What is an online estate agency?
Online estate agencies are not mainstream yet. What do we call “online estate agencies”? How different are they from traditional real estate agencies?
An online estate agent is an alternative – usually much cheaper – to a high street estate agent that you instruct to sell your home. Indeed, online estate agencies aim to provide the same service at a lower cost. Some will sell your home for a fixed fee, while others will sell your home for a lower commission compared to traditional real estate agencies.
“Traditional estate agents have charged too much, for too little, for too long.”
Michael Bruce | Founder of Purplebricks
Purplebricks: the biggest online estate agency
One online estate agency is better known than the others: Purplebricks. Indeed, Purplebricks will make £140m in revenue for the 2018-2019 financial year (FinancialTimes). Founded in 2012, it expanded quickly to other markets. However, Purplebricks announced its departure from the Australian and U.S. markets earlier this year (Forbes).
“While Purplebricks’ stock has faced a turbulent three years, its underlying revenue has consistently grown by impressive margins.”
Mike Delprete, April 2019
Comparing Purplebricks’ revenues (blue) and company’s valuation (green), we can see that Purplebricks’ international expansion fueled a lot of enthusiasm… until 2019:
- 2016: Australian launch
- 2017: US launch
- 2019: exiting the US
- 2019: exiting the Australian market
Why did Purplebricks fail in the United States and in Australia? Customer acquisition cost
While Purplebricks is a profitable business in the United Kingdom, it was not in the United States and in Australia. These markets proved too expensive when it came to customer acquisition. According to Mike DelPrete, the customer acquisition cost was “$15,000 for Purplebricks in the United States, compared to $730 for Redfin” (direct competitor).
As massive advertising expenditures are required to acquire customers, Purplebricks couldn’t become a global actor as projected. So, who are the competitors or the equivalents of Purplebricks globally?
Who are the equivalents of Purplebricks globally?
Are there many online estate agencies around the globe? Is it only a British phenomenon? Who are the equivalents of Purplebricks globally? Let’s have a look at a few of them:
| Country | Company | Funding | Business model |
| United States | Redfin | $200 million (crunchbase) | 1.5% listing fee |
| United Kingdom | PurpleBricks | $245 million (crunchbase) | £899 to £1,399 |
| France | Proprioo | €25 million (LesEchos) | 1.99% commission |
| Spain | Housfy | €10 million (crunchbase) | €3,990 success fee |
Obviously some markets are more mature. For example, in the United Kingdom Yopa raised more than £90 million, to become a serious competitor to Purplebricks. Through proper funding and intense competition, the online estate agents have now captured 4% of the British real estate market.
Also, in the United States, Redfin is now capturing close to 1% of U.S. existing home sales.
However, other markets such as France are still way behind. Yet new actors are going to replicate their British equivalents, with Proprioo’s recent funding (€20 million) but also Liberkeys (€4 million).
Will these online estate agencies kill the traditional ones?
No, these online estate agencies won’t kill the traditional estate agents. Indeed the National Association of Realtors has more members than ever (CNN). While 50% of homebuyers find their homes online, 87% still end up retaining an agent.
Yet, it’s clear that sellers want to have a choice: iBuyer, online estate agent, or traditional agent? Still, a huge majority of sellers are going for the traditional estate agents.
One segment that is more endangered is the rental market. Indeed, while Airbnb doesn’t need to be presented anymore and has captured the short-term rental space, there are now new actors such as QuintoAndar (raised a $250 million series D) who are now clearly capturing the mid-term and long-term rental markets. Will traditional real estate agencies lose this market? This seems more likely, as transactions are not as sensitive for buyers and sellers, hence allowing a bigger part to be played by technology.