Rightmove

Rightmove offers agents a vast distribution channel, but educating agents about the efficiences of the internet is proving a steep learning curve.

The combination of a softening housing market and a liquidity crisis, which shows no sign of abating any time soon, is proving a recipe for disaster for estate agents who are struggling to attract buyers through their doors. Enter online property websites.

They offer agents the distribution channel that only a bonus-rich executive at Savills could ever afford to replicate alone - a fact that estate agents across the country are finally starting to realise. Indeed, Spicerhaart's announcement on Wednesday that it is in final negotiations to buy Tesco's online estate agency, Tesco Property Market, is evidence of the continued growth expected in the online property service market.

And, in terms of the market's strength to date, the success of the FTSE 250-listed property website Rightmove speaks for itself. The group revealed a 77% increase in pre-tax profit, from 17.7m to £31.4m for the 12 months to December 31 2007 and an 18% increase in advertisers, from 16,321 to 19,287. Average revenue per advertiser - estate agents and property developers - increased 35% to £259 per month, up from £192 per month in 2006. Agents' identity Rightmove claims to have over 20,000 agents and developers advertising over one million UK properties on its site, attracting some 70,000 prospective buyers every hour.

But it has become a victim of its own success, with critics accusing it of having a monopoly on the internet property listings market. Others have lambasted agents for relinquishing their identity - and therefore their unique selling point - by becoming Rightmove members. As one industry source says: "Estate agents signing up to Rightmove are selling their soul because they're reliant on someone else to sell their properties. They're simply helping strengthen the Rightmove brand. "That's absolutely fine if they're happy to relinquish their brand and become one of thousands of branches." He adds: "The more agents strengthen the Rightmove brand, the more power they give it, which we saw with its increased subscription fees - it hiked them and laughed all the way to the bank.

"Once it gets members reliant on the distribution, it's able to squeeze them as much as it wants." Rightmove increased subscription fees for 7,000 estate agents by 30% between August 2007 and January 2008, with office fees increasing from £250 to £325 per office per month. Miles Shipside, Rightmove's commercial director, says: "On the contrary, Rightmove, particularly the Rightmove Choice branding suite, is a resource that helps strengthen an agent's brand, getting their name and logo in front of 29 million visits a month we receive from active home movers.

"Serious buyers, sellers, tenants and landlords are doing their business online, and it no longer makes economic sense for agents to purchase inefficient advertising, such as newspaper, especially in the current market." Anecdotal evidence from one South West London-based agent certainly supports this claim. He recalls that the advertising budget of one national chain at which he worked several years ago was in excess of £15,000 - somewhat different to Rightmove's subscription fees today.

Converting leads In terms of the site's future growth, Ed Williams, Rightmove's group managing director, acknowledges that the management team has its work cut out, given many agents' continued scepticism about the use of internet advertising. He says: "We've been trying to educate the market on the effectiveness of online marketing for many years." But as educated as agents may become about the internet, and as successful as they are at attracting prospective buyers via a property website, there's no guarantee that they will convert this interest into sales and, consequently, agents' bottom line. Shipside says it's impossible to monitor conversion rates. But research the property site commissioned the British Market Research Bureau to conduct in November reveals that 33% of people who bought a property last year first saw it on the internet, compared with 27% who were told about their purchase by an estate agent. And of the 33%, 23% of people first saw their home on Rightmove.

So, it seems that there's an obvious advantage of enlisting on an internet property site to maximise buyer interest, particularly for sole traders in need of greater distribution. Rightmove's success is perhaps inevitable, given its founders. The site was launched in 2000 through a joint venture comprising estate agency giants Countrywide, Halifax, Connells and insurance company Royal & Sun Alliance, which subsequently sold its estate agency business to Connells in 2003. Shipside says: "For years, agents had been paying hundreds of millions of pounds in newspaper advertising, which was controlled by the major newspaper groups.

"There was a definite gap in the market for the major estate agencies to develop the internet for the benefit of the industry, which wasn't in the interest of the newspaper groups because it would have cannabilised their advertising revenue."

