Rightmove could charge agents an average £2,500 per month per office at some point in the long-term future.
City analysts were briefed after Friday’s results were posted by the portal.
At the briefing, incoming chief executive Peter Brooks-Johnson “sketched out the sustainability of growth to £2,500 longer term”, analyst William Packer reported. The sum of £2,500 is what Rightmove said agents had been spending per month on newspaper advertising in the past.
While it looks as though such a figure could be a long way off, it appears that agents are already paying at the rate of over £1,100 per branch per year on average.
Analysts on Friday were told that Rightmove’s target this year is to win another £70 per branch per month.
The Average Revenue Per Advertiser was £842 per month last year – taking the average branch’s average annual spend on Rightmove to over £10,000 for what is thought to be the first time – and for this year is targeted at £912.
Packer, of Exane BNP Paribas, said his own firm is forecasting that Rightmove will be charging £1,000 per branch per month in two years’ time.
The Average Revenue Per Advertiser was £842 per month last year – for the first time taking the average branch’s average annual spend on Rightmove to over £10,000 – and so could end this year at £912 per month with the extra £70.
Packer said that analysts were told of an upside if Optimiser up-sells successfully.
Although Rightmove’s results showed a surge in revenues and profits for last year, the share price fell 245p (6%) to 4000p on Friday.
Packer attributed this largely to the surprise announcement that well-liked CEO Nick McKittrick, 48, is stepping down. He has been with Rightmove since the start 16 years ago, and boss since 2013. He will step down at the AGM in May but will stay on into June “to ensure a smooth transition process”.
Packer described his departure as “a risk”, although also noting that the incoming CEO, Peter Brooks-Johnson, is well-liked, known to investors and has been the effective deputy CEO for some time.
However, Packer also noted two other possible reasons for the City jitters.
One was concern over a drop in leads to “nearly 47m” – down 6% year on year, according to other analysts.
The other reason cited by Packer was a small drop in estate agent members in the second half of the year, down 0.4% from the first half of 2016.
The fall in the number of branches was attributed at the analysts’ briefing to largely just one agent. Packer concluded that this was almost certainly Countrywide.
Estate agency numbers at Rightmove showed flat growth last year, said Packer – ending at 17,462 compared with 17,336 in 2015.
Overall, Packer reported, the tone of the Rightmove briefing to analysts was confident.
Other analysts have also given their verdicts.
Anthony Codling, of Jefferies International, described the results as robust, with the ARPA of £842 still having “further to go”.
Codling said Rightmove continued to deliver margins in excess of 75%, a “super normal profit”.
Codling went on: “So far all challengers have failed. Initiatives such as OnTheMarket suggest that agents are trying to win back control of digital marketing, but as yet the efforts of ‘estate agents collectives’ have had little impact and ironically, the One Other Portal rule has, in our view, only enhanced rather than challenged Rightmove’s dominant position.”
Steve Clayton, of Hargreaves Lansdown, said that the average £842 per month last year meant advertisers were paying £10,100 per year – an increase of 11.7%.
He said Rightmove “thus retain fabulous pricing power, for agents are still getting an enormous bang for their buck and Rightmove’s rivals lack the same depth and breadth of market coverage”.
Yesterday evening, Exane’s Packer said that Rightmove “offers sustainable double digit structual growth”, which he described as a rarity.
In his new update, Packer said: “We see Rightmove, underpinned by its must have status with estate agents, as a key winner from the recent competitive upheaval. Rightmove is also attractively valued relatively to international peers.
“In an industry with strong network effects and high margins, we see a marketing war with existing peers or new entrants as a risk.
“A slowdown in the UK residential property market may result in estate agent members closing or reducing enhanced product spend.”
It’d still be cheap at that price.
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Over 4700 advertisers can’t really afford the existing subscription as it is now and with their main competitor creating themselves the means to take control of the space it will not happen.
Rightmove can whack the price up as much as they like and a few will pay it, £2500 a month is the price of a senior negotiator so inevitably some agents will dumb their agencies down with more selling delegated to technology. The agents smart enough to understand the business they are in will ,with this confident announcement, turn to their financial directors and strategists and do some assessment of the business that are long overdue.
