If Rightmove fees had risen with house price inflation, it would now be charging branches just over £300 per month, rather than the average £967 it does.
The claim was made in a post on EYE yesterday by Robert May, which crunched some Rightmove numbers.
This was his original post:
“If you are paying more than £967 per office you are paying more than the average, you are subsidising your competition.
“How much more than your competition are you paying? Take your monthly subscription way from £1,934, that is how little one of your competition is paying for the same service you are!
“Take £236 away from what you are paying each month per office. The figure you end up with is how much profit you are paying to Rightmove each month.
“Divide £236 by what you are paying per branch and take that away from 1 to work out what your % profit to Rightmove is. An agent paying £1,300 per month is paying 82% profit not just (rolleyes) 76%.
“Take £236 away from the price you have calculated your competition is paying, that is their contribution to Rightmove’s profit.
“If you are paying £1,300, your competition is paying £634. They are contributing £398 profit compared with your £1,064 contribution. You pay 82% of the profits they pay 41%
“House price inflation since the crash in 2008 is 131%.
“If Rightmove had increased its average fee per agent in line with house prices their average subs would be £304 per office per month, giving a profit margin of 29% not 76%.”
EYE’s editor (we’re better with words than numbers) sought some clarification from May as to his sums.
First, the £967 quoted by May is the average rate per advertiser (ARPA) given by Rightmove in its interim report for the first six months of the year.
Readers should note that this is the average for both agents and new homes customers.
The figure compares with an average ARPA of £922 during 2017.
Rightmove said in its interim report that it anticipates this year’s ARPA to be around £80 higher than last year.
The additional explanation comes from May, who told us:
“If there are just two customers and the average is £967, the total,what the pair of them pay is 2x £967, and that equals £1,934.
“If one customer pays £1,000, the other pays £934. If one pays £1,500 the other pays £434.
“Taking off what one agent pays shows how much someone else is paying to balance up the their subs to £1,934.
“It is an over-simplification but makes the point.
“The £236 is 24% of the ARPA, the profit is 76% so the fixed costs are 24%
“The fixed costs do not change, so if someone is paying £967 and 76% is profit, £734.92 is profit.
“If someone is paying £1,500 take off the fixed costs of £236 and £1,264 is profit.
“An agent who is only paying £236 doesn’t contribute any profit, and all their subscription is paying for are fixed costs.”
“It is a very simple illustration to show how the numbers work against those agents least able to haggle.”
EYE has approached Rightmove for comment, including inviting a bylined article, so that we can give its side of the argument as to the price hikes.