OneRoof gaining in presence and relevance

by Alistair Helm in


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OneRoof, the new challenger in the property portal space has made some significant gains over the past 7 months since I last reviewed the site. As I predicted at the time; I foresaw a steady rise of this portal’s ascendancy in the minds of consumers and the real estate industry. The latest data certainly shows that to be the case.

Audience

Let’s start by looking at the key metric of audience. As highlighted in my November article I’ve been using the services of the free web tracking analytics tool SimilarWeb to record the progress of OneRoof and the other portals of Realestate.co.nz and Homes. The service cannot track Trade Me Property as it is not a discrete domain name. As noted at the time, the absolute traffic numbers detailed on SimilarWeb may not actually reflect the true audience numbers, however the trends and comparisons should be judged to be a reliable data set for analytics.

So in terms of top line audience, OneRoof has made significant steps forward. As at the latest data for June, OneRoof recorded a total audience of 1,120,000 as compared to Realestate.co.nz at 1,560,000. This places the audience of OneRoof at the equivalent of 72% the traffic of Realestate.co.nz.

The audience growth over the past year for OneRoof proves the value in the eyes of the consumer of the platform. From a position, a year ago when traffic was less than half that of Realestate.co.nz to now being at 72% of its scale is a significant improvement.

Now, as I stated the actual scale of the audience is not the key number, it is the relativity by comparison to Realestate.co.nz that is most important. At the same time the composition of the audience to the site is also very relevant. As I highlighted back in November, a large proportion of the traffic arriving on OneRoof was actually internal traffic from the NZ Herald website where all the property related stories were hosted on the OneRoof domain name. At that time this referral traffic amounted to 62% of all traffic, that’s nearly two thirds of all traffic viewing pages on OneRoof were actually drawn to the site to read property news stories and not drawn to viewing listings.

The good news for OneRoof executives (and possibly the bad news for Realestate.co.nz executives) is that this reliance on this referral traffic from the NZ Herald website is diminishing as the chart below shows.

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As of last month referral traffic has now fallen below search traffic at just 36%; compared to 63% at this time last year. OneRoof is clearly winning in the key arena of search engine optimisation and paid search, which now represents close to half the traffic to the site. That is impressive, as largely this traffic will be looking for property listings.

As I analysed back in November, I like to make an adjustment to the monthly audience figures for OneRoof and excluded the traffic from NZ Herald. The chart below tracks this adjusted traffic to show that for last month the traffic to OneRoof drawn to the viewing of listings is approximately half the scale of the audience to Realestate.co.nz, still a strong performance for a new entrant in the market and clearly still growing.

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As a further comment as to source of traffic, the chart below compares the performance of OneRoof with Realestate.co.nz and Homes vs. the same time last year. This ably demonstrates the success OneRoof has achieved in securing search traffic, placing its percentage source at very similar levels to the other sites.

However the mark of a credible and sustainable business online is undoubtedly the direct traffic created from users bookmarking or choosing to go directly to the site. Over the past 12 months the proportion of OneRoof traffic coming direct has risen from 10% to 18% but still languishes below the performance of Realestate.co.nz at 47% and Homes at a staggering 62%.

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Listing Page Views


Whilst the overall traffic to a property portal is critical in assessing the value of the offering provided by the company, there is no escape from the fact that aggregation of traffic numbers is not the real value proposition. What is key is individual listing views. Like it or not, what the property portals need to do is to provide agents and their clients, the property owners; with an audience, a very focused audience of potential buyers - active or passive buyers. Therefore the true measure of a portal is page views on individual listings.

Now this is where I have a major complaint of OneRoof. They do not provide open stats on listing pages of the number of views that have occurred on a listing. Something that Trade Me provide, Realestate.co.nz provide and almost all portals worldwide provide. Why should OneRoof choose not to do this? Surely not something they forgot? So from a casual user (or potentially a vendor) perspective it is really hard to see how many times the listing page has been viewed.

Thankfully though OneRoof has built an excellent agent portal to provide such stats of page views for agents listings. I therefore chose to work with some of my colleagues and come up with a sample of relevant stats for listings on OneRoof over recent months. I selected the data of page views over the first 7 days and compare those numbers with the same period on Trade Me and Realestate.co.nz. The first 7 days are without doubt the most relevant marketing period representing more than half of all-time traffic to a listing.

The results details in the chart below are revealing. Whereas Trade Me averages 1,669 page views on a listing in the first 7 days, OneRoof only managed to deliver 70 page views, at the same time over those first 7 days Realestate.co.nz delivered an average of 315 page views. On this basis Trade Me is 20 times more effective than OneRoof and Realestate.co.nz 5 times more effective than OneRoof at delivering exposure to prospective buyers. Clearly the value of OneRoof has yet to be seen in true buyer engagement.

