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: In September, just last month, you announced that OnTheMarket had signed a market first agreement with a little company called Facebook and I notice Rightmove didn’t do the same deal. Why? Can you give us some quick background on this and what advantage does it provide to your customers? Are you seeing any benefits already, if not, when will you?
Ian: Clearly, I’m not party to any discussions that might have been had between Rightmove and Facebook, one can surmise that Rightmove is an incumbent and a very strong player, might want to keep all the juice to itself, if you like, and not share listings with somebody like Facebook.
We were very pleased to be selected by Facebook as one of their partners and it’s no secret that Zoola is the other one.
Ryan: So, Facebook called you?
Ian: Correct. That doesn’t matter because we would’ve seen it as an advantageous partnership, however the conversations arisen. Our relationship with them has been extremely productive, we got from zero to being live with Facebook Marketplace in really record time, I would say, given the scale of the implementation and the importance of it to us.
The benefit to agents who provide their data to us to list on OnTheMarket is it simply extends the reach that we’re able to deliver to them. It is early days for us, we now do have all our lettings listings going to Facebook and being seen on Marketplace but what I can tell you is that it is already a material element of our overall traffic. The most pleasing thing at this stage is that it does not appear to be cannibalising our existing flow so we’re reaching largely a new audience via Facebook which is obviously very good for us.
Ryan: All data is pointing to a tougher housing market, we go into the winter, it naturally slows down on transactions. Can you tell us what you feel about and equally, how does that affect your investors and the agents on OnTheMarket that have signed up in their droves over the last year?
Ian: The data is telling us that it’s a muted market rather than a catastrophe, it is slower and obviously that puts more pressure on agents in terms of income, they have significant cost pressures.
If I look back, and I’ve been in the industry maybe 20 years now and have seen at various stages the market turndown and how the estate agency industry reacts. There are pretty significant defensive qualities in the independent sector, so the small agent generally tends to exit the market, but they do hunker down, they cut spending, reduce staff and paddle through until better times, that’s been the pattern. So, you don’t see mass departures from the market, in fact I saw some data yesterday published in one of the trade news feeds that suggests that actually the number of agent offices open has gone up in the last 6 months. Now, I would say that the market is over-supplied largely.
What it means is there is significant pressure on agents to reduce the costs that they face in operating, that will be compounded by the fact that for lettings agents, they will very shortly lose tenant fee income. We are a strategic cost reduction play for thousands and thousands of agents.
Ryan: That is, I think, something that people don’t understand so well. These cost pressures, what’s the real no-brainer?
Ian: Our tariff, and this will be the case at the end of a typical 5-year contract for a small agency firm, involves listing fees which are probably even now a quarter of what Rightmove charges. They’re making a 75% profit margin so there is plenty of scope for us to build a highly profitable business for our shareholders whilst at the same time, delivering a material cost reduction for agents.
Now, up until this point, perhaps people have been prepared to live with the kind of pricing that the other portals have been putting through and some of the behaviours they’ve displayed. We’re coming to the crunch now, Rightmove fees are in many many cases in excess of what agents are paying for their office rent so it’s a material part of their cost base now. The continued double digit price increases which Rightmove have flagged they are aspiring to actually make the pip squeak. So, this is a time where many agents will begin to consider what their options are.
To some degree, and you’re right to focus on the context that we’re operating in, all we can do is influence what we’re doing. We have delivered so far on building the network and we have delivered so far on traffic, we’ve trebled the traffic in September compared with February, most important of all, the combination of those things has meant that we’ve quadrupled lead generation between February and September. So, what that means is for every visit we receive, we’re generating more than a third more than we were in February, it also means that on average agents who are listing with us on a per office basis are getting twice the number of leads they were getting in February. We have a very clear view of where we need to get to in terms of quality lead generation at the point where we’re inviting people to move from a free to a paying contract and we’re well on track to achieve that.
If we can position ourselves and create that belief amongst agents that we are not only delivering value for money but actually, potentially, in combination with other portals can be a replacement for Rightmove. That’s the biggest prize of all for our shareholders but also for the agents because of the potential money-saving that is available to them.