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OnTheMarket Plc

OnTheMarket plc Q&A (2 of 3) with Zeus Capital (LON:OTMP)

OnTheMarket plc (LON:OTMP) Chief Executive Officer Ian Springett caught up with Zeus Capital’s Head of Account Management Ryan Mendy for an exclusive interview.


Ryan: Can you run us through your headline numbers and performance to date?

Ian: In many respects, the performance for the half-year hasn’t shifted enormously the revenue level from where we have been for the previous half year. The growth strategy that we’ve embarked on, supported by the IPO and the £30 million capital raised, is primarily in the first instance geared driving market share of agents listing property listings on the portal and consumer visits feeding through ultimately to the all important lead generation for agents. So, the vast majority of our additional agents that we’ve added since IPO, in accordance with that fast growth strategy have come on board on free trials.

Somebody much wiser than me who’s run property portals in another geographical market puts it very simple. You first of all build listings, secondly you build consumer audience and thirdly, comes the money. The value you will then generate from those two things growing and the interaction between them, what we call ‘network effects’ so more people looking at more property, allows you to generate more value for your customer which in this case, and in the case of Rightmove and Zoopla, is primarily the estate agent. Worth noting that 75% of Rightmove’s revenue comes from estate agents and the remaining 25% is pretty much wholly reliant on the 75% being there.

So, in terms of the numbers, broadly flat in revenue terms but we are spending some of the money that we’ve raised to build the organisation, to increase our marketing profile, to drive more visitors to the portal and translate those into value for estate agents. So, we’ve moved into a £5 million loss compared with the profit for the previous half-year but that is entirely expected and in accordance with the plan.

The pleasing statistic is that we have achieved what we’ve achieved which I’ll come on to in terms of KPI’s with a much slower cash burn that we had anticipated. So, we’ve simply been able to deliver what we’re delivering whilst spending less money than we thought we might have to.


Ryan: There’s no hiding from it, you’ve been called ‘the disruptor’ to the UK’s £4 billion market value and biggest established player, Rightmove. There must be benefits to agents that are signing up to OnTheMarket, how’s it going? What’s your edge and can you describe what genuine evidence you’re seeing which is proving that you’re offering is delivering to the needs and expectations of the agents that are signing up?

Ian: It’s probably worth saying that this business wouldn’t have come in being were it not for a very strongly perceived need on the part of actually a very wide range of independent agents. My belief continues to be that there is a strong will amongst the majority of the market, which is the independent sector, for OnTheMarket to succeed in what it’s doing, and I’ve described what our objectives are already.

I think prior to the IPO and the fundraising, the wish, the will on behalf of the agent community wasn’t matched with the belief it was going to be achievable and that maybe down to strategy, I think it’s probably partly down to the level of resourcing we had in the business, this was a pure start-up.

We had reached a point where in order to achieve our strategic ambitions, with Zeus’ help, we were looking to raise substantial capital but also give ourselves that quoted stock to use as a currency, as I’ve mentioned, with new share issuance to build an extremely strong core of agents, maybe 10,000 branches worth, who have a strong vested interest through strategic and financial means in the success of the portal.

So, our pitch to all agents is that this is an agent-backed portal, it is there to be the antidote to Rightmove and the pitch is to say that we are committed to sustainable fair pricing for the core product. When we’re challenged on that by the cynics who say, ‘once you’ve got market power, you’ll just amend your policies and crank the price’, we say firstly, you have the opportunity to sign into a 5-year deal which largely fixes the tariff, albeit with an escalator in later years. Secondly, agents are, and are planned to continue to be, the majority shareholders, these are passive shareholders, they’re not looking to interfere in the running of the business, but I suspect they would interfere if we went back on that kind of proposition that we made to them.

There are many many ways in which once we are a full-scale in the UK portal listings arena where we can generate more value for all shareholders through means other than taking more and more money out of the agent’s pocket for the same service. So, that’s something that we’re putting on the table for everyone.