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Just for clarity the 11 selected properties are not a random sample. They were all listed in Devonport over the past 6 months. They were all been promoted extensively online across the 3 portals using premium products. Adjacent to the actual page views for each group of listings is the average of the 11 listings - on Trade Me being 1,669 and Realestate.co.nz 315. The other adjacent highlighted number - 1,420 on Trade Me and 315 on Realestate.co.nz is the average 7 days page views for all Devonport listings over the first 6 months of this year (129 listings). Naturally as noted above no such data is available from OneRoof as there is no open data for listings page views.


Content

A property portal has a single task, that of providing consumers with access to view properties for sale or rent. Content is king, and always has been in this digital world.

Back in November I estimated that OneRoof had around 80% of the listings of Realestate.co.nz. I judge that this level has not significantly changed in the past 8 months. To come up with this estimate, I did a somewhat crude assessment by selecting random regions and suburbs to see how the comparison with Realestate.co.nz plays out in the inventory war.

Based on this sample and using a simple weighted average I would say that at this time OneRoof has around 80% of the inventory of Realestate.co.nz. The same position as 8 months ago.

The conspicuously missing franchise brand from OneRoof remains Harcourts. To be clear there are Harcourts listings on OneRoof, however they are few and far between as the total franchise is as yet not fully listing on the portal. Rather than an integrated API feed of all listings, individual offices and agents are listing manually to derive presence on the site.

This situation has such a sense deja vu for me. Back in 2008 Harcourts were the last of the franchise groups to list fully on Trade Me. At the time the pressure coming from the salespeople was enormous and despite the deep principles of the executive team of Harcourts who wanted to support the industry owned site of Realestate.co.nz, the franchise eventually made the decision to list on Trade Me.

Then again in 2013 amid the pricing fiasco by Trade me, Harcourts again were the most vehemently opposed to the proposed pricing change and fought to encourage agents to boycott the platform, with some degree of success; although that boycott has all but slipped into history.

Whilst I admire the deep principle of the Harcourts executive team to hold out from listing on OneRoof, I sense the time for the strategic decisions to list or not was at least a year ago and now that the other major franchises have acceded to the support of OneRoof there is little to be gained in holding out.



The future looks bright for Trade Me Property as it casts a darkening shadow on Realestate.co.nz

by Alistair Helm in ,


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“Someone should never take part in a fight unless they know they will win it”.

This was the opinion voiced in an article by David Hargreaves on Interest.co.nz in February 2014. Over 5 years ago. The article expounded the view that the real estate industry had more to lose than Trade Me, over the then, bust up over increased fees being introduced by Trade Me at the end of 2013.

Five years is a long time in our fast-paced digital world, yet the prophetic view expressed in the article is coming true all these years later, only not quite as imagined. The view then was that the real estate industry’s very business model, could in some way be impacted by the squabble with Trade Me. That has not eventuated. However, the real estate industry has lost in their ability to control the digital marketing platform. A loss far less financially significant, but none the less a squandered opportunity.

I have written at length over the years on what I see as the problems of Realestate.co.nz, and its ever weakening position against Trade Me in the competitive arena of digital marketing, including an impassioned address to the Real Estate Institute AGM last year. Sadly time moves on, and with it, the ever growing strength of Trade Me Property; and for its rival Realestate.co.nz, as the title of this article states, things look bleak.

The half year results of Trade Me published last month stated “The performance of Trade Me Property is exceptional and should continue into the second half of F19”. Not only is it exceptional at $22.3m, it is also sustainable. Trade Me Property in my opinion has found its sweet spot and for now the future looks bright. This result and optimistic outlook are the direct result of two significant successes that have yet to be fully realised. But before I examine these two matters, let’s pause a moment to look at Trade Me Property revenue over the past 4 financial years as reported in financial investor reports.

The most recent 6 months to December 2018 is outstanding, and follows what has been a fairly average performance over the prior years with revenue growth barely hitting double digit percentage growth.

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I am no financial analyst, but I would hazard a guess (as I have done in the above chart) based on my experience and knowledge that the second half of the FY2019 year is likely to see year-on-year growth of 30% resulting in a full year revenue of over $48m, up over 80% on 5 years ago when things went so wrong for Trade Me.

So to what do I ascribe this remarkable performance of Trade Me Property. Firstly a smart and highly successful new product launched last year – Premium Listing.

