U.K. Property Website to Challenge Dominant Duo of Zoopla, Rightmove

The next battle in the U.K.’s online property-search arena is about to commence.

A new property website, set to launch on Monday, will aim to take on Zoopla Property Group PLC and Rightmove PLC, publicly traded search companies that have become household names and Internet favorites for property-obsessed Britons.

The shrinking affordability of houses in the U.K. is a source of frustration for home buyers. The website, OnTheMarket.com, is borne of frustration among estate agents, who in the U.K. pay to list their clients’ properties online.

The website will be run by Agents’ Mutual Limited, a company originally set up by six estate agents. The venture has so far attracted 4,600 individual branches out of around 19,000 in the country.

Membership comes with a stipulation that has ruffled feathers: Member branches must stop advertising homes on either Rightmove or Zoopla from next week.

“What they’re doing is trying to fragment the market,” said Simon Baker, founder of industry body Property Portal Watch, and former chief executive at Australian property search firm REA Group Limited. “Agents are claiming that the big-bad Rightmove and Zoopla have been taking all their money, and it’s time to take back what’s rightfully theirs.”

Rightmove, the bigger of the two, charged approximately 17,000 estate agent branches an average of £671 ($1,015) a month in 2014 to list an unlimited number of properties, up from £607 a month in 2013. Zoopla charges £323 a month on average.

For more than two decades established industries have been forced to confront competition emerging from the Internet. Insurance companies have clashed with price-comparison websites. Airlines tussled with travel-booking sites.

Except for the rule forcing agents to break from either Zoopla or Rightmove, “On The Market is hardly different than any other competitor,” said Alex Chesterman, chief executive at Zoopla.

Many large estate agents, such as Savills and Knight Frank, have elected to stick with Rightmove. Zoopla shares have fallen 36% in the past six months, according to FactSet data.

Stock borrowing data—a good indication of short selling interest—shows that hedge funds have little appetite for betting against Rightmove shares, whereas they have amassed sizable short positions in Zoopla.

A measure known as utilization, which shows the amount of stock borrowed as a proportion of shares that are available to borrow, has risen to almost 60% in Zoopla, up from less than 10% in September, according to figures from data group Markit. In contrast, utilization in Rightmove is less than 3%.

Mr. Chesterman said that Zoopla expects defections to Agents’ Mutual to be temporary.

One of the challenges for Agents’ Mutual will be to build up an audience. Rightmove receives around 90 million visits each month. Zoopla has about 40 million views.

New competitors in the past have “struggled to build up a meaningful audience,” said Nick McKittrick, chief executive at Rightmove, which he said plans to build on the £10 million it spent in 2014 on its brand.

Property search offerings from Google Inc. and U.K. supermarket Tesco PLC failed to take off. Google pulled out of its property search offering in the U.K. and U.S. in 2007 due to a lack of users.

A possible risk for Agents’ Mutual in the short-to-medium term is that its members could defect because their clients “will demand to be where there are the most eyeballs,” said Mr. Baker at Property Portal Watch.

Agents’ Mutual plans to bolster its attempt with a “multimillion pound” budget for television advertising among other marketing campaigns, said spokeswoman Vikki Thomas in an email. More agents are also expected to join, she said.

Agents’ Mutual has also garnered criticism from the growing ranks of online-only estate agents, which have been banned from joining the undertaking altogether. Some have accused Agents’ Mutual of anticompetitive practices, and formally complained to the U.K.’s competition authority.

“We have received a number of communications relating to the estate agency/letting sector and are considering some of the issues raised,” said Simon Belgard, spokesman for the Competition and Markets Authority, in an emailed response to questions. “As yet, no decision has been made on whether to investigate anything formally.”

“We have received no notification that an investigation is going ahead and have had no correspondence with the CMA,” Ms. Thomas said.

Barclays analysts, in a note to investors this week, said they doubted Agents’ Mutual will “get the consumer traction it needs.” While the battle plays out in the short term, “we prefer Rightmove,” they said.


By Art Patnaude – Wall St Journal
Jan. 22, 2015 6:26 a.m. ET