As always seems to be the case with Purplebricks, the hybrid agency has had a good week...and a bad one.
Undeniably impressive was its announcement that it secured new investment of £125m - some to buy shares from existing management but most to go to further expansion in the US, helping it enter unspecified new markets and the rest to fund technological innovation and expand Purplebricks’ service offering.
Less impressive, of course, was its scattergun blaming of the market, the weather and assorted other factors for its under-performance in recent months in terms of securing instructions. Somehow the profits warning failed to blame the company itself despite its public relations battering over the absence of completed sales info.
However, more interesting for debate now is what this week’s investment news means for Purplebricks in the future. Its plans for development now look rather more open and far less predictable than just a few days ago.
This is what I mean.
The investment by Axel Springer is provocative, in the best sense of the word, because it is unexpected: until now, Axel Springer’s main European property investments have been in the portals Immowelt (Germany’s number two portal) and SeLoger (a leading French portal).
So what are we to make of Axel Springer now controlling around 11 per cent of Purplebricks? I think there are three options.
1. The Rightmove option: Is Axel Springer involved because Purplebricks is in fact set to become a portal, as some have predicted? It is unusual for an investor already doing well from portals in Europe (made successful by traditional agents paying fees) to help a ‘disruptor’ that threatens traditional agents in the UK.
Analysts have suggested that Purplebricks is uniquely positioned in terms of size, ambition and scope to expand its listings by taking those from traditional agencies and online rivals, and simply becoming a cheaper-fees Rightmove.
2. The ZPG option: This is to diversify, with core income from listings (either in its current role as a hybrid agent or expanding to become a portal) but with growing income from non-listings, too.
This would explain Purplebricks’ desire for a ‘lifetime relationship’ with consumers. No details have been released but with Purplebricks likely to have few returning customers in the long-term, it needs another revenue stream to sustain itself - especially if transaction numbers in the wider market remain low. So whether it is through acquiring businesses (like ZPG) or offering additional services to sellers, buyers, landlords and renters, it may go in the direction of diversification.
3. The Purplebricks option: That is, the option we thought it was taking before this week’s news - that it was simply going to use yet more investment funding to become bigger, and thus winning (by some margin) the race to be the largest survivor when online consolidation begins in earnest in the near future.
The only problem is, Purplebricks could have taken this option without this week’s news. It could have raised more than £125m on the stock market without the need to involve a third party like Axel Springer, which comes with property baggage in the form of those European portals.
So Purplebricks almost certainly wants more than ‘simple’ expansion in the UK, US and elsewhere. It wants something else, too, that Springer can attract. Is it expansion into Europe, or something brand new?
Of course there is no answer to the question about which way Purplebricks will go: the essence of this company is its unpredictability. Which is why it wins so many headlines, and drives the rest of the industry apoplectic. Don’t choke on your Easter egg, but Purplebricks clearly has a long way to go yet.
But just which way?
*Editor of Estate Agent Today and Letting Agent Today, Graham can be found tweeting all things property @PropertyJourn