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This product works exceptionally well, Satisfying the needs of both the vendor and agent. The standout presence of this large listing creates impact in the search results and delivers a markedly high level of page views, not just on web browser pages but also on the Trade Me apps. This is significant, as up until the launch of this product there were no premium listings on either Trade Me Property or Realestate.co.nz that delivered a premium impact on the mobile apps in standard search results. The product design is loved by agents as it incorporates the agent and agency branding to great effect. Priced at a significant premium to the existing offering of Super Feature, the new Premium Listing has achieved a high penetration rate in the key markets of upwards of 15% of listings. This product is likely to benefit from the power of the virtuous circle. Agents love it, they include it in marketing budgets, the results are a delight to agents and vendors, other agents see the power and brand influence and they become adopters and for the buyer searching for property the design is as ever from Trade Me beautiful.

So that is one of the powerful drivers of this new rejuvenated and growing Trade Me Property business. The other is inventory.

I reported back in October last year that Trade Me had then surpassed Realestate.co.nz in terms of total listings of property for sale (including private sales). This was a key milestone as it destroyed the long standing cornerstone of marketing by Realestate.co.nz that they were the leader when it comes to inventory of listings. Subsequent to that turning point Trade Me has powered ahead and as of this month they have surpassed a new milestone.

Trade Me Property now features more property for sale from real estate agents than any other website. This is significant, really significant. Five years ago things went wrong for Trade Me over the price changes and the real estate industry endeavoured to boycott Trade Me. Today more of the industry support Trade Me than support Realestate.co.nz - the property portal that is owned by the industry. The charts below highlight this recovery by Trade Me, firstly for all listings and secondly for agent only listings.

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For Trade Me Property to be displaying significantly more agent listings than Realestate.co.nz on the website today (28,483 vs 26,277), means that real estate agent office are questioning the value of Realestate.co.nz. For the past 5 years the industry has rallied around the industry owned site seeking to consolidate support to make it the critical asset that it had the opportunity to be.

Sadly the industry, whilst well intentioned and principled as a body, is in reality a loose aggregation of over 600 independent business owners and over 15,000 independent contractor-status agents. They all think and act, first and foremost to their own best interest. Trade Me is a marketing tool, just as is the Property Press and the newspaper supplements, as well as Realestate.co.nz and when individual agents select marketing campaigns for their clients’ property what matters most is results. Those results are judged in page views and enquiries, as well as agent profile and presence, and this is where the rubber hits the road. Trade Me is winning this battle and likely to press the advantage even harder in the coming months and years, leaving the events of late 2013 to be a distant memory.


Disclosure: I have over the past 13 years been a senior executive at both Realestate.co.nz and Trade Me Property.

I am not at this time involved in either company through any role or investment. This article, as with other similar articles are written based on published information combined with insight gleaned from studying the property portal marketplace internationally over the years.


The rise and rise and rise and rise of property portals

by Alistair Helm in


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The announcement last month of the acquisition of Zoopla the #2 property portal in the UK by Silver Lake Partners, the US private equity firm for £2,200 million (NZ$4,180 million) was a clear statement as to the confidence the financial markets and their investors have in the business models of digital real estate marketing.

Zoopla is not the leading UK digital property portal. That accolade goes to Rightmove which according to its own stats has 70% of the UK total audience for property searches. Zoopla was only launched in 2008. At that time Rightmove had been in operation for 8 years and had gone public two years earlier. Rightmove in 2008 was generating over £50m in revenue.

Zoopla though was never one to daunted and was ever ambitious, lead by the charismatic and driven CEO Alex Chesterman. Through the first 6 years, the business grew through acquisition of other real estate websites and property publications building a formidable position as the #2 player leading to the IPO in 2004.

The IPO valued the company at £990 million, half the then value of Rightmove. In a savvy move Zoopla offered real estate agent customers the opportunity to buy shares at a 20% discount; a smart move to side step a challenging move by a new industry owned start up OnTheMarket which required loyal agents to sign up to only one of the other commercial portals to try and break the duopoly. Those agents who did and hung on to their IPO shares will likely see a return of 177% in 4 years.

This stellar rise and exit for Zoopla is not an exception in the market of property portals. I thought it would be interesting to do some analysis of the key players around the world to see just how valuable these businesses have become over the years. Many of the leading portals have been in operation now for close on 20 years.

Restricting this review to the UK, Australia, USA and New Zealand is not truly reflective of the global market that sees many massively successful operators – the likes of Seloger in France, Scout 24 in Germany, Zap VivaReal in Brazil to name but a few; however I have observed and researched extensively these key businesses over the years, so feel comfortable commenting on their performance and strategy.

 

3 Leading Property Portals - NZ$30 billion in value

The top 3 portals in my opinion globally are the REA Group, operator of Realestate.com.au in Australia (and other countries), Rightmove in the UK and Zillow in the USA. Together these three businesses have a collective market value currently of over NZ$30 billion. Five years ago those same 3 portals had a market value of just NZ$11 billion. I have for reference included New Zealand’s own Trade Me for reasons that will become obvious as I proceed.

