In history, there have been many great triumvirates (Latin, triumviratus, ‘three men’). The First Great Triumvirate emerged in the Ancient Roman Empire, three great strategists and politicians — Julius Caesar, Pompey, and Crassus. Another great triumvirate (or ‘Troika’, in Russian) emerged in the Soviet Union: Stalin, Kamenev, and Zinoviev. In almost all of the triumvirates in history, there was an initial agreement, followed by a struggle, until one emerged as the most powerful victor. So how does this relate to property portals?
Now, we’ve reached a new pinnacle, a time of an even more powerful Triumvirate — the three great property portals. Who will emerge victorious and sit on the gleaming golden throne as Emperor of Property Search domination? Can there only be one winner, or will a treaty be found before the world of property is shaken forever?
We will analyse each of the property portals to gauge whether their strategy to become King of the property portals could work.
Certainly the most powerful and wealthy member of the Portal Triumvirate. Rightmove currently dominates the property portal industry. They have two thirds of the current property portal traffic, with average monthly visits of 120m, making them one of the most visited websites in the UK. Out of the 3 portals, they not only have the most traffic, but also the longest time on-site, showing that their content is the most engaging for consumers. In terms of technology, their ‘Optimiser’ package has become an increasingly popular tool for agents looking to improve their property exposure and lead-generation. This tool’s growing importance to Rightmove has largely been overlooked by many — it now represents 50% of agency growth and 12% of agency revenue.
However, the big question to ask — have Rightmove become too comfortable in their poll position? Their growth has been slow and steady over the last few years, with revenue increasing 83% between December 2012 and December 2016. Their growth strategy has always been focused on organically building a customer audience.
During a similar period, Zoopla’s revenue has increased by 630%. Of course, Zoopla was far newer in 2012 and began at a much lower figure relative to Rightmove, but, still, that is some very fast growth.
Will Rightmove’s next move be the right move?
While Zoopla has used this capital to acquire and invest in businesses, Rightmove has not done much with theirs other than reward shareholders. Rightmove enjoy a very, very respectable operating profit margin of 70% — much higher than Zoopla’s 25% margin — so it must be sitting on sizeable capital reserves. One has to wonder what their next step will be — we think there may be an acquisition or big product release soon.
The distant second, but the one with the most aggressive strategy — is Zoopla coming to claim the throne from Rightmove? Some commentators believe that the gulf is too wide, but the case of REA Group’s Italian portal, Casa, being over-taken by its number two player, Immobiliare, shows that it can be executed with the right strategy in mind. If we look at share price as an indicator, then Zoopla has been closing the gap recently.
It is possible that Zoopla has been inspired by this very occurrence on the other side of Europe. Zoopla has had a busy few years, with acquisitions of other companies across the property process. USwitch, Hometrack, PSG, and ExpertAgent have been some large acquisitions made by Zoopla, at a combined valuation of roughly £400 million, and we have no reason to believe that their appetite for growth via acquisition has been satisfied. In addition, Zoopla has also invested in several high-growth proptech start-ups, such as Trussle, Landbay, PropertyDetective, and Fixflo, which could bring them some tidy new income and data streams for minimal capital investment.
Can Zoopla build an end-to-end property solution?
Their strategy for property portals domination is to control the entire end-to-end process, not just property search. Zoopla has already integrated various acquisitions and investments into its search portal; uSwitch is clearly linked to every property, while users can generate a property report from Property Detective instantly.
With the acquisitions of PSG, ExpertAgent, and TechnicWeb, Zoopla has now entered the estate agency services and software market. Not only does this give Zoopla new, diversified streams of income from businesses that complement its existing offerings, but it enables Zoopla to gather huge amounts of data from various different touch points in the property process. Zoopla will be able to tailor a huge range of packages for agents, while Rightmove does not have the operational capacity to offer this.
Of course, its acquisitive nature could also be a weakness. Studies show that the M&A failure rate tends to be around 80%, so Zoopla will have a lot of integration risks to resolve across a lot of different businesses. If Zoopla can successfully integrate their new businesses into the newfound ZPG body, then Rightmove may be forced into making a response.
Without doubt the weakest of the property portal based on traffic, but also the youngest at only 2 years old, having been founded in January 2015. Created by agents, for agents, perhaps this is the ‘man of the people’ of the portal world? They were established by some of the UK’s leading estate agencies and only list properties that are represented by high-street agencies with a bricks & mortar presence (that means no to you, online agents). In addition, they incentivise the agents to sign up to their portal services since they are modelled as an ‘Agents’ Mutual’, which shares a part of the profits with its partners.
Simply too late to the party?
Perhaps they can rally up the very people that supply the portals — estate agents — and gradually increase their market share? The biggest hurdle OneTheMarket has to overcome is that it was late to the party. Rightmove and Zoopla dominate SEO, which is an integral part of being successful property portals. It is unlikely that OneTheMarket can compete with the other two portals while offering the same properties.
The fact that OnTheMarket was created to protect traditional agents may also put it at risk of ignoring the increasing market share of the online agents. Some estimates put their future share as high as 20% of the entire agency market by 2022. Recent reports have commented that agents have been jumping ship from the portal as it simply wasn’t bringing them sufficient leads, while tying them into limiting contracts. Becoming a property site with a definitive niche may be a possible strategy for it to garner some SEO gravitas.
So, what next for property portals?
2017 is an interesting year for the Portal Triumvirate. Zoopla’s aggressive acquisitions in 2016 may be forcing Rightmove’s hand into making a move, whether it be an acquisition or a large product release. Meanwhile, OnTheMarket will need to solidify its foundations by improving its offering to estate agents, especially its SEO and lead-gen. The ‘Agents’ Mutual’ business model is something that should be built upon, rather than being a limitation.