Property advertising has changed dramatically in the past decade, and it's fair to say that online advertising through the Rightmove (RMV)/Zoopla (ZPLA) duopoly accounts for a bulk of the industry's £550m annual UK ad spend. However, a new portal called OnTheMarket launched in January this year in an attempt to break the stranglehold. Created through a consortium of estate agents known as Agents' Mutual, the non-profit set-up was devised in response to a steady increase in advertising rates imposed by the duopoly.
While the launch was a logical move, its timing was off because Rightmove and Zoopla had already established themselves with a majority of the 20,000 odd agents spread across the country. But the new portal's major flaw is that agents signing up to use the portal can only also advertise with either Zoopla or Rightmove, but not both.
Not surprisingly, this went down like a lead balloon. After signing up around a quarter of all agents, new subscriptions slowed to a trickle. Initially, Zoopla, being smaller and younger than Rightmove, suffered the most, with a majority of new sign-ups for Agents' Mutual coming from Zoopla. Rightmove's bigger toehold meant that agents already signed up were more reluctant to leave because Rightmove's site generated the most leads and the highest level of traffic. Ironically, Agents' Mutual's strategy is to charge higher rates for the first five years, and reduce them once break-even is achieved. In addition, marketing remains the key to pulling in more business. According to investment bank Berenberg, Agents' Mutual has around £8m to deploy on marketing in the first year, half of which has already gone on the advertising campaign at the time of the launch. Overall spending is likely to be higher than this, though, as independent estate agents using Agents' Mutual promote the brand. £8m is similar to what Rightmove spent last year, while Zoopla has spent around £20m, principally to boost brand awareness
Rightmove and Zoopla are likely to continue expanding, assuming the housing sector remains buoyant. Revenue is expected to gain further traction, as the migration away from print advertising continues. In 2007, 85 per cent of property advertising was in print; this is now closer to 50 per cent. A recent survey by Berenberg suggests that there could be a further £195m of revenue set to make the transition away from print.
The threat from OnTheMarket may prove to be less than feared, and certainly less than the threat from increased activity in online-only agents and developers to the traditional estate agent. Agents' Mutual does not allow applications from these operators, and currently only 2 per cent of Rightmove's listings belong to online-only agents. But without the physical cost of maintaining a string of outlets, agents operating exclusively online can offer substantially lower fees. Crucially, traditional estate agents charge around 1.5 per cent commission on a housing transaction, based on the selling price. Where online agents score is that they operate on a fixed fee, regardless of the house price. Business through online agents in the UK is still well behind other markets. In the US, French and German markets they account for more than 10 per cent of the market. It has to be said, though, that online agents don't offer the full range of services provided by traditional estate agents.
