It might be worth reminding ourselves that the primary stated objective of setting up Agents’ Mutual (the clue is in the name) was to bring the industry together behind a common purpose of lower marketing fees, with some founding principles of being agent-owned and controlled and not being run for profit. In other words, for the sole benefit of its agent members and to hell with the greedy shareholders who control the other portals. It would achieve this with agent funding and support and the ever controversial one-other portal rule (OOPR).
It was not set up to sue high street estate agents in court, which can only be viewed as the precise opposite of bringing the industry together. And despite their victory in their first court battle regarding the legitimacy of the OOPR, the legal war is far from over. An appeal is underway by Gasgoine Halman on the OOPR matter, which may be well be costly and ultimately have a different outcome. There are also other legal battles continuing over breach of contract claims within the High Court and other groups of disgruntled AM members are threatening to sue. So the first objective must be viewed as a failure, despite the recent outcome in court, since being in court in the first place fighting your customers seems entirely contrary to this objective.
The second stated objective was to gain traction in the market by overtaking Zoopla and eventually Rightmove. There was debate about whether this meant agent members or consumer traffic, but that debate has gone away and is largely irrelevant as AM has fallen so far short in both regards. Two and a half years after launch (time flies when you’re going nowhere and spending other people’s money), AM has well under half the agent membership of either of the other portals and less than 20% of their audience. Rightmove has gone from strength to strength financially, judging by their recently published accounts, and ZPG has become a far more interesting and diversified business. Objective two must be objectively judged as a failure.
Recently, AM published its accounts for last year. They are not very inspiring, with a £4m after tax loss – unless, that is, you were one of the directors who got some of the £99k mentioned in there, despite it being clearly stated pre-launch that directors would not be paid. So broken promises perhaps on directors fees, but AM has certainly managed to keep one of its promises of running the business not for profit! The problem is that the intention was to be lowering listing fees over time and there is no chance of keeping this promise.
Now to my prediction of what the upcoming tour is all about. My best guess is that AM will be looking to garner member support for a change in their structure to allow outside investment - either private money or through the public markets. Either way, a de-mutualisation, however it's dressed up, will be an admission that the original idea has failed. Admitting you have failed at something is no bad thing; it can be cathartic and a step towards a better future. Provided, of course, that lessons have been learned and there is a viable plan moving forward. That’s where I am less confident.
First, given the egos involved, I expect the failures of the past few years to be painted as successes and there to be no real plan to win in this space. AM’s biggest mistake has been misunderstanding the market and misjudging the quality of the existing players and brands.
A change in proposed structure, if I am right, effectively requires blowing up all the founding principles of a mutual status solely for industry benefit without external shareholders, of equal votes for all member firms, of no risk or liability to any of its members/shareholders, of running it not for profit and reducing marketing fees over time. So the idea that got people excited in the first place may, indeed, no longer exist.
But the bigger problem for Ian Springett, I fear, is that he just doesn’t get it. The problem is not one of money or lack of investment - after all, almost £50m of industry money has been poured in already. I suspect that AM are about to abandon the one thing, its mutual status, that made it different and interesting. The other part of my prediction is that the OOPR will be withdrawn. It is high time this happened as it has hurt both it and its members. It would also alleviate many of its legal issues and allow AM to move forward in a fair and sensible way. But even doing all this doesn’t solve the real issues, which are a weak consumer proposition, a poor value member proposition and a team that doesn't understand and resists the digital evolution.
Anthony Codling, Equity Analyst at Jefferies International Ltd, offers this view on the current position of AM: “Agents’ Mutual’s accounts talk about ‘developing new strategic plans for the long term development of the business,” he said. “These plans envisage a period of strong growth over the foreseeable future, underpinned by significant initial investment.”
He added: “In my view Agents Mutual is staring at a potential inflection point. ‘New strategic plans’ suggest a change from the current strategy and ‘significant initial investment’ suggests to me significant fund raising. It will be interesting to see what form this fund raising takes. Will it be from estate agents so the mutual maintains control of its destiny, or will it be from institutional investors looking for the next Rightmove? If the latter, agents should be careful what they wish for. It is my view that outside investors will want to see significant rises in ARPA at OTM and there is a risk that in taking on the ‘beast’ they inadvertently create another one."
In my own view, a lot more than corporate structure would need to change at this point for AM to have any chance. It has damaged relationships with agents across the country and had many consumers use it never to return due to lack of a differentiated and interesting proposition. It’s also got ongoing legal challenges and is guilty of charging agents far too much compared to others in the market. As Homer Simpson once said: ‘Kids, you tried your best and you failed miserably and the lesson is, never try’. A bit harsh? Perhaps, but it begs the questions what problem was AM really trying to solve, and whether greed and envy were the main drivers all along?
Of course, this is just speculation and we will know much more next week, but Ian Springett is looking a lot like Donald Trump to me as he gets set to embark on a Trump-like tour. He will likely paint clear failure as success. He will likely claim a change in direction is needed but not because things aren’t working. And he’s going to make a lot of promises he can’t keep. No doubt this will include telling everyone how TREMENDOUSLY it is all going and how HUGE it is going to be! Good luck with that...
*Simon Shinerock is Chairman of Choices Estate Agents. For more information on Simon, see his blog or his LinkedIn profile.
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Indeed, spot on article Simon. I never understood what the guys at AM were trying to achieve or what problem they were trying to solve. It always felt to me like an idea conjured up by a group of old timers who wanted to turn the clocks back and pretend we were not moving to a digital world, in which we are well served by Rightmove, Zoopla, Google and others. This project was always doomed to failure and I suspect that you are right that now that AM has exhausted all the suckers within the industry willing to give them money and sign absurd contracts which damage their own businesses, that they will now be forced to find some new suckers outside the industry to give them more cash to pour down the drain. What an awful waste of £50m of my fellow industry members funds! The directors of this project should be ashamed of what they have done by dividing the industry, hurting their members with anti-competitive clauses, forcing members to stick with and pay them even though they don't want to and over-charging them 10x market value for a portal service. What kind of business survives by threatening its customers that if they wish to leave they will be sued? Not one that will be around for very long! Shame on them. As you rightly point out, they are a weak equivalent to others in the space in every way and that isn't going to change. The smart thing to do would be to call time on this failed vanity project but given the egos involved I doubt that will happen. Instead, they will no doubt find some external dumb money and spend the next 3 years wasting that too. Will be interesting to see if the directors and their respective businesses are willing to fund this venture significantly further...if not, then that in itself says a lot.
They are a disgrace to the industry, having lied and cheated their members. How can they hold their heads up.?
Their actions are shameful.
Just take a look at the characters on their board to see why lying and cheating comes pretty naturally! I look forward to seeing which institutional investors put money behind a business that operates by restricting and threatening their customers so I can make sure my pension is kept well away from them! .
Why not wait till the outcome of the meetings before making assumptions - what I'm sick of is all the finger pointing. No I'm not a board member just an agent who wanted to try and take control of my spiralling costs of the online marketing. Zoopla brought to my business a very poor return for my investment so OTM was a viable alternative. As much as the business model of RM is second to none, their need to charge eyewatering fees in an industry where their clients are cutting their own fees thereby putting their own businesses at risk seems ironic Why not give it a rest and let's put our heads down and go about trying to earn a living. Who is all the finger pointing helping at this point ? No wait surely not RM and Zoopla
One last thing ... remember the old saying 'divided you conquer - united you fall"
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