This is an ongoing series of articles that cover the topics and insights shared during the three-day Real Conf 2021 hosted by Adfenix. The following article summarizes the key discussion with Douglas Driscoll on Day 1 Session 4 of the conference.
Douglas Driscoll is the CEO and owner of Starr Partners, a Sydney-based real estate group. Douglas has over 20 years experience in the industry, and in this session he shares insight on:
The Risks and Benefits of Portals for Estate Agents: The Risk of Status Quo
What is a portal?
Douglas breaks down three types of portals:
- iBuyer model - this describes the instant buy-up businesses such as OpenDoor in the States. They are ‘a bit unproven and untested’, according to Douglas, but in its heyday had a lot of money going into them.
- Sale-by-Owner - while self-explanatory, this is a business model that deliberately cuts agents out of the equation and goes directly to the public.
- Traditional portal - where the portal charges the agent for the privilege of being listed and promoted to customers’ listings on the portal itself.
Portals are popular because of an obvious convenience factor, more than anything else. The term portal itself alludes to the collection or aggregation of data from various diverse sources and placing them in one uniform place.
Apart from the convenience of having a slew of agents that can be contacted in one place, we also have active buyers and passive buyers on these portals. Passive buyers can be contacted via social media, for example, while active buyers are the ones that will go on a portal with the intention of searching for property.
The Australian Case Study
In Australia, there is a duopoly of two major portals, one of which can be likened to that of Zillow in the States. The market cap of this site, realestate.com.au, is three times the size of Rightmove in the UK. All three names are behemoths in the world of portals. Realestate.com.au is the fifth most visited site in the country, lagging behind the likes of Facebook and Google, and has 12.5 million unique visitors every month - an astronomical figure. The cost to list is pricey as well, which is why Douglas posits that portals around the world are looking to Australia and asking how they too can charge their clients in their respective territories more money.
But the phenomenal pricing of Australian portals owes much to a preexisting robust market in the country, with incremental price increases. There is also the added luxury of being able to pass on the cost to the client which happens a lot.
The success of Australia’s portals lies in the investment of tens of millions of dollars every year being poured into marketing, promotion and content, a tactic that has captured the hearts and minds of the public. Why is that important? It’s important because the portals have become something of a national institution, and one that the public trusts and genuinely likes.
What threats do portals pose for real estate agents: The Three D's
They can be broken down into three points:
- Disintermediation - Many agents fear that portals pose such a threat as to cut them completely out of the equation. However, portals are huge in scale and size, employing hundreds of people but by proxy they also have a sales force of thousands - that sales force being ‘us’, the industry. They do not pay the industry, but the industry in fact pays them, and does all the dirty work for them. As a strange result, agents then shouldn’t actually fear being cut out at all, but focus on sharpening the skillset where they cannot be replaced.
- Diminishing profits - This is a more immediate and pressing issue, because of the exponential price hikes in listing portals, with Australian portals increasing their costs in the last six years by 100% - and getting away with it.
- Diversification Strategy - Portals have evolved from one trick ponies into huge machines that perform a number of services in addition to just advertising listings, encroaching on the businesses of agents and agencies. One solution Douglas suggests is for the latter to boycott some of these ancillary or add-on services, because agents don’t want to be involved in making portals richer and more profitable than they need to be.
He also highlights an important issue that agents (and the industry at large) need to take into consideration: the priority is to sell property to customers at the very best price possible, and get the very best outcome possible. Unfortunately, portals provide a valuable search source for consumers at the moment, and wiping them out completely would be a disservice to customers. For the time being, for agents at least, portals seem to be a necessary evil.
Predictions for the next five years:
- More players will enter this space, and certainly more challenges will come into play from outside the industry. Real estate is a multibillion dollar industry globally, so external players are bound to encroach the space very soon.
- ‘Fat cat’ portals may continue to get fatter at the expense of other players in the industry, although some may rise to the challenge of opposing their business model, whether it be one of the social media sites, Amazon or Google etc.
To sum up:
- There are three types of portals: iBuyers, Sale-by-Owner, and traditional portals
- The number one reason why portals are so popular with consumers is the convenience factor
- The success and inner workings of portals differ from region to region, with Australia serving as a phenomenal example of how the success of portals can enable them to set costs at will and well above the norm
- The success of Australia’s biggest portal lies in its incredible investment in marketing, promotion and content, winning over the public effectively
- Portals pose a number of threats for agents that can be summarized as the three Ds: Disintermediation, Diminishing profits, and Diversification Strategy
- All players in the industry should have the common goal of placing the customer’s best interests as a priority.
About Real Conf.
Real Conf 2021 is a three-day virtual event exploring ways that agencies and brokerages can leverage the power of digital to increase business opportunities, elevate the brand, and empower agents to deliver success. The conference features hundreds of invaluable insight from keynote speakers, panel discussions and case studies from experts in the field.
All 15 sessions with 25 speakers are now available to stream on-demand.
Gain full access to the stream and watch the sessions in their entirety by signing up here: https://www.adfenix.com/real-conf
