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Portals market survey

publication date: Jul 30, 2009
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The property market is having a dreadful time and property portals have been no exception. Internet research company Comscore’s December 2008 figures showed portals’ traffic dropping 16 per cent year-on-year, compared to growth in overall web traffic of 11 per cent. Is it all up for property portals?

ChestermanCertainly there’s a lot of change happening in the market. Alex Chesterman, CEO of Zoopla (pictured right) says, “The market is being transformed – there is a shake-up happening.” Second generation portals, such as Nestoria, Globrix, and Zoopla, are taking an increasing share of traffic and moving up the rankings – though the ‘gorilla’, Rightmove, is still dominant. They’re growing fast – March showed Zoopla increasing traffic by 26 per cent month-on-month, with Nestoria and Globrix enjoying 15 and 18 per cent growth, against a market average of just nine per cent.

ZooplaBut meanwhile, somde of the other first generation portals – particularly fish4homes and the Trinity Mirror network – have been slipping. And the NAEA’s own site hasn’t made inroads; it’s still light on properties listed and hasn’t got to the top ten in terms of traffic. What’s particularly interesting is that many of the second generation portals are embracing new business models, rather than the monthly-subscription listings model used by Rightmove and others. For instance Zoopla has evolved a payper- lead model instead of fixed fees and 12-24 month contracts. The estate agent lists properties for free and only pays if a lead is generated.

“We give everything away for free, to a certain extent,” says Globrix CEO Dan Lee. He believes a portal needs a critical mass of properties for consumers to be interested in it, and the easiest way to get 100 per cent coverage is to list for free. Admittedly, he reckons at the moment he has 80-90 per cent of all properties for sale in the UK represented on the site. By listing them for free, Globrix saves the cost of a sales team.

GlobrixGlobrix is funded by providing special promotion services for agents and by advertising for ancillary services such as mortgages, conveyancing, insurance and house moving. Dan points out that Rightmove doesn’t do that, as it is constrained by its relationship with agents. It’s difficult to see what will threaten Rightmove. In addition to being number one in terms of web traffic, it’s also highly profitable. Dan Lee says, “being on Rightmove is a hygiene factor for the agent” – even if it didn’t get them business, the agent’s clients know the name and want to see their agent is on Rightmove. And he claims, “Rightmove’s business is overpriced; if it wasn’t they wouldn’t be making 52 per cent margins.”

Rightmove has also moved into the lettings business – it’s increasing the number of offices represented by 10 per cent to 3,500 since the start of 2008. That’s very much the trend for most UK portals, which – like many agents – expect the lettings market to be far more active than sales in the near future.

FindAPropertyBut it does look likely that there will be consolidation among some of the other portals. Some has already happened – 2008 saw Findaproperty merge with Primelocation, as well as Hot Property merging with Propertyfinder. June saw REA Group announce Propertyfinder is under review – it could be sold, or closed if a buyer isn’t found, as it has been lossmaking for some time.

Daniel Lee, CEO of Globrix, says the news is interesting. “They were number two or three, and it proves the first generation model isn’t necessarily sustainable.” He points out that if Propertyfinder has been driving traffic by pay-per-click marketing, it may have generated web traffic too expensively. “If you buy traffic in, you have to sell at a higher price to make a profit; it’s a kind of arbitrage really.”

He believes that over the next year, Propertyfinder won’t be alone. “There’ll be more closures and there will be smaller sites starting up and closing down.” Although there’s been significant price pressure in the market, leading portals don’t seem to have cut their rates. Digital Property Group has changed its fee structure to try to align rates more closely to the value delivered, taking into account the agent’s location and the number and average value of the properties listed. However some agents have said this increases their fees up to 20 per cent, though it is in others’ favour.

DellMartin Dell of Kyero, the Spanish property portal, says he’s been able to maintain prices too. “We’ve seen a lot of price pressure in the last couple of years,” he admits, “but our pitch is that we price for what we deliver.” He’s lost very few customers on price, though some have gone out of business. Most of the first generation of portals in the UK have now begun to expand into international property, though this still accounts for only a small proportion of their total business. Otherwise, the market is fragmented. For instance Kyero competes mainly against ThinkSpain, as well as UK portal Primelocation, but there are numerous smaller portals selling Spanish property to UK buyers. Idealista and Fotocasa are the biggest in Spain, but are hardly ever used by overseas buyers.

Kyero“There are a lot of also-rans,” Martin Dell says. “They’re making money. None of them are well funded; it’s just a programmer and a guy on the phone selling, so they can afford to be cheap.” The larger international portals, on the other hand, are now beginning to expand. Kyero is building portals in a number of other countries, though they will be separately branded. But lack of data is a problem in many countries, Martin Dell complains. “The American and UK sites are doing all the innovation; in overseas markets it’s down to a lack of data.”

Portals are increasing their functionality all the time. For instance, Alex Chesterman says, Zoopla has gone beyond listings to provide “a much wider experience”, looking at all properties, not just those that are for sale. That enables the site to attract a different audience, including owners checking the value of their property.

