Trying to compete directly with leading real estate portals is incredibly difficult – it is unlikely to succeed. The intelligent challengers understand this game and how it is played. You are not trying to overtake the leaders, but are building a viable business on your own.
This story was republished with the permission of the author.
Efforts are being made worldwide to remove leading real estate portals. In the United States, the commercial real estate company CoStar has spent over $ 400 million on the acquisition of the Homes.com and Homesnap portals. In the UK, startup Boomin is raising an additional £ 25m to compete directly with Rightmove.
The main value a real estate portal offers its clients is exposure to the most potential homebuyers and homeowners. In the US, Zillow’s traffic lead over the recent CoStar acquisitions is astronomical.
Homeowners want to advertise their greatest asset in a place where buyers will definitely be looking. Zillow is that place: From a traffic standpoint, Zillow has 23 times greater reach than Homes.com, making it exponentially more effective and valuable.
Trying to compete directly with market-leading real estate portals is an incredibly difficult task that is unlikely to succeed. The unique challenges include:
- Incremental market share gains do not mean incremental increases in value.
- Getting listings is the easy part. Building traffic is tough.
- Product differentiation means little. The main value for users is range.
The CoStar strategy
CoStar doesn’t have to take Zillow off the bench to build a valuable business. Zillow’s clients are real estate agents – top class agents – who pay Zillow for leads. However, Zillow only works with about 5 percent of real estate agents in the United States, allowing CoStar to tap a large addressable market.
The narrative that CoStar tries to compete directly with Zillow is simply this – a story designed to piss off agents and generate excitement. The real battle is not about the consumer eyeballs. It’s about a real estate agent’s wallet.
The challenger portals succeed with the easy part: securing listings. The traffic is the hard part.
Over the years, the top portals have claimed their lead over billionaire multinational media companies (Zillow vs. realtor.com, IS24 vs. Immoweb), industry-backed, publicly traded upstarts (OnTheMarket vs. Rightmove), and private equity-backed No. 2 (Zoopla vs. Rightmove) and listed competitors (Domain vs. REA Group).
Hundreds of millions of dollars have been thrown against the top portals for years without affecting their dominant position.
Previous evidence shows that this new set of challengers is extremely unlikely to dethrone the top portals. The intelligent challengers understand this game and how it is played. You are not trying to overtake the leaders, but are building a viable business on your own.
Mike DelPrete is a strategic advisor and global real estate technology expert, including Zavvie, an iBuyer listing aggregator. Connect with him on LinkedIn.