The online agency sector looks to have disrupted itself, with forecasts that the scenario will now be the survival of the fittest as the industry shakes out.
Pressure also seems likely to grow on high street firms, particularly the larger ones, to make up their minds as to their own digital strategies.
YOPA, Purplebricks and eMoov all now appear to have out-stripped the pack in the online sector in terms of their values and funding, meaning it could now be more difficult for other online agents to raise the further millions that these three have done. Profitability has to be the next focus for these and rivals such as HouseSimple and Nested.
easyProperty, now in the hands of the Guild and Fine & Country, heavily backed by Toscafund, is due to relaunch this week as a business to business offering. Less than two years ago, in December 2015, easyProperty forecast it could be worth over £1bn by 2018. However, in March this year it posted losses of almost £11m on a turnover of less than £1m.
While Countrywide says its digital offering is a success which has now rolled out to over half of its branches, the UK’s biggest agent also says that 95% of customers still prefer the traditional option. The architect of its ‘alternative’ offering, Sam Tyrer, has in recent weeks left the company, and judging by the share price, the City is unimpressed. Rumours persist that Countrywide is buying a hybrid agency business but the firm has not responded to our inquiries.
Foxtons declined to comment as to its own digital strategy when we asked the firm.
Most, if not all, of the bigger independent regional agents have yet to reveal their hand, while Paul Smith, chief executive of national independent firm Spicerhaart, has made no secret of his criticism of the Countrywide strategy and of online agents generally. Other national firms have also given no indication as to any digital plans.
In the online/hybrid sector, Purplebricks remains massively in top position, worth around £1.2bn. YOPA was valued at £95m before the latest funding and is now worth £115m. eMoov is now valued at £40m.
YOPA has achieved over £58m in funding boosted by the latest £20m investment by LSL plus an additional investment of £7.6m by Daily Mail and General Trust plc.
Russell Quirk, of eMoov, which has just raised a further £9m for its own expansion, said: “This is great news for the online/hybrid sector and is nothing short of absolute validation of the model.
“The big traditional players have no real choice but to future-proof their businesses by investing in the disruptors in order to create a ‘best of both’ approach.
“The question now is what do the other corporates do?
“Notwithstanding the standard incumbents’ dilemma, it’s surely hard for them to continue to ignore the inevitability of where this is going.
“Importantly, what is also apparent is that there are only three online/hybrid brands that will now prevail and I think it’s fair to say that it will be hard for others to compete, and especially the majority that have not invested in technology properly as we have done.”
Daniel Attia, co-founder and CEO of YOPA, said: “We are delighted to welcome LSL as an investor into the business. LSL has been evaluating a range of opportunities in the online and hybrid estate agency space, and their investment is a fantastic testament to our strength and potential.”
Ian Crabb, group chief executive of LSL, said: “This investment provides LSL with a meaningful presence in the expanding online and hybrid markets, and represents an attractive strategic shareholding for the LSL group.”
YOPA currently offers a fixed fee of £839, or £1,399 in postcodes in and around Greater London.
YOPA’s founders include the son and grandson of Daily Telegraph moguls the Barclay brothers.
Savills, which backs YOPA, is a founding member of OnTheMarket, while LSL, which now also backs YOPA, continues to support Zoopla – whose biggest shareholder is the parent company of the Daily Mail, which is also a YOPA backer.
Pyrrhic victory in sight for the winner as they slug it out
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yes, the corporates need to decide if they want to carry on devaluing their industry with click bait cheap fees. Coubtrywide need to be careful. Misleading public to get in the door then upsell. I cant offer both for simple reason online offer is a rip off.
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Every £10,000,000 raised in investment is enough to subsidise upto 10,000 (1% of the market) house sales to the tune of upwards of £1,000 each.
I really can’t get what is innovative about this kind of model. It’s just a website allowing vendors to do most of the work themselves…. and most people realise they will not be as good at ‘performing home surgery on themselves’ as a highly experienced consultant surgeon.
We are also still waiting for an online lister to stick its neck out and tell the truth;
What is your Fee Average per Completec Sale (FACS)?
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>I really can’t get what is innovative about this kind of model. It’s just a website allowing vendors to do most of the work themselves…. and most people realise they will not be as good at ‘performing home surgery on themselves’ as a highly experienced consultant surgeon.
AgentV, you flatter yourself. Top A level results, 6 years at University and only the best become consultant surgeons.
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Who said I haven’t got A levels and medical qualifications? 😉
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I hear you agent v. People who dont understand analogies prob make great online agents.
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Did you seriously just compare estate agents to “highly experienced consultant surgeon”?
ARE YOU SERIOUS FAM?
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No… I used an analogy to illustrate a point….. as many authors do in books.
Cyberduck tried to twist it into something it wasn’t to provoke an argument… as he usually does.
