It's not about the Search

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So much emphasis is placed on the role of the web portal in the real estate industry. Primarily because of the crazy value of REA, owner of Australia’s most successful web portal. As a matter of fact, realestate.com.au is by far the most successful web portal ‘per capita’ in the world by far. Adding to this is the fact that they have so much disposable funds to re-invest in brand awareness - just look at the Arni campaign. Their capacity to build a brand connection (not a relationship) with the real estate consumer is incredible.

But, any experienced real estate agent knows that there is a lot more to real estate than searching. And, when you look at this properly, what REA are really the best in the world at is monetising an audience. They are world leaders in hiking prices up for premium listings. I’m here to say that the searching process is only a small part of a buyers property cycle, and that the value of REA is comprehensively disproportionate to the role it plays in the industry. I’m not saying that it’s not worth it’s 10 - 12 multiple of earnings, i’m just saying that REA’s value is fundamentally different to the value of the industry, specially when they play such a small role. 

In my opinion it should be a tense place to be as an executive or equity holder at that organisation, although they probably don’t feel too tense up there at the top. They see no cap or limit on potential earnings, which is in stark contradiction with what i’m proposing. If you look at the share price since Jan 2014 it has been channelling horizontally since then - despite large increases in revenue. For me this represents a fantastic dichotomy of corporate greed extracting more funds from an industry where the sum of all of it’s constituents (agents) is worth less than the corporate giant. The revenue of REA is dwarfed by the real estate industry itself.  

There is a wave of new technologies being built right now that put the consumer first and provide utility for them to get things done. When you look at how REA monetise their audience more closely, the very act of priority listing placements is anti-consumer and also anti ’social technology’. It actually makes it harder for consumers to find the right property. Also, the very act of searching can be done in any one of dozens of web portals with similar amounts of listings and better website experiences. And then there’s the rise and dominance of mobile devices reportedly up to 60% now…

Priority placements are useless on mobile devices. Soon, the market will wise up to this. It won’t be agents complaining, but vendors when they are signing off on their marketing campaign. It’s just that REA were first to market, have the best domain name and have the biggest budget to engage their customers.  But, when you look not too far into the future, buyers will just have to ‘make themselves available’ and searching will cease and the property will find you.

There’s change in the air.


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