Andrew Goldthorpe MRICS, CEO of PropertyMutual, is changing the game, offering a profitable vision of an entire industry controlling its own destiny, a vision of David defeating Goliath, because David knew where to aim.
Onthemarket's difficulties, which include burning cash at unsustainable rates, additional cash raises diluting member share ownership, and a record low share price resulted this week in swift and decisive action by its Board in removing their chief architect and CEO.
How did it come to this? I believe these difficulties can be traced back to the Agents' Mutual business model which, despite flaws that were apparent to many, still persauded a considerable number that the Onthemarket portal would replace Zoopla in just one year. So convincing was the publicity, that thousands of hard nosed and hard working business people signed five year contracts that guaranteed the CEO an annual war chest of £millions. Despite this enormous bounty, the failure of Onthemarket to overtake Zoopla in one year became apparent to agents and the financial markets alike and the cracks started to appear.
The blessing of the "corporates" was sought but rejected, with public documents revealing that private IPO discussions occured as early as 2016. The subsequent de-mutualisation vote in 2017, which took a lot of ordinary members by surprise, forever shattered any illusions of commitment to the "limited by guarantee" model and long term mutuality. A disappointing floation price of £1.65 instead of the targeted £5.00 indicated market indifference and set Onthemarket on a slippery downward slope.
In my view, five years of cash burn, broken promises to the original backers, and failure to overtake Zoopla has left not just a tainted legacy but most importantly a crystal clarity that copying the same "limited by shares" IPO model, successfully pitched to agents by Rightmove in 2006 and subsequently exploited by Zoopla, is now old news. Latecomers to the IPO party like Onthemarket and other Rightmove wannabees are doomed to fail, guaranteeing riches for the few whilst disappointing the many, because as industry commentator Mike DelPrete recently put it, trying to beat Rightmove is "at best expensive, at worst futile".
As soon as Rightmove announced its IPO in 2006, the original “contract” for mutual betterment between its founding agents and the Rightmove business was broken. Despite this, the corporate propaganda juggernaut has been incredibly effective in persuading agents that the only way of marketing real estate is the 20 year old Rightmove model i.e. pay through the nose for the “privilege” of giving control of costs and data to investor led corporations. This behaviour is now so ingrained that agents are even now gifting their most valuable commodity, their data, to unaccountable “free” portals, or taking a chance on exit-strategised start ups, or the latest "tech" breakthrough portal, all of whom claim they could be the next Rightmove. Unfortunately, none of these portal pretenders have the budget to compete with two powerful brands, and are limited by shares, so they offer nothing new to an industry crying out for a new vision.
Whilst I am enormously saddened that agent members are the ones most affected and disillusioned by Onthemarket's de-mutualisation and failure to make an impact, the consumer has remained indifferent throughout, caring nothing for "portal wars". Their needs continue to be served by better funded and higher profile portals. OTM v1 agents are now breaking free of their five year lock-in contracts and jumping ship, time served in full, albeit back into the arms of the same investor led corporations they thought they were leaving five years ago.
So a different approach is needed going forward, one that leaves behind Onthemarket and its obsolete business model and that is in step with the start of a new decade. Let me be clear that by my definition, Agents' Mutual was never a legitimite mutual. It had too many restrictions, different classes of membership getting different returns, and a Board that did not sufficiently consult or act on the wishes of its members, all of which led to insufficient industry appeal and an IPO or go under "vote".
So what chance another mutual, albeit the original property mutual? What many have missed and yet what Jefferies.com recently recognised, in their laser focused analysis of Rightmove and the UK portal market, is that only PropertyMutual’s hybrid mutual business model has “an incredibly disruptive blueprint that would take the agency-portal relationship all the way back to its pure-play mutual roots”- Jefferies.com (12/2019). They go on to say, “New entrants like PropertyMutual have exactly the construct needed to return the industry back to a sustainable agency-backed model. But the challenge is to drive collective action: we think the cycle could be about to do just that.” – Jefferies.com (12/2019).
Building on the theme of Rightmove having peaked in efficiency, a view supported by its recent softening half year results, Jefferies most telling comment is, “It is really only the agent’s fear of losing an instruction from not being on Rightmove that holds back the churn – the greatest threat to Rightmove is therefore collective action across the estate agency industry to communally break free of what has been described as “an abusive relationship”. Unless PropertyMutual rapidly can drive such groupthink, this isn’t imminently likely.” – Jefferies.com (12/2019). In other words, agents must accept that nothing will change until they are willing to collectively abandon old methodolgies and start doing things differently.
Agents have talked about taking collective action against the corporate might of Rightmove and Zoopla for years but lacked a model capable of delivering it. At the start of a new decade and in a particularly challenging market, I believe PropertyMutual, a never-for-sale company limited by guarantee, separated from, but backed by, an investable commercial service provider with no ability to influence ARPA (Average Revenue Per Advertiser), is the model whose time has come. Highly respected Mutuals like NFU Mutual and the Nationwide have been delivering returns to members and yet retaining independence for over a century.
PropertyMutual's mission is to silo and curate our members data; control our members' marketing costs; and build a platform of professional excellence; run by an accountable Executive Board and a Board of Trustees which returns surplus revenue to our own members, consumers, charity and social causes. We operate to the same ethical standards as the established Mutuals and have the same huge potential. Agents now have a safe haven in PropertyMutual, so this is a call to action for agents to come together and fund, own and run PropertyMutual, the original legitimate and ethical mutual that will always put its agent members first, is 100% independent and accountable, and is structured to deliver #collectiveaction by agents for #collectiveimpact.
In conclusion, I agree that “trying to beat Rightmove (at its own game) is at best expensive and at worst futile”. After all, the definition of insanity is repeating the same mistakes and expecting a different result. But PropertyMutual is changing the game, offering a profitable vision of an entire industry controlling its own destiny, a vision of David defeating Goliath, because David knew where to aim!
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