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This scale of growth is spectacular. What is even more spectacular is the relative rise in the market value of these companies measured against their own domestic market index. I have simply indexed the growth in share price to the index at June each year.

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The performance of the REA Group is stunning, eclipsing the performing the ASX market by close on 4 times over the past 6 years. Zillow doubling the Nasdaq index performance and Rightmove outpaced the FTSE 100 by more than double. Sadly though our own NZ digital portal of Trade Me with a broader portfolio than just property has not attained such stellar growth and has fallen behind the NZX index over the same period achieving just half of the market index growth over the past 6 years.

 

Australian international benchmark

The REA Group is now not just an Australia real estate digital portal it has operations in Asia and now the US. This latter move driven by its largest single shareholder News Corporation (owns 60% of REA Group) which acquired the #2 property portal in the USA (Move.com) in partnership with REA in 2014.  However in terms of profitability at EBIDTA level the performance of REA relies almost entirely on the profits of Realestate.com.au, and they keep rising year-on-year with revenue growth in the last financial year of 16% - this is a 20 year old company that added A$92m of incremental revenue last financial year to total A$671m.

REA Group though are not alone in carving out a global powerhouse performance to better all comers, they are actually part of a triumvirate of Australian digital behemoths – REA Group, Seek and CarSales – each are the global benchmark for their category of property, jobs and motors. By no small coincidence the 3 core classified platforms of our own Trade Me.

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Just like the REA Group, Seek and CarSales have significantly outpaced the ASX market index over the past 6 years, close to doubling the ASX for CarSales and higher for Seek.

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Financial Indexing of Portals

Some further financial indexing provides valuable insight into the relative performance of these global leading portals for property and other classifieds.

In terms of absolute market value the comparison is staggering. REA Group still remains the most valuable property portal keeping Zillow at bay, and a significant 50% more valuable than its jobs portal partner and 3 times the value of the auto portal.

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The inclusion of Trade Me Property is purely as a means to compare the property operation of Trade Me with its peers in other countries. I have purely used the % representation of property revenue as a surrogate for value representation. Sure I know full well that a digital business based on a 4.7 million population of NZ is never comparable with the population of Australia, UK or US; I'll come back to that benchmark shortly.

When it comes to true grunt, any financial expert will tell you that value is only a reflection of profit and this is where the appeal of digital portals comes to light. The EBIDTA margin of these portals is impressive … if you turn a blind eye to Zillow.

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Rightmove is the king of money making – for ever £1 it receives as revenue it spend just £0.27 on running the business allowing it to reinvest 73 pence. Trade Me shows its might just as effectively, with a very impressive 58% EBIDTA margin, ahead of REA and its Australian counterparts whose 31% and 45% are still worthily impressive margins.

This metric of margin is critical in comparing digital portals. The very appeal of digital businesses is scale. The simple principle being that the core cost of a digital platform should cost no more to service for a million users than for 10 million or 100 million. That is why digital businesses can generate such EBIDTA margins. However this is where things get interesting. Why is it that Rightmove serving a UK market of 66 million people can achieve 73% EBIDTA margins whereas Zillow serving a 326 million population can barely scrape 1% margin? Equally how can Trade Me serving a domestic only market of 4.7 million hope to deliver 58% margin?

The answers to these two questions are complex and not directly related. The US market is nothing like Australia, UK or NZ when it comes to property marketing, there is no such thing as paid for subscriptions for listings or vendor paid marketing; leaving Zillow to monetise agent advertising and client leads.

As for Trade Me the very impressive performance of 58% margin may possibly be part of the reason that its market value has not attained the stellar rise of its peers, as a function of stifled ambition and lacking investment courage?

The final metric I will provide is the relative performance of these portals on a per head of population basis.

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Here we see the same stellar performance of REA extracting a market value which equates to over $500 per person in Australia. Trade Me as a group delivers an impressive $406 per person in NZ,  but the truer comparative metric is the equivalent market value of the property sector (based on share of revenue) delivering a market value of just one tenth that of REA. Having said that the surprise is the relative performance of Rightmove at $130 per person in the UK. This potentially portends to the view that the upside for Rightmove is still significant, although the danger is made in assuming the UK real estate marketing landscape is similar to Australia which it is not.

The overriding clarity that these data points highlight is the enormously successful digital property portal businesses that have been developed globally over the last decade, but more significant is the powerhouse operations of digital portals across the Tasman over the same period. What can we as NZ’ers somehow learn from this and more importantly what can Trade Me learn to help it chart a more dynamic path to growth as a true NZ icon in the digital portal space?