The Big Issue

12 minute read

Over the past few months we have seen a number of portals released. At my last count in my Firefox bookmarks there are now 26 real estate sites that would like to be known as National Portals. However I can only count three as true National Portals backed by companies that can get these portals to the masses and one of these – MyHome is only in the mix because of the backing of PBL and MSN, with MSN just playing a basic role.

So here is my breakdown:
Number One – REA: Love them or loath them, they are the kings of real estate in Australia, they know the market better than any of the other portals and have done very well with this knowledge since the early days of ‘sponsoring’ Institutes to back and co-market their products directly to agents through seminars and promotions. The site has a wealth of information and has so many more listings and visitors than their nearest competitor Domain. They have been able to continually raise their agent fees year on year by an average of 8-10% and will continue to do so until agents pull them back a little or the gap between Domain and REA closes.

New Revenues: Obviously overseas expansion is going to give their shareholders some joy. Also getting smarter with their advertisers and allowing smaller players to advertise in local areas will give them a boost. They will continue to raise fees for agents whilst they can. They also acquired HubOnline to do more web development and hosting and have just released a new version with the Clarke system (another acquisition) integrated. I personally think this could cause a few more problems as more and more agents become a little uneasy about having everything under one provider. If successful it could bring a reasonably large increase in revenues and I can see why they made this acquisition. The deal with RP Data ends soon as well and I don’t think they will renew this partnership and will more than likely sell agents sales data themselves – instead of passing on the data, which will create another revenue stream.

Problems: The site is tired and old and the amount of advertising and the way it is pushed into consumer faces is getting out of hand. I also think it is going to be harder to push further fee increases onto agencies in what are tougher times and with a Federal Election looming with more uncertainties they will have to be creative to keep their shareholders happy. This will be tough as any change to the site has to go through so many departments to keep too many parties happy and this will be their toughest challenge.

Challenges: I think they will have to take control of who advertises where, to have any hope of competing in the long term. Traditionally slow moving companies falter fast on the Internet and if they cannot change, the years ahead could get tougher with big new entrants a certainty long term.

Number Two – Domain: Fairfax has been the surprise for me over the past 6 months. I spent two years wondering what the hell they were doing and it turns out they were doing nothing. However a new team took the reigns (well partly) and it seems to me they have some good strategies going forward. Their newspapers will continually take hits and losses but their online arm will see some great improvements over the next 12 months with the acquisition of Rural Press and I would expect to at least see a 30% improvement in visitor numbers. The site is far from perfect and I must say I preferred the old one to look at, but the new site does have many more functions and some that I use everyday.

New Revenues: Obviously with the Rural Press acquisition this will give a boost in many regional areas. The Melbourne and Sydney Newspapers will give them strength in these areas. However, apart from this revenue, growth will be slow. They still are second to REA in so many regions of Australia and in my opinion the only way they will reach REA is to be better value and perhaps finally – to be taken over by a PBL or another major player – perhaps an International player..

Problems: Being owned by a newspaper is a problem in itself. The big old newspapers just like making money and dislike giving anything away cheap or free. The cost to enter markets where they have no newspapers is a big problem for Domain, having digital newspapers is a good start but they need to make sure that they invest heavily in this area to make any inroads.

Challenges: They have to get more agents on board. With agents comes listings and with listings comes consumers, they have the site, but they trail REA by way to much and this is mainly due to being completely inactive for many years. Another problem is MyHome. In my opinion the only one who will lose short term, is Domain. REA have the visitors and the listings, so any inroads in the short to medium term will not come at their expense. Domain need to get into any market they currently struggle in and get into it in a big way, offering incentives for agents to join and not just 3 months free (or $50 per month) but 12 – 18 months. Once they give them the results then they charge them and agents will be happy to pay.

Number Three – MyHome: You may wonder why I even bothered putting them in here. Well PBL and Microsoft is the only reason. They should be ashamed by what they released. I am sick and tired of big companies jumping into new Internet markets with little to no thought except for how much money that can be made. Agents email me every other day telling me they have listings on the site that they had given no permission putting there, logos which are stretched and what has to be the worst site usability I have seen with for many years. I have had a number of emails from people saying I was too harsh on them, but to be honest I had worse to say but held back. Now after spending a frustrating hour on the site tonight, I have nothing good to add – nothing. The deeper you go into this site the harder it gets and I may be no genius but I do know how to navigate a good site and this my friends is not a good site.