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I would hazard a guess that LSL’s motivation behind this investment is that are just covering their bets with this £20m
Whilst they are playing their focus and main chunk of money on black (High St model) .. a cheeky £20m on red (Online) covers themselves in case it goes the other way.
Talking of YOPA, I have briefly met Gavin, the new YOPA marketing chap at a recent Estate Agent event .. quite aptly he is ex -marketing chief guru of Paddy Power and he comes across as a chap that knows his onions… their £20m bet might be a sweet one
My intuition tells me Yopa are a sleeping giant in the EA online sphere and the people I have met all appear to be decent people. PB caught the wave at the right time, leaving the rest in the wake.
..and what of EasyProp?
EasyProp has the advantage of reach because many Guild members might take up the EP model in their patch – although the balance between marketing/focus on your own high-end end indy EA brand and the EP brand will be a tricky one
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A very measured and in my view, accurate assessment Chris.
I believe that there is much for us all to learn from the so-called ‘online’ sector – convenience for customers, analysis of cost base, leveraging the real value in IT., and marketing a clear message to prospective buyers and sellers to name but a few.
That said, these (and other factors) when combined with a High Street profile, real local knowledge and experience, a genuine commitment to delivering relevant personal service and a continual desire to implement innovation will mean that the so-called ‘traditional estate agents’ will be able to maintain a profitable business and, I believe, ultimately a larger market share than ‘onliners’.
Essentially, these two market sectors will (in my humble opinion) appear to merge in the years ahead – with the terms ‘online’ and ‘traditional’ becoming irrelevant. When it comes down to it we are all ‘Hybrids’.
The real difference will be the offering to the consumer of a ‘Pay Up Front’ or ‘No sale – No Fee’ proposition.. or indeed a combination of the two. A choice to the prospective seller of…’You take the risk or we take the risk – it’s up to you!’
There is plenty of room for all these models ( and more) to co-exist, and for them to learn from each other. However, it won’t be the likes of either ‘onliners’ or ‘traditionals’ that will ultimately decide, but the person who is all too often forgotten about in this debate…
… the consumer!
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What will win out ultimately is what provides the best consumer service and success at a reasonable fee.
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Mr Bradbury
Just WHO is it that, in your opinion, forgets the most important person in this debate?
Mores to the point – surely it is far more pertinent to your argument to give them their respectful and correct title of customer, rather than the frankly crass and impersonal buzz-word of “consumer” that certain factions seem to favour these days…?
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Client
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Owt’s better than “consumer”, htsnom79, innit!
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“…the new YOPA marketing chap… quite aptly he is ex -marketing chief guru of Paddy Power…”
There is a common theme in the CVs of all these ‘Marketing Minions’ – online gambling.
So far I’ve only come across one for who the penny eventually dropped – and began to understand that homesellers don’t want ‘evens’ at best for their grand or thereabouts.
After wearing out his crop he’s now backing a very different horse.
Have to say it’s more a case that a knackered nag threw him at the start of a long, drawn-out death-roll – but he fell well and is still running to form today – which is more than can be said for the nag.
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disgusting that a traditional agent would even back online version. Its like me, iam a surgeon and I said no when purple- hospital asked me to work for them. I couldn’t quite get the cut right over the phone. Woooop
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Guess YOPA is already planning its big drive through OTM if the vote for the IPO is yes.
With its existing vested interest it will almost certainly see a near takeover of OTM as its route to beat PB.
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Given the vast amounts of money being invested in hybrid and online proportionate the actual revenue generated from the sector, I can’t help but feel this entire sector is a board-room rat race where the big boys chuck money at a losing horse just to impress investors who don’t see that the bet is a flexing of muscles.
At the moment there is clearly not enough interest from the consumers to justify the size of these investments.
Don’t think of it as disruption. Think of it as keeping up with the Joneses, even though you know they’re wading into a bog. Sure, you’ll get your knees muddy, but at least the spectators get a look at you playing the game.
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After reading the article on Friday night I took a brief look at YOPA. In May they raised £15M and claimed they would double the number of agents by the end of the year. Since then they’ve added just 1 to the 75 they had then. See http://www.propertyindustryeye.com/online-agent-yopa-raises-another-15m-as-daily-mail-and-savills-pour-in-more-money/
On Sunday they had listed 12 properties in the previous 24 hours. PurpleBricks listed approximately 126.
Apparently they have also had a National TV campaign.
Still, it takes time for a brand to be recognized and theoretically there’s no reason why what PurpleBricks have achieved cannot be copied. Huge credit must be given to the Directors of PurpleBricks though and it remains to be seen whether YOPA’s Directors measure up. The experienced LSL working with them should help.
Interesting times.
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I’m not sure YOPA will find it as easy as that.
