Are Things Bad for Rightmove?
September 9, 2008 by Simon Baker
Three interesting pieces of information have come to light in the last couple of weeks concerning rightmove.co.uk.
- rightmove.co.uk reported that it lost 1,300 agents in the first have of the year but offset this loss by signing up 800 new agents.
- A survey conducted by Estate Agency Today said 75% of agents would not renew with rightmove.co.uk and would move to the free sites. (Click here for full article)
- Finally, an article in the Telegraph (Click here for full article) reveals that Rightmove is one of the top 10 shorted stocks with more than GBP 50m staked on the shares continuing to slide.
The question is … does this really mean that Rightmove is in trouble or will they ride through the storm and profitably remain in front?
Well on the surface, these seem like startling facts and figures and we should all be scurrying off to sell our Rightmove shares. However, a little more thought about the situation of agents and the strength of rightmove.co.uk probably reduces the severity of the situation.
Firstly, for an agent the most important thing in tough times is leads and when you look at the traffic to rightmove.co.uk, you know that they continue to dominate the UK market with more visitors than any other site (Click here for related article) - therefore an agent is likely to pay something and get significantly more leads than paying nothing and receiving much less leads.
Secondly, i often hear the argument about the price of advertising on rightmove.co.uk. Well the reality is that online advertising of property accounted for only GBP 75m out of a total of GBP 700m spent on property advertising. Given that online generated the majority of the leads, why would an agent sacrifice a strong lead generation tool to continue to pay for less effective media. The reality is that other media will suffer before the online space.
Thirdly, given rightmove.co.uk’s position as market leader, it is likely that agents who use more than one portal will give up the other portals that they have to pay for before they give up rightmove.co.uk. They may in parallel try the free portals however they are unlikely to replace rightmove.co.uk as the main generator of leads for the agency.
Fourthly, rightmove.co.uk will be affected by an increase in the number of agents leaving the market however they should be able to partially off set any loss through new agencies entering the market and signing up, some pricing power (they have pushed through a hefty price increase this year), and the increase in revenues from the letting market and the new homes markets.
Finally, given the cost base that rightmove.co.uk has at the moment, margins should be able to be maintained, even when there is a decrease in the growth in revenues, by a greater focus on cost reduction.
Overall, while there is some hype around the potential impact of the market on Rightmove, the bottom line is that it is unlikely to be as significant as projected by some pundits. The real impact may be on findaproperty.co.uk, propertyfinder.com and primelocation.com.
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It´s also very interesting to think in a three year period when the real estate sector back again.. Then Rightmove would be a much stronger leader than now because it would have benefit of being “the last cost to cancel” for many agents, this means a lot of growth against the secondary players.
This would depend in my opinion in the way that rightmove manages his high cost structure during the storm. But a big ship would battle the waves better.
Instead the best free portals would have the chance to become the new secondbest portals after the storm.
The worse thing now is to be a high cost number 2 or 3 in the market<
[...] personal blog with more frequency and also started a global property analysis blog. For the best, here is his take on Rightmove (leading site in the UK) and all the bad news that has been priced into the stock. I completely [...]
The Rightmove business model is attracting a great deal of discussion lately judging by the various blogs. The charging model was fine when the property market was buoyant. Now estate agents are looking to cut back on expenses, high cost Property Portals may be included on the cut back list. The internet as we all know is highly effective for the marketing of property. Rightmove have established themselves as a market leader - they know it - and for this reason it appears they are being rigid on their charging model. The concept of one big website for the majority of Estate Agents is great for buyers but I question if this is the best solution for the viability of Estate Agents in general. If there is one big property website, the law of economics will question the need for so many Estate Agents in every UK town and city. A choice is obviously good for the consumer, but are Estate Agents really shooting themselves in the foot by heavily promoting Rightmove by way of Rightmove Promotional material in their windows and online/newspaper advertising?