If half the Rightmove user base evaporates but the income from the rest remains the same, profits won’t go up but stock and the diverse appeal of Rightmove is reduced. A Rightmove with a few large dominant agents the selling public don’t like or trust won’t be much of a portal.
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I couldn’t agree more. There should at least be a fee structure related to stock levels, rather than a flat rate per branch. Otherwise they will lose more and more income as agents amalgamate into less branches covering wider areas.
If you are an agent completing 50 or less sales a year, for instance, RM is quite an expense per property.
Or perhaps they want to become elitist?
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Those of us that can remember being “valued customers” of the newspapers” can also remember seemingly high rates they used to charge. However, these rates were negotiable by the supply and demand issues at the time and of course being “valued customers” of the newspapers meant that the spend could be adjusted to suit the trading at the time. Savings made being a “Valued customer” .
Along came the portals and to say the timing was right (RM in particular) is an understatement. BUT, we had several portals, now we have two; well three if you count “Off the Market”.
So we are now longer “valued customers” of portals; the portals customers are those who look at the sites in the first place, we are are just paying for the privilege of being there and they can and will charge us what they want. WHY because they can, we have no commercial leverage. YET!
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Yet indeed!
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The cost of owning and running unions dominated print advertising meant very high barriers to entry. Digital advertising doesn’t have those problems. Where a print room was hugely expensive to set up and the lead time to roll off the first printed advert was measured in months not weeks or days It was almost impossible for new competition to exist.
Rightmove and Zoopla have almost the exact opposite problem; it is easy to become a competitor, the hard part is becoming an established one. OTM has done the hard bit, it only needs to be different to Rightmove and Zoopla to succeed.
I was discussing this over the weekend and was fascinated how thinking differently to everyone else open up possibilities.
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It is a great pity that someone representing OTM cannot come on here, read what is written…. and the comments…. and then court some more support amongst us all with a few encouraging words to remind us they are on our side.
Thinking differently is absolutely critical for OTM at this stage. That’s why is should start listening to everyone with a comment or an idea to help!
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Pis might fly!
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Pigs sorry…. can we edit on here?
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Robert, you want to take over OTM?
If the tribunal rules the wrong way there could be a vacancy…
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RM are really taking the proverbial, and we are allowing them to. OTM may not be perfect but it is all we have and if enough people get behind it it will succeed and improve.
I really hope our industry does’nt blow this opportunity to take back control. If we do I hope you all look forward to opening your monthly RM invoice.
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In some areas in the U.K. this proposed monthly cost is equivalent to two or three completions. Volumes of instructions are falling and, there comes a point where, despite any benefits Rightmove may offer, more cost-effective alternatives make more financial sense. Beware the thin line between confidence in your product and hubris.
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Cost effective alternatives Mr Wood! Interesting, what do you suggest pigeon post or banners being tied behind small aeroplanes? They have us by the short and curlies!
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So far!
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No they don’t, they are service supplier with a legacy product and a lot of profits to lose. Agents only have to work harder if they don’t have Rightmove, What will Rightmove do without agents? They can’t work harder, there isn’t an alternative set of customers and the internet listers are proving disruption doesn’t work.
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Robert, IF the portals market changed due to whatever, and started to happen, and I don’t think it will, then there is an alternative for them of course…….. and if the change triggered another plan, then it would very obvious it was happening from the start but, could not happen over night. Having said that Poopla and Uswitch is an indication of change I would have thought?
Agents can always work harder generally of course, as Henry Ford said ” Quality s doing it right when no one is looking” but, in reality there is not enough instructions to go round. IMHO the industry will change dramatically in the next 10-15 years.
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A project to change the industry has been underway since 2008, sadly for those trying to change the industry no one told the public. The public don’t like ‘not agent’ agency. The disruptors have thrown everything at it and cash like there’s no tomorrow, it ain’t happening. Agency is a service industry and service is just one of those things that cant be digitised.
Rightmove are going to kick back against what is going to happen to them once they understand the implications of what is going on.
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There won’t be many but as I said above, for some, the value of Rightmove as an instruction getter will be outweighed by the cost of maintaining a £30,000 PA advertising spend.
