Ask any of Rightmove’s thousands of estate agent and developer customers what they think of the company and chances are the response will be grim. Words like ‘arrogant’ are common, phrases like ‘a necessary evil’, are used with monotonous regularity.
Should this worry them?
It’ll come as no surprise that Rightmove doesn’t quite see it this way. Its CEO, former management consultant, Peter Brooks-Johnson, speaks of “a culture which is both restless and focussed” but he maintains that the business believes in the “magic of inquisitive listening”. Perhaps he, and his foot-soldiers, should listen a little harder.
Their attitude bears striking similarities to Ryanair at the height of its powers. It’s an attitude that comes from the deep-seated belief that their customers need them more than they need their customers. Rightmove’s hubris is further exacerbated by their market domination, that makes them almost a mandatory inclusion on any property marketing plan – a little bit like the Standard was in London, in the days when press advertising ruled.
However, those of us with long memories know that markets are volatile and businesses that have weaknesses can be highly vulnerable when change occurs. And having a substantial percentage of your customers that only use you because they have no other choice, is a significant weakness indeed. Ask Ryanair.
Among the property portals, Rightmove is the market leader by a distance. Patrick Hosking, Financial Editor of The Times, described their pricing power as “Herculean”, the business is a “cash generating gorilla” he wrote. The other two major players are indeed a very long way back – but I get the sense that things are changing.
The news broke last week that UK developer, Bellway Homes has announced a deal with OnTheMarket. That means three of the top five developers are now signed to the portal, despite them only recently deciding to accept housebuilders on their site.
OnTheMarket seem to be sorting themselves out.
Their launch in 2015 was marked with a promise of ‘fair pricing for agents’ (a bit like Rightmove when they started), and they had the critical mass of six of the country’s biggest agencies as shareholders. Despite all that, they had a slow start, caused mainly by their ill-conceived ‘only one other portal’ rule, which they hoped would go some way to killing Zoopla off. That went well.
But, since the Agents’ Mutual decided (not unanimously, I understand) to demutualise, and the plc was listed in 2018, they have become much sharper commercially. In an effort to avoid profit-hungry investors taking the business the same way as Rightmove, listing agents were given a chance to grab a slice of the action, about 2000 of them did so.
They finally dropped their silly portal rule last year (for new recruits), despite having just won a three-year legal battle to keep it; they allowed on-line agents to join, introduced mouth-watering incentives for new listers and finally opened their arms to the developers too. As a result, they have started to recruit meaningful numbers of agents, offering free trials and competitive deals to get them signed up, in an effort to achieve critical mass. Since the floatation, they claim to have more than doubled the number of agents’ branches listed on the site.
Meanwhile, Zoopla also continues to maintain steady progress. The acquisition of the Zoopla Property Group by private equity firm Silver Lake in 2018 had a sharpening effect on the business, much like OTM’s floatation. They abandoned some of the irrelevant, non-core, activities they indulged in, something I strongly believed they should have done years ago, and concentrated on offering a less-confusing journey for house-hunters.
Now they are a private business, they can take a longer-term view. Invest in building the brand, be much more commercially aggressive; to coin the words Peter Brooks-Johnson used to describe Rightmove, they can develop a ‘culture which is both restless and focussed’.
They can also invest in the site itself. Enhance the user-experience, develop the tools that will offer their listing agents a genuine commercial advantage. And do all this against the backdrop of a much better relationship with their agents and developers. As part of Silver Lake, Zoopla now has deeper pockets and is more commercially minded. I expect them to make significant strides forward over the next few years.
In the battle for market share, neither OnTheMarket nor Zoopla have any great emotional brand loyalty to overcome. Despite the hefty marketing budgets invested by all of the top three, including millions spent on the telly, their advertising is safe, predictable and dated. Nothing in their creative work even attempts to build a brand personality, it’s all about the ‘what’ and ‘how’, and nothing about the ‘why’. Compare their dreary television ads with the leaders in other incredibly competitive markets, like Compare the Market and Amazon. An enlightened marketing director, a brave CEO and a proper creative agency; it wouldn’t take much to be the most talked about brand in the industry.
One of the problems that all the portals face, is that their market is a finite size. Residential property transactions in the UK have been static at about 1.2m per annum for the last six years and show little sign of significant growth in the short term. So, to meet their investors’ insatiable demand for increased profits, other than by reducing their costs, they have three options; 1. Increase market share (difficult for Rightmove in the current circumstances) 2. Diversify into other products and services (hardly the ‘focussed’ culture Rightmove aspires to) 3. Increase their ARPA – their Average Revenue Per Advertiser per month
ARPA is considered a crucial measure of success and Rightmove is streets ahead of its competitors according to this benchmark. OnTheMarket averages just under £350, the last data published for Zoopla suggests theirs is similar – but Rightmove dwarfs those numbers, earning over £1,000 per month per advertiser, and they’re not done yet. They believe there’s a lot more growth to come from their hard-pressed client base. I’m not so sure.
Their relentless drive to increase spend per advertiser is the thing that causes most of the friction between Rightmove and their customers. Arbitrary price increases, packaging of products and high pressure, ‘take it or leave it’ sales techniques are often cited as the most resented aspects of the relationship.
Rightmove’s business model and commercial strategy depends wholly on maintaining critical mass. It is not lost on the agents that, without them, Rightmove doesn’t have a product and the balance of power could shift very quickly if genuinely viable alternatives become widely available and affordable. If agents start to leave in numbers and more developers follow the example of Bellway, Barratt and Persimmon, then they will need the support of a loyal customer base. Based on their current level of popularity, those supporters might be a tad thin on the ground.
It’s not just potential migration to other portals that poses a threat to Rightmove’s continued growth and prosperity. Habits in media consumption change continuously. Rightmove does the traditional portal model extremely well, few would argue with that, but their content in the social media environment is un-engaging and clunky.
The Millennials are the next generation of homebuyers and their preferred journey might render the traditional model redundant. Unthinkable? Who would have believed the latest generation of social media consumers would turn their backs on Facebook, citing it as being for ‘old people, like my parents’?
What’s needed is a good, old-fashioned, charm offensive. More flexibility, more inclusivity, a greater willingness to deal. It’s time for Rightmove to engage with their customers, to listen; genuinely listen, rather than act out some management-speak cliché. To put it simply, if we’re dealing in clichés, Rightmove needs to start planning a coronation, it’s time to make the Customer King.
Ryanair made headlines by openly declaring the war against their customers was over, a little bit of short-term pain, for substantial long-term gain. It’s time for Rightmove to follow suit.
Matt Fleming is a Residential Property Consultant advising marketing agencies and housebuilders direct. He has specialised in residential property for over 35 years and, during that time, has worked with most of the UK’s top 20 developers. The thoughts and sentiments in this article are entirely his own and do not necessarily reflect the views of the businesses he works with.