The subject of industry owned property portals seems to be popular at this time, so I decided it warranted an opinion piece or two. Let me start the first of these articles by sharing my opinion as to why the current wave of interest, whilst well intentioned is not well focused or likely to succeed. All it is likely to do is to distract the attention away from the core service that real estate agents should be addressing for their clients and focus it on their suppliers, not in my opinion a smart business move.
In a later opinion piece I propose to share my thoughts as to how the real estate industry could achieve a position which may well exercise some leverage in their relationship with these leading industry portals in a way that goes beyond just wanting to replicate what they do.
Back to the issue of why, what is going on at this time is wrong and misguided.
I was amused by the tweet of well know UK property commentator Henry Prior, I interpreted it as a somewhat cynical view of what is a major proposal.
Just as the industry was digesting the news of Agent’s Mutual proposal to challenge the supremacy of the leading property portals we get the announcement by Nethouseprices of their plans to launch an industry owned portal. They are more bullish about timing citing the view that they will be up and running within the coming months rather the vague coming-next-year offer from Agents Mutual. Timing is key, but it is not everything.
Leaving aside the logic of two competing industry portals warring between themselves whilst also trying to topple the massive incumbents, who to be honest, will be mildly amused to see this as a minor skirmish. The key discussion I would like to have is around the logic and potential for an industry owned portal to become a credible and viable option in today’s market.
Let me start by saying that I hear the argument loud and clear, from the collective voices of real estate agents in the UK and interestingly enough in Australia as well where the same cry can be heard “let’s boycott these monopolistic portals because they are just charging too much”.
I spent 6 years championing the cause of the true industry owned portal of Realestate.co.nz in New Zealand as a challenging #2 to what I often referred to as the “rapacious profit motives of the media owned competitor” (in the NZ case the then Fairfax media owned Trade Me). I can tell you that despite what I thought was a compelling proposition for an industry owned portal: 98% of the industry content, a true industry ownership, coupled with a flat and non-discounted monthly fee of just NZ$200 (US$159) per month per office not increased for 5 years. Despite all this I still had to literally fight every day of those first 4 years to stop agencies unsubscribing and trying to leverage every deal they could using the competitor as the threat.
Interestingly it was not until we operated in a much more commercial model of focusing on premium advertising for both listings and agents did we engage and see greater loyalty from our customers.
So I can tell you from first hand experience, words are cheap and even if you establish a comprehensive portal and charge a low fee don’t for a minute think it will be easy building and then retaining loyalty. The very nature of real estate is engrained in self-employed businesses whose heart and every living, breathing reflex, is to the first thought of how it will impact on my business, and my bottom line rather the very laudable principle of ‘for the good of the industry’.
So having laid that out as a platform which a UK industry owned portal must accept, let’s look at the points these collectives of agencies raise in support of an industry owned portal.
They exercise a collective disgust at the fees being charged, and by how much those fees have risen over the years. It is a valid argument, but only in as much as the increases have been steep, but only steep as a percentage off a very low base. Five or ten years ago the cost of subscribing to these portals was small as compared to the massive budgets expended on print media – portals had to demonstrate value in traffic and leads and invest to secure the eyeballs of the home shoppers – the clients of their customers. Now that the leads flow in as a consequence of online all but replaced print media, it is time for the industry to lay to rest the print expenditure and recognise the per-lead value from the web and the significant cost savings it delivers as compared to 10 or more years ago when it was the media barons of the print media the real estate industry was attacking at the time.
The industry believes that they can simply build a portal and “they will come” – after all a website is just a website and how hard can it be to attract an audience if you have great content? Well the fact is content is king, but just as ingredients are critical to make a syrupy cola soda – you don’t make Coca-Cola or Pepsi out of sugar and flavouring alone and especially not overnight. Consumer brand allegiance is built over time and costs money. The industry may not like it, but the self same real estate agents who are championing the new industry owned portal have spent the past decade supporting and promoting the one they now want to topple.
The tactic and mantra I often hear is “we have the listings, and we should decide on which website to feature them” – sorry no! Real estate agents don’t own the listings and they (if they value their professionalism) should appreciate that their first duty in business is to serve their customers, not wage war on suppliers. Home owners engage real estate agents to sell their homes, a key part of selling a home is marketing and nowadays that is online, to suggest that these listings of their clients should be placed on websites to the exclusion of the leading operators is potentially doing a gross disservice to their clients.
There was a time back in the dawn of the industrial era when Henry Ford saw the potential to build a car for the masses and he set about pioneering the concept of the production line. At the same time he asked himself why should I buy pre-cut timber when I can make my own and whilst I am at it why not own the forests. This backward integration became prevalent as conglomerates rules the corporate battlefields for most of the 20th century. Those conglomerates have long gone replaced by nimble “just-in-time” manufacturers who rather than applying backward integration, outsource to specialists. For Boeing, it designs the planes and then bolts together major modules from outsourced manufacturers to make their airliners. In the case of auto manufacturers equally where image is critical their core skill is entirely design in the case of Porsche. The lesson to the real estate industry is to focus on the added value services to drive the customer experience, improve efficiency and profitability, not by trying to squeeze suppliers. Smarter companies work with suppliers to tailor the solution for mutual benefit.
The initiative to build a competitor to Rightmove, Zoopla in the UK or in Australia the long held view to compete with Realestate.com.au is in my view driven by the very public view of the market cap of these publicly listed companies. I am certain there is more than a little degree of envy in their minds as they look at the collective value measured in the billions of dollars and ask – how did we contribute to these companies success and yet we don’t own even 0.01% of the company and they still want us to keep paying more? The answer is sadly because ideas are cheap and implementation takes guts, determination and risk. People might argue the same about Facebook or LinkedIn in respect of the fact that you and I create the very content that makes these online communities so vast and so effective as a communication tool, yet they want to charge us to make use of their services, so it is with real estate portals, they saw the potential more than a decade ago, they executed ruthlessly to optimize the opportunity and that is why they are where they are. You can’t undo that or believe you can easily and quickly attain that position in 5 years let alone 1 year or without many millions of dollars.