EasyProperty has spent millions of pounds to achieve “staggeringly small” revenue and is a lesson in “how not to build a business”.
The analysis comes from international proptech commentator Mike DelPrete, who says that easyProperty has raised just shy of £40m since is inception, making it one of the best funded online agency in the field, second only to Purplebricks.
He says: “What drew me to this story is the sheer amount of money raised and subsequently spent.
“According to its filings, easyProperty had a full year loss of £11.4m in 2016, having lost £6.8m the year before.
“And what did that money buy? A staggeringly small £874,000 in revenue for 2016.
“How did easyProperty manage to spend so much money and achieve such little market traction? It’s a crowded space, but there are a number of other players making significant gains.
“To me, this is a lesson in how not to build a business.”
He goes on: “What’s striking is not how much money easyProperty is spending but how little return it has for that spend.” The company had expected to be listing 4,000 to 5,000 properties each month by 2016, but “the reality is around 80 properties per month”.
DelPrete says that easyProperty is spending £12,000 to gain each listing. In contrast, Purplebricks is spending £1,000.
Furthermore, while Purplebricks is spend around £1 for every £1 in revenue, “easyProperty is spending £14 for every £1 in revenue. That’s an outrageously bad return on investment.”
The full article is on Property Portal Watch here
Separately, Anthony Payne of Lonres yesterday tweeted out a reminder of easyProperty’s ‘funeral march’ stunt through London in September 2015 – the funeral that was meant to be of traditional agents.
Payne pondered: “Reap what you sow. Is a loss of nearly £11m on turnover of less than £800k the death knell for easyProperty?”
Countrywide, LSL etc beware. If you are considering the online offering it is.very easy to P*** away large sums of money. Estate Agency is all about the quality and ability of the staff in the front line not the faceless number crunchers who now run all the big boys and think by saving money here and there is the answer, the answer my friend is selling more, and to sell more you have to have good staff, good staff cost money, spend the money on staff rather than a p****** contest
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The problem that online agents have is getting sufficient valuation enquiries to give the instruction volume required to make money from low fixed fees.
Unlike us high street agents they don’t have local brand awareness from offices, boards, referrals etc., etc.
Prior to PB online agents almost exclusively advertised for valuations online and the volume of searchers specifically looking for ‘online estate agents’ is too insignificant for any company to build the instruction volume required.
PB have had to spend millions on TV to create sufficient valuation interest and without that level of spend other online agents will be marginalised further and doomed to failure, especially high spending low revenue companies like easyProperty who will quickly lose investor interest quicker than they have lost their cash.
As for PB, my guess is that if they stopped advertising for month their valuation enquiries would collapse because, again, they don’t have sufficient brand awareness to maintain any volume level of enquiries without constant advertising.
Having said that, PB’s current £1 for £1 performance is impressive and indicates a high level of conversion from enquiry to instruction, a metric that is critical when spending so much on advertising.
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I disagree. Spending £1 to generate £1 revenue is pointless and means you’re running at a significant loss.
Unless they get to the stage where they can considerably pull back on their advertising and receive the same number of enquiries, I can’t see how £1 for £1 can be sustainable.
Never before has an “estate agent” embarked on such a sustained, national advertising campaign in order to build a brand. However, unlike most products that get backed by heavy advertising, the frequency of purchase is very low as most people only move a handful of times in their life.
I really can’t see how a low cost, low frequency purchase can justify the same level of advertising spend indefinitely and given their instructions will probably dry up without it, it will be interesting to see how it all plays out.
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Agreed. We are also not factoring in how much their boots on the ground cost. A self employed pb rep should normally epxect 25k+ for their services, how many are actually getting anywhere near that and if they were, on current figures how much higher would that push the spend per listing? In other words currently these people are subsidising PB’s figures where they are working but not earning a proper income.
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As a local agent, if we were to halve our fees to subsidise our offering and put our local competitors out of business, only to then raise our average fee back up to £2,000 again afterwards, we could be prosecuted by the competition and markets authority.
How can online listers, which are much larger businesses than independents, deliberately try and do this and get away with it? Can someone explain?
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@AgentV – thats NOT true.
If you collaborated to lower fees with other agent competitors to achieve demise of another competitor you’d likely be prosecuted.
To reduce your own fees im sure the CMA would see it as competition that gave consumers further choice and your loss would be consumer gain.
But if a decent agent you could be getting 1.5%/2% anyway.
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https://www.youtube.com/watch?v=cemTusT9ufs
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Have you watched the video Trevor?
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In EU and UK competition law this is called Predatory Pricing.
