The UK’s largest property portal Rightmove has announced a hefty 8.5% rise in H1 profits due to increased advertisement sales to estate agents.
Revenues reached a healthy £119.5 million, giving the portal giant a monthly profit of around £20 million and no doubt making newly promoted CEO Peter Brooks-Johnson a very happy man.
News of the chunky profit increase for Rightmove comes hot off the heels of miserable financial results from some of the UK’s largest and most influential estate agents. Foxtons announced that profits fell 64% to £3.8 million with Chief Exec Nic Budden blaming “unprecedented economic and political uncertainty”.
Countrywide, the UK’s biggest estate agent, recorded an eye-watering 98% collapse in pre-tax profits in the first half of this year. CEO Alison Platt said she “wouldn’t describe (the 98% fall in pre-tax profits) as dramatic”.
Try telling that to the shareholders – the beleaguered agent’s share price is at an all-time low and has been in freefall since mid-2015.
Rightmove was described as “defying gravity” by Hargreaves Lansdown analyst Danny Cox, “Rightmove’s traditional estate agency customers are under immense pressure from the low level of housing transactions and the assault from much cheaper online-only agents such as Purplebricks”, Cox said. “The fact that many of Rightmove’s customers are choosing to spend more in this environment is a great vote of confidence in the platform, and a sign of just how dependent they’ve become on the group in today’s digital age.”
The company itself was typically bullish (if a little robotic) about the bumper results: “the visibility provided by our subscription model coupled with the value provided by our products and the strength of the Rightmove brand and traffic give the board confidence in delivering its expectations for the current year.”
World’s largest property portals by revenue
UK’s largest property portals by revenue
Agents and developers who use Rightmove may be interested to hear that there are rumours the group are looking to increase the average spend per customer by a whopping 300% – starting with an alleged increase in fees. City analyst Anthony Codling warned investors that Rightmove has “a Holy Grail annual revenue per advertiser figure of £2,500 per month”.
This is a huge increase from last year’s average customer spend of £856.
Codling also states in his investor release, “agents might complain and new home developers might moan about the fees they pay to Rightmove, but both are spending more and more.”
DealMakerz thinks it’s fairly clear what the bigger picture is behind these results – traditional agents are having their lunch eaten by online platforms.
In some cases it’s as simple as an estate agent office directly transferring their monthly profit margin, using portals as a judge, jury and (deal) executioner. However, one could argue that they wouldn’t have reached their margin without the use of portals that provide them with invaluable national exposure to buyers. Either way, total reliance on one external factor in any business is extremely risky.
Over the past year, property markets in both London and the UK have ranged from stagnant to fairly healthy. Countrywide’s 98% drop in profits under no constraints of any financial or housing crisis is a hugely worrying situation – stating the shocking results are ‘not dramatic’ is bearing on outright madness from Countrywide CEO Alison Platt.
With interest rate rises and a lettings fee ban on the horizon, both Countrywide and Foxtons need to adapt their business models fast or risk the lights being turned out for good.