In part 1 of The Agent Strikes Back we saw that agent owned and operated sites OnTheMarket in the UK and Squiiz in Australia have either launched or are about to launch. The question now is a simple one ... will they succeed?
What Does Success Look Like
Firstly we need to define what success looks like for these sites? At one extreme, success could be defined as knocking off the current market leader while at the other extreme, it could be defined as simply forcing the current leaders (and number 2 players) to reduce their prices.
From my perspective, success needs to be more than just forcing the market leaders to drop their prices. These two new sites are businesses with shareholders. As such, they need to operate profitably (or at least at a break even level) and they must deliver results for their end customer - not the agent, but the home seller and the landlord. What we know is that in a mature market (such as Australia and the UK), you need to be the leader or in #2 place to operate either profitably or break even (and deliver results).
In short, Squiiz needs to knock off Domain and OnTheMarket needs to knock off Zoopla. Can they do it?
Will They Succeed?
To believe that they will succeed, we need to believe a few things.
They Need to Have as Many Listings as the Current #2 Site (Preferably More)
When consumers visit a property portal, first and foremost they want to see listings. For either OnTheMarket or Squiiz to perform better than Zoopla and Domain (respectively), they will need to have at least the same amount of content as these two sites. Without having this same level of content, the consumer will simply look at other sites (or the vertical search sites such as Mitula) to get a full view of the market.
OnTheMarket is taking the aggressive approach of requiring its members to only have one of Zoopla or Rightmove as a second site. Most agents are likely to select Rightmove and therefore Zoopla is likely to have a drop in content.
Of course, Zoopla is not going to lie down and take this without a fight. It is likely that they will increase their marketing efforts and target home sellers with a message about "you are not on Zoopla and you are missing out on quality buyers for your house". They may even take the hyper aggressive approach, as we did in Australia in 2002/3, and write directly to the home sellers encouraging them to talk to their agents to put their listings on the Zoopla site. In some cases, Zoopla could even go direct to the home seller - clearly not what the industry wants.
In the Australian market, Squiiz is not taking such an aggressive approach and therefore is likely to, at best, have the same content as Domain but is more likely to have a subset of the listings on Domain and realestate.com.au.
They Need to Drive More Traffic than the Current #2 Site
This is the hardest for both OnTheMarket and Squiiz to achieve. Both players are up against marketing juggernauts - realestate.com.au and Rightmove are currently out of reach while overtaking Domain and Zoopla will be very challenging.
Low cost traffic will be hard to source for OnTheMarket and Squiiz. SEO is challenging as not only do they need to compete with the incumbents, the also need to compete with the vertical search players to get to the top of "page 1". As we saw in Part 1, Squiiz is already fumbling the ball on SEO.
SEM is also very costly and it is almost impossible to buy enough traffic to compete. They can source traffic from vertical search sites such as Mitula to help close the gap. However other traffic drivers such as PR, email alerts etc will take time to build.
Therefore both will be reliant on very costly mainstream marketing to build a brand and drive traffic to the sites.
The other challenge for Squiiz is the double "i" in its name. Too many people will misspell this and driving traffic and awareness will be even more challenging.
Therefore, even with a "large" marketing campaign, Squiiz and OnTheMarket are unlikely to make much of a dent in the current traffic numbers of Zoopla and Domain. The most at risk is Zoopla if their content dwindles and OnTheMarket has deep enough pockets (and we are talking tens of millions of pounds) to market themselves.
They Need to Provide Engagement with the Site Than the Current #2 Site
All the market leaders do a very good job at engaging the consumer when they visit the site. They use a combination of listings, market information and reports to provide the user with a holistic experience.
The new sites have commented that they will only be listing services and not providing additional information. While this is understandable, that approach is more early 2000's than what market leading portals do today. One just needs to look at Zillow and Trulia in the US to see the additional information they provide their consumers so that they can make the right decision when enquiring about a listing.
They Need to be Able to Fund the Growth of the Business
This is probably the biggest issue. Both Squiiz and OnTheMarket want to keep prices low for their customers and they have also stated that there will not be premium products and they will not take display advertising. The problem with this approach is that these alternative sources of revenue are also large revenue streams for the portals - especially in Australia.
The models adopted by the new players will leave them dramatically exposed in fighting any prolonged marketing war. They both may have sufficient funds for an initial market campaign however they are up against sites that have invested tens (if not hundreds) of millions in marketing and brand building over 10+ years. Their brands are household names and dislodging them will be very challenging.
At the end of the day OnTheMarket and Squiiz have entered the market. They are based around the core belief that property portals have been profiting at the expense of agents for too long and the industry has to take back "control" of the data and the listings. However the industry seems to have forgotten that is it a service provider or market maker between sellers and buyers of property. The agents don't own the data, at best they are custodians of the data for the period of the transaction. The agent should be doing everything in its power to get the seller the best price for their house. Does pulling the listing off Zoopla to make sure it is on a low trafficked OnTheMarket make sense? Perhaps from the agent perspective but not from the home seller's perspective. There is lies the rub and perhaps the most important question - what business are the estate agents really in? The market making industry or the advertising industry?
Simon Baker is the former CEO and MD of the REA Group, the former Chairman of the iProperty Group and a serial investor in Property Portals around the world. He is also the founder of Property Portal Watch.
Join us at the Property Portal Watch Conference in NYC on the 26th and 27th January. Topics such as this and many more will be discussed in detail.