It is estimated that there are nearly ten thousand property related portals and marketplaces around the world. They operate in different segments from rentals, primary sales to secondary sales and have differing financial models. Each of them has to deal with complex underlying real estate market structures, different operating economics, different Government legislation and varying levels of competition.  

Over the last 3 weeks I have been assisting eight companies across the globe. They are all experiencing the same change in fundamentals – listings are DOWN, traffic is DOWN, leads are DOWN and transactions are DOWN. Their customers – the agents – are in deep trouble and this is being passed onto the portal and marketplace.  

It’s obvious what is far more important to all of them is a simple – WHAT TO DO TODAY TO LIMIT THE IMPACT OF THE VIRUS.

What has become clear is that when looking for guidance around what to do during this crisis, one size will not fit all.  

Industry analysts and consultants often point to what the big boys (Zillow, realtor.com, realestate.com.au, Rightmove, ImmoScout24, etc.) are doing. This is fundamentally irrelevant for 99 percent of the portals and marketplaces globally. The big boys are super profitable, sitting on strong cash reserves, and operate (mostly) in established markets. The US examples are most irrelevant as they operate in an MLS driven market with extremely large cash reserves.

On Monday we are running a FREE webinar where we will discuss what property portals and marketplaces around the world are doing TODAY to combat the impact of CoVid-19 on their business operations. The information we will share is the result of a detailed survey of around 150 portals and marketplaces around the world.

In particular we will detail during the webinar:

• Financial initiates being undertaken today to help agents and developers 

• Non-financial approaches to building a stronger relationship with customers 

• Tools being developed to help agents and developers operate in a social distancing world 

• Cash preservation initiatives to ensure they survive the downturn in their businesses

Of course, this is an interactive webinar, so you can ask questions as we go.

Here are five early and important insights from the Coronavirus Impact Survey launched yesterday. If you would like to participate, please click here.

Register today for a FREE webinar on Monday 6th April where more results will be discussed. In addition, those that complete the survey will have a special webinar on the 8th to discuss the results in full. 

There are many more insights that will be shared.

Since January / February, the following changes have already happened for portals and marketplaces (on average):

1. 19 percent decrease in customers/advertisers

C-Level leaders are reporting that there has been a significant decrease in customers in March with the second half being significantly worse than the first half. The main cause is advertisers temporarily closing their businesses or choosing to stop advertising – very few have actually gone out of business already. Leaders are expecting the churn of customers to continue for the next two to three months.

2. 15 percent decrease in listing numbers

Overall the C-Level leaders are reporting that the number of listings from advertisers has decreased by around 15 percent.  This seems in line with the number of customers ceasing to advertise with the portal. It is expected that this will accelerate as housing markets around the world slow down.

3. 17 percent decrease in revenue and this is expected to increase to 28 percent 

The average month on month (Feb to Mar) decrease in revenue was 17 percent. However, leaders reported up to a 70 percent decrease in revenues.  Most leaders expect this to get worse and compared to their original budget, expect revenues to be off by 28 percent for the last 9 months of the year.  Most of the decrease in revenues is being driven by customers proactively decreasing their listing and VAS (value added services) packages.

4. 73 percent of respondents are offering some form of financial assistance

Most portals and marketplaces are offering some form of financial assistance to their customers. The most popular types of financial assistance are discounted listing subscriptions (with an average of 33 percent discount), deferred invoice payments, free listing subscriptions, and discounted depth or value-added services.

5. 24 percent decrease in total enquiries

On average, enquires are down 24 percent over January and February while visitation has decreased by similar numbers.  It is expected that this will decline even further as buyers and renters cease to enquire about properties as their own personal financial situations worsen.

These are just some of the many findings coming out of the 60-question Coronavirus Impact Survey.  If you would like to participate, click here to complete the survey.

During the FREE webinar on the 6th April, these survey results will be discussed in further detail while people that complete the survey, will be invited to a special webinar to discuss the survey results in detail. 

Download your free version of the survey results by clicking here. 

190 C-Level leaders responded to the survey providing details on the impact on their finances, their customers, HR, product development, capital raising and the visitors to the site.

What the survey results show is that the Coronavirus will have a massive impact on online classifieds and marketplaces around the world.  It will impact all parts of the business and almost no one will be immune. 

Leaders are expecting the impact of the Coronavirus to last for 18 months until their businesses return to normal.  Head count will be reduced driven by dramatic falls in revenues as the advertisers – agents / developers / car dealers etc. – all come under enormous financial pressure.

