New models in global real estate tech8 March 2017

Mike DelPrete

A bit about me• Former head of strategy at Trade Me.• Traveling the world looking for new models

that are getting traction, and looking at portal strategies.

• Currently writing, consulting and advising.• Based in New York.

Today we’re talking about• Growth strategies of leading property

portals • The new winning models• What this means for the industry

Growth strategies of leading property portals

Property portals in mature markets are big business…

…with big profit margins.

They’re still growing fast; plenty of runway for core advertising business.

Nearly all of them are expanding across the value stream, providing more services to consumers and agents.

• Aggressive; seed through full acquisitions• Focus in adjacent services – “one stop

shop”• Full acquisitions: building audience and

plugging market gaps (NYC)• Operates businesses as stand-alone entities

• Conservative – no acquisitions• Focus on core proposition

• Blended; minority through full acquisitions• Will fully integrate businesses or operate at

arms-length

They have varied M&A strategies; there’s no winning formula.

Audience Extension

Agent & Partner Tools Rentals Consumer

Focus

Industry disruption is not going to come from the big portals.

While best positioned to disrupt the industry, portals are the least likely to because agents are their biggest customers.

Disruption will come from startups.

The new winning models

FSBO Online Agency Disruptiv

e

I’ve seen three models getting traction globally…

I’ve seen three models getting traction globally…

• Comfree is a FSBO operation in Canada.• 25% market share in Quebec.• Lists over 40,000 houses annually.• Average revenue of ~$1,000 USD per

customer.• Around 400 staff, mainly in call centres.

• Purplebricks is an online agency out of the U.K.

• Around 2.2% market share in the U.K. market (~25k houses annually).

• Has an online platform and service centre to support local property experts.

• Recently expanded to Australia and announced plans to enter the U.S.

• Opendoor buys and flips houses.• Has raised over $320M and valued at over

$1B.• Incredible customer proposition through

reducing friction.• Charges a fee of 9% -- higher than the 6%

average in the U.S.

Opendoor is up to 2% market share in Phoenix, and growing quickly.

And it sells houses for a median average of 5.5% higher than it buys them for.

While it sounds niche, Opendoor is gaining significant market traction, with a realistic path to $1B in annual revenues.

Similar models are popping up all over the globe.

$30M

$32.5M

$5M+

The successful models all share several traits:• Majority of staff are customer facing.• Obsessed with customer service.• Tech-enabled, not tech-led.• Not just about price; offer a better

experience.

Technical vs. non-technical staff

?

Technical vs. non-technical staff

The successful models all share several traits:• Majority of staff are customer facing.• Obsessed with customer service.• Tech-enabled, not tech-led.• Not just about price; offer a better

experience.

What does this mean for the industry?

These new models will disrupt the industry• The models have proven traction and

consumer demand.• They will slowly disrupt the industry.• Copycats will pop up in all markets, not just

mature markets.

Disruption will come from well-funded start-ups, not incumbents, portals, nor niche players.

The impact on property portals• New models still need to advertise on

property portals.• Extremely unlikely that portals and new

models will compete.• Consumers want choice; portals need to

cater to these new models to remain relevant.

Five years from now…• A more fragmented industry with a focus

on consumer choice and increased value.• Agents aren’t going anywhere.• Property portals secure in position as best

place to advertise a home for sale.

Five years from now…

Today 5 years

FSBO

Online Agency

Disruptive

Traditional Agents

Traditional Agents

Five years from now…• A more fragmented industry with a focus

on consumer choice and increased value.• Agents aren’t going anywhere.• Property portals secure in position as best

place to advertise a home for sale.

www.mikedp.com