Homsters CEO Andrew Olejnik told this year’s Property Portal Watch Conference in Bangkok the western classifieds model won’t work in emerging markets so he came up with a different approach.
He’s disrupting the market by challenging the assumption that the traditional pay per listing system is good and we should be speeding up the growth of emerging markets so as to replicate it.
Olejnik, whose background is in venture capital rather than real estate, co founded the Homsters property technology company with applied mathematician Maria Renn.
The two self funded the startup, which along with seed capital and revenue from their digital real estate marketing business is financially viable into the future Olejnik asserts.
With clients in Russia, Spain, the Ukraine and Dubai the marketing venture contributed to the capital required to build the Homsters platform which launched in Kazakhstan earlier in Q1 and Ho Chi Minh city, Vietnam in February 2016.
The dedicated real estate marketing company also gave Olejnik and Renn entry into the board rooms of the developers around the world.
“We asked them questions to understand the way they think, because they’re the wholesalers in the equation," he explains.
“When we enter a market we go straight to the wholesalers. If we do that well the the agents follow because they want to be where the wholesalers are.”
Olejnik says he’s been travelling around emerging markets his whole life, but the choice of the two locations was made using highly methodical rationale.
“I don’t believe you should set up in your home country just because it’s where you live and you speak the language,” Olejnik told delegates.
“If you bring in the right product you just need a translator and the market will get it, so the numbers should decide.”
Following through with that logic Olejnik and Renn ran 50 parameters through a global market sizing model of 50 countries to figure out where their model would work the best.
They then ran interviews in the shortlisted markets and were most impressed by the interesting nature of and opportunity within both Kazakhstan and Vietnam.
“The markets are super fragmented which means classifieds are being butchered and they have to service 30,000 agents who can’t pay anything,” Olejnik says.
He adds when he was in banking he thought it was the most inefficient industry ripe with opportunity. That was until he tried to buy property.
“I realized the real estate industry is the most inefficient but also the biggest which creates an even bigger opportunity,” he says.
As part of this process, Olejnik quickly came to question the traditional classifieds pay per listing model prevalent in the real estate portal industry.
“The solution to the pain of buying real estate should be classifieds, but it isn’t,” he says.
“Classifieds simply offer a buyer access to a large data base and there’s no one qualified to answer questions or solve problems, especially in the emerging markets.
"By definition classifieds should be structured at the top of MLSs so classified brokers and agencies can promote their business.
“But in emerging markets qualified brokers don’t exist in the same way they do in established markets like America. More importantly they don’t have exclusivity over the content which means they’re never going to pay you to promote it."
In addition Olejnik says the source of the problem is the pay per listing model which favours the seller.
“If only one side is paying and you’re promoting them to buyers you’re not a marketplace you’re an advertising platform," he argues..
Olejnik couldn’t see a valid reason for continuing to force the classifieds model in his chosen markets.
“Why would you invest a lot in infrastructure that at the end of the day will hold you hostage? Even in the established markets portals are reliant on brokers.
“Here’s a market with no rules whatsoever. It’s an opportunity."
Olejnik and Renn have built a a new model where the portal goes “straight for the pie” in terms of broker commissions rather than relying on a structure that may “stand between them and the pie”.
They went for performance marketing, which Olejnik maintains is the future of real estate.
“We developed a way for brokers and agents to pay per value. We offer best practice marketing and we carry the risk. The advertisers only pay us when we get results.
“This is true value for everyone. Once you offer that value you can start making demands. You can provide social capital or trust, which leads to enormous value for investors and later translates into equity value.
"We still offer agencies digital marketing, help close sales for a percentage or provide other services to make sure value is realized."