To help online classifieds and portals make the most sense of what is happening, the Online Marketplaces Group is running its second FREE webinar on the 6th April.  

Click here to register

The theme of this webinar is “A Deep Dive into the Revenue and Cost Initiatives Portals and Marketplaces are Implementing”.   

Looking at what the REAs, Rightmoves and Zillows of the world are doing is not very instructive.  They are profitable or have significant cash reserves. They are operating in established markets where the market structure is well defined. However, most portals and marketplaces operate in a more tenuous environment and need practical examples of what they can do to survive in the current turbulent market.

This webinar will use practical examples from portals around the world to understand what they are doing, the impact it is happening, and how their customers are responding.

In the first weeks of March, Zillow saw a 191 percent increase in the creation of 3D home tours and Redfin has seen a 494 percent increase in the requests for agent-led video home tours.

To help agents, many portals around the world are rushing to market products that overcome the challenges presented by social distancing. These include products for remote showing for homes, improved virtual tours, the use of Virtual Reality, online consultations, and the improvement of the underlying contract process so that minimal human interaction is required.

Lifull Homes – Japan (www.homes.co.jp)

Lifull Homes has launched a new app in response to social distancing in Japan.  The app focuses on the rental segment and connects agents handling rental properties with renters looking for properties. The app lets agents set up online consultations, do property tours and even complete any required documentation.

Hemnet – Sweden (www.hemnet.se)

Hemnet in Sweden has launched “Hemnet Live” in partnership with video experts, Bambuser.  This allows agents to perform live home showings over the internet without anyone around. They can interact with potential buyers using the chat functionality.  The service is being provided free of charge during the initial launch period.

The objective is to ensure that agents continue with business as usual while practising social distancing.  In a survey of visitors, over 50 percent said they would consider a streamed online home viewing provided the quality is high enough. In the first few days, Hemnet scheduled over 150 online home viewings with agents rating the product 6 out of 7 for the service it provides.

Hemnet is also working on other projects that will simplify real estate transactions without physical interaction.

realestate.com.au – Australia (www.realestate.com.au) 

realestate.com.au has launched a Digital Inspection feature that is free to agents. The agent films themselves walking through the property highlighting the various aspects of the house and then this is uploaded to the “Inspections” section of the buy or rent listings making it easy for buyers and tenants to see a property remotely.

Domain.com.au – Australia (www.domain.com.au)

Domain is launching a new digital inspection and auction tools through Real Time Agent, a business it acquired in November 2019.

The range of tools will allow agents to remotely show listings and to conduct private viewings of properties.  They will also launch a new product that allows agents to register bidders and conduct live stream auctions remotely. 

Rently – USA (www.rently.com)

Rently is a US based software company that develops self-showing solutions for rentals.  Their keyless entry solution allows potential tenants to tour houses by themselves using a one-time code.

Demand for their keyless entry solutions has tripled since the beginning of March as social distancing protocols come into place throughout the US. 

See it on YouTube here

Zenplace – USA (www.zenplace.com)

Zenplace is a tech company that provides rental management solutions to the US market. Some of the products and services it provides include virtual tours and robot-based tours. The robot has a screen where the real estate agent can speak to the potential tenant and lead them around the house.

Since March 11, they have seen a 293 percent increase in interest for smart automated lockboxes and self-serve showings and a 278 percent increase in demand for videos, online and 3D tours.

How did the market leader get it so wrong and, in the end, will it matter?

Some Background

For years Rightmove has operated a 70 percent-plus EBITDA business, making large profits and creating enormous value for its shareholders. Since listing in 2006, Rightmove has generated a 1,500 percent return for its shareholders.

In the 2019 financial year, the company had a pretax profit of GBP 213 million on revenues of just GBP 289 million.  To deliver this, Rightmove increased its ARPA (average revenue per advertiser) by 8.2 percent - through a combination of price increases and premium product sales. During the year it returned GBP 149 million to shareholders through dividends and buybacks and had GBP 61 million in current assets as of 31 December 2019.

The rapid emergence of the coronavirus crisis and the virtual grinding to a halt of the UK housing market has placed enormous financial pressure on the whole industry – from developers, through agents, and of course marketplaces.

Zoopla has reported that UK housing sales could plunge by 60 percent in the next three months.  The pressure placed on UK estate agents is substantial as they operate on relatively thin economics.  The average home sales price is GBP 240,000 and with commission rates of 1.25 percent, the average commission is just GBP 3,000.  This compounded by the pressure of the online estate agents makes every penny spent on marketing critical.

