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The future of Zoopla Property Group & Rightmove unpredictable

Since the conception of Rightmove in 2000, Rightmove has grown to become the dominant force within the world of online property. Over the past five years,  Zoopla  have taken over smaller competitors to become a large property portal.

Rightmove was set up by the corporate agents, Halifax, Connells, Countrywide and Royal & sun Alliance in 2000, by 2004, Rightmove had 6,000 members, which is 50% of UK Estate Agents, floating on the Stock market in 2006. Today having a capitalisation of circ. £2.1 bn.

Zoopla similarly, floated on the stock market in June 2014. However, the issue is the fees to its customers, the Estate & Letting Agents having quadruped. Given the income to Rightmove is £140 million, the running of the business only costs £36 million per annum, therefore, £102 million profit goes to shareholders.

Similarly, Zoopla costs £35.5 million to run, generating an income of £65 million, meaning £29.5 million to shareholders and a capitalisation of £919m.

As a result, Estate & letting agents have to pass these operating costs to their customers, keeping fees higher than they need to be. In addition, rather than making the portal more consumer friendly and improving the site for users, they are more interested in shareholders and increasing their profits year on year.

From January 2015, a new property portal is to be Launched ‘On the Market’, which is a co-operative and not for profit business OnTheMarket. By September 2014, they have over 4,000 offices signed up for launch on January 2015.

One of the interested parts to this new portal is not the fact, the 4,000 offices have signed up for a five year contract, it’s the fact, a stipulation of the contract is to drop either Rightmove or