Last week I wrote a couple of articles about the rise of agent owned and operated sites in Australia and the UK. (Part 1 and Part 2) My summary view is that while these sites will have some short term impact of the incumbents, they are unlikely to have any long term impact on the local property portal industry structure. The core reason for this is that there is too much to lose for the current #1 and #2 in each market to just lay down and let someone else eat their lunch. They are run by smart operators who have built these businesses and know how compete quite aggressively. Alex Chesterman at Zoopla and Antony Catalano at Domain won't sit back - both have a reputation for entrepreneurship and aggressive business building. (Read part 2 for my summary thoughts)
The team over a Property Industry Eye ran a summary of the articles and generated significant comments around the story. The main thrust of these comments was that the OnTheMarket site would win and that Zoopla is losing agents quite fast (not sure if this is true) and would lose in the long run. I therefore thought it would be interesting to outline a strategy that Zoopla could adopt to compete against OnTheMarket.
First and foremost Zoopla can fight a battle and fight it hard. Their balance sheet (at end September 2014) had GBP 31 million in cash. This is in addition to the strong monthly cash flow the business is generating. So what do to with this?
If they are losing agents, then clearly it has to do something to get the listings back and advertised on the site. The more listings you have, the more reason someone has to visit the site and to generate a lead. On approach could be to discount to get an agent back advertising on the site. This is problematic as all agents would quickly work this out, come off the site and just sit back and wait for the call with a discounted offer. Long term it would just dampen the revenue streams and impact the overall share price.
Another, more preferable approach could be to offer the ability to vendors (and land lords) to advertise their homes directly on Zoopla for a fair, but high, fee. At the moment it appears that Zoopla is generating around GBP 6 per listing per month (1.1 million listings per month and GBP 80 m in revenue last year). Perhaps it could offer the consumer the ability to advertise directly at GBP 20 per month or they could go to their agent and get it cheaper. Clearly this would put pressure on the agents to justify to their customers why they are not advertising on Zoopla - especially when the cost per listing is so small and the commission for the sale is relatively large.
Of course this approach would have to be backed up by a marketing campaign around "Is your listing on Zoopla? Only GBP 20 per month or ask your agent for a better deal". This can be implemented on the site (they did have over 500 million visits in 2014) as well as in the media. They could even target the vendors of that agents who have not renewed directly through a good old fashioned direct mail campaign as the addresses are known!
All of these are possibilities. However as the Zoopla market cap is near GBP 1 billion, there is a lot to lose by doing nothing and letting OnTheMarket / Agents Mutual through the door. Time will tell however don't ever underestimate a portal under attack.