The following email has been sent to the Australian's real estate industry from the CEO of Domain, Antony Catalano. It is a clear message to Australian real estate agents that they should not be spending money on the REA Group as they are just paying more money for the same results. This is clearly designed to put the pressure on the new CEO, Tracey Fellows, who has been in the job for just over a week.
Here is the email in full.
Domain CEO Antony Catalano calls on real estate agents to unplug REA
If Australia's real estate industry had any doubts that it is fuelling its own demise it need look no further than the reality behind REA's latest round of price hikes.
Increases of up to 60% are again being thrust upon the industry in what can only be described as an extortionate money grab by an organisation that seems to think that agents individually are powerless to stop them.
Traditionally media companies enter an annual rate negotiation with their clients but REA is a law unto itself. It doesn't see the industry as its clients, nor does it treat them as such. It holds the industry in contempt.
REA will justify these latest increases on the basis of a supposedly bigger audience, yet clearance rates at auctions don't increase with their reported jump in audience. Advertisers spend money to sell more product, but the number of sales in the real estate market has no correlation to the audience size of REA. That means you are paying for more tyre kickers.
REA recently produced more of its lavish marketing material to show it has 23 million visits per month. That's an impressive number clearly designed to impress the real estate industry. But there are approximately 400,000 sales transactions a year and 600,000 rental transactions. In other words, REA says there are 276 million visits to their site a year for just 1 million transactions. This is a gross waste of every vendor's money, spending enormous sums to attract an unqualified, disinterested, irrelevant audience.
Alternatively, let's take their national audience across sales, rentals and commercial real estate of 3.3 million unique visitors a month. What they don't tell you, is how many of those visitors are your vendor, the next door neighbour, other family, friends - or you and your sales and support teams. The fact is that a large number of their unique visitors are not genuine buyers. Notwithstanding, they are charging your vendor for all those visitors. Not content charging you and your vendor to place an ad, they are now using you and your vendor as an audience number to justify their ridiculous pricing.
By comparison, the cost for a retailer to advertise their product in a banner ad on the home page of realestate.com.au costs $25 per thousand impressions. To put that into context, a $7,000 Premiere package would need to attract 280,000 views to justify the price.
Can REA really claim there are 280,000 buyers for any particular house? How do they justify charging such an inflated rate to agents who are the core of their business?
Make no mistake though, the grab for a 100% share of the advertising spend - with its very serious implications for every agent brand in the country - is just the start of a plan articulated by former CEO Greg Ellis to disintermediate real estate agents and grab a bigger share of agent revenue. They are certainly making good on that promise by:
Make no mistake, REA represents an existential threat to every real estate agent in this country. Once they have laid claim to the entire marketing budget, their plan to grow revenue even further in the next two years is to encroach on agent commissions through the introduction of paid vendor leads.
Some of this might make vague sense if REA had 100% of the audience, but it is a long way from that position. For example in Sydney, Domain is a clear winner in many suburbs by agents and listings and across NSW, Domain has more agents than REA.
In Canberra the clear market leader is Allhomes, while Domain has more agents and listings than realestate.com.au. REIWA in Western Australia attracts a large audience, as does realestateview.com.au and onthehouse.com.au.
In partnership with agent groups in Melbourne, Domain and reviewproperty.com.au have proved they can generate as many leads at a fraction of the price of REA. So successful has this partnership been in Melbourne that Domain outsells REA's most expensive depth product Premiere by a factor of more than 2 to 1 in many suburbs. Domain and reviewproperty.com.au have also partnered in an equity model that rewards the industry.
So, there is an alternative - it's called Domain and we have a long history of being a proven industry partner.
At Domain, we understand the importance of a diverse marketing mix of boards, brochures, print, digital ads and data marketing to deliver the largest number of buyers and the best possible price for every property. We understand how important agent brands are to your listing capacity, and how quickly you will lose that identity in the world REA imagines.
The good news is that, having created Godzilla, agents and vendors can bring the monster to heel. Realestate.com.au is, after all, nothing more than a URL without your content.
So, in the best interest of your vendors, agents and a fair market, we would encourage you to stand up for vendors and for your industry and urge you not to sign any contract with REA.
The alternative is to work with Domain to create a long-term, sustainable industry partnership. Domain is committed to keeping prices in check and working with the industry to drive better value for your customers.
Domain also makes one other promise - it will never aim to take a slice of your commissions and never seek to cut you out of the process.