Is Propertyfinder Worth Saving?
June 5, 2009 by Simon Baker
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It’s been a hectic week for the team at Propertyfinder with the REA Group and News International announcing a full review and the possible closure of the business, and the management team at Propertyfinder putting together a MBO.
A cursory review of the REA Group accounts reveals that there is significant red-ink next to the Propertyfinder business. However, deeper analysis reveals that the Propertyfinder business has strong traffic, solid revenues, a strong reputation and a good management team in place. Therefore the question that arises is “Is Propertyfinder actually worth saving?”
In this, our third article in the Propertyfinder series, we look at Propertyfinder and its performance in the UK market.
When looking at the viability of any property portal, the critical factors for success include: the traffic to the site, the volume of paying advertisers and listings, the revenue model and its sustainability, and the cost base.
Traffic to the Site
For the last 3 years, Propertyfinder.com has consistently rated as either the 2nd or 3rd most visited property portal in the UK.
According to ComScore, in April Propertyfinder was wedged between the two DMGT owned sites FindAProperty and Primelocation. Its other sites, hotproperty.co.uk and ukpropertyshop.co.uk, are ranked 14th and 9th in the market.
| Site (UV’s) | Apr-09 |
| Rightmove | 2,933 |
| Find A Property | 1,378 |
| Propertyfinder.com | 1,246 |
| Prime Location | 1,204 |
| Vebra | 783 |
| Nestoria | 602 |
| Globrix | 422 |
| Homes And Property | 375 |
| UKPS | 283 |
| homesonview | 277 |
| fish4homes | 229 |
| propertyindex | 145 |
| Find A New Home | 145 |
| Hot Property | 144 |
Underlying Propertyfinder’s consistent traffic is a mixture of brand strength, good SEO and sometimes generous PPC spend.
Established in 1995, Propertyfinder was one of the first portals in the UK. Over the years it has had a number of owners (including Asserta, VC firm Arts Alliance, and recently News International/REA Group) and each has invested heavily in the brand. Establishing a brand in any market takes times, effort, and money. The Propertyfinder brand has a place in the psyche of the UK property hunter and is therefore a valuable and hard to replicate asset.
Positioning with Agents
Around 5,500 agents currently use Propertyfinder. This is up ~9% from the end of December 2008 when there were 5,068 agents on the site. (Source: REA Group Analyst Presentation) This is a great effort by the sales team especially since the number of agents in the market has severely contracted.
In addition, there appears to be strong support from the major accounts with well known names such as Connells, Spicerhaart Group, Your Move, Savills, Hamptons, John D Wood, Fine & Country, advertising on the site.
Recently a UK agent wrote on Property Portal Watch that “ have been with Propertyfinder for at least 6 years now, and out of all the portals they have been the most helpful and passionate about what they do. You know what, it’s not easy working with us estate agents, and they seem to really care and have always been so helpful. I will continue to back them and if there is a management buyout, the better they will get I am sure. The more UK they get, the more I will back them.” This shows that there may be good underlying support for the Propertyfinder business from within the estate agency community.
When compared with the other subscription sites, Propertyfinder appears to have a similar number of agents as FindAProperty and both have more agents than PrimeLocation. What is interesting is that there is a small amount of overlap in agents between Propertyfinder and FindAProperty.
Establishing a trusted brand with advertisers takes time and the Propertyfinder team appears to have created this. For new entrants to the already crowded market, this is hard to replicate and therefore the position Propertyfinder has created with agents is a valuable asset.
Revenue Model and Sustainability
Revenues are estimated to be around £7m per annum. While this is about 1/10th of Rightmove’s, it is probably close to the revenue being generated by FindAProperty, and significantly better than the portals chasing non-traditional models including Globrix, Propertyindex and Zoopla.
Propertyfinder’s main source of revenue is from Agents purchasing subscriptions to list as many properties as they like. It is estimated that the ARPA (average revenue per agent) is approximately £90 per month and thought to be just below FindAProperty.
According to Bob North’s page on Estate Agency News, the cost to an agent for a lead from Propertyfinder is significantly less than the cost of a lead from FindAProperty, PrimeLocation and Rightmove.
This revenue stream should be sustainable given the customer contracts, the long term relationship with these customers, the low cost per lead created, and their ability to continue to deliver leads.
Costs Associated with Delivering the Model
For any site to be competitive, they need to operate at a low cost model with a clear path to profitability. News International and the REA Group have been investing in Propertyfinder and therefore running it at a loss. From looking at the REA Group’s annual accounts, it appears that they have been spending around £12m per annum in running the business.
For Propertyfinder to be worth saving, they will need to run at a profit and bring these costs down to around £5m per annum. This should be achievable through a reduction in the workforce, a focus on online marketing, the move to a low cost platform, and the removal of the corporate overhead related to being part of the REA Group and reporting to News International.