New Revenues: New revenues? Revenues! You watch, the free offer will be extended and extended again, because, why would any agent bother advertising on a site that gets very few visitors and no agent results. So you could say any revenues are new revenues, but after the worst start in classifieds advertising by a major player in Australia’s history things can only look up – or can they? Once the marketing stops so will the visitors and the statistics make the story look a hell of a lot worse.

Problems: Without trying to sound like I am repeating myself. Fix the damn site up. It looks like cousin Jeffrey did the design and the usability is atrocious, for the love of %^&$#, get a professional in.

Secondly put your wallets away and stop marketing the site until you get these things fixed. I cannot belive that 5 weeks on the site has hardly fixed the usability issues, there is simply no flow. I got stuck for about 10 minutes after looking at a larger map, I seriously did not know how to get back to the results.

Let’s just say they pretend for one minute that they get these things right. Okay, you have 10 million to spend, why not put 200 sales staff on and get out and door knock every single agency in Australia, drop off a prospectus and give all agents 2 years free on the site with some guarantees on fees and product packages going forward. Then once you have 80% of REA’s listings, then spend the 10 million telling all of Australia about it.

Challenges: Get a person in charge of all development that knows how to rebuild a real estate portal for the user and for the agents. There are plenty of good people out there. Whilst Ninemsn is a showcase of how NOT to treat your visitors, at least it looks professional, so please please, please make it look like you know what you are doing.

Some Stats: The site had 251,000 visitors in the first month. This does not sound too bad, but go deeper and it gets much worse. Consumers spent on average 128 seconds on the site, yes 128 seconds, go to the site and see how much you can get done in this time (and think about the 40% of people on 56k Modem Connections). You also have to take into consideration all of the agents looking at the site and seeing if their listings are on there. REA’s average time is just under 12 minutes. That means users are going into the site and having a quick look and leaving.

So we come to the biggest challenges all of these sites face. Google, Yahoo and MSN are looming large. The reason I count the other two alongside Google is because anything Google do – Yahoo and MSN more often than not follow.

What this will mean for the market is simple. I don’t think there are too many people in Australia doing their property buying/renting research offline, so all of these new entrants are only going to be taking visitors away from the incumbent portals REA, Domain and MyHome. I am going to concentrate on Google here, not because they will be first ( personally I think they will be) but because they will be the most popular in this country.

Google will be free for agents, they will also not distinguish between a private seller and an agent so it will boost private selling across Australia to around 10% or maybe more. Many more home sellers will try this at first and many will also return to agents if not successful. But the key point here is that it will be FREE, the model for Google is to give software and systems away for free and place advertising alongside this data. The current portals try to have it both ways. If Google enters then the current portals fees will drop overnight. Google will not get the same press they have had in the past as most of the major media players in Australia now have a interest in real estate, but consumers have an amazing affinity with Google and their software. More often than not Google’s software looks clean and plain but works like a treat and is easy for a user to pick up in little to no time. A Google Real Estate Search Engine would look like the Google Search but with photos and links to more data such as maps. Advertising will be the same (Adwords) and the site will be lightning fast.

The systems will be clean and you will be able to use Google’s System or set up an RSS, XML feed into their system. You will also be able to create reports and have these emailed to you on a regular basis. The systems will also be feature packed with other webmaster tools like Google Sitemaps and Google Analytics.

So, this will basically mean REA, Domain and MyHome will have to work fast now to get the listings. They will also need to develop new sites that are ready to go once this challenge comes. This may not happen for a few years but the bottom line is who can react the best to this challenge? REA know they are slow to make changes, to crank a new website would take less than a few months if they didn’t have to deal with the way 3rd party advertising is structured on their website and Domain will suffer if it is still number two by a long way when this launches. MyHome will have MSN to fall back on locally although I doubt on a global scale MSN would worry about the deal with PBL and probably already has some clause of separation in place.

So if Google affects the online world it will hit traditional newspaper property guides even harder. Already more and more vendors are going for Internet marketing first and then newspapers (traditionally the other way around) and as the market remains cool, this will be more prominent in promotional plans going forward. It doesn’t matter if agents feel more comfortable with newspapers, it is the vendors that will make the decisions with marketing dollars. More and more Vendors now know that a $1000 Internet marketing campaign that lasts until the property is sold and contains images, detailed property information, floor plans, videos and podcasts is a smarter first up option versus a $6000 newspaper property guide package that has big glossy ads and lasts only one day and contains very limited information to the consumer.

So we all face challenges, portals, agents and even humble developers like myself, but it is the ones who can react to these changing conditions better that will survive. Sure some will tick along nicely but the days of getting agents to pay for providing portals with valuable content that they in turn use to attract 3rd party advertising are coming to an end.

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  • Paul D
    Posted April 2, 2007 at 1:23 pm 0Likes

    Why is it that everyone assumes that Google will enter the real estate information field and give the agents FREE listings, when Google can plainly see that agents are prepared to pay to have their listings presented on line ??? Why wouldn’t they just make themselves affordable and set their price under their competitors.

    Are Google that magnanimous that they can forego a profit, which can plainly be had ?? Please explain.

  • Peter Ricci
    Posted April 2, 2007 at 1:34 pm 0Likes

    Paul, the reason is simple. Google currently provide so many software packages and all are free up to a certain (large) amount of data. They have built a 13 billion USD per annum beast out of providing information. They have stated that anything that anyone wants to search and research they want to be involved in.

    They have built this from zero. It is a perfect model. They make all of their money (well most of it) by engaging advertisers who would like to have their companies seen alongside this information.

    Australian companies pay around 50 million per annum to appear on REA Domain and Search Engines, so considering we are a small market an International Real Estate Search Engine for Google would bring in well over 1 billion USD of additional revenue.

    Not bad considering they would not need to receive one cent from people wanting to advertise properties.

    At the moment portals want it both ways, they want agents to pay thousands of dollars per annmum and then use the agents listings to then have banks, credit unions and others to advertise with them.

    Google understands the importance of information and they respect the consumer so highly6 that they make it is quick and easy for them to get to the information they want. Something portals have to change.

    I am not saying it is a certainty, but it makes sense and fits within their current model.

  • Craig
    Posted April 2, 2007 at 1:58 pm 0Likes

    Paul D, Google are an advertising company. Currently around 99% of their revenue comes from advertising. The model is pretty simple, aggregate as much information as possible via search engine, email (GMail) or verticals (Google Base) and then provide context sensitive advertising based on this information. There is no way Google will ever charge Agents or private sellers to upload data into the Google or Google Base. Well never say never but I can’t conceive anything in the next 10 years that would make want them to change this situation.

  • Paul D
    Posted April 2, 2007 at 2:44 pm 0Likes

    OK thanks Peter & Craig. The other guys better watch out !!!!!

  • Anthony
    Posted April 2, 2007 at 3:18 pm 0Likes

    Peter, do you think that Google – with Base/Realestate – will affect the share price of REA?

  • Peter Ricci
    Posted April 2, 2007 at 3:26 pm 0Likes

    Nope, not a jot. However it will create a good spread of properties once the agents get involved and will also make a great case for a portal (standalone) for real estate.

  • Anthony
    Posted April 2, 2007 at 3:32 pm 0Likes

    That appears a bit contradictory – if REA has to reduce prices – ultimately that effects share price due to lowered revenues and profitabilty?

    Would love to know other people’s opinions.

    (would you buy a pile of shares today at todays price – with the knowledge Google was looming?)

  • Peter Ricci
    Posted April 2, 2007 at 3:42 pm 0Likes

    Anthony, businesses like REA/Domain will never reduce prices unless they have to, competition will do this, but I would not see a Google Base as a classifieds site, but a another place that will be quite popular where agents can spread their listings.

  • Robert Simeon
    Posted April 2, 2007 at 6:47 pm 0Likes

    I think that it would be fair to suggest that our entire real estate industry is under a microscope. Not only property portals as real estate agencies are looking at all costs associated with running businesses.

    I know that one of the hottest topics today with franchise groups is the amount of money that agencies pay franchises each month to use their name.

    I know that with our franchise Richardson & Wrench that back in 1994 we met with the owners and argued that paying 10 per cent based on turnover was no longer financially viable for the business owners. We were the first successful group to go onto a flat fee monthly charge adjusted annually on CPI. You also had the co-op groups who were already on this business model.

    After industry discussions many franchises reduced the performance monthly percentages – however today there still remains a ground swell that they are still paying too much.

    Yes, the internet has played a strong roll in allowing agencies to better promote their respective brands. Even today, some franchise groups ban offices from having their own property websites !! Such is the fear of online.

    I think that it will not only be the property portals that take a measured assessment of Google – as it will also threaten established franchise groups also.

  • Paul Krayven
    Posted April 3, 2007 at 8:37 am 0Likes

    Just took another look at myhome as well. I still don’t like it. Has anyone looked at the bottom of the search results under safari 2.0.4 yet? 🙂

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