It’s been a hectic week for the team at Propertyfinder with the REA Group and News International announcing a full review and the possible closure of the business, and the management team at Propertyfinder putting together a MBO.
A cursory review of the REA Group accounts reveals that there is significant red-ink next to the Propertyfinder business. However, deeper analysis reveals that the Propertyfinder business has strong traffic, solid revenues, a strong reputation and a good management team in place. Therefore the question that arises is “Is Propertyfinder actually worth saving?”
In this, our third article in the Propertyfinder series, we look at Propertyfinder and its performance in the UK market.
When looking at the viability of any property portal, the critical factors for success include: the traffic to the site, the volume of paying advertisers and listings, the revenue model and its sustainability, and the cost base.
Traffic to the Site
For the last 3 years, Propertyfinder.com has consistently rated as either the 2nd or 3rd most visited property portal in the UK.
According to ComScore, in April Propertyfinder was wedged between the two DMGT owned sites FindAProperty and Primelocation. Its other sites, hotproperty.co.uk and ukpropertyshop.co.uk, are ranked 14th and 9th in the market.
|Find A Property||1,378|
|Homes And Property||375|
|Find A New Home||145|
Established in 1995, Propertyfinder was one of the first portals in the UK. Over the years it has had a number of owners (including Asserta, VC firm Arts Alliance, and recently News International/REA Group) and each has invested heavily in the brand. Establishing a brand in any market takes times, effort, and money. The Propertyfinder brand has a place in the psyche of the UK property hunter and is therefore a valuable and hard to replicate asset.
Positioning with Agents
Around 5,500 agents currently use Propertyfinder. This is up ~9% from the end of December 2008 when there were 5,068 agents on the site. (Source: REA Group Analyst Presentation) This is a great effort by the sales team especially since the number of agents in the market has severely contracted.
In addition, there appears to be strong support from the major accounts with well known names such as Connells, Spicerhaart Group, Your Move, Savills, Hamptons, John D Wood, Fine & Country, advertising on the site.
Recently a UK agent wrote on Property Portal Watch that “ have been with Propertyfinder for at least 6 years now, and out of all the portals they have been the most helpful and passionate about what they do. You know what, it’s not easy working with us estate agents, and they seem to really care and have always been so helpful. I will continue to back them and if there is a management buyout, the better they will get I am sure. The more UK they get, the more I will back them.” This shows that there may be good underlying support for the Propertyfinder business from within the estate agency community.
When compared with the other subscription sites, Propertyfinder appears to have a similar number of agents as FindAProperty and both have more agents than PrimeLocation. What is interesting is that there is a small amount of overlap in agents between Propertyfinder and FindAProperty.
Establishing a trusted brand with advertisers takes time and the Propertyfinder team appears to have created this. For new entrants to the already crowded market, this is hard to replicate and therefore the position Propertyfinder has created with agents is a valuable asset.
Revenue Model and Sustainability
Revenues are estimated to be around £7m per annum. While this is about 1/10th of Rightmove’s, it is probably close to the revenue being generated by FindAProperty, and significantly better than the portals chasing non-traditional models including Globrix, Propertyindex and Zoopla.
Propertyfinder’s main source of revenue is from Agents purchasing subscriptions to list as many properties as they like. It is estimated that the ARPA (average revenue per agent) is approximately £90 per month and thought to be just below FindAProperty.
According to Bob North’s page on Estate Agency News, the cost to an agent for a lead from Propertyfinder is significantly less than the cost of a lead from FindAProperty, PrimeLocation and Rightmove.
This revenue stream should be sustainable given the customer contracts, the long term relationship with these customers, the low cost per lead created, and their ability to continue to deliver leads.
Costs Associated with Delivering the Model
For any site to be competitive, they need to operate at a low cost model with a clear path to profitability. News International and the REA Group have been investing in Propertyfinder and therefore running it at a loss. From looking at the REA Group’s annual accounts, it appears that they have been spending around £12m per annum in running the business.
For Propertyfinder to be worth saving, they will need to run at a profit and bring these costs down to around £5m per annum. This should be achievable through a reduction in the workforce, a focus on online marketing, the move to a low cost platform, and the removal of the corporate overhead related to being part of the REA Group and reporting to News International.
On the surface, Propertyfinder has been losing money over the last few years in the chase to be the clear number two in the market. The investment by News International and the REA Group has been significant with mixed results.
However, when you look at the underlying business, you can see that Propertyfinder has a number of assets that are hard to replicate and continue to make it a valuable player in the UK market. It has strong traffic, a billing relationship with 5,500 (perhaps 50% of the market) estate agents, a good brand with consumers and agents, and solid revenues.
For the business to remain viable, it needs to slash costs and run with a mindset of being a low cost, profitable #3 in the market. They cannot take on the might of Rightmove or DMGT directly but if they take the approach of a Ryan Air or Southwest, rather than a BA or United, they should carve out a profitable niche for themselves. To do this, they need to operate on £5m or less in operating costs.
So, on the balance of the facts, Propertyfinder is definitely worth saving and has the potential to flourish once out of the corporate environment of the REA Group and News International.