The CEO and founder of CoStar Group, which owns OnTheMarket, says the UK property portal, which his firm acquired last year for £99m, could be rebranded ‘Homes.com’ and may sponsor the new Manchester Utd stadium.
Speaking at the Proptech and Portal Watch conference in Barcelona, Andy Florance told Online Marketplaces’ chairman Simon Baker that he is willing to be patient to take market share off of Rightmove via OnTheMarket.
The CoStar boss also said he is not interested in buying Rightmove or Zoopla, before asserting that OnTheMarket is now ahead of Zoopla by number of leads delivered to agents.
He said: “Rightmove is operating at a margin I would never be comfortable operating at, you’re super vulnerable by operating at 74% – it means you’re not working towards growth and you’re not building for the future.
“Agents in the United Kingdom express overwhelmingly to me that they are dissatisfied with the way the pricing works there.
“Rightmove has suggested it will increase prices by 35% in the next couple of years – what additional value are they offering for that increase? It’s questionable.
“We [CoStar] represent the competition.”
Florance also said in a hypothetical scenario that Manchester United could soon be playing at the “Homes.com stadium”.
Florance was highly critical of portals’ willingness to “step on the faces” of their customers without consequence, and said OnTheMarket will differentiate itself by having greater respect for agents.
“I am fascinated by the concept that intelligent people believe that market share can never shift in the portal world. If you don’t treat the customers well, the customers will seek another solution.
“There are a number of companies operating on the premise that you can do whatever you want to the customer, and they will take it and they will be your victim, and you can just step on their face.
“One of the first things we will do to differentiate ourselves from the other players is to treat the customers with respect. If you treat your customers with respect while your competitors are abusing them, that’s a competitive differentiator. We plan to provide choice to customers.”
Florance criticised Rightmove as well as US market leader Zillow for its strategy of consistently raising prices without adding extra value to its agent customers.
He continued: “Hypothetically: if we were to invest $300m-$400m into marketing OnTheMarket in the United Kingdom, and offered reasonable pricing to agents, superior software and more content, would we shift the game? Of course we would, I’ve done it a million times!
“I feel that to a little degree, Rightmove is a little complacent and arrogant. Hubris is a dangerous thing.
“Honestly, I’m fine with my customer saying ‘You’re not the cheapest solution’ – and by the way we’re not – but when our renewal rate percentage is in the high 90s, we are clearly providing value. Our pricing increases historically have mirrored inflation and we’ve grown through expanding the platform, not by milking the customer.”
Florance added that he has a long-term strategy to make OnTheMarket, or Home.com, the number one portal in Britain.
This was as punchy an interview as it sounds. Florance seems to genuinely despise Rightmove and its relentless price increases – and he was withering about REA’s £6.4Bn bid, saying he could spend that money much more effectively in the market, taking his time and getting to #1 by offering consumers and agents better services.
He also said he’d hate to be in charge of a 70%+ margin business because you’re not innovating; your job is to maintain that number at all costs, including gouging customers forevermore.
Going to be an interesting few years …!
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Interesting strategy – why not just get on now with providing facilities & services to agents utilising Co Stars funds instead of dare I say bland advertising a football club. Essential to take care of the customer / agent – Gerald Ratner comes to mind !
The current market & probably next year an uncertain time with Labour at the helm & majority of agents certainly on the sales front likely working hand to mouth.
I can never get my head around an arrogant company like Rightmove earning 70% +/- profit at the expense of agents – guess very few businesses in the world able to produce such a result.
One needs to take a bold step perhaps holding Co Stars hand & basically jump ship from Rightmove otherwise they will drain you dry.
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Be interested to know which metric us dopey estate agents would need to see, to leave rightmove for zoopla and PornStar.
More views? Vendors don’t care.
What would swing it?
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Weak agents will use it as a weapon against their competitors if you’re not on RM and then the (selling) public care by not instructing you.
It’s a catch 22, but only from the start, because if enough people vote with their feet that argument falls away. The industry had the chance at Covid but didn’t take it. But RM (almost singlehandedly) are shrinking agents’ margins to zero in many cases whilst they sail off to the sunset with their 70% profit margin. It’s immoral
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Or sell up & retire to the South of France with a share of the Billionaire offer pay-out.
One needs to collaborate as agents & contract dependent – leave Rightmove & join up elsewhere.
Clients & vendors are basically interested in – best price , agreeable time frame & competitive commission .
Joe Public will follow suit depending where the market place is – ‘nuff said.
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We use all three main portals, and without a doubt OTM performs the worst out of them all, and by a significant margin. Sadly, we’re tied into a contract with them for the next few months, but once it expires, they’re being binned if there’s not a significant uplift. And it will need to be one hell of an uplift.
The thing is – we all know what’s going to happen.
He can sit there as smug as he likes, making comments about Rightmove’s clearly obscene profit margins, however we all know that if Co-Star DID do the unlikely and got OTM to topple rightmove, Co-Star would soon be the ones price gouging us instead of RM.
Why would Co-Star’s shareholders behave any differently from those of RM in that regard? It’s literally what they are in it for.
Be very careful what you wish for.
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