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House price downturn? It's all the same to Rightmove
Neither the credit crunch nor the rocky and uncertain property market has done anything to quell the need to both speculate to accumulate, and to stay abreast of a changing digital world, writes Linton Chiswick.
As recently as June, the talk was of Rightmove’s impending decline. Google had just dipped one of its giant toes into the UK property search market, sending a wall of water over the established portals. Even Rightmove’s managing director, Ed Williams, was shedding stock as fast as he could, reportedly selling £8 million of shares (almost half his holding). 'A time to short Rightmove?' pondered more than one analyst. Rightmove’s share price was 664p.
Before that, in February, Investors Chronicle had described Rightmove’s business as 'old hat', and marked it 'sell'… at 535p.
The punch line? A few days ago, Rightmove shares peaked at 740p on takeover rumours. In Europe, Axel Springer, the publisher of German newspaper Bild, had made a €566 million bid for SeLoger.com, France’s Rightmove equivalent, and Rightmove had suddenly looked undervalued and a good catch.
So, if the property portal is an 'old hat' business on the brink of being swamped by more powerful players or free alternatives, what’s the attraction?
On November 12, Rightmove will pay shareholders a first-half dividend that’s gained 67% in value over a year. And while its own index continues to point to falling house prices, traffic to its website was up, apparently, 22% in the first half of the year.
The point is that Rightmove doesn’t really need to care about house prices. It makes its money by charging estate agents to advertise. Each branch pays a fee and, in return, gets to show all their properties, plus choose whether to pay for extra promotion. The average spend per agent increased 20% during the first half of the year, and almost 600 new offices joined (or re-joined) the website during the same period.
Nor was Google the first high-profile threat to Rightmove in recent years. Resentful at feeling held to ransom by the website, agents – under the leadership of the National Association of Estate Agents – launched a free alternative back in October 2008. PropertyLive had good will on its side, a readymade data set and – best of all – it was free. But if it took ingenuity, raised fists and a belief in the power of revolution to launch PropertyLive, it took real guts to scramble to the front of the barricades and be the first to leave the market-leaders. Estate agents don’t want to change the world. They just want to sell houses.
The bigger portals know it’s a market worth fighting for, and neither the credit crunch nor the rocky and uncertain property market has done anything to quell the need to both speculate to accumulate, and to stay abreast of a changing digital world.
The launch of the iPad drew an energetic response, and Rightmove-rival Primelocation managed to demonstrate just how much the prize was worth playing for when its own iPad app appeared for a while at Number One in the 'lifestyle' section of the free apps chart. People spend time looking at houses online. The fast-growing and acquisitive Zoopla has recently ploughed cash into a high-profile TV advertising campaign, spending on old media to capitalise on new. Rightmove itself has launched a full mobile site with a GPS tie-in, to cater for smartphone-equipped house hunters on the move.
The bigger players in property search know it’s a numbers, and a profile, game. Rightmove’s biggest strength is barrier to entry. It’s just too late to launch now and build the brand awareness of a Rightmove or a Primelocation. The clicks go where the data is. The data goes where the clicks are. The big players consolidate their lead either way.
A further reduction in transaction levels – enough to shut estate agency offices en masse – might damage Rightmove. But it’s worth noting that even at current, historically low levels, offices have been opening, some agencies expanding. With property search an increasingly online activity, it’s print advertising – traditionally a £500m annual spend by agents (compared to Rightmove’s £70 million turnover) – that’s most likely to suffer.
So no wonder Axel Springer was so keen to recover some of the property advertising action in its new form. In the UK, Primelocation is part of the Daily Mail-owned The Digital Property Group stable (along with FindaProperty.com, Globrix.com and FindaNewHome.com). Is a move on Rightmove, by News Corp, or even the Daily Mail & General Trust, next?
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