Takeovers and makeovers

During the final months of 2023, while the public watched Rishi Sunak battle immigration, politicians make fools of themselves in celebrity jungles and the stupefying boredom of Christmas TV adverts jingled on, the property industry was entertained by a renaissance of two lost causes. Or to put it less politely, the final months of 2023 saw two of the estate agent world’s most controversial businesses roil and thrash around in what many believe to be their death throws.

The two organisations, of course, are Purplebricks and OnTheMarket. Purplebricks revealed a relaunch on Boxing Day, having already promised to sell homes for free rather than their previous flat fee of £999. This approach, most traditional agents assume, is founded on the belief (held among those inhabiting owner Strike’s HQ, clearly) that there is a sizeable percentage of UK home vendors who would leap at the chance of selling their home for free or much cheaper than a traditional agent charging 1.5%. Most sensible people I talk to point out that while this proved true for around 10% of vendors in the case of Purplebricks during its peak, for the other 90%, it wasn’t.

I struggle to see how a free model can gain any larger market share.

So why offer your services for free? Strike and now Purplebricks believes a gratis offer will generate enough referral revenue from lenders and conveyancers to make for a viable and hopefully volume business.

Service cut to the bone

The trouble is, to achieve this you have to cut your service down to the bone and, while many vendors grumble about traditional agent’s service, they often discover online-only agents are either not much better on average and, in individual cases, worse. And whatever online agents say about high street branches, many vendors like a ‘local’ person in a local office who they feel has a connection to them when they are selling their biggest asset.

Purplebricks spent some £100m or more trying to persuade the public that high street agents were ‘commisery’ and by contrast they saved vendors money. I am struggling to see how the ‘free’ model can gain any larger market share than it already has – and by the way, according to TwentyCI, it’s shrinking, not growing.

Talking of market share, much excitement has been expressed by agents that OnTheMarket, armed with tens of millions of CoStar pounds to market itself to the public, can take on the Rightmove/Zoopla ‘duopoly’. I fear the yahooing by some people is down to the large cheques they’ll get from CoStar now that the sale has gone through. And good luck to them.

But you don’t have to be Richard Branson to predict that, on a good day, it’s going to be an uphill battle whatever the war chest. OTM, after many very troubled years under Springett, just couldn’t get the cut-through with agents and had to resort to old-fashioned stocks-and-shares enticements to sign up enough to gain more listings market share.

While Rightmove’s share price did at one point dip before Christmas by 2% on the CoStar takeover news, there are too many corporate corpses already on the battlefield for level-headed people to think this effort will come to much more than that. The new owners of OTM disagree, saying: “The current market leader has grown complacent focusing on margin over innovation, and pricing ahead of value.

“The level of shareholder support we received is a major endorsement of our plans to invest in OnTheMarket.”

Advertising agencies will be rubbing their hands at the prospect of pitching for the £46.5 million OnTheMarket is to spend on marketing this year, but will it shift the dial? My experience while working at PrimeLocation is that City portal backers underestimate the public’s laziness and how persuading them to use a very similar service to the one they already trust and use – i.e. Rightmove and Zoopla – is a huge task.

OTM will have to offer a single and strong point of difference compared to the other portals that makes moving home easier, quicker or cheaper for the public. Otherwise, what’s the point of its existence? CoStar has hinted that it will be doing this, so let’s see. But the new OTM will also have to bribe its existing and former agents to stay/return, but what with? It’s now a private company without equity to distribute.

This battle of wills and money is going to be the fireworks display of the year and I enjoy watching the fizz and rumble. Let’s see where we are at the end of year and what shape Purplebricks and OnTheMarket are in. Maybe I and the ‘naysayers’ will be proved wrong.