Portal monopolies and a broken record
Lately I cringe every time I read articles like these complaining about portal monopolies, how portals can’t do this or that, or prices that are too high:
Growing unease over Property24's tenant recruitment service - Property Professional
MAIN IMAGE: JP Farinha, CEO Property24; Tony Clarke, MD Rawson Property Group; Andrew Sadomba, principal Y-Rent…
We are seeing the same complaints every year with no action plan or vision on how things should work or what prices are deemed fair. Industry seems stuck…like an old vinyl record.
Don’t get me wrong, I understand the frustration around high prices and click-leads. Portals I believe, can be sustainable with subscription fees of under R1000/office fees (unless they have investors to please).
But take a step back in time with Google trends and see how SA’s dominant portal not only opened the lead to other portals, but also to traditional agent brands. A clear shift started happening in 2013/4 where Property24 gained traction and Private Property started to lose traction. This was at a time when Property24 launched a much improved website and started driving SEO and pay-per-click SEM hard. It was the perfect time for industry to respond but at that time portal pricing was not a serious issue, so I guess no one was too stressed.
Looking at the USA, you will see a similiar graph for Zillow:
Private Property struggled with the FSBO model and switched to an agent inclusive portal around 2009 (Entegral was key to make this happen with our syndication platform). Ironically both Property24 and Private Property are now pushing their FSBO models hard with millions in revenue on the table.
The move from part of the industry and print newspaper group Caxton to buy Private Property was done in 2018 in response to Property24 trying to buy the challenger portal in 2016. The portal was then later sold to Cognition Holdings in a share exchange for their current 50.01% majority stake. 30 Real estate companies kept their 13% share with OOBA and Betterbond (who also owns some franchise groups), keeping 15% each. To date there is no portal that is majority industry owned.
In my opinion, this was done too late as Property24 already had so much momentum. Now you not only had to match their dollar-for-dollar advertising budget but had to spend significantly more to win consumers over and grow your market share. This becomes quite difficult to justify when your subscription fees are lower than your competitors and agents simply don’t have spare cash left. High pricing can also be a strategic move to keep your competitors at a distance. The move from Property24 to launch their tenant recruitment service (or any other service) brings additional marketing funds to the table. Small marginal gains.
In a tech driven industry you need smart people fuelled by lean company structures to make quick decisions, and drive change. The industry organisation’s REBOSA’s decision to exclusively back Private Property and the view that no other portal has any chance, continuous to have such a negative impact on improving competition within the portal industry. It has to change, and very fast.
Not a unique South African problem
Browse the highly acclaimed Inman site and you will see similiar stories focused on Zillow:
Gary Keller on Zillow: 'This is a fight'
The Keller Williams founder said at the KW Family Reunion that real estate agents are going to determine the fate of…
If you write a check to Zillow, you’re voting for a Zillow world ~ Gary Keller
Don't blame Zillow, blame your leaders
Zillow harnessed the power of the internet and delivered tangible value to agents while the legacy industry stood by…
When it came to the digitization of real estate, executives often failed to grasp the worries and future needs of the working agent. And they hesitated in taking bold steps to act on their behalf. Yes, some agents had to be led into the future, but good ones were already there, waiting for their broker-owners to deliver the tech goods. When they didn’t, others stepped in and filled the void.
Zillow harnessed the power of the internet and delivered tangible value to agents while the legacy industry stood by and let it unfold. Now, Zillow has become the industry’s octopus, its tentacles reaching everywhere. ~ Brad Inman
The problem most agents now face is that 80%+ of online leads originate from the dominant portal. With high prices it has forced many to make challenger portals who charge too much, an optional expense. In the process they lose valuable listing data.
