It never rains but it pours. And that’s certainly been the case for the online estate agency sector in the last 12 months.
Monsoon season began on May 18 last year when Purplebricks, up until then the darling of the London stock market, began its decline from a share price that, whilst not its peak, valued the seeming disruptor at north of £1 billion.
By October, weekly declines in value saw £300 million of colour knocked out of it. By December, May’s £3.95 share price had evaporated to a paltry £1.39. Almost exactly two-thirds off.
As someone that at the time was trawling around the City’s fund-managers seeking support for an IPO, this boded about as well for me as Nigel Farage popping up as guest speaker at the Liberal Democrats’ Christmas party in a double act with Enoch Powell.
Suspicion over Purplebricks’s sustainability, its service levels, its sales success rate, its cost of acquisition, the integrity of its TrustPilot reviews and, of course, its mad, mad expansion into every corner of the globe were all raising concerns amongst the investment fraternity.
All of a sudden, Anthony Codling’s ‘a broken clock is correct twice a day’ prediction started to look accurate (his assessment of its medium-term share value was 94 pence, brave in that when he made the forecast its price was over £5.00).
Today, you can buy a Purplebricks share for just over £1.00, albeit that Neil Woodford would probably take a fair bit less than that for some more of his if you could do it quietly. How the mighty fall, eh?
That’s as maybe however the effect that this fall from grace has had on the rest of the online estate agency sector has become plain to see.
In late 2018 and since, investor sentiment disappeared as quickly as it appeared. Coupled with a growing ‘Deal or No Deal’ Brexit anxiety and a concern over the health of the property market, and, accordingly, the property sector itself, funds were about as likely to invest in online estate agencies (or any other for that matter) as they were as likely to bet on Theresa May becoming Britain’s longest ever serving Prime Minister. Not a great bet.
If Purplebricks was the earthquake, the resulting effect that occurred throughout the online agency sector was the tsunami – consuming and battering anything in its path for some time after the initial shock.
Famously, my own Emoov succumbed, running out of cash in December last year and taking Tepilo with it.
Just three months later, House Network was flattened followed by the submergence of easyProperty despite a lifeboat covering its tracks in the form of a ‘takeover’ by shareholder Tosca only for it to be thrown overboard to Evolve – a somewhat ironic brand name under the circumstances.
A number of bit players have also drowned albeit without much of a whimper given their relative insignificance in market share terms.
By Q1 this year it was clear that this so-called disruptive business model did not have the consumer legs that many of us, VCs included, had thought.
But what of those left standing?
The new Emoov and the new easyProperty, having been given the kiss of life, are barely visible in listing terms.
They are tiny and small enough to cling on to some random drift-wood here and there and to float along for a while.
Emoov in particular enjoys significant legacy SEO visibility as a consequence of the digital PR gained over many years by yours truly. They, by my reckoning, will survive albeit on a no fireworks, no explosions basis.
One must ask though, what is the point of a business if it is too small to create a decent lifestyle income for the bosses and/or is not scalable enough nor profitable enough to be of any exit value?
Notwithstanding all of that, what of the ugly sisters to Purplebricks’ Cinderella in the form of Housesimple and YOPA?
YOPA this week revealed that it is on the look-out for another CEO. Ben Poynter is leaving to ‘pursue other interests’ and which I suspect can be translated to ‘is leaving because the ship is going down’.
YOPA has been quiet this year. Barely any above the line marketing and no listing or revenue growth to talk of, this outcome being kryptonite to investors and hence LSL has slashed the value of its holding in YOPA twice and has refused to follow on in the last two funding rounds. Ouch. And rumours of redundancies abound.
Uncomfortably, a rumoured £75m raise became a virtually meaningless £16m cash-grab but, important to note, from purely existing investors only.
To add injury to insult, founders Andrew Barclay and Daniel Attia have jumped or been pushed out of the door too, the latter replaced by Countrywide veteran Grenville Turner albeit not a man renowned for his digital prowess.
The equivalent of Jamie Oliver enlisting the Galloping Gourmet to save his restaurant chain, perhaps. To extend the cooking analogy, YOPA are toast. It’s just a matter of time.
And so to Drizella, the ugliest of the two sisters but certainly not the fattest. Housesimple are to estate agency what meths is to alcoholics. A cheap substitute.
And I say cheap but what I mean is, ‘free’. They are for nothing. They are zero. They are yours to do with as you please and bear no consideration at all, so to speak.
Housesimple are the veritable race to the bottom, through the bottom and out the other side. Plumbing the depths of value integrity as would-be plankton on the sea-bed of the industry only sucked up by blasé bottom feeders that skulk the murky depths of expectation.
A business model based upon nothing will amount to nothing. Believe me, cheap was not enough to ensure survival. So free is beyond the pale and will only end in drowning. House Simple’s latest ‘commission adjustment’ has so affected a number of its agents that they are jumping ship and is, as with YOPA, a sign that the slippery slope is well and truly being slidden upon.
The saving grace for House Simple? A quick and dirty acquisition by Purplebricks to save face and that Martin Hughes of Tosca, shareholder in both, will no doubt soon orchestrate (at an eye watering discount) in order to consolidate the sector and to dominate the 5% to 10% market share available - this despite 15 years of the online project and over £250m having been thrown at it. Ouch again.
All whilst YOPA withers on the vine and dies of natural causes soon, I suspect.
Remember that easyProperty funeral that Rob Ellice led back in 2014? Now that’s what I call proper irony.
*Russell Quirk is Co-Founder of Properganda PR and Investor Director at Keller Williams (Essex)