Purplebricks has brand recognition, it's time for them to seek engagement with the various communities. That strategy requires very little money if done well - rather, just a bit more work building sustainable relationships. At present, they're all about awareness and that's never enough.

  • Andrew Stanton CEO Proptech-PR    Proptech Real Estate Influencer

    Mike DelPrete makes an off the cuff comment, but when analysed in the round, Purplebricks is not really doing very well, it's current market cap is 378M down from a market cap in excess of 1.3BN in the past. It has never made a profit. Yes, on paper the UK arm has made profit, but if you then factor in the multi-million pound losses elsewhere in it's empire, zero profit, and a big red number.

    Mike may have forgotten that it has burnt through a cash stockpile a year last April 2018 of 160M, to have only 41M left by December 2019. And it is currently still burning 3M a month. Despite massive upfront cash-flow. So, in 14-months without fresh capital from outside investors things are going to get pretty interesting.

    Mike's assertion that cost of acquisition is sub £400, is meaningless in itself, if as the company accounts show the actual cost of running the operation far outweighs the inward cash flow. Add to this that seven major online UK agents have ceased trading in the last 24-months, none of which made profit, and many made multi-million pound loses, I am not sure that acquiring clients for sub £400 is a triumph for anyone.

    Lastly, Purplebricks originally had 7M private investment, then 45M from the AIM flotation and 135M from poor Axel Springer, as well as tens of millions of revenue from vendors paying upfront fees, but where has all the money gone?

    Mostly, on marketing costs to keep the brand front and centre, and those adverts are killing the revenue streams, once the brand is off air, and off the digital highway, it will soon be forgotten, that is it's Achilles heal. Brand awareness can only be bought for so long.

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