This was highlighted by Rightmove in February in its full-year report to the market where it said: "slower H2 2019 will impact some agents in early 2020 – some smaller agents will continue to struggle with lack of cash flow from slower activity".

Rightmove "Helping" the Industry: Its Ill-Conceived Deferment Package

Like many portals and marketplaces around the world, and knowing its customers were in financial pain due to a slow market dramatically exacerbated by the coronavirus crisis, Rightmove decided it wanted to help its customers through this tough period.

On Wednesday 18th March, Rightmove launched a deferred payment package:

"The scheme will give qualifying agents the option to defer the payment of £275 per branch of their monthly invoiced costs each month for six months starting from 1st May. The amounts deferred would be paid back evenly over the same term after six months of the first deferral period.

"Agents also have the alternative option to defer payment of £500 per branch of their monthly invoiced costs each month for three months paid back evenly over the same term after three months of the first deferral period.

"For agents on a lettings-only membership package, the scheme allows deferrals of £150 each month for six months or £250 each month for three months."

Rightmove then defined a qualifying agent as being:

1. Have fewer than 25 branches on Rightmove
2. Have been a continuous Rightmove customer for at least 12 months
3. Pay by direct debit and have paid their Rightmove invoices on time for the past two years
4. Provide evidence of sales or let the agreed pipeline (or proof of funds).

This package was never going to work as it didn't take into account the real issue that estate agents are facing – they won't have much income for the foreseeable future.  The package was likely to do was cause its customers even more financial pain in the future.

Secondly, the sheer complexity of the package and the complex qualification requirements made it look like it was built by accountants who had never met a client and were seeking the perfect solution.

Finally, it appears the package was designed to maintain the financial growth rate of the business (as best it could) to serve its shareholder masters.

The Industry's Quick and Brutal Response

The response from the industry was quick and brutal. Property Industry Eye ran an article about the deferment package which garnered over 200 negative comments.  This helped launch a Boycott Rightmove Facebook group (which now has 1,300 members) and the www.SayNoToRightmove.co.uk website (which now has over 900 agents registered).

The following day (19th March) OnTheMarket took the more pragmatic, agent-friendly approach and launched a simple 33 percent reduction for those customers on full tariff listing agreements.  What they didn't say is how many of its customers this would affect.

On the 20th March, Zoopla, clearly smelling blood in the water, put together an offer for their customers designed to entice agents with fewer than 30 branches to turn off Rightmove and just use Zoopla.

If an agent commits to leaving Rightmove at the end of their contract, they would get nine months for free advertising on Zoopla – as long as they enter into an 18-month contract on normal fee levels following the free period.

Zoopla also launched another similar option, whereby agents who are not on Rightmove or don't want to come off Rightmove, would get three months of free advertising before returning to normal fee levels (as long as they sign an 18-month contract).  These three months may increase to five depending on the impact of the coronavirus.

Rightmove Backflips, Apologizes and Comes to the Party

The pressure on Rightmove was enormous and just 2 days later (Friday 20th March) the company backflipped and rolled out a new discount package for its customers. In an announcement it said

"Instead of offering the deferred payment scheme to independent estate and lettings agents, we're going to reduce your Rightmove bill by 75% for four months, starting from 1st April whether you advertise residential properties, new homes or commercial premises.

"You don't need to apply for this discount, your invoice will automatically come through reduced by 75%. To be clear, this is not a deferred payment, this is a discount that you don't need to pay back."

This was followed a few days later with the CEO of Rightmove, Peter Brooks-Johnson, admitting to an agent "we don't always get things right, but I like to think we can see it when we get things wrong and we do something about it."

What has been the Short-Term Impact?

The last week has taken a toll on Rightmove that will have a significant impact in the short term.

• The already negative view of Rightmove has been enhanced through its launch of the deferment program and then backflip.
• Agents are still coalescing around the Facebook group and the SayNoToRightmove site.  This is likely to intensify as agents have time on their hands during the lockdown and social distancing.
• The Rightmove share price dropped 15 percent following the announcement of the deferred payment package and the negative response of the industry.  This wiped around GBP 700 million off the market cap. However, since the announcement of the 75 percent reduction in fees, the share price has recovered almost all the lost ground.
• The 75 percent discount package is expected to cost Rightmove between GBP 65 million and 75 million in profit this year.
• Revenues will be significantly lower this year driven by the discount package, the churn of agents and the highly likely significant reduction in taking up premium products.
• In 2019, Rightmove lost 6 percent of its advertisers and this is likely to grow in 2020 as agents take up the Zoopla offer or simply just go out of business.
• Rightmove has had to cancel its final dividend and suspend any financial guidance for the market.