This is why we see so many free portals. How else are you going to get agents to send you their listings if you have nothing to keep buyers on your site? I’ve had plenty of discussions with portal partners over the years including Barrie from Gumtree, Josh from ImmoAfrica, Carolyn from Property360, Julius from PropertyMatcher and Craig from BidOrBuy to see how we can improve the exposure for agents. These are all genuinely awesome people with good intensions wanting to make things work. But a part of the market is reluctant to give their full support, due to their vested interest in other structures and portals. Why would the biggest franchise companies support other portals when they are owned by a bond originator who also owns 15% of Private Property? You need to look after your investment.
On that point, the Property24 guys are nice people too ;) I’ve had some great coffee discussions with JP over the years. These are smart focussed people.
You can change your portal colours, give away houses or launch treasure hunts, the consumer will decide which portal they see as the single source of information. Data is the new oil and listings do matter.
Different focus = missed opportunities
Portals work on winning consumer eyeballs to drive leads. Those with investors need to focus on ROI so launching disruptive new services that brings them closer to the transaction is inevitable. In the US, Zillow is a perfect example: they bought a mortgage business, deal tracking, rental management and recently a viewing platform. Heck, they even buy houses at the click of a button. I can guarantee most portal CEO’s are eyeballing Zillow for ideas.
On the other side of the fence we have real estate franchises more focused on selling franchise licenses (2/3 of revenue easily from this) and the average agency trying to get the best agents on board. Real estate is effectively a recruitment business and why we are seeing companies like Compass buying out agents to gain market share. Lately we are seeing a focus (or rush?) from international franchises building their own CRM systems or buying out smaller tech companies. Traditional real estate companies also face an onslaught from tech driven startups including those that focus on fixed fees and salaried agents. Agents have their own internal wars to fight, let alone dive into the portal space to develop a challenger portal.
Portals and agents have a different focus on revenue generation but what we are seeing is portals slowly moving into the traditional agent space and getting closer to the transaction, while agents are keeping in their space having to deal with industry competition and selling houses. The portal that have agent investment is simply boxed in to stay in their lane, which is futile. It gives the dominant portal freedom to challenge the status quo and set their own prices.
Where do you draw the line?
The role of the portal in the property transaction is growing. Both portal and agent provide an essential service to consumers.
A property portal is a vital element for buyers to research areas or start a search through its democratization of listing and sales data. How much of the commission pie it deserves, is really up to consumers to decide in terms of the value it offers. What services shouldn’t it offer before it “oversteps the line” and what prices would be fair to charge to keep agents happy?
The role between agent and portal is becoming more blurred with overlapping responsibilities. Think back 25 years where agents were the sole gate keepers of listing and sales data and how things have changed since then.
Is it game over?
It’s not game over, but it is maybe time to make some serious collective and individual decisions on what is best for the industry going forward. We have to realize that the fate of the industry will not be decided by what agents demand from portals, but what consumers want and love. We should consider some points in this process:
- Right now, agents still have the upper hand when it comes to pricing a home and the art of negotiating a sale. Service is still marketing and why we are seeing more and more referral success stories from clients.
- Track your buyer lead sources, and know where best to spend your money. With more competition, you need to run a super efficient business.
- We need more transparency to move the industry forward. Agents also need to be more transparent on their sales track records to consumers as part of the sales pitch to help eliminate the use of ‘random estate agents’ and overpriced properties sitting on the market for months.
- Don’t hold onto the past, open yourself to change. Try new things in your business, including working online, and making use of virtual tours and viewings.
- Focus on your own brand and marketing your own website in social media, not that of a portal. Hyperlocal marketing is NB too.
- Support all portals where you can. I cannot stress this enough. It’s not a magic bullet but it is the 1st step to help unlock more competition in the marketplace.
- Should industry establish a 100% agent owned portal where members decide the fees and the direction? Sure, you probably won’t get market share fast, but you will provide something tangible that gives you leverage to move away from that broken record problem and actively work on something. Be competitive and take up the challenge to blur the line between agent and portal from your side.
Join my on The Real Deal forum to discuss portal monopolies or share your views here.