Reposted with permission from Mike DelPrete.

Purplebricks’ H1 2020 financial results highlight a business whose growth has clearly plateaued and reached maturity in the U.K. The company appears to have reached peak efficiency, putting a ceiling on its future growth prospects.

Financials: Profitable, but no longer growing

Purplebricks’ revenue growth in the U.K. has effectively stopped. Total revenue is down from the same six-month period last year, and the overall growth picture has gone from growth in 2018 to a plateau in 2019 and 2020.

Purplebricks’ U.K. business is still profitable, which is becoming a rarity in the world of real estate tech brokerages. Other high-flying overseas disruptors, like Redfin, Compass and Opendoor — which have raised billions of dollars and are grabbing market share from traditional incumbents — are all unprofitable.

The fundamentals of the Purplebricks business model are sound, with demonstrated profitability, but it has clearly hit a glass ceiling in terms of market share. Its number of customers, as measured by “instructions to sell,” has remained flat over the past two and a half years.

Purplebricks remains a business that scales linearly based on money (marketing costs to acquire customers) and people (local property experts to service those customers).

Marketing ROI

One key to the Purplebricks business model is efficient marketing spend at scale. On a positive note, its marketing return on investment (ROI) has bounced back up in the most recent six months. Each £1 invested in marketing returned £3.8 in revenue.

By way of comparison, Redfin had a marketing ROI of 9.8x in 2018 and 5.9x in the first nine months of 2019 — significantly higher than Purplebricks. This is a reflection of the value of Redfin’s popular consumer portal; having tens of millions of visitors browsing listings helps the brokerage acquire customers at a relatively low cost. (Last week I wrote about the difficulty — and incredible competitive advantage — in building a large consumer audience.)

Overall customer acquisition cost (CAC) has also remained relatively flat, at around £375 per customer. This number really hasn’t changed much in over three years. The small fluctuations suggest a business model that has reached peak efficiency for customer acquisition — again highlighting a limiting factor in growing market share.

Gross margins

Purplebricks is a business with a novel operating model. It has managed to change how traditional real estate agents are compensated, with a structure more similar to Uber than a traditional real estate brokerage. As a result, its gross margins — at 64 percent — are top of the industry. (For more on this, check out Inside Compass — Part 5: Endgame.)

Lessons learned

I continue to use Purplebricks as a case study of successful disruption in my university course on real estate tech. Going from an idea to the largest real estate agent by market share in the U.K., with a profitable business model (in the U.K., at least), is impressive and worthy of study.

In the U.K., Purplebricks succeeded where every other hybrid agency failed by scaling. While its competitors slowly went out of business and failed to demonstrate a path to profitability, Purplebricks — partially through sheer force of will and spending power — managed to scale to the point of profitability.

But while Purplebricks managed to cross that first chasm, it never really made it over the next one: becoming a platform. The business still scales linearly based on marketing spend and people; I’ve yet to see evidence to support a credible path to double-digit market share. In the U.K., this may be as big as the business can get — a high-water mark for the hybrid agency model.

Mike DelPrete is a strategic adviser and global expert in real estate tech, including Zavvie, an iBuyer offer aggregator. Connect with him on LinkedIn.

Are you ready for what the industry holds in 2020? Inman Connect New York is your key to unlocking opportunity in a changing market. At Connect you will gain insight into the future, discover new strategies and network with real estate’s best and brightest to accelerate your business. Create your 2020 success story at Inman Connect New York, January 28-31, 2020.

Agenda | Speakers | Past Connect Videos

Thinking of bringing your team? There are special onsite perks and discounts when you buy tickets together. Contact us to find out more.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription