Will There Be Any Agent-Controlled Property Portals Left in Ten Years?

November 17, 2023
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"Wow. Agents really missed the boat, didn't they?"

That was my reaction when I first plotted the graphs for our report on real estate portal ownership earlier this year. Of the 900 real estate marketplaces we looked at, only 17 (2.3%) count agent groups or industry associations as major stakeholders.

And that number is shrinking as agents around the world look set to give up more control of the shop window...

The majority agent-owned British portal OnTheMarket is about to be gobbled up by the U.S. real estate data giant CoStar in a £100 million deal and this week we learned that the agent shareholders of Dutch portal funda are set to vote on allowing private equity firm General Atlantic to join them.

Maybe this sounds a little alarmist.

CoStar would no doubt tell me that backing agents' interests is in its DNA and even in its name. Funda is only allowing General Atlantic to acquire a maximum 29.4% interest and the press release announcing the move was effusive about the "careful, confidential and professionally supervised process" that selected GA as a bidder.

These ownership changes do seem to be part of a trend though. There is the obvious example of Realtor.com in the U.S. which was taken over by Rupert Murdoch's News Corp in 2014 but there are plenty of other cases of agents giving up control of portals.

The Australian challenger RealEstateView was founded in 2001 by regional agent groups and was recently taken over by portal magnates Anthony Catalano and Alex Waislitz. Leading Swedish portal Hemnet, which has been raking in the profits lately, was set up by agents before being sold to private equity firms in 2016. Even Rightmove, the bete noir of British agents, was founded in 2000 by agencies.

Most of the real estate portals that agents still have a meaningful stake in are 'also rans'. Some seem to have been set up just to provide competition and price regulation against dominant market leaders, even if they don't want to admit it in an interview.

Agent Bakced Real Estate Portals 1

So why have agents around the world given up their interests in real estate portals?

The answer seems to be about money. It takes a lot of capital to create a market-leading portal brand and if agents manage to do that, the investment can't just stop there.

Realtor.ca is the traffic leader among real estate websites in Canada's highly regional market. The portal is fully owned by the Canadian Real Estate Association (CREA) and is one of very few around the world that does not monetise listings at all. Leads are provided to agent members free of charge with no advertising of any kind allowed on the site.

While that's great for members it also means that when competitors come along with a big marketing budget, Realtor.ca doesn't just have a war chest ready with which to respond.

Although the network effects of leading portal brands are notoriously difficult to break down, SEO moats don't last forever and both Zillow and CoStar have been sniffing around the Canadian market. That's why, according to a report from Inman.com, the CREA is engaged in talks to spin off Realtor.ca to attract outside investment in a move reminiscent of the NAR selling off Realtor.com in the United States.

Agent-owned real estate portals may have an easy job marketing their services to agents but mostly they have struggled with the expensive, specialist tasks of building brand and traffic.

French number three player Bien'ici was in the news recently bucking that trend and claiming to have gained an extra 10% market share following the controversy around FSBO listings on its rivals. That growth though must be fuelled by a levy imposed on the members of its agent association owner, La Fédération Nationale De L'immobilier (FNAIM).

In February 2021 members coughed up €23 million for Bien'ici's development and they'll probably get another letter through the door sometime soon if they want to keep that market share against the likes of Adevinta-backed Leboncoin and AVIV Group-owned SeLoger.

How much longer will agents keep stumping up the increasing sums of cash needed to maintain their portal?

An agent association that unanimously agrees to put their money up and collectively take action on something for a prolonged period is surely the exception rather than the norm. The U.S. National Association of Realtors is a collection of more than 1.5 million individuals which sold off its portal in 2014 and is currently reeling from scandal, lawsuits and division. In the UK, even the apoplectic outrage among agents that spawned the SayNoToRightmove campaign in 2020 turned to division and apathy within a year.

Selling homes is very much a results business. Agents are usually concerned with what's happening now, not what might happen in the market in the future. That's why taking the payday from a CoStar or a General Atlantic now and not having to worry about funding a portal's marketing campaign or product development roadmap looks so appealing.

There's also the question of conflicting interests at play here.

In August the South African Competition Commission released a bombshell report which imposed several eye-catching conditions on the country's two leading real estate portals. One stipulated that big national agencies should be made to divest their shareholdings in the Private Property portal.

The commission reasoned that Private Property's relationship with large national brokerages led to favourable contracts which in turn meant stifled competition and a barrier to entry for smaller agencies. Similar accusations have been levelled unofficially against many agent-backed portals around the world — the big corporate players get mates' rates while small independents pay full price.

Although most countries' competition authorities aren't likely to stop agents from owning portals any time soon (agents in many countries would probably like their local competition authorities to be a bit more interventionist rather than less), the question of how much of a stake agents will continue to have in portals remains.

As the prize gets bigger so does the competition and so does the amount of money needed to build and maintain a market leader. While it may still be viable for agents to control market-leading portals in relatively small markets such as the Netherlands and Denmark in ten years, the sheer amount of profit on offer makes portals in large, developed markets incredibly attractive acquisition targets.

At the Property Portal Watch conference CoStar's CEO, Andy Florance talked about the European real estate portal market like a man about to embark on a shopping spree rather than a one-off. He also implied that portals owned by private equity funds tended to be overvalued with the implication perhaps being that those that are owned by agents are not.

There is a kind of Godwin's law about any online discussion among real estate agents. The longer the conversation, the more likely someone is to drop a variation of the immortal line: "Well if us agents don't like the portal fees, maybe we should be the ones running the portals."

In ten years, agents will probably still be saying it. It will just seem even more naive than it does now. Like a typecast actor, agents are just too good at playing the role of customer in the great portal game.

November 17, 2023
Since March 2020 Edmund's job has been to read about, write about, collect data on, analyse and generally know about real estate marketplaces and the companies that run them. Before that he worked at the aggregator Mitula Group (which became Lifull Connect) for five years.

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