Purplebricks’ share price plunge now appears to be emulating that of Countrywide’s, prompting the suggestion that it’s time for Purplebricks’ founders to do the honourable thing – and quit.
But perhaps they are looking at another option entirely: ‘Rightmove 2’?
When Countrywide’s shares slid from an all-time high of 686.4p to just 100p, its CEO Alison Platt was forced out on the back of her disastrous ‘retail’ strategy, albeit that her tenure began when shares were at 408p.
As I write, Countrywide’s shares have tumbled even further and are now just 11p (and even sunk as low as 8.5p in December), with the company clinging on by its fingernails and hoping its new ‘back to basics’ approach will do the trick.
Surely Purplebricks’ shareholders must be concerned they are heading in the same direction with shares tumbling from an all-time high of 525p in the summer of 2017 to about 140p at the weekend, and 99.8p at their lowest on the day of their profits warning.
As we’ve seen from Countrywide’s example, could they plunge even further? Can this model ever be profitable?
What must the group’s biggest shareholder, Neil Woodford, be thinking as he watched £36m wiped off his 27% stake overnight when Purplebricks announced its recent profit warning, along with the exit of its US and UK CEOs?
It’s even worse for German media giant Axel Springer, which has seen its investment cut in half in just one year.
It has lost a massive £68m by my calculations, having invested £125m in Purplebricks, buying 27.7m shares at £3.60 each totalling £100m last March and a further 3m shares at a cost of £3.07 totalling £9.2m in July, taking its stake to 12.5%.
To cut its losses it might be time for Axel to forge ahead with opening its proposed joint venture portal in the UK on the back of its German Immowelt.de portal, which is the German equivalent to Rightmove.
It would need Countrywide and LSL to make the numbers up, plus probably the under-invested-in Connells/Sequence group.
It’s allegedly being billed as Rightmove 2.
Any independent agent being pulled into that party surely needs to see the true benefits of OnTheMarket – the agents’ portal.
Purplebricks and Axel already have a joint venture in Germany – Homeday.de – the Purplebricks equivalent: have a look at the website, it looks remarkably similar!
Of course the share price is only one indicator of how things are going at Purplebricks.
I’m pretty sure from the number of job applications we are getting from their ‘Local Property Experts’ and the Purplebricks senior team that there’s real disquiet on the ground.
It will be interesting to see if the return of Kenny Bruce from his travels in California and Australia will quell the unrest. Is his California, dream over?
It must have been exciting for the staff at first, to be part of a pioneering, disruptive outfit that was doing something different.
But now their team appear to be feeling unloved, with their noses put out of joint by the joiners from Countrywide – and fearing for their futures.
There’s only one way forward for the Bruce Brothers – and that’s to pour their remaining millions into an all-out advertising offensive, to try and build their market share and get as many leads as they can in a very sluggish market – and one that might get even worsen post-Brexit, depending on what happens.
You can keep investors happy with lots of TV and marketing spend, but in the end losses catch up with any failing business.
For a business which had its official launch in 2014, it has now had five years to make its mark.
How much longer does it need before it realises that charging a low fee while burning millions in advertising spend to buy market share won’t make it profitable?
Watch the portals take our fee income
Portals worldwide are under growing pressure to increase their income – and it seems they are turning to estate agents’ other sources of fees to fill their coffers.
In Australia, REA Group bought a mortgage broker, Smartline, which immediately led to healthy profits, along with selling larger photos to customers!
However, Domain in Australia launched mortgage, insurance and utility switching services in joint ventures, which are still at the start-up phase and making a loss, despite a massive increase in revenue, according to analyst Mike DelPrete.
Zillow in the US also bought a mortgage broker, Mortgage Lenders of America LLC, suggesting it too is moving closer to the transaction, along with making an instant offer.
At the same time, in the UK Zoopla has uSwitch.
These portals are moving further away from being organisations that just connect buyers and sellers to ones making larger pools of revenue.
DelPrete describes these portals as moving from search engine to service engine, pointing out the rich pickings to be had from mortgages, insurance, conveyancing, moving and utilities, home services and repairs, offering the one-stop shop.
But watch out. As these portals move closer to the customer, don’t forget that they displace agents in the process.
Keep on top of the tech
We’ve just come back from the Inman Connect real estate tech event in New York with some golden nuggets when it comes to future thinking.
Three areas that really stood out were: how Artificial Intelligence will be impacting our interaction with data, whether that be from an agent’s perspective or from a consumer view.
How text messaging is being used to make the customer journey easier and positioning potential calls before they get made, increasing answer rates and reducing call times.
And lastly, how agents are using tech to improve data capture and influence behaviours when managing leads and customer journeys.
The US market has some parallels to the UK with online agents such as Purplebricks trying to enter the space and the introduction of iBuyers.
In both cases, the US looks to customer service as the differentiator and reason to engage with a traditional Realtor. The challenge in the UK is whether we can adopt the same principles and application of emotional intelligence to gain buyers’ and sellers’ confidence.
There are some incredible tech companies doing outstanding things in the US that will invariably be of interest to the UK market.
Among them are Jane.ai – an Artificial Intelligence platform that makes company’s information accessible through slack or chat type services; and NextDoor – a post completion value-added service that agents could provide to purchasers to establish themselves in their new community.
* Paul Smith is chief executive of Spicerhaart