The last week has been one of self-inflicted wounds for the team at Rightmove.  Instead of leading the industry, they have let the industry dictate to them how to run their business.  They missed the market with the deferred payment package and have been playing catch up ever since.

The question now is what this means in the long term and what can Rightmove realistically do to position itself well and resume its leadership position once the crisis is over.  In part 2 of the article, we will look at these two questions in detail.

There is a very serious concern amongst C-Level leaders of online classifieds and marketplaces around the world that the impact of the Coronavirus is putting the viability of their businesses at risk.

The detailed, 60 question survey of 190 leaders showed that 55 percent of them believed the viability of their businesses is truly at risk, with 43 percent believing they may not even survive the short term. There is anecdotal evidence of businesses already "shutting up shop" as they realize, they don't have the cash reserves to survive the rapid downturn in business.

Leaders are also pessimistic about how long the Coronavirus will have a direct impact on their business – either on their revenues (and thus their customers' businesses), the ability to work closely with their customers and the impact on their workforce.

When asked the question "how long do you expect the Coronavirus to have a direct impact on your business", the C-Level leaders indicated they expect an average of just under nine months of direct impact on their businesses.

On a region by region basis, the C-Level leaders in North America (the USA and Canada) and LATAM believe the impact will last longer, while in Africa there is relative optimism that the impact will be shorter.

However, companies will not be "out of the woods" once the immediate impact of the Coronavirus has passed. C-Level leaders believe that it will be at least another 9 months until they will return to business as usual and over 20% will need to raise capital if the impacts last more than 6 months

It is clear to see that online classifieds and marketplaces will face at least 18 months of pain as they operate in a Coronavirus impacted business environment and then try to rebuild their businesses.

About the Impact of the Coronavirus Survey 

The Impact of the Coronavirus Survey was conducted by the Online Marketplaces Group between the 18th and 25th of March. 190 C-Level leaders from around the world completed the survey. There was a fair equal representation across all business sizes and all markets.

For more information on the survey contact simon@onlinemarketplaces.com

]]> https://www.onlinemarketplaces.com/articles/online-marketplaces-industry-survey-reveals-challenging-times-ahead/feed/ 0 https://www.onlinemarketplaces.com/articles/usd-90-billion-in-listed-marketplaces-value-destroyed-in-just-4-weeks/ https://www.onlinemarketplaces.com/articles/usd-90-billion-in-listed-marketplaces-value-destroyed-in-just-4-weeks/#respond Sat, 21 Mar 2020 04:00:00 +0000 https://www.onlinemarketplaces.com/usd-90-billion-in-listed-marketplaces-value-destroyed-in-just-4-weeks/ The last month has been a crazy month on the global stock exchanges.  Across the board, shares in listed companies have plummeted by up to 60 percent – all driven by the uncertainty created by the Coronavirus.

An analysis of 15 well known listed marketplaces and marketplace groups reveals that over USD 90 billion (or 38 percent) in value has been wiped off their market caps – over one third of their value just 4 weeks earlier.

In local currency, the overall decline has been 41 percent on average, well above the decrease in the Dow Jones of 35 percent and the NASDAQ that has dropped 27 percent.

When looked at on a stock by stock basis, Zillow is the worst performer losing over 55 percent of its value.  Shares plummeted from a high of USD 65 to USD 29 as investors see problems with their iBuyer model in the current market.  Not surprisingly, Zillow has paused its iBuyer operations while the Coronavirus plays havoc with the markets.

Three of the next four worst performers are number 2 or 3 players in their respective markets. Domain in Australia has decreased 52 percent in local currency, OnTheMarket in the UK has dropped 48 percent, and Lifull in Japan 46 percent.

Clearly the market is factoring the movement of advertising revenues from the number 2 and 3 players to the market leaders as advertisers have less money to spend.

Interestingly the Scout Group in Germany and CoStar in the US decreased by 23 percent and 26 percent, well below their peers. This probably reveals the strength of their underlying business model.

It is clear that the Coronavirus is going to play havoc with online marketplaces around the world.  The customers are either going to stop buying or stop paying, challenging cash flow and putting the pressure on management to steer their businesses through this challenging time.

On Wednesday 25th, the Online Marketplaces Group is running three webinars to review the results of their recent Impact of the Coronavirus Survey and to discuss the best way forward for marketplace businesses.

The sessions are 10 am Singapore time, 11 am Madrid time, and 10 am New York time – all on the 25th of March.

Register today - Here