There is no question that PB stole the march on those sellers who would have sold privately, but that was a small market. As their advertising campaigns kicked in they have more latterly attracted sellers, not by an online proposition but purely because they are perceived to be a “cheaper” option.
Much of this comes down to what motivates a sellers choice of agent. Fee, is just one reason, the others are “have used the agent before” “want to buy through an agent” and “they have a lot of boards in my area” PB may now get a few of these sources too, but I would argue a very small number of them. YOPA and the others get even less if any.
This means their market WILL ONLY come from a huge marketing spend and how long can that be sustained. PB made £200K profit and they are listing what 4K houses per month. Unless they charge more how is this ever going to grown into a something £M profit?The others stand even less chance.
I believe its fundamental that most people only move house every 5-8 years and at that point, they put their head out the door and see who their LOCAL agents are, the online non local agents will always lose out on this. What I can perhaps see happening is lots of smaller, firms using online and more geographically strategic offices to cover a wider area, but not national. The key however will be that they actually work out what to charge to make money. Many that have gone down this online route so far don’t offer enough to make a charge upfront and if they do the same charge on a no sale no fee basis, will simply of out of business.
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RealAgent,
I agree it will be harder (more expensive) for YOPA in some respects but in other ways it might be easier. Once their name becomes recognised they should gain from other online marketing too and people will be more comfortable with online Agents now that PurpleBricks have been around for a while. Somebody seeing a PurpleBricks Advert might think “OK, when I come to sell I’ll take a look at PurpleBricks & YOPA and see what the pros & cons are.”
Every year the homebuying demographic changes in that the older generation are replaced by the iphone generation. I disagree that a homebuyer will look to see who their local agents are when it comes to buying a house. The marketing from the online Agents will be working on these people too and I see online agents increasing their market share over time.
PurpleBricks’ model for profit still hasn’t been proved but the theory is that marketing costs stay more or less constant whilst demand increases and the ability to service that demand also increases. If this happens, then the profits start becoming significant. If you look at what has happened to date the number of listings increased by nearly 100% year on year but marketing costs rose by nowhere near that amount. If the same happens this year (and looking at the data it’s not out of the question) there will be substantial profits coming through from the UK business. This is why investors are prepared to inject capital. It’s not a foregone conclusion but the signs from PurpleBricks are encouraging to investors looking at the medium to long term.
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But how much did PB spend on getting their name recognised? and I would argue that being the first in they had a better selection of ex high street estate agents to employ. I’m not sure YOPA do or will. Its also a reality that someone STILL has to decide to pay regardless and that is the bit that I think needs to change for these firms to ever be a long term alternative.
Yes the demographic does change but in terms of home ownership I’m not sure thats helped the online only model. I was 18 when I bought my first flat, so if that translated today I might agree that demographic played to the online. I very much doubt that many agents sell to 18 year olds now! In fact probably someone has the stats but would it be 28+ now? Certainly the biggest sector selling in the South would be 45- 55 demographic who whilst know about an IT world, dont live their entire lives by it.
I’m sure their costings would still constant, but as I pointed out they would need to have upward of 10% in EVERY marketplace to have the volume of calls to value that the local estate agent would…..that’s something I just can’t see they can ever break especially as the service they offer, despite what they would have anyone believe relies on list and hope. While that sells, it doesn’t endear your customers to use you again, or indeed recommend you.
I guess we will both have to see who is right.
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Cyberduck46…
PurpleBricks are encouraging to investors looking at the medium to long term.
…and that pretty much sums it up.
Marketing costs to build a Virtual Golden Share Egg
….versus real Estate Agents with real Staff providing Full Estate Agency Services to deliver the best result for their clients.
As long as we are clear these 2 industries have different agendas…. the Virtual is to fast track to Investor Profits…. that bloated fast grown chicken which is sold in bulk bags at discount prices…
….versus the Real Estate Agency Business which builds and maintains a sales and service business for Homesellers/buyers and seeks to make a sustainable/justifiable profit for the long term.
As long as the Consumer knows that these 2 business are very thinly related.
The Virtual merely seeks to mimic the Real Estate Agency Business.
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>versus the Real Estate Agency Business which builds and maintains a sales and service business for Homesellers/buyers and seeks to make a sustainable/justifiable profit for the long term.
GPL, let the public decide. That all sounds very nice in theory but in practice it’s not really like that.
Your vision of how the traditional estate agent does business doesn’t coincide with my experience. Estate Agents have a very poor reputation or didn’t you know that?
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cyberduck46 – Out of interest, what level of experience do you have?
To tar an entire industry with such confidence you must have moved home a great many times.
Are we talking 20, 100 or 1000 house sales?
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Cyberduck46…
You must use a brush in your “profession”… with those “sweeping” statements.
