Any bid by Zoopla and OnTheMarket to displace Rightmove as the number one portal in the UK is at best expensive and at worst futile according to a leading analyst.
Mike DelPrete - former head of strategy at a New Zealand portal and a long-standing analyst of estate agencies in the UK and the US - says Rightmove is an example of a company with what he calls ‘network effects’
By this he means dominant online forces such as Rightmove, Facebook, eBay, and Craigslist are enjoy network effects - being ‘the’ place that people want to be seen, or want their products advertised.
“Even if a new entrant’s product is objectively better, a smaller audience of potential buyers and sellers means an inferior consumer proposition. Sellers want to advertise to the biggest audience possible, and buyers want the largest selection possible” he says in his latest report on the state of portals worldwide.
Specifically referring to the UK landscape he says: “For all the cyclical uproar aimed at Rightmove over its ever-increasing fees, its traffic dominance shows no signs of waning. It remains the undisputed best place to advertise properties for sale, with Millions More Buyers than its closest competition.”
DelPrete says all three major UK portals reported higher January traffic than the two previous years but while Zoopla’s and OTM’s percentage gains may sound impressive, they are from smaller bases than Rightmove’s.
“Rightmove’s traffic lead over its next closest rival remains strong and fundamentally unchanged over a number of years, despite several companies attempting to challenge its dominance” he says.
And he adds that even after Zoopla’s $3 billion acquisition by private equity firm Silver Lake in 2018, and OnTheMarket raising and spending tens of millions of pounds to compete, Rightmove’s traffic dominance remains intact.
And DelPrete writes: “The evidence suggests that it is nearly impossible for a runner-up portal to overtake the leader. In fact, there is no evidence that the all-important traffic leadership metric between the top two portals can be budged even a small amount.
“Which begs the question: Why are upstart portals attempting to displace leading portals? OnTheMarket launched in 2015 to challenge the duopoly of Rightmove and Zoopla in the UK. It was founded by a broad consortium of traditional real estate agencies who didn’t appreciate the market and pricing power enjoyed by the existing portals.”
The analyst says there are similar scenarios in Australia and the United States.
He sums up his analysis this way: “Attempting to compete directly with a leading portal is at best expensive, and at worst futile.”
Here's his report in full.
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David's can beat Goliath's, if they know where to aim.
That's actually quite funny and quite ironic too. Rightmove is firm wholly reliant on something it doesn't own and cannot readily replace; the property listings supplied by a customer base it's in a coercive relationship with.
It's £6b market cap is supported by just 5% of revenues from agents and builders without whose stock Rightmove does not exist. 95% of the company's value is fragile and vulnerable to someone coming along and doing a better job for less.
Of course Rightmove could try to buy such a competitor out of the market but if that competitor isn't for sale at any price, they can't.
Any attempt to buy into the supply chain to protect the Duopoly CMA created when it allowed Primelocation and Findaproperty to be rolled into ZPG will be met with an industry awareness that didn't exist in 2011.
Making Rightmove sticky to its customer base and retaining the BIG DATA that gives it it's value will probably only realistically be achieved by sacrificing the £300m revenue it takes from agents and builders.
It is a great brand, well known in the industry but sadly it is now a legacy list system that is reliant on its reputation for what it was rather than what it is and will become.
I think he's wrong. People will inly take so much. Younger buyers are moving towards social media. Agents just need to grow some balls.
Woolworths fell. Giants will fall eventually if their product doesn’t keep up with market changes. Agents need help with compliance in CPRs. Where is Rightmove helping agents with this? Say on leasehold, scraping data from Land Registry on lease terms? Or HMO licence data, all scrapeable? Or other risks such as dodgy cladding, working with block management asset-register software? There is so much data Rightmove could aggregate that could ease the home buying and selling process. Think taxing your car, when the DVLA already know you are insured with an MoT. Makes it easier, safer, cheaper.
Rightmove are not innovating and eventually, out-of-touch Goliaths die. MySpace? Friends Reunited? Rightmove could really help sales and letting agents comply with legislation, reducing risk and adding value for customers and agents. They can certainly afford some product development. Complacency is the biggest risk to their shareholders long term, because when eventually it tips, it’ll tip fast.
Why the focus on reach? When most agency is local.
Why pay to use a platform? When any agency can build their own.
We thought Instagram would be king of social media a few months back... Guess what? TikTok is slowly taking away their engagement.
RightMove have had a good run but they are just living of their brand, they are slowly losing that by the month. Zoopla will take over but I predict Zoopla will not hold the throne for long as there model is not much different.
True disruption will occur, agents are sick of paying for your yachts and fancy holidays - it's only a matter of time.
RightMove will not be #1 in 2030.
I agree with Mr S. Saunders above ( whose parents couldn't decide which way to spell Stewart/Stuart ?)
Irony is the agents have the power but not the collective balls....they must act together and quickly and create their own portal, It's not rocket surgery ! the public will follow the properties... thing is agents must look ahead, RM is not about to stand still and let their position/ market value decline ... Mr DelPrete is correct that RM has a "network effect" and it's the place vendors want to be seen and that is exactly the future opportunity for RM.
The future is easy to predict, it will be quicker, easier, cheaper and different to what we know now.
If you take a look at Block-Chain technology, digitalisation progress at the land registry and digital contracts it shows that the way we buy and sell property is changing fast.
Thanks to the agents RM are now big enough, rich enough and powerful enough to re-position their business model and cut out the middle man !
RM are already the biggest estate agent in the country they just get us to do all the donkey work !
The agents are both their biggest asset and their Achilles heel so if i was on the board i would want a plan B. so that if agents do grow some the business moves forward..... Such as....
Ditch the agents and go direct to the public, Buy someone (Purple Bricks) to develop a route and buy (My Home Move) to take control of conveyancing.
Remember in the future property sales won't take months, it could be days once a completed chain is in place. Base your thoughts and plans on not what you know now but on the digital future.
P.S. perhaps they own Purple Bricks already !
Public companies with few growth prospects but tremendous revenues often choose to buy back their own shares. Guess what Rightmove have been doing for years?
It’s only a matter of time.
Entirely wrong, RM ain’t no FB, the foundation’s of RM are being undermined as we speak, it won’t be long before the entire unedifying edifice comes tumbling down
"Sellers want to advertise to the widest possible audience"?
Sellers want the best achievable price and that is NOT dependent on widest audience.
It is this subtle misnomer that ensnares those agents that can't think for themselves.
Reach has very little to do with achieving a higher price, or attracting the right buyer. Spray and pray spring to mind.
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