Has it still got the Rightmove?

Rightmove’s shares tanked last year on unconfirmed reports that Google was planning to enter the UK's property listings market. However, the share price has been recuperating since then, and now there is more wind is in its sales following news that Rightmove will be paying to use Google's mapping technology instead of its 'aboutmyplace' maps.

The trouble is, the deal does not prevent Google from deploying its might in the UK market. And there is a wider issue for Rightmove: what once was cutting edge - selling property ads online - now looks distinctly old hat. That's because there has been a proliferation of next-generation property websites that list properties free - much as Google's site would be expected to do - and generates income from offering additional services and outside advertising. One such example is Globrix, in which Daily Mail and General Trust has recently bought a 50 per cent stake.

So, if Rightmove's business model didn't exist, it is hard to imagine anyone inventing it now. That said, Rightmove has the huge benefit of first-mover advantage, which means it dominates house-hunting web traffic in the UK. So, if agents want their properties to be well seen, they still need to pay Rightmove.

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However, the undeniable benefit of the free-listing model to estate agents makes us wary of Rightmove's shares at their current price. Especially as it's easy to imagine rapid defections from Rightmove were free-to-list sites to gain traction. Then, if estate agents stop renewing their subscriptions, Rightmove’s content suffers, the site has less to offer visitors and traffic drops off, prompting further defections by advertisers. What’s more, the existence of nationwide chains of estate agents means such a downward spiral could rapidly take effect.

True, national estate agent chains, such as Countrywide and Connells, helped to found Rightmove, but these firms have now largely sold their equity stakes. If a big national chain dropped its advertising it could leave a noticeable hole in Rightmove's coverage of UK property listings. And, while Rightmove’s average spend per month per estate agent's office of £305 may not seem that large, for a national chain with several hundred offices the cost is significant, especially as house sales are still running at about half their normal rate.

The bear case is far from a fait accompli, though. Many City analysts are still huge fans of Rightmove and believe it can maintain its number one position for a long time. Despite a high level of market penetration, Rightmove has also found ways to keep growing strongly. Though, in the current environment, growth is harder to come by as few estate agencies are opening and fewer new houses are being built.

Another draw for the fans of Rightmove is its truly stunning cash generation. And to these accolades can be added the group’s success at trading through the downturn with the help of significant cost cutting. Analysts are also quick to point out that the cost of advertising on Rightmove is a fraction of what estate agents used to pay for print advertising. Futhermore, Google may be less of a threat than it has been billed as its recently-launched Australian service has yet to worry the competition.