Rightmove’s monopoly is the single biggest driver of venture capital investors piling into proptech.
Facebook, Google, Amazon and Microsoft before them operate in a world where ubiquity is the natural state.
The internet has created a new world with no barriers to entry, so the service that everyone else uses becomes the de-facto monopoly.
Monopolies often make life easier: who wants to visit a dozen search engines or property listing sites when you can get it all in one place?
Taking advantage of this phenomenon is the aim of entrepreneurs and venture capitalists: a hope to create the next generation monopoly in a world without middlemen – or in this case, estate agents.
But we know how that story ended when Purplebricks won with its ‘Avon-style’ estate agency creating a network of ‘Local Property Experts’.
The repercussions have so far affected proptech more than the traditional high street agent: easyProperty flung itself into the arms of The Guild of Property Professionals when a tech-only disruption strategy failed to capture enough customers.
This ‘Avon-style’ business model, termed as a hybrid agent by the property industry – neither online nor traditional – isn’t suited to the natural monopolies the internet tends to create.
Purplebricks requires significant investment in TV advertising to drive people to a service they use very few times in their lifetime.
And that’s not the only issue with disrupting the people in property: the conveyancing process is currently taking a minimum of six weeks to sell/buy a home legally. It’s almost as uncertain a timeframe as finding a buyer with sales falling through a common occurrence.
Can you imagine how small Amazon would be without next day delivery guarantees and one-click purchase?
And that’s the most relevant example: Amazon has broken through many of the barriers people throw up when talking about disruption.
Naysayers said people will never buy shoes online. Well, now they buy three sizes and send back the two that don’t fit. Or all three if they’ve changed their mind. Flexible, quality service that gives people confidence to come back for more.
We had much of this negative commentary at the bottom of my recent Viewber article.
What is interesting about Viewber, which absolutely will transform the estate agency industry, is how there are currently no copycat companies.
Viewber could absolutely be that natural monopoly aided by the internet that disrupts the property industry.
The facts are that Rightmove fees will increase, the minimum wage will soon be increased further and business rates rises are already biting.
Once agents become addicted to higher profits, serving customers out-of-hours and never having to waste money hiring and training new negotiators, they’ll wonder why they didn’t use Viewber sooner.
And yes, I am absolutely saying negotiators are going the way of the facsimile machine.
But what else could? What are VCs eyeing up for disruption?
Research firm CB Insights takes a global look at some of the tech companies trying to disrupt residential real estate:
Beyond the realm of ‘tech-enabled brokerage’ where most of the companies talk about ridding the world of agents, there are a few interesting points of focus.
Josef Wasinski, my Unmortgage co-founder, often says inertia wins/disruptors lose if the experience on offer is not ten times better than the incumbent offering.
Change is something people need to believe in – offering ‘features’ like signing agreements on a smartphone are like next day delivery. They’re good, but everyone will offer them if people come to expect such things.
The world is going to be dominated by the next launch of a service that changes the way we think about – let alone do – property.
This line of thinking leads to funding of myriad virtual reality technologies, new agencies/brokerages using apps and the internet and data companies to predict property prices.
The latest trend is digital mortgage brokerage – lots of money to be made from cutting out the human mortgage brokers and replacing them with electronic forms that plug directly into the banks’ lending criteria.
Flying cars and colonies on Mars these are not.
Looking at the companies I have written most about over the years – part personal enthusiasm, part genuinely newsworthy – there’s a fundamental re-imagining of the world: Opendoor, Property Partner, Fixflo and Viewber.
In addition there’s been a lot of coverage on Agents’ Mutual / OnTheMarket.com and Purplebricks, not because they’re going to be big monopolies, but because they’re controversial in our little bubble.
Like boiling a frog, the heat of change will come gradually until it’s too late and we accept the new status quo.
That’s exactly what happened with Rightmove. Out went split commissions and common courtesy to be replaced by negotiators chained to their desks getting a reverse tan from the dull glow in front of them.
By the way, Amazon just entered the real estate market in the US with this ‘Hire a Realtor’ page:
What this will be is yet to be seen. It could become the new way to choose an estate agent, or something completely removing the relationship between agent and consumer.
Whatever happens, now is the time to think about how the internet will monopolise property. And in my mind, it will look more like Viewber than Purplebricks.
Rayhan's piece first appeared on www.propertyindustryeye.com
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