OnTheMarket plc (LON:OTMP) Chief Executive Officer Ian Springett caught up with DirectorsTalk for an exclusive interview to discuss what they are trying to achieve, the key strategic elements to achieving their objectives, the key areas focussed on since IPO and what investors should be looking out for in the coming months.
Q1: Ian, can you give us a brief rundown of why OnTheMarket entered the market and what it’s trying to achieve?
A1: The UK property portals market, prior to our entry in 2015, had become pretty highly concentrated, just two large players, Rightmove and Zoopla, and really effectively operating a duopoly.
By contrast, the estate agency market is highly fragmented which reflects the fact that it’s a local business, the majority of agents are small firms with one or two branches, serving the community they live in.
During that same time, the internet and property portals in particular have become the place where the public begins looking for a property and estate agents now rely on portals as a very important source of enquiries from property seekers and those looking to sell or let.
Those factors, the imbalance of power between two big portals and thousands of small estate agent customers relying on their service gave the portals strong pricing power. They were raising prices by double digit percentages each year with Rightmove in particular generating profit margins in excess of 75% as a result.
There was and is, therefore, an opportunity to work with agents to create a portal which prices the core property listing service at a sustainably fair level still a highly profitable business by the way but without racking the customer. By building such as agent-backed portal to full scale, many other revenue opportunities then flow and not all of these are necessarily from agent’s pockets so there is an opportunity to move into the new homes developments arena, overseas property, value added services of various types. Obviously, these portals generate very large consumer audiences and it’s possible to generate third party advertising from them as well.
So, at the background Rightmove and Zoopla, because of their position, have combined market cap of over £5 billion, our aim is to disrupt that duopoly and reallocate the value to reflect more closely where it’s really created. Just remember, portals rely on agents not only for most of their revenue but also for the essential property content which attracts the audiences they enjoy in the first place.
Q2: What are the key strategic elements to achieving those objectives?
A2: We have already an established committed customer base of thousands of leading estate agents across the country who have supported this business since it launched in January 2015 and the majority of those are also shareholders in the company.
So, our first priority is to continue improving the service we provide to them and encourage them to support their portal in practical ways which will give us an edge when competing with the two large portals. An example of that is that they advertise new properties with us first when launching them on to the market which is a good hook for consumers and also begins to reduce their reliance on the other portals. The better the service we can provide to the customers we already have, the more we are positioned to attract and to satisfy new agents that we are taking on board. The portal is excellent, we had the luxury, I suppose, of building it from scratch in-house in the run up to our launch, it creates a great advertising environment and a superb property search experience and we’re improving that continuously.
So, from that platform of the products and the established and committed customer base, we now need to build rapidly the number of agents and the property listings we carry to reach the same scale as Rightmove which has pretty much whole of market coverage. We’re doing this by offering introductory free trials of our service to agents but also by offering share incentives to those agents willing to enter into long-term paying contracts with us as the majority of our existing customer base have done.
We’re also progressively increasing our marketing activity to ensure we build the property audience, the property seekers, who use OnTheMarket as part of their search activity. We’re scaling up the organisation to support the business growth, increasing the tech team to support new product development to create those added value services which will generate new revenues later on.
Q3: You IPO’d on 9th February, so we’re only 8 weeks in, what are the key things that you’ve focussed on and delivered during that time?
A3: As soon as the IPO was completed, our field sales team, which at the time was 15 people covering the country, began engaging with estate agents who are not with OnTheMarket to seek their support. Rather than simply pitching a free trial of another property portal, we’re investing time to explain our proposition which is an agent-backed portal which will provide this sustainable lower cost alternative to the Rightmove/Zoopla duopoly. We explain why that’s important to their business, what they can expect from us over the next year or so, how they can help us succeed and that’s worked so far, in fact we’ve added more than 2,000 new estate agent offices to the 5,500 we had on the portal at the time of the IPO.
To support still faster growth and enable us to talk more regularly with all agents, we’re increasing the size of the field team and since IPO, it’s already reached 32 people and we plan to double it again by the summer and add to it further during the course of the remainder of the year. That team is centrally managed, all appointments are set for them by our telesales team, it allows us to monitor their performance, make sure their diaries are planned efficiently and that obviously has also increased in size as we address the quite substantial market that we still have to tap into.
We’ve also began investing in marketing and the direct result is that consumer traffic to OnTheMarket has already more than double to 12 million visits in March and 13.7 million visits in April, compared with January and February and with the same months last year.
Q4: I think you’ve already touched on this but what should investors look out for over the coming months to assess the value and potential of OnTheMarket?
A4: Well, we will be giving updates to the market from time to time about our progress in building the number of agent offices we’re listing and that’s a pretty key indicator of our progress in building the network to full scale. The faster that we can reach that scale, and the same scale as our competitors, the sooner we can begin investing more in marketing to help deliver more enquiries to them and of course, the sooner consumers will find a comprehensive stock of property with onthemarket.com.
We’ll also update on our visit traffic, investors should look for steady growth over the coming months ahead of our fuller marketing push later in the year, once the agent network has been built up.
They’ll certainly see some brand building activity from us soon and they can also look for our logo in increasing numbers of estate agent windows. That is one of the obligations that agents take on when they join us and that is to promote us through their own means, in their office windows, on their websites, on their property particulars and other advertising.
Of course, investors can just come to the portal, try the portal out, see how it compares with the others and obviously, if they are searching in their local area, they should see more and more agents listing with us over the coming months.