Summary
On the surface, Propertyfinder has been losing money over the last few years in the chase to be the clear number two in the market. The investment by News International and the REA Group has been significant with mixed results.
However, when you look at the underlying business, you can see that Propertyfinder has a number of assets that are hard to replicate and continue to make it a valuable player in the UK market. It has strong traffic, a billing relationship with 5,500 (perhaps 50% of the market) estate agents, a good brand with consumers and agents, and solid revenues.
For the business to remain viable, it needs to slash costs and run with a mindset of being a low cost, profitable #3 in the market. They cannot take on the might of Rightmove or DMGT directly but if they take the approach of a Ryan Air or Southwest, rather than a BA or United, they should carve out a profitable niche for themselves. To do this, they need to operate on £5m or less in operating costs.
So, on the balance of the facts, Propertyfinder is definitely worth saving and has the potential to flourish once out of the corporate environment of the REA Group and News International.
- Could a Management Buy Out Save Propertyfinder?
As reported last week, the REA Group and News International are considering closing Propertyfinder, its UK operations. Since then Nick Leeming, the Founder and Major Accounts Director of Propertyfinder, has been reported as saying that the management team, lead by CEO Gillian Kent, are mounting a rear guard action to save the business by putting together a MBO (Management Buy Out) plan. The clock is now ticking for the Propertyfinder management team as the REA Group stated that the review of the UK operations would last only 40 days. Assuming a plan can be assembled in time, what is the plan likely to look like and could a revamped Propertyfinder be profitable?...
- Zoopla Confirmed as Potential Propertyfinder Buyer
Last week it was revealed that the Propertyfinder's management buy out attempt had failed and that the REA Group and News International had entered into a heads of agreement with a mystery party. This mystery party has now been confirmed as being Zoopla. Zoopla is a relatively new entrant to the UK online real estate market having initially launched a site around home prices and more recently moving into advertising homes for sale in the UK using the pay per lead model. Earlier this year Zoopla closed out a £3.75m capital raising. Check out our coverage of Zoopla over the last year. On reflection, this deal makes sense by providing Zoopla with a boost into being a serious competitor in the market and it gives propertyfinder.com and its team a new lease on life....
- REA Group Considers Closing Propertyfinder
In an announcement to the Australian stock market today, the REA Group said that it was commencing a review of their UK operations. The announcement also flagged a potential closure of all or part of the Propertyfinder business as well as the potential write down of its UAE and Hong Kong assets. They said that the likely net impact on their 2009 net profit is anticipated to be in the range of $26m to $28m. This announcement comes after the recent closure of the UK print operations and rumours circulating that the REA Group had unsuccessfully tried to sell the Propertyfinder business to DMGT and Rightmove. So what is the likely outcome?...
- Propertyfinder MBO Fails But …
The much talked about management buyout of propertfinder.com in the UK has failed however a new mystery buyer has emerged. In a late announcement on the ASX, the REA Group & News International have entered into a non-binding heads of agreement for the potential sale of their UK online business. Internal sources say there were three “very detailed and strong bids” however the while the existing management put in a “very impressive bid”, they were not the preferred option. A period of exclusivity has been entered with the preferred bidder so that they can undertake due diligence and the identity of the preferred bidder might be revealed as soon as the end of next week. Given the comment in the ASX release that “if this transaction successfully proceeds to completion, it is unlikely to have any impact on the guidance (already) provided”, the offer being considered is likely to be small. The REA Group and News International have also kept the door open to close the business or just sell the assets to the preferred bidder as they continue the consultation process with staff – a prelude to closure. So who is the mystery bidder?...
- Why rightmove should acquire propertyfinder
Times are tough in the UK market at the moment and it seems to me that the best value creating play would be a merger of rightmove and propertyfinder and therefore increase the gap between rightmove and the rest of the market....
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Brand building takes a while…. of course it doesn’t come cheap…
After years of spending and gaining a stable position, I think this will be the most inappropriate decision ever. Okay! if the company is bleeding there are ways to overcome – 1st step CUT COST and plenty more can be done. Recession is not forever…
“If they give you ruled paper, write the other way.”
Certainly with a lower overhead structure it might be viable
REAS corp costs laid on top will make it unprofitable.
Still only a number three player which in a crowded and cost sensitive and almost nonsensical market in terms of the multiple players and models you would need to be pretty brave.
Without the News Ltd and REA Group distractions, Propertyfinder will be able to re-establish their operational identity and focus on delivery.
Being a number 3 player in an overall country market is fine. It all comes down to execution on your target market, and as Simon has muted, managing rev/costs.
Propertyfinder has a tremendous opportunity now to set itself apart from Rightmove and TDPG – both of which have had sometimes rocky relationships with the property industry.
The issue may not be the management teams ability to produce a solution. It may be a case of the REA Group and News Corp wanting to recoup as much as possible.