You state “Estate Agents have a very poor reputation…. ” ….yes, like every profession there are SOME poor Estate Agents.
Raise you head above the forum parapet and tell me what your profession is….. honestly. It’s a great start to an open discussion – honesty.
Just imagine the cross which I have to carry having been a Police Officer many years ago….. yes, SOME of those aren’t great at their job either.
Is there any profession where everyone employed is perfect?
I know that Our Industry sadly seems to have attracted the “dubious get rich quick” folk keen to dip in and make a few quid then bale out and onto the next money making venture.
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Given the number of current players in the online space, combined with their collective advertising spend, PR coverage and editorial exposure (surely questionable motives where Daily Mail/Telegraph concerned?) I guess that market awareness of this “altetnative” model must be close to it’s peak.
Given all of this noise, fanfare and novelty factor, the alternative model seems stuck at around 5% of the market.
Going forward, my guess is this will slip as it will be hard for these companies to maintain this level of investment and marketing. Couple this with the fact that for the public, the novelty will wear off whilst Social Proof will continue to support the fact that 95% of your peers stick with the traditional method of selling.
However, I think the biggest problem is simply the reality that selling property (not just advertising it) is difficult and for it to be successful, you need an experienced person by your side who is inextricably linked to the final outcome.
When the numbers eventually come out, whether officially announced or fuelled by dinner party conversations, that the majority of people who use the online model have simply thrown their money away, I suspect their 5% market share will fall.
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Shaun77….
Agreed.
I would be interested to view the independently verified Concluded/Exchanged Sales Figures.
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>Given all of this noise, fanfare and novelty factor, the alternative model seems stuck at around 5% of the market.
Is it though?
I can remember a report in September 2016 by Hardman & Co which stated (from memory) that PurpleBricks had 2.5% market share (could have been 2%) and this was something like 62% of the online market.
Not sure whether this was stock or number of instructions at that specific time or over a period of time. Nobody ever makes this clear when quoting these things 🙂
My own proxy data suggests PurpleBricks’ market share of new instructions has risen from around 2.5% in February to about 3% now. PurpleBricks state in their 2017 annual accounts to have increased from 62% of the online market to 72%.
PurpleBricks’ increase of instructions, in my eyes, comes from both online and traditional agents. With approx. 1.4 million instructions. Half a percent is about 7000 instruction or about £7m in revenue.
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Those Virtual Companies floating to the top can claim they are the market leaders in…… Marketing!
NOT Estate Agency?
…Marketing!
Their Tag Lines should read
” NO Sale? So, What! ”
” Thanks, we’re Paid! You?… Fingers crossed ”
” Knowingly Sold? We don’t care ”
I fully understand the Online Only Option for some clients… and it has its place.
I can’t help but laugh when I pass the very occasional Purplebricks Board (I have seen them in outlying areas where the seller has opted to take a “punt” for a £1000? plus whatever extras were then foisted on them)
…and I think, ” paid up front? ” and I pass the board months later, and I think ” PB took your money and ran ” ……it’s Autotrader for Property however at least Autotrader charges £50? to simply list your car for sale
The Virtual Only Agents are charging say a £1000 up front for listing a property for sale? ….it’s a fantastic business venture …..while it lasts
OTM has a real opportunity however if it wants to burn through cash marketing for “Share Price Growth” then the current virtual examples show that seems a winner… until it fails? PB starters have already cashed in Millions I believe
…it is the “Steve Miller Principle”
All together now ……” Gooooo on take the Money and ruuuuuun! ”
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Reasons NOT to use YOPA
Exhibit #1 – this (offers over) £800,000 property.
https://www.zoopla.co.uk/for-sale/details/44895494#wH6ov3FJodxIo1tA.97
I rest my case, M’Lud…
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PeeBee…
As the Homseller? ….does one not phone the Agent/Local Property Expert/Geezer or Geezeress with the camera and say….
“I appreciate I am paying peanuts however I didn’t realise you were sending a Monkey to take my photos?”
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Apparently one doth not, GPL.
Beggars belief, dunnit?
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And if reason #1 wasn’t proof enough –
I give you Exhibit #2 – which also appears to involve a teensy weensy breach of copyright (however cr@ppily executed):
https://www.zoopla.co.uk/for-sale/details/44865276#1yBXPXDAXpuLX6C1.97
Beggars belief – does it not?
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The Price Reductions on this flat
https://www.zoopla.co.uk/for-sale/details/40041205#w21UjsQKF4Emtb3F.97
– total THREE HUNDRED AND ELEVEN GRAND…
…which is more that its’ last selling price, apparently!
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I know I am abroad at the moment and it is difficult to see in sunshine but is there a single photograph in focus? Is this what they call a ‘professional advert’
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Thumbnails from another Agent’s listing!
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