In 2016 the Financial Times released a report on the most profitable industries. Residential real estate came out on top, by quite a lot. With a prize for the winners so big, it's no wonder that new challenger property portals seem to spring up almost weekly in some markets. But just what kind of profit margins do property portals around the world operate with?
Having covered plenty of portal company Q1 results over the last few weeks here at Online Marketplaces, we have spent many hours trawling through company financials and we've built up enough data to compare some of the major names in real estate marketing around the world and answer a question that has long intrigued us: Which property portals are the most profitable?
Below is our profitability ranking of all the portal companies that publish their financials based on the latest available figures. Where possible we've tried to compare apples to apples, but not all the businesses on the list generate their revenue just through running property portals and not all of them break their revenue streams down accordingly in their reporting. The comparison is interesting nonetheless...
As we can see, Rightmove - long held up as the paragon of profitability - is sitting pretty at the top with profit margins over 68%, slightly down from its 2019 heights of 75%. Whether this impresses you or upsets you probably depends on which side of the real estate value chain you work on. The portal firm regularly ranks among the FTSE 100's and indeed the UK's most profitable businesses generating £249k of EBITDA for each of its 558 employees in 2020.
Just behind Rightmove are REA Group in Australia and Scout24 in Germany, two well-established leaders of mature markets with network effects so powerful that, according to Similarweb, their traffic is twice that of their nearest domestic competitors.
When looking down the list and exploring historical data the really interesting thing is that more and more property portals are catching up and getting closer to the profitability line on the graph below.
The likes of Frontier Digital Ventures portfolio portals Zameen in Pakistan and PropertyPro and MeQasa in West Africa as well as Indian companies 99acres and Square Yards have made some pretty big strides over the last few years when it comes to their bottom lines.
For these big portal companies with EBITDA margins over 30%, is it just a question of being a market leader in a mature housing market with big commissions for those who facilitate expensive transactions? Looking at the data for portal profitability crossed with GDP per Capita in their domestic markets there is indeed a big difference between portals in mature markets and those on the way up.
Clearly, the big money for property portals comes as the market they operate in matures, house prices go up, agents charge more for their services and portals are able to charge agents that bit more to advertise their wares.
Interactive version of this graph available here.
The one portal company that stands out throughout the analysis is Zillow. The undisputed market leader in a market where in 2020 the average house cost $389,000, around 6.3 million of them were sold and agents earned 5-6% every time. While many of the ingredients are there to push Zillow's EBITDA margins up to rival those of Rightmove, the situation is a bit more complex.
Zillow has made no bones about trying to get into every step of the transaction a feat which, for property portals that all started out as pure advertising businesses, is a process that requires skill, big pockets and, above all, patience. From its much talked-about iBuying adventure to some of its recent acquisitions, the company is not worried about who it upsets or how its margins compare to portals in other markets; it's shooting for the moon and may well be on another profitability plane to many of the other portal companies one day.
Disclaimer: The present analysis does not claim to be 100% accurate and is intended as a comparative evaluation of the property portals included. The purpose of the data presented is to analyse portals relative to one another and arrive at broad, industry-wide conclusions rather than assess any given entity in and of itself. All data is taken from publicly available quarterly and yearly financial data published by the companies mentioned in this analysis. GDP Per Capita data is as per IMF 2021 estimates taken from Wikipedia.