Other content is also being added, including community features that will enable consumers to contact professionals, and neighbourhood information. All this permanent content should help Zoopla rate high on search engines. One of the problems with the traditional listings model is that listings are temporary, so Google tends not to pick the data up. Kyero has a number of features such as pricing data and a ‘popularity’ score based on various criteria, such as the proportion of views to enquiries. These all add value to the bare bones of the listings. So does a weekly newsletter and articles on various topics. Content creation and search engine optimisation accounts for over two-thirds of Kyero’s cost base, a massive investment.

But after all, a large agent could theoretically introduce all these bells and whistles to its own coverage. When the first generation portals started, many agents had no web sites or very poor sites, so the portal had major advantages. Now, Dan Lee says, agents are beginning to understand how to do their own online marketing, with good sites and good search engine optimisation. Even so, he thinks agents benefit from using a portal.

But what can portals offer that agents can’t? Martin Dell believes portals can help offer impartiality and transparency, which is particularly important to buyers of overseas property. The advantage to the agent is that educated customers will create the best qualified leads, though he admits some agents still don’t like to use Kyero’s price guide.

“Asking an estate agent about value – he’s not the best man for the job!” Martin jokes. “With so much information available on the internet, the agent doesn’t set the price, it’s the market that sets the price.” He’s also proud that the Kyero newsletter tells the bald truth about what’s happening in the Spanish property market. “We’re not here to pitch, to sell; we’re impartial.” Agents will also find it difficult to compete with portals in terms of the sheer size of investment in technology and content. The top ten portals can outspend any agent, even the biggest. Dan Lee says “Lots of people underestimate how much money and time it takes to run a proper portal. It’s a million a year before you get out of bed.”

Portals live and breathe the internet, leaving agents to concentrate on selling properties. Besides, portals tend to dominate the search engine result pages. It’s difficult for an agent to get such good results on its own.

John NotleyMany of the newer portals get most of their traffic through SEO [search engine optimisation - making their sites and brands easily 'findable' by Google and Yahoo etc] and don’t run conventional advertising campaigns. However John Notley, sales director at Digital Property Group, says agents shouldn’t underestimate the importance of branding. “Brand searches are pretty significant,” he says. Users will often google the portal they want. To get an idea of the importance of portals, look at BrightSale’s figures. In November 2008, 28 per cent of its business came from direct searches, but 63 per cent from portals. Going it alone, BrightSale would lose two-thirds of its business. Portals greatly increase the size of an agent’s footprint on the internet, and increase its reach.

Alex Chesterman says, “An agent’s toolkit really needs to combine multiple routes to attract leads” both online and offline, including both portals and its own site. He points out that many users are faithful to just one portal, so that “if agents want to attract the widest possible audience, it makes sense to be on more than one portal.”

DPG’s Insight is another useful tool for agents, giving each agent a view of how their properties are doing on the site. John Notley says, “It hands agents a level of analysis that they haven’t had before. They no longer have to have a hunch about what’s the most popular type of property in their area – we can tell them.”

RightmoveAgents are becoming more selective, though. BrightSale has actually withdrawn from Rightmove; other agents have trimmed the number of portals they are spending on. Dan Lee says many agents are becoming more aware of the distinctions between different online presences. “They’re taking more control of where they put their properties, though they don’t want to be beholden to a single source.” Rightmove’s recent results showed the number of advertisers unchanged, and average spend per advertiser actually increasing. The largest agents – Halifax, Countrywide, Connells, and LSL – have all renewed their contracts. Some agents may be cutting their presence on third tier portals in order to focus on the most important sites.

But another reason for the buoyancy of Rightmove’s results is the overall swing from offline to online spending. Alex Chesterman says, “Agents are putting more online than they were historically. It’s the offline spend that has really taken a hit.” He thinks online marketing took a 25 per cent share of estate agents’ budgets before the recession, but it will take three-quarters of their marketing spend by the time we emerge from the downturn. There’s a good reason for this. Cost per lead is lower and the results are also more trackable and easier to manage. While print media cost per lead is around £50 according to some agents, figures from GCG Consulting show costs mainly in the region of £3 to £5. The second generation are even cheaper: £1 per lead at Zoopla and a big fat zero at Globrix.

It’s not surprising then that the value of property ads in local papers has halved, as shown in recent results from DMGT (Northcliffe) and Trinity Mirror. Dan Lee also points out local newspapers’ property web sites can often only show a couple of thousand users, “That’s not really worth anything,” he says. “You need the eyeballs.” Newspapers are trying to use digital to prop up print, but it may not work.

It’s an interesting time in the world of the portals. Not all will survive, that’s certain, but some will thrive. And as Martin Dell points out, “Agents just want leads.” Portals appear to be an increasingly good way of providing those leads, giving agents not just buyers, but vendors too.” As long as portals are value for money,” Martin says, “agents will continue to use them.”