The management team, which has remained the same since the company's £425m launch on the London Stock Exchange in 2006, includes Nick McKittrick, managing director of Rightmove.co.uk, in addition to Williams and Shipside.

Williams worked for McKinsey & Co, Accenture and JP Morgan before joining Rightmove, while McKittrick joined from E-Loan, an online financial services site. He has also spent eight years as a management consultant in the technology consulting division of Accenture. A chartered surveyor, Shipside joined Rightmove in 2001 from Halifax Estate Agencies, where, as a regional executive, he had responsibility for 60 agency branches. Prior to that, he was a director at an independent, East Midlands-based estate agent. Shipside cites one of the key flaws of the traditional agency branch model as its inability to reach prospective clients. He explains: "It's massively ineffective for estate agents to be trying to market the two million properties coming on to the market each year, to the four million potential homebuyers."

But he insists that Rightmove and estate agents are complementary business models - a partnership, which he says was envisaged from the site's inception and remains today. On working with agents, Shipside says: "It was about consumer protection. Obviously, when you've got one million properties on your site, accuracy is imperative: estate agents have to be accurate by law, under the Estate Agents Act."

But, like Williams, Shipside believes that agents have a long way to go to maximise the potential return on investment of this partnership, with many yet to shift their mindset and consider marketing as a means to an end, not an end in itself. In other words, agents cannot simply upload their properties on to Rightmove and consider their work done, rather they should be continuously devising strategies to ensure site users click on their properties and not their competitors'. Williams says: "We're still in a world where agents don't even do the basics when it comes to providing comprehensive property details.

"They wouldn't dream of giving a client inferior property particulars on paper, but a lot of them are doing so on the internet." New search facilities Rightmove is in the throes of developing a number of products, which aim to help site members differentiate their properties from rivals, which in turn can help boost their revenue.

Its existing Rightmove Choice package offers agents a branding suite and a property suite, which enables them to make their firms and instructions more prominent with the use of banners and premium, highlighted adverts. Rightmove is also developing its search facilities, to enable site visitors to search for particular features within a property, such an ensuite bathroom.

Shipside says agents should also be reviewing their service standards in preparation for future client visits. He says: "Quality of service needs to be high. There's scope for estate agents to give real service. "Are companies' viewings really offering a buying service? Are agents really considering individual buyers' needs? When selling, agents really need to find something that suits buyers, so that they are adding value for their fees." The negative outlook for the UK economy and corresponding slump in house prices means that agents now have little choice but to reduce the asking prices of instructions on their books, which, Shipside explains, requires agents to develop stronger relationships with clients, in addition to a value-added service. He believes this will help them manage clients' expectations more effectively. He says: "Some estate agents are going out of business, so it depends how effective remaining ones are at changing their business practices in a tougher market.

"It's about how they use internet tools effectively and ensure they are offering clients a quality service and, importantly, how they convince buyers to buy. If they over-price a property, it will catch up with them. They have got to be pricing below the market." He adds: "Agents have got to work so as not to spoil consumer confidence further. They have to explain to vendors that if they have to drop 10% on their asking price to sell, they can make it on what they are buying. "This requires a different skill set, which is difficult for agents who have not experienced a market downturn before." Williams says that agents also need to adapt their business model to cater for internet leads. He explains: "Agents know from their own experience that the phone used to ring on Friday when the local newspaper came out, but now enquiries are spread much more evenly over the week because buyers are using the internet."

Williams expects 1,500 estate agents to cease trading this year, which he says will result in Rightmove's member retention rate declining to 85%, down from 92% in 2007. As for Rightmove's own quest for survival, the outlook is good, so long as agents' and developers' confidence in the distribution power of the online property website market continues. All Williams and his team need to do now is concentrate on the competition from their rivals. Spicerhaart is understood to be planning a direct-to-consumer site following the acquisition of Tesco Property Market, but the intricacies of the deal, and the estate agency's future plans, are yet to be unveiled, so it's anyone's guess how long Rightmove can retain its leading position in the online property market space.

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