Rightmove is an impressively efficient business, so says a report from investment advisers Hargreaves Lansdowne.
The report says that Rightmove’s business is essentially running a website which has low operating costs, while its expansion costs were kept to a minimum – while it is so dominant it its market it can keeping raising its prices.
George Salmon of Hargreaves Lansdowne comments: “Rightmove’s business, running a website, doesn’t cost a lot. As the group underwent huge expansion, costs were kept to a minimum, and as such margins are around 77%. That’s among the highest in the FTSE 100.
“The other string to its
bow is the fact it’s a must-have portal for traditional estate agents, which
allows Rightmove to keep pushing its prices up. Last time we heard from the
group, it was raking in £1,077 per branch, per month.
“That pricing power is
particularly important, because it’s offsetting declines in the number of
estate agents on the high street – down 3% at the half year.”
He cautions, however: “If agents keep closing, and are replaced by online competitors, the group may need to rethink its pricing structure (charging per branch, per month) in the future.”
This report offers an
opinion which perhaps needs to be borne in mind by other proptech companies,
and future proptech entrepreneurs. While most of them focus on undercutting
traditional competitors and growing using massive fundraises Rightmove’s
success is essentially based upon doing the opposite – having low operating
costs and charging as much as possible.