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I think AgentPink is absolutely spot on about the advertising but I think easy’s problems are because of one other thing… Arrogance.
If there is ever one guaranteed way of making yourself look stupid, it would be to come out and tell everyone what you’re going to do before you’ve started to do it!
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Paying yourself half of your turnover might provide a degree of insight into how their finances were run.
I imagine the shareholders might have something to say about that…
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Lets face it this story has highlighted what many of us have known for years. On-line is a failed business model and looses more money than it gains. Not one on-line has made any real profit for investors? and that includes PB. If more was made public of how these companies persistently fail and was public knowledge, investors may not be so “lemmings” to slaughter. The only winners are the big cheeses at the top raking in fat cat salaries and cash in shares which have no value for extortionate £millions …. criminal. How you can get away with valuing any business with a multi-million pound loss above £1 let alone the staggering £200m is beyond comprehension.
On-liner portals who go after the High Street agent, particularly those that ridicule the high street have not done anything to revolutionise the home selling/lettings. They actually do less than the high street. They have brought nothing more to the market than cheap fee’s, slander high street agents and not make any money for their investors……. criminal.
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Unfortunately Woodentop, investors look at companies like Amazon (online Book seller originally ) and Google ( Basic search engine ) and others and see that they lost enormous sums of money for years before ever making any profits and assume that an online agency will do likewise, the only problem is they need the online agent to all but eradicate the existing competition both high street and online so they can raise fees to a profitable level, and frankly thats never going to happen. They will chase this forlorne dream for a while before realising that their cash has sailed off into the Caribbean sunset
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In other words, milk the system for as long as you can get away with it. Criminal.
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‘slander high street agents’
many of whom are members of the NAEA, being slandered by another member agent….and what does the NAEA do about it???
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maybe this will highlight to the investors of PB that making money through estate agency is hard, making a profit to pay the shareholders ????
Two hopes
one’s called Bob !
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I wouldnt say any budget online agency is about selling homes.
Its about creating a fund be it the theme of property, icecreams or telecoms etc.
The real model is hedge fund vehicle to bring in mass £m’s funds that lead to founders exiting.
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Or put another way, come up with some hair brained idea to dupe investors with a dream, while they lick the cream.
Or put it another way, they know exactly what they are doing … tantamount to fraud.
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I have agood idea…anyone want to join me and make gazillions?
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Trevor, you are absolutely right. Ellice has no doubt taken out every penny he put in originally and then some. When it fails, he will still win, unless he’s investigated with a view to prosecution. Of course his credibility will nose-dive but I’m sure that won’t worry this personality-devoid character.
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It is more about investors suffering poor returns from traditional sources plus the fear of missing the early boat on the next big thing. Plenty of easy money (excuse the pun) around just looking for a destination. Tesla, the electric car Co., becoming the US No 2 car maker in terms of market capitalization, ahead of Ford, crazy. A very high price is being paid for “potential”.
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https://www.youtube.com/watch?v=cemTusT9ufs
There surely has to come a point where the Competition and Markets Authority have to take a serious look at ‘investor subsidised companies specifically designed to undercut and destroy much smaller competition to attain much larger market share’.
If they don’t there will come a day when all of us, our children and our grand children, will have little choice but to end up working on much lower wages for a handful of huge dominant companies only there to make more and more money for shareholders.
Enormously subsidised competition is unfair and designed to destroy thousands of privately owned small businesses. How many small bookshops do you ever see now, compared to pre-amazon days?
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The public are their own worst ememy. Convenience is really all that the web has done, allowed them to become even lazier with cheap thrown in for good measure. The latter is self-destruct which they will eventually regret as standards will (are) drop and less choice. In the meantime denial and milk without thinking ahead. You used to pay for quality but the internet has breed “expect quality but pay cheap”. All going to end in tears for everyone.
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The Producers?
Ponzi schemes?
What have I missed?
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Interesting comments from all about the pros and cons of On Line V Traditional high street.
When the residential market takes a real dive/dip which it will in the normal cycle ( remember the late 70’s, the 88/89, and more recently 2006/7 ) then the on liners will take a real hit as the market will need the expertise of the real agent knowing his local patch well and his purchasers, and actually hopefully will still have the ability to sell properties and give that service that the likes of PB in this current market cannot and don’t have to ….yet
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I’m a bit late on this story but…HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA…breathe…HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA..uhhh…phew.. that was good…!
(In my opinion), Robert Ellice is an arrogant SOB who treats people like dirt, who won’t listen to sensible advice and who shirks responsibility whilst taking credit. In this case, I hope, at long last, he will have to take responsibility whilst his credibility sinks. Couldn’t happen to a nicer man.
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