Agents’ Mutual (oops, that name might need to change…read on) has been touting its recent legal victory and is about to embark on a 20-meeting trip around the country to brief its members on its ‘big plans’ for the future. But the problem is that its legal woes are far from over and its big plans will likely involve papering over all the broken promises and failed objectives of the past 3 years and simply making a new set of promises that are even less believable.
So, with Ian Springett about to embark on this cross country tour, I thought it might be worth speculating on the purpose of the tour and what might be next for AM…
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...