Most people move within a 26 mile radius of their existing property. It may be that some agents will take the view that there are more cost effective, or cost neutral, options within a local area on social media or, even, local newspapers.
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I agree Chris,
If you also factor in a couple of lost instructions per month to the Call Centre loss leaders that you were now not invited to as a result of their ‘investor’ subsidised RM marketed fees.
Then are RM not already costing you £1000s more per month?
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More and more reasons for OTM to succeed and create more competition!
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OTM do not stand a chance as they are set up at the moment. Hubris pure Hubris.
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RM have always been clear that they want all your marketing budget and will keep hiking the prices. If only there were standardised prices, but everyone is paying something different no matter what your RM rep tells you
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And you wonder why we backed OTM!
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“The average spend per advertiser is £842 . . “. Well we are paying almost double this for a single sales and lettings office. Is this £842 an average for each discipline I wonder? RM’s smoke and mirrors pricing policy enables them to charge independent agents whatever they like. Pips and Squeak come to mind!
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We created this monster and now we are going to be punished for it. How many estate agents direct people to rightmove when looking for properties online…..direct them to your own website. How many are paying for premium listings, feature agent, feature property etc. Start be reigning this in a little.
As RM puts prices up, the much cheaper Zoopla will follow. OTM will eventually fall to pieces, great idea, incredibly poorly run, all leading back to the duopoly again. Unless OTM gets its act together or someone else has a go at, the future doesnt look all that bright.
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OTM has some great innovative products being developed by ‘independent’ supporters …. just waiting in the wings….that can help it achieve an enormous technical lead over the opposition. Will they listen?????
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The game currently being played in court by OTM has given RM further confidence that it will only serve to strengthen their grip allowing them to ratchet up the tariffs .No doubt keeping their potential enemy Bricks close mindful there will come a time that they might be soon in a postion to negotiate themselves a good deal if they already haven’t.
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Morning All…
“In his new update, Packer said: “We see Rightmove, underpinned by its must have status with estate agents……..“
Anyone else feel all warm and fuzzy inside reading this?
The only reason our/your/my business is surviving is thanks to RM. Bless them, what would I do without them.
On a side note, I wonder whether “Packer’s” comment should have been read out at the ZooCon -v- AM trial…… as it was said last week….. when a company has such a stronghold surely this is a factor making the OOPR a necessity to break in to this market and triggers the “exceptions” in the anti-competitiveness law.
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Just to sort of news to put you in a bad mood on a monday…
When are we all going to do something about this ?
Has anybody actually had the nerve to leave Rightmove and hows it going ?
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Most of the agents in west wales have. They all dropped RM in favour of OTM and Z. No idea how it is going. Dawsons in Swansea were one of the main players
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Thanks …. why don’t we be radical and have a big secret unrecorded meeting and just use OTM ….
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Is this the innovation Rightmove spoke about last week when planning the way forward?
Plus appearing to justify it on the basis of agents spent an average of £2,500 per month in the past on newspaper advertising. Surely to justify this potential price hike on this basis defies logic.
I’m not sure this is the kind of innovation the market is looking for when its going through challenging times with an cloudy outlook for the next few years.
If this strategy was actioned the danger could be to create the springing up of a “new cut price hybrid style .com property portal with deep investor funding?”
This should give Rightmove and consequently Zoopla cause for concern.
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What was it that was said about arrogance?
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Actually…. or even ‘pride’….its Monday morning folks, that’s my excuse anyway!
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IMHO, there is NO ROOM for more than two main portals. Wrongmove and Poopla know that.
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“Analysts on Friday were told that Rightmove’s target this year is to win another £70 per branch per month.”
Interesting way to put it, I’d say, Rightmove’s target this year is to tax another £70 per branch per month.”
Everytime a new branch opens, their tills start ringing, even though RM didn’t actually do anything. You just created them another £1000 a month with zero input from them. They just rub their hands together and the best of it, in order to do this, you have to give them your stock. You couldn’t make it up!
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what goes around…..
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They are a business that prospers on the back of our success.
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So did newspapers but no one moaned about them at the time!
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Actually we did and you could negotiate with them and they had other revenue streams as well.
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They prosper because there are so many agents.
If there were less agents they would have less customers to charge.
