Breaking Property News – 08/08/2023
Daily bite-sized proptech and property news in partnership with Proptech-X.
New Purplebricks in desperate need of a purple patch
Typically, when a company fails and its assets are sold off, take for example Purplebricks, there usually follows a period of relative calm whilst the new ‘enterprise’ takes shape. Freed up from controversy and negative headlines the new management team have time to plot out a fresh and winning strategy. Unfortunately, in just a few weeks of the ‘takeover’ for the sum of £1, it seems that Purplebricks is back in the headlines for all the wrong reasons.
No doubt the backers of PB#2 had hoped that the madness of the old regime latterly governed by a naive and inexperienced CEO, who failed to notice her c-suite edging its way out of the door, was at an end. Unfortunately with the imminent ‘letting go’ of a number of personnel from the company, like a bunny in the headlights this onliner is making news for all the wrong reasons.
Whilst there is talk of taking on or retaining some of the troops in a different capacity, making the user UX smoother perhaps, it would seem that the old fashioned bean counting strategy of cutting headcount and a typical 60% of personnel cost to the bone is on the way.
Now in a normal business being mindful of having a low gearing of personnel might work, say you were an online distributor of clothes etc, and could automate human roles.
But as I see it, Purplebricks was always a whippet rather than a thoroughbred racehorse when it came to extra personnel, I think it had less than 30 people who were not direct fee earners – taking vendor cash upfront. If these fee earners are lost, add in the fact that PB#2 has cut fees to buy the market, and less property will be moving due to a huge economic slowdown and you have a real fiscal problem.
Historically Purplebricks came nearest to making profit when it was listing and taking cash upfront on an industrial level, about £90M of revenue. To do that you need a big sales team. And it was achieved in a reasonable housing market with super motivated ‘self-employed’ LPE’s who had their patch and monetised it.
Now with the PAYE model, PB#2 will not be attracting the same machine gun selling automated sales people and in fact in a difficult market, vendors tend to go with who and what they know, preferring to pay the premium for a job well done, versus taking a punt on a different marketing option.
More than anything though it is hard to see how the ‘Strike’ pay nothing to sell your home business model can be welded to the pay upfront, sale or no sale model of PB#2″, as they are at the polar extremes of the two business models. Yes Strike is being shuttered, and being de-canted into the £1 business that was such a coup, but what will their new work look like?
Given that Purplebricks was operating in a market that saw completion rates for the last decade of 1.2M annually give or take, rising to 1.45M two years ago, decreasing to 1.25M last year, and likely to be 890,000 this year, then their losses on a monthly basis are likely to be North of a million and maybe a lot more if they ramp up the advertising spend.
OnTheMarket allows agents to get extra marketing revenue by going the extra mile.
You have to hand it to CEO Jason Tebb, and maybe it is his estate agency DNA kicking in, but he really does provide services that look after his client agents first, he is always looking at ways to drive new revenue but in a joint revenue manner with the agent partners who pay to use OTM.
In the latest big shake up Jason has been quoted as saying, ‘We’re committed to ensuring our agents are at the forefront of everything we do in order to support their businesses with fresh and innovative solutions’. And what has just been unveiled is a new iteration of OTM’s Activator service.
Jason comments that the Activator service, ‘Gives agents more of a say over what appears on their listings, which is something other major UK portals either can’t, or won’t, do and it gives them much more control over how they promote their partnerships to nurture additional revenue streams’.
More tellingly he goes on to explain that he sees it as, ‘another step in our evolution towards becoming a ‘one stop shop’ technology company that provides services for agents and consumers, across the entire property ecosystem. We will continue to develop meaningful ways to facilitate consumer interaction opportunities for agents by providing tools to help make the home moving process easier and more straightforward’.
This approach is very different from some other portals in the UK and globally, where the agents and other property related practitioners are just seen as cash cows to be regularly milked until they are dry. And this true alliance a hallmark of Jason’s tenure when his door is always open and he if always listening to his clients seeing that it as a joint enterprise rather than a software business looking for the highest returns at any cost.
What it does mean is that those agents who are entrepreneurial enough can set up shop on the portal and further leverage income streams in a way that more orthodox buttoned-down portals allow. Which is a shame as literally multi-millions of consumers come monthly to all portals and monetising these opportunities should be at the front of any strategy.
I have zero business connections with Jason Tebb in fact I have never been in the same room with him, but I do genuinely admire his business acumen and the fact that he is the agents friend. I also in the day job deal with many founders who play around with revenue and business models trying to get the right blueprint that generates income and gets traction, sadly many never get there.
Maybe the Jason advantage is that he was in the frontline and really gets the agency business, and now as the top decision maker of policy and executor of it he can use this insight in a very agile way, selecting only the biggest, quickest wins for all.
And maybe as OTM is late to the party it has to work harder, but it has the advantage of not being glued to a very static business model that has worked well for over two decades. Because we all know what happened to Blockbuster video, it was unassailable until Netflix saw the future, (they were both doing exactly the same rental video model) but one quietly evolved and built that new future version of film being streamed to customers, not mailed out in packages, and in just six years took all of the market leaders customers and forced it to close.
Andrew Stanton Executive Editor – moving property and proptech forward. PropTech-X
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