Rightmove (RMV) faces a competitive threat from online estate agency Purplebricks (PURP), according to consultancy business PropTech Consult.
Purplebricks offers an online platform to help buy and sell property at competitive costs. Unlike traditional estate agents, it does not have any high street branches to maintain or legions of sales staff to pay, and so is able to pass on some of those savings to customers.
It is an asset-light business model that Shares has highlighted many times. In fact, the online agent's exciting potential encouraged us to flag the company and its shares as one of our top weekly selections, in September 2016 at 134.31p. We updated on progress earlier in May, prompted by the company's planned expansion into the US this year.
SLOWER ADVERTISING GROWTH
The nub of PropTech's analysis is that Rightmove enjoys ‘supernormal profits from a monopoly amongst advertisers.’
But PropTech's Eddie Holmes warns that without investing in new routes Rightmove runs the risk of standing still in an industry being disrupted by new entrants and digital specialist, such as Purplebricks and ZPG (ZPG), previously known as Zoopla.
ZPG is another looming threat as it has diversified its offering to consumers and advertisers by providing various products across the property lifecycle.
FAILURE TO INNOVATE
Innovation has not been Rightmove's strong point, according to Holmes. In his opinion the company's platform has virtually stood still since is launch in 2000, while expansion in commercial property and overseas markets has largely failed.
A continuation of that trend opens to door for disrupters such as Purplebricks and others, to increasing take market share away from Rightmove. Purplebricks’ competitive pricing also limits Rightmove's own pricing power, the analyst believes.
The respective share prices of Rightmove and Purplebricks clearly illustrate the markets view on each company's future prospects. Over the past year Purplebricks shares have more than doubled to 353.25p, versus a virtually flat Rightmove share price at £42.29.
