“Closer to the transaction” is becoming the growth mantra for property portals in established markets. The reason is simple – there is far more value to be captured at the transaction level than at the advertising level. However, while selling properties is the most obvious way to capture transaction based revenues, it is the secondary transactions that are being aggressively pursued.
In any real estate transaction, there are primary and secondary revenues. The primary revenue stream is the commission attached to the sale of the property while secondary revenue streams come from mortgages, utility switching, moving services, storage services and insurance.
Moving into the primary transaction arena is problematic for portals in established markets, as this is the business of their advertising customers – the agents and the developers. Therefore, to leverage their brands and audience, portals are attacking these secondary revenue streams.
Domain in Australia has just announced a mortgage broking joint venture with online broker Lendi. This new venture is to be called Domain Loan Founder.
This is hot on the heels of the REA Group spending AUD 67 million to acquire a majority stake in mortgage broking franchise, Smartline, and entering a strategic mortgage broking partnership with the National Australia Bank. It is expected that this new financial services business for the REA Group will contribute AUD 26 million to AUD 30 million in revenues with a 30% EBITDA margin.
This is not their entry into the mortgage broking market. In 2005, the REA Group partnered with Ray White’s HomeLoan Market to create REA Home Loans. While achieving some success, this business was sold to the Ray White Group in 2007.
Mortgage broking in Australia is a AUD 2 billion per year business, according to Domain’s CEO Antony Catalano, the average commission on a mortgage worth AUD 5,000 – considerably higher than the AUD 1,200 Domain earns from advertising on each listing.
In the UK, Zoopla has also moved into the secondary transaction market with its acquisition of USwitch. This business monetises the utility switching market and now accounts for more than 50% of the total revenue of the Zoopla Property Group.
Idealista in Spain has also moved into the mortgage segment and is aggressively promoting its mortgage market on its listings.
The Mitula Group has been rolling out its “Closer to the Transaction” strategy which sees them working with property portals around the world driving secondary transaction revenues while sharing in the value created from these transactions.
Although secondary transactions are a clear growth option for established market portals, rolling them out is far from simple. It requires the development of new skills and capabilities (usually through acquisition) and a concerted effort by the portal to manage the traffic on its site to ensure that they leverage their existing assets to get the best outcome.
The next Property Portal Watch Conference will be held in Lisbon in early October. The key theme of this conference is “Getting Closer to the Transaction.” Click here to find out more.
Simon Baker is the former CEO and Managing Director of the REA Group, the former Chairman of the iProperty Group, and the current Chairman of the Mitula Group, Real Estate Investar and RESEM. He is also the founder of Property Portal Watch and a serial investor in the online classifieds industry.