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WOW! That’s really deep, man. Profound statement. Insightful, even.
You don’t possibly think that there would be the meagrest of possibilities that they…
would …
just…
charge…
more…
per…
Agent, then?
Bright spark.
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Correct.
People on here are complaining about falling margins due to increase in RM fees though.
Perhaps that means there are simply too many agents.
If agents can’t put up with an increase of 10% to take their ad spending to just over £11k then they are in a game where the margins are too slim and naturally agents will have to go out of business or and wait for it, this is the bright spark – actually get better at their job.
What has increasing the number of agents ever done for the customer?
Certainly not an increase in the quality of service (increase in complaints to TPO every year).
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They are taking the pi55 now. They are making record profits, which is fine, they are a business like mine, but there has to come a point where you say enough is enough.
It’s just money grabbing cut-throat greed, which if an agent themselves were to portray, then we’d be criticised.
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An ironic advert on the side banners today!
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Do something about it….
Repost from earlier thread.
From the CMA website
Businesses abusing their ‘dominant position’
This is another mayor type of anti-competitive activity be businesses that you can report to the CMA.
A business might have a ‘dominant position’ in the market if:
A) It has more than 40% market share
B) It’s not affected by normal competitive restraints
It might be abusing a dominant position if it is unfair to customers or other businesses.
Making a formal complaint is easy, just follow the link
https://www.gov.uk/government/publications/report-anti-competitive-or-market-issues-to-the-cma
I for one have already complained. The more the merrier.
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Wonder if some people have a fear they will receive a backlash if they are seen to complain…is it anomynous?
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anonymous
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A great link thank you
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It is an advertising channel.
It cannot be held accountable because agents can’t do their jobs without it.
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Yeah… whatever.
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Go on then, leave Rightmove and explain to your customer that your years of experience are better than advertising to the most number of prospective buyers.
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An open question – in the cold light of day, has the foray into OTM bearing in mind its associated costs and in its present form provided any real tangible benefits to member agents be it revenue, profit or market share?
Please note “in its present form”.
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Revenue, profit or market share aren’t the only measures of success. OTM is a 5 year project they are not half way through yet, they don’t have to prove or achieve everything instantly.
AM is a seriously solid foundation even if OTM and the way it operates changes. This story might just give OTM the boost it needs.
I think things at OTM do need to change; a strong character to take hold of both operations and sales capable of going belly to belly with Zooconnbricks and taming RM and things could be very different by the time OTM has its 3rd birthday. It isn’t just small independents who are affected by changes and a challenging market. My analysis of all that is going on open up some intriguing possibilities for change in this next 12 months
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I think everything will change in the next 12 months. If independent agents come together more as one voice and that voice is spoken loud and clear…then the future will undoubtedly be very bright for all of us….
VIVE LA INDEPENDENTS!!!!!
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Interesting comment Robert.
Maybe now is the time the corporate estate agents realise that their businesses are still principally proper estate agencies and now need to work more closely together with independents rather than try and carve up the independent sector with the help of the big two portals?
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Corporate agency is being attacked more than independent agency, I think that is going to drive change.
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Why is everyone so upset?
This is what RM do!
We had our chance with OTM and blew it.
Just accept it as hard as it is. You will do NOTHING about it other than moan and continue to pay them.
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Absolutely smile please.
All this “if the OOPR rule was not around we would have supported it”…. bla bla whatever….
To understand AM/OTM was a real opportunity you would have understood the OOPR was essential for each agent to essentially trust the next agent would reduce spend on the portals if they joined and not simply increase spend to be on all three. (legal or not)
Perhaps our last hope is an AM win against ZooCon and we all read this story again and again to understand WE (Agents together) could create our own Number 1 Property Portal, on the basis of we fill the shelves! But in the meantime thank you RM for allowing me to make your website a pleasure for people to visit.
If the OOPR rule is dropped following a ZooCon win, will OTM new member numbers increase and those joining drop RM or Z of their own accord? I doubt it…… it may increase (you never know), but I doubt there will be any decrease on the others and AM will have to work quick to keep the existing members from not using a “court case loss” as an excuse to break away.
Like you say though…. what’s the issue…. RM rate hike isn’t anything new! and in a market with fewer instructions and the downward drive on fees, good on em…… hit us hard now, let us know what we have to look forward to.
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There are a number of key elements to a successful and effective business; the model, funding, IT, marketing and management. With regard to OTM it would appear that the model and management need tweaking or changing.
As with any business the Members of OTM have the ownership, power and ultimate authority to make these changes, a daunting prospect perhaps but one which needs addressing urgently if the project is to be successful. All business plans need a periodic review and change often follows, often driven by the shareholders. The recent court case surrounding OTM only arose because of a flawed element within the business model.
The Members need to co-ordinate their thoughts, vote and act accordingly if OTM is to be an effective antidote to the ever increasing costs of RM & Zoopla.
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OTM, it will never happen, too agent market centric, think outside the box guys! Times are a changing!
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If they take on board the new ideas and developments of independents, and those supporting the cause of independents ( one person in particular springs to mind), they still stand a great chance of succeeding. Everyone just needs to keep belief!
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PF21……..what are your “out of the box suggestions” please…?
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There are many ideas out there, some superb ones, but we need the existing membership of OTM to influence them to start listening.
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That would be telling…..but as has been said on here today we are a service industry.
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In response to Robert May’s post above.
During a discussion ‘down the other pub’ (when our Ros was the Landlady and it was a nice place to go…) on 24 February 2012 about Rightmove’s results release and their 23% increase in underlying profits, I posted the following:
“IF RM cost more than its’ worth – if you got less out of it than you pay in – you and every other Agent would walk and it would shrivel and die overnight. It doesn’t.
Time to face fact, I am afraid.
Look – you want to make it better – make your own!
How about someone who knows what the Hell they are doing create a RM clone. All (…or most of…) the bells and whistles – but NON PROFIT MAKING. The site must be OWNED by the Agents who advertise on it. Each a shareholder. One price paid per branch/discipline. Any profit made after operating costs is then repaid to the shareholders proportionate to their payment.
OR – donated to charity. Get some positive publicity out of it!!”
A year later we had Mr Springett announcing his dream for the future. I should have patented the idea.
On February 28 2015 we’d moved to a far better, comfier pub – same brilliant landlady, of course! – and in conversation with Robert May about the usual chancers, Robert posted
” I think I will invest my time and experience keeping agency just the way it is, a genuinely level playing field where honesty, integrity, qualification, experience and reputation are the measure of an Agent’s worth rather than everything stories like this represent?
I am getting increasingly irked by the amateur, money for nothing, attempts to extract cash out of an industry that relies on a strong moral compass and social etiquette most of these entrepreneurs have never even heard of let alone considered important.
Possibly now is a good time for Ros to review the track record and performance behind some of these ‘By appointment to’ tailors and the many cloaks they have promised will spiv up our industry in recent years.”
to which I responded
‘Hmmm…. Mr May – one of my favourite films is ‘Field of Dreams’.
Best known for one line – “If you build it, he will come”.
You, better than most, know what is to be built.
I assume that not only are the foundations laid, but it’s walled up, lid is on and it’s almost 2nd fixed…?
I, for one, would come.’
Well… he went out and built the ultimate “playing field leveller”. AGAIN, I should have patented the idea – but I had not one Scooby what to patent, never mind how to build the b100dy thing…!
Apart – both models can and will run independently, each serving a purpose for the user.
COMBINED – it would be a case of stand back… as I for one have no idea just how big the thing could get.
And when and if that happens, I will rue the days I didn’t take out those patents…
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Thanks Peebee I would sign up to serve Agents Mutual in a heartbeat and do have tech which compliments what they already have.
I have been thinking about this sketching out bizzo, I’ve concluded it is one of those inauguration speeches with hopes for the future rather than anything too serious or threatening.
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I too would love to serve Agents Mutual
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57 comments and counting!
This has to be the one of the most talked about issue for ages. It is obviously raising a lot of passion and emotion. I for one think we should, as independents, get wholly behind OTM, Robert and anyone else who has the true well-being of the INDEPENDENT FULL SERVICE AGENT sector at heart.
Even if you currently work for a corporate you should consider the ‘IFSA’ as a way to one day own your own business doing something that you truly love doing!!!!!
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The sole reason my firm didn’t sign up with OTM was the ‘one other agent’ clause – we didn’t like being told what we couldn’t do by a website. If they dropped it and recanvassed in the light of this apparent forthcoming extortionate greed, I wonder how many would now join.
The most poignant comment being repeated time after time is that WE, yes WE are paying their exorbitant salaries. Suckers or what!
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We are at the very least taken for granted….. and by the looks of it going to be exploited in the future.
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From May 2016
My underlying point is, all those agents who do not support OTM are waving a dirty great big flag above their office door that says, “come and take my cash”. And you had better believe that there will be a wave of proptech & two portals beating a path to their door to do just that…………………. With that in mind, all OTM naysayers might want to pop into that pharmacy over the road, pick up some lube, brace and go to their happy place, cos RM & Z… they are a coming.
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I told you so, lemmings to the slaughter. The average agent hasn’t the guts and will follow winging behind the RM Rep up to the time the bailiffs call and close the business down. The writing has been on the wall since agents promoted RM (not RM). You have no one to blame but yourselves if you continue to rollover. Wake up people, it isn’t as if the advertising costs that much …… Codling said RightMove continued to deliver margins in excess of 75%, a “super normal profit”. And how do they manage to do that? They know you won’t fight back and yet you are happy to roll over when a vendor says they won’t pay your fee. Income going down and overheads rising …. nuts.
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In my (albeit simple) opinion the answer is simple:
If OTM dropped the one other portal rule and had a flat fee of say £ 75 – £ 100 per branch per month, I suspect that almost every sales and letting agent in the country would be willing to give it a go for a year or two.
That’s say 15,000 agencies (?) x £100 pcm x 12 = £ 18 million – surely enough to run a relatively straightforward website and database – together with promotion, even without any third party advertising ?
If almost every agency was on OTM this would give leverage against RM and ZPG. (I suspect a large majority of agents would drop ZPG within a year if it took off).
Perhaps even have a promote OTM month (or 2 during each year?) where window displays, flyers, advertising, etc just has OTM and no other portals. OTM would be owned by the agents after all. This at least puts OTM on the consumers radar (which it just isn’t at present), and possibly then the pipedream of taking down ZPG and then RM might, might! just be possible ?
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I’m confused about the maths here.
According to Estate Agent Today, the total value of houses sold in the UK in 2016 was £227B, on which agents earned commission of £4.089B.
https://www.estateagenttoday.co.uk/breaking-news/2017/1/purplebricks-says-it-has-no-idea-why-its-share-price-is-so-high
And according to Property Industry Eye, there are roughly 17,500 estate agent branches in the UK.
http://www.propertyindustryeye.com/rightmove-boss-sketches-out-possibility-of-charging-2500-per-month-in-long-term/
That’s 17,500 branches competing for annual commission revenue of £4B – an average revenue of £234K per branch per annum. If the cost of advertising on RightMove averages £10,000 pa – that’s a marketing spend of 4% of revenue, or a 23X ROI on marketing spend.
Even if RightMove were to increase to £2,500 ARPA, that’s still a 8X ROI on an 13% marketing spend – expensive but surely not prohibitively so?
Sure, these are averages, and some agencies will be doing much better / worse than the average – but it does suggest that the problem here isn’t advertising cost. I get that there might be an emotional reaction to RightMove making off like bandits while agent margins are squeezed by the likes of PurpleBricks – but surely that’s the real issue?
Traditional agents don’t deliver enough perceived value (to buyers or sellers) to justify their average (low, by comparison to other countries) commission. What’s more, they’re struggling to even defend the current level of fees against online-only services.
The UK estate agency model is being disrupted by new entrants – because that’s where there’s the most cash up for grabs and the least value delivered. There’s no reason to think that trend won’t continue to have an impact and nibble away at the edges – first in the UK, US and Australia – and soon, everywhere.
Options? Bitch about and plot against a cost-effective lead gen service or improve service levels and (eventually) revenues.
Focusing on RightMove v Zoopla v OnTheMarket misses the point completely – there’s a limit to how much you can cut costs, especially in marketing, before it becomes counter-productive and the start of a slow death spiral.
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