Clearly, we can demonstrate already that simply by adding a competitor into the market it has dampened down the pricing of some of our rivals, notably Zoopla who we took a considerable amount of business to the portal we launched. We saw immediately their pricing power diminished, considerably diminished, and they haven’t recovered from that, doesn’t mean to say that their portal business may not be making perfectly adequate returns but they’re no longer able to make super returns.

The evidence of that is that agents were prepared to switch away from Zoopla. At this point, agents have not yet, in large numbers, been prepared to switch away from Rightmove and their preparedness to do that will be a function of how far Rightmove will continue to push their pricing and how credible we, and to some extent Zoopla, are as an alternative.

So, how are we becoming more credible? We’re becoming more credible because we have doubled the number of estate agent offices on our portal since the 9th February, our IPO day, so we’ve added 5,500 new offices to reach 11,000. To give you a bit of context, 11,000 is 63% of the number that Rightmove have reported it carries for a number of years now, they have 17,500 and you can imagine that this is really the addressable market for a portal because Rightmove generally claims to have a very high percentage of the market.


Ryan: What would be the total scale Is it a bit more than Rightmove?

Ian: It’s a bit more than Rightmove but there is a long tail where agents come and go quite frequently from the market. So, I would suggest that a reasonable benchmark for us to report on is how we’re doing against Rightmove, at least for the time being, and as I say we’re at roughly 63% of what they have.

Within that, there’s quite a long tail of agents who have very few property listings so large numbers of offices but actually very limited property stock in aggregate. Rightmove’s numbers and Zoopla’ numbers include hybrid agents where they allocate a certain office equivalent number for a given number of property listings so if a hybrid agent has 1,000 listings, that might be counted as say 20 branches, in the branch count that Rightmove publishes. At present, our growth has been entirely from high street agency, so these are real office location numbers that we’re publishing.
We started life with the market leaders so the people who were with us at IPO who were already shareholders, committed listing agents, more than 2,000 of them.


Ryan: So, this is the Savills etc?

Ian: Correct. Lots of high quality independents as well, they have tended to be the market leaders, they have a higher than average number of property listings per office. Our means of deploying our resources immediately following the IPO was to concentrate agent recruitment activity in areas where we have strong market share and offices with good property stock. So, we’ve continued the theme and that’s how we’ve built up in the way that we have.

Clearly, alongside that, it’s been important for us to build consumer audience and we’ve been progressive in the build, we haven’t’ wanted to spend too much marketing budget prior to reaching a level where we have significant market coverage in most areas of the country. Our marketing takes the form of an underpinning digital marketing spend which we’re very good at and it’s been honed and honed over the years to be a very efficient means of delivering productive visits.

That builds actually on a portal which was put into the market base don new tech at the end of 2014 and it has, within its DNA, very good search engine optimisation and we’re seeing the benefits of that coming through now. So, if you search for property on Google, it’s highly likely that you’ll see OnTheMarket, not only on the front page but actually quite well up the rankings. It’s now an issue of how many relevant listings that answer that property query do we have compared to Rightmove and Zoopla, we can see that it some areas where we’re stronger than Zoopla, we come up higher in the rankings. So, that’s very pleasing because it’s free traffic.

Overlaying that, we have run national television campaigns and we have recently, in September, launched a new creative which focusses in very strongly on our core USP which is agents, because they are key for this portal to succeed relative to the others. They are, in quite large numbers, now giving us their new properties for a 24 hour period, at least, before they shift them onto Rightmove and Zoopla. That is a powerful message to the audience we want to attract which is the active property seeker.

So, if you look at the traffic numbers for Rightmove, you have to think about it like a dartboard, if you think that they’re getting 140 million visits a month, a large proportion of those visits are not from people who are active property seekers. It is the bullseye in the middle which are the people who are likely to transact in the next 3 months and we’re after that same bullseye.

Our message to that group is that we have a quality product, we have the best agents and many of those agents are giving us their stock before Rightmove and Zoopla.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.