In a blast from the past, I took a look at my ideas pad from back in 1999 – this has sat on the progeny of my Palm Pilot back up all this time.
Let’s take a look at the ideas and which if any made it… suffice to say I didn’t follow through on any – alas – there within a lesson!
Idea:
Webtor
What’s the pain?
Easy searching for real estate online
Historical context:
At the time (1999) the Internet was not really well utilized for searching for houses for sale, usually, you had to go to the high street estate agent or crawl through the property press.
Has anyone done it now?
Err, yes, RightMove.co.uk, Google, pretty much everyone
Lessons?
This seems to have been just exploitation of a new distribution channel for the property market. Interestingly some deregulation in the industry allowed easier sale with only minimal interaction with a conveyancing solicitor. There have been societal changes in the last decade with more single occupant households and also the Internet and economic booms have to some part lead to job creation and the increased requirement for labor mobility. The local property rag model was sub-optimal for this type of house search and the internet has been helpful. Digital cameras have become cheaper and this has allowed easy uploading of lots of images of the houses which has reduced the time to market for web-based advertising versus batched property papers.
I suspect in terms of barriers to entry to this market, there was little to overcome except any potential reticence from the incumbent estate agents and inertia of the customers – probably due to ignorance of the new technology. It would seem that there would have been a classic tipping point when the online market really took off simply based on the number of houses in the online network marketplace. It may have been interesting to look at whether an initial niche strategy of taking say one property hot spot with good technical know-how among the buyers/sellers may have been a good initial entry point to market.
Rightmove.co.uk’s history shows they started at the height of the .com boom in 2000 essentially as an online portal to display the houses that traditional estate agents sold. The revenue model IIRC was just charging a commission for displaying a new listing, no percentage of the house sale price. This is nice as the marginal cost of storing another listing on the website is low so a one-off fee revenue model means cash up front regardless of whether the house sells or not. As essentially an online advertising site, capital costs would be low so effective cost control and scaling up and down the size operations was probably possible to help weather the .com bust period.
One question that comes to mind is how defensible was this market – how did rightmove.co.uk erect barriers to entry? Clearly, anyone could set up a website to advertise a house for sale so the question was what was the crown jewel? I suspect the brand was a key intangible asset as was the large number of houses on the site – first mover advantage or superior execution must have helped rightmove.co.uk get to the point where most of the smaller players dropped out. What was right move’s basis for competing? They claimed they provided a lower cost option for advertisers than other outlets (e.g. papers) – this would have seemed a risky strategy initially as someone else could have come in and undercut them and a price war could have been fatal for the embryonic market back in 2000. Luckily the key competition was advertising in the papers and the costs there and market reach favor the online strategy. We could postulate that if one of the national papers had set up a website to advertise property online they could have levered their brand to sew-up the market but perhaps they were too worried about cannibalizing the paper-based revenue?
Where next for this market?
Well, looks like rightmove.co.uk have expanded into related markets from the main property sales starting point; they are looking at new builds, rentals, and commercial property and holiday homes. An international expansion could be interesting but fast forward to 2010 and many markets abroad already are well serviced by online property sales. Growth by acquisition may be tricky based on how funds need to be raised. With the generally depressed state of the economy and property market, it may be time to batten down the cost control hatches and weather the storm, allowing the weak competitors to die grabbing their market share. Looking at rightmove.co.uk half yearly report for 2008 it seems the cost reduction strategy is the way they have gone but how long this is tenable as their margins get squeezed with competition based on price we will have to see along with reduced volume/revenue. Probably time to harvest the profits and divest… watch out for Google!
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