I admit it: I’ve wanted to use the phrase “Crossing the Rubicon” in an update for a while now. Conveniently, real-world events have now aligned to give me that chance. In this instance, the point of no return is real estate portals directly competing with real estate agents. Moves are being made.

I admit it: I’ve wanted to use the phrase “Crossing the Rubicon” in an update for a while now. Conveniently, real-world events have now aligned to give me that chance. In this instance, the point of no return is real estate portals directly competing with real estate agents. Moves are being made.

Best frenemies

Portals and agents have a symbiotic relationship. While they may not always like each other, they both benefit. Portals have been reticent to get directly involved in the transaction for fear of upsetting agents (their biggest customers).

Thus, while best positioned to disrupt the industry and displace agents, portals are unlikely to because of the risk to their business. And don’t forget that portals generate most of their revenue from agents.

The forms of competition

Direct competition between portals and real estate agents could come in several flavors:

  • Brokerage: The portal launches its own brokerage, effectively “hiring” its own force of real estate agents.
  • Online agent: The portal launches a Purplebricks-style online agency, backed by technology and fed leads through the portal.
  • iBuyer: The portal launches an Opendoor-style iBuyer, where it buys and sells houses directly.

In all scenarios, the real estate portal takes a much larger share of the total agent commission revenue pool — which is huge.

The move makes sense — portals have strong competitive advantages that can be applied to direct competition with agents:

  • Massive audiences, which lead to low customer acquisition costs.
  • A consumer-oriented brand built on trust and transparency.
  • Strong technology DNA. Most portals have big tech teams and proven backend tech systems.
  • The opportunity to create a complete, one-stop-shop ecosystem for consumers.

Getting closer to the Rubicon

Three very recent events highlight significant activity in this space. These are three big deals!

While each deal is a bold move closer to the transaction, each is hedging its bets (similar to my children’s “I’m not touching you” strategy).

  • Axel Springer + Purplebricks: Different markets. Axel Springer operates top real estate portals in France, Germany, Belgium and Israel. Purplebricks is not active in any of these markets, and has not announced plans to expand. Yet.
  • Zillow: Still using agents. Even though Zillow will buy houses directly from consumers, it will utilize buy- and sell-side agents for all of its transactions. Meaning there is no loss of business for agents, unlike other iBuyers.

The Zoopla opportunity

In the case of Zoopla and Silver lake, this quote says it all: “ZPG has significant opportunities to … make further acquisitions in ways that would likely be difficult to implement in the context of delivering consistent financial results to the public markets as a listed company.”

Zoopla has been doing more of the transaction for a while now, and is well diversified. But ultimately it is limited as a public company.

Silver Lake as owner removes that obstacle; ZPG can theoretically focus on long-term vision without as much regard for short-term profits. In other words, it can rock the boat. This is exactly what I’d do if I wanted to launch an online agent or iBuyer platform.

Strategic implications

There is undeniable movement from real estate portals towards getting directly involved in the transaction, and putting them in direct competition with real estate agents.

While each portal has significantly hedged its bets (for now), the trend is clear. It shows a long-term desire and strategy.

While less likely at the moment, other portals are surely watching and may follow.

Check it out!

This article is based on part of my latest report, The Future of Real Estate Portals. If you’re interested in more on this topics and others, you can order the full report or check out the free preview. It’s great!

 

 

 

Mike DelPrete is a strategic adviser and global expert in real estate tech. Connect with him on LinkedIn.

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