Analyst: ‘Agents can’t do without Rightmove’

Rightmove has been backed to weather the cost of living crisis and a property market downturn.

Analysis by investment service Wealth Club, after the portal published its half-year results last week, highlighted the property website’s dominant market position an said agents “simply can’t do without it.”

Charlie Huggins, head of equities at Wealth Club, described Rightmove’s half-year results as decent and said that even if the housing market stalls, there are reasons to think the company could prove resilient.

Huggins added: “Rightmove’s revenues aren’t directly linked to the number of houses bought and sold, or even to house prices.

“Instead revenue comes from estate agents paying a fixed subscription to list all their properties on its site. As long the estate agent remains in business, they will continue to pay their Rightmove subscription.

“This doesn’t mean Rightmove is immune to any housing market travails. In a downturn, some customers may go out of business, as we saw during the financial crisis. Rightmove may also be forced to offer discounts to its customers when conditions get really bad, as it did during the pandemic.

“The reality though is that Rightmove’s exceptionally dominant market position means estate agents simply can’t do without it.”

With a market share of 88%, it’s the first place people go when looking for a house to buy or rent, Huggins said, adding: “Rightmove’s business model ought to be relatively well placed to deal with inflation. 

“It has considerable pricing power and the business model is highly scalable (after-all it’s basically a website with some tools layered on top). That translates to exceptionally high operating margins of around 76%, giving the group more ability to shoulder cost increases.

“If the housing market goes into a tailspin, Rightmove will feel it, but probably a lot less than estate agents and housebuilders. And if it doesn’t, the group looks well placed to continue growing. There are certainly worse positions to be in.” 

Rightmove revealed in its half-year report last week that revenue was up 9% annually to £12.8m and operating profit rose 6% to £121.3m.

Its average revenue per advertiser (ARPA) figure was up 11% annually to £1,290 per month.

Broken down by user, Rightmove posted record agency ARPA growth, up £132 or 12% to £1,262, while new homes ARPA growth was up 9% to £1,446 per development per month.

The ARPA figure is calculated as revenue from advertisers in a given month divided by the total number of advertisers during the month, measured as a monthly average over the six-month period.

Agency revenue increased overall by £12.6m year-on-year to £122.2m, according to the update.

Rightmove said it now has 16,116 agency branch customers and 2,818 new homes developments.