There has been a lot of noise in the UK market about the launch of OnTheMarket (OTM) by AgentsMutual. The new site is polarizing the industry through its contentious approach of forcing agents to only advertise on only one other portal. The question is will this approach cement OTM as a leading portal in the UK market or will normal service eventually resume with Rightmove and Zoopla dominating.
I have been involved with property portals for 15 years, first as the CEO of the REA Group for 8 years then as an investor and advisor in portals around the world. During this time I have seen a number of attempts by industry players to take back control of online advertising. I have also had experience with the UK market having operated (as part of the REA Group) propertyfinder.co.uk for a number of years.
Based on this knowledge and experience here are my predictions for the short, medium and long-term future of OTM.
Short Term (First 6 Months)
In the short term OTM will get traction in the UK market. The combination of the “one other site” policy and a healthy marketing budget will see to this.
To advertise on OTM, an agent has to commit to only advertising on one other portal. This approach means that an agent has to drop its advertising on either Rightmove or Zoopla (as well as the other smaller players in the market).
The result of this policy has been swift with a number of agents indicating that they would cease advertising on either Rightmove or Zoopla at the end of their contracts.
Zoopla seems to be have been hit hardest with many agents indicating that they would come off this site. While Rightmove seems to have remained the site of choice reflecting its leadership position and its longevity in the market.
The impact has been toughest on Zoopla with its share price significantly down over the last 5 months from a 250p to around 150p.
Of course these companies are not going to take this policy lying down and have started to fight back. On the B2B advertising front both have released traffic updates showing all time high traffic to their sites in the first half of January. Rightmove claims its traffic is up 10% over the same time last year while Zoopla claims theirs is up 7.3%.
Zoopla has also commenced aggressively marketing itself to the consumer. Below is an example of a recent signboard promoting "Smart is knowing where to be seen when selling". This is a clear reference to agents cancelling their contracts.
Of course these marketing messages are to pre-empt the inevitable marketing campaign that will surround the OTM launch. It has been rumoured that a significant amount will be spent to promote the new site to the UK market.
Medium Term (6 to 18 Months)
In the medium term things will start to get a little tougher for OTM.
First and foremost, Zoopla (in particular) will fight hard to win back agents. They have significant funds to do this. They will probably use a combination of targeted discount pricing and consumer advertising to put significant pressure on the offices that have come off the site.
The messages to the consumers will clearly be around “not being seen by a large part of the UK home buyer market”. The message will be designed to get the home sellers to put pressure on the estate agents to advertise on Zoopla. They will force the agents to have to justify why they are not advertising on Zoopla and therefore not acting the in the best interests of the home seller.
The interesting discussion will come internally within agencies. The sales people (who do not own the agency or control the marketing operations) will have to be the front line for handling disgruntled home sellers. They will start to lose listings to agents who don’t advertise on OTM and thus start to see their commissions (if they are on them) reduce.
This occurred in Australia in the early to mid 2000’s when companies such as LJ Hooker and the industry backed realestateview.com.au actively persuaded their customers (the estate agencies) not to advertise on realestate.com.au (the REA Group owned market leader). The result was the agents lost listings, had reduced commissions and eventually relented and started advertising on realestate.com.au site.
I also believe that Zoopla could start a marketing campaign direct to home sellers that are not advertising on Zoopla. They could build a target list of houses not on their site, write letters to the home owners outlining that they are missing out on marketing their home to millions of home buyers and if they want to advertise on the Zoopla site, they just have to see their agent or they could even advertise directly on the Zoopla site (in parallel to using an OTM aligned agent).
As for OTM, they will have to raise money through either seeking external investment or through putting their prices up. They will need money to fund marketing.
I expect that the initial campaign will have limited long term benefits and OTM will be forced to continue to have a higher than anticipated marketing spend to build traffic numbers so they can generate leads for their advertisers.
The beneficiaries of this increased marketing spend will be Google, Mitula, and Nestoria, as they can drive relevant traffic quickly to the OTM site.
In the medium term, some agency will break away from OTM so they can use Rightmove and Zoopla. They will be either the big ones who negotiate long term low cost contracts (to their benefit) or the smaller ones seeking a point of differentiation.
There will also be a lot of agents marketing to home sellers directly trying to poach them and they will inadvertently do a lot of the "dirty work" for Zoopla in promoting Zoopla's cause.
Long Term (18 Months+)
In the long term normal service will start to resume. I expect that AgentsMutual will remove the “only one other portal” policy as a result of pressure from its advertisers.
Once this policy is removed, it is likely that agents will take up advertising on three sites as a minimum – Rightmove, Zoopla and OTM. This will ensure that listings don’t become a differentiator in the market and brand, brand awareness, and consumer experience will become important.
On this front, Rightmove and Zoopla are best placed. They have access to significantly more capital than AgentsMutual and will use it to ensure that they remain #1 and #2 in the market.
OTM will slot into #3 spot.
The interesting thing is that while the underlying reason for launching OTM has been to take back control and reduce the cost of online advertising to the agents. It is likely that in the long term, the costs will go up as some agents will be on 3 sites rather than 2. Clearly not all can afford this and the smaller and medium sized agencies could end up even worse off than they are today.
There are many examples of businesses that have failed because they didn’t listen to their customers. AgentsMutual is heading down the same path. Estate agency is a middleman, a broker between the buyer and the seller. As the middleman, they are rewarded with a commission on the transaction and are expected to do everything in their power to maximise the outcome for the seller.
In reality, failing to advertise on either Rightmove or Zoopla is not acting in the best interests of the home seller. While AgentsMutual can move the market in the short term, in the long term the customer (the home seller) will always right and normal service will be resumed.