Can Agents’ Mutual succeed where corporate giants Google and Tesco failed? That is the question posed in a new report for investors.
It says that to succeed, a new entrant would need “millions” – specifically £100m – by way of a marketing budget.
The report also emphasises that while Rightmove will remain ahead of Zoopla after the latter’s stock exchange debut, both will continue to hike prices.
William Packer, of Exane BNP Paribas, who has written ‘Zoopla & Rightmove: an independent primer’, says the UK property portal industry remains “an attractive investment proposition” and “we see Rightmove and Zoopla as well placed”.
However, the report says that “significant debate exists as to the market share of both audience and leads” respectively for Rightmove and Zoopla.
The report says the debate is important, because it is leads which justify price increases to agents, and therefore drive revenue growth.
Despite this, the report predicts that both portals will be able to sustain double digit revenue growth over the next five years.
It says: “We see ARPA [Average Revenue Per Advertiser] growth through baseline price increases and upselling to premium packages as the key growth drivers, complemented by estate agency formation.”
Paribas also expects Zoopla’s ARPA to grow slightly faster than Rightmove’s, albeit from a lower base.
The report identifies Agents’ Mutual as a potentially disruptive entrant, with its “only one other portal” rule.
However, it cautions: “We see the likelihood of Agents’ Mutual reaching a critical mass to drive large-scale cancellations as limited. In the event it does gain significant traction, we see Zoopla rather than Rightmove as most at risk.”
It continues: “A successful Agents’ Mutual launch would be a negative for both players but likely more so Zoopla.
“If Agents’ Mutual succeeded in their ambition to attain 2,000 estate agents in the next three years, while maintaining their ‘only one other portal’ pledge, we see a number of negatives.
“Firstly, we estimate around 20% of the 2,000 estate agents would choose to leave Rightmove (rather than Zoopla), resulting in a churn of 400 agents.
“Additionally, in this environment ARPA growth, especially that based on price increases, could be curtailed. We see Zoopla as more exposed to this risk.”
The report does not rule out new entrants, but warns they will have to invest about £100m to build a brand and drive sufficient audience to compete with Rightmove.
It notes that even Tesco and Google both failed to make their online estate agency ventures work.