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New site swoops for Zoopla clients

New property portal Onthemarket is taking market share from Zoopla for now, but it probably won't last.
February 19, 2015

What's new:

■ New competition from onthemarket.com

■ UK agency numbers down 21 per cent since September 2014

■ Monthly traffic up 14 per cent year on year

IC TIP: Hold at 186p

Estate agents have faced a tough call in recent weeks: should they leave one of the UK's two leading property listings websites? This is a central requirement of joining Onthemarket, the website of non-profit group Agents' Mutual, which launched in January with the promise of reducing agents' exposure to the escalating listing fees charged by Zoopla (ZPLA) and Rightmove (RMV).

The former has now revealed the extent of the hit it has taken: it lost 17 per cent of its UK agency clients in the year to January. A further 500 paying members served notice in January, meaning more than a fifth of the company's UK estate agents have now left since the September year-end. The blow was somewhat cushioned by growth in the number of new home developments and overseas agents it serves, so that total client numbers at the end of January were 11 per cent lower than last year.

Yet consumer traffic continues to grow. Average monthly visits during the period totalled 42.3m - up 14 per cent year on year - buoyed by a 42 per cent increase in mobile visits. In January, the site received a record 50.5m hits. By comparison, Onthemarket attracted just 14,000 hits a week immediately following its launch.

 

Canaccord Genuity says…

Hold. The drop-off in client numbers was in line with our expectations. Growth in new home developments and overseas agency clients, where Onthemarket has little impact, is encouraging. These areas typically generate higher average revenues per agent, so the impact on revenue growth should be disproportionate. We maintain our 200p target price, but given the share price appreciation in recent days we downgrade our recommendation from buy to hold.

 

UBS says…

Buy. The key barriers to entry for Onthemarket are its limited brand recognition and tiny hit count, which suggest the mutual will struggle to attract customers and generate strong leads for agents. In fact, there is already evidence of agents returning to Zoopla within three weeks of moving to Onthemarket. We believe the balance of probabilities is heavily skewed towards an upside case for Zoopla in which onthemarket.com tanks within two years and agents flood back to the incumbent. If this happens, and assuming pricing increases of just 12 per cent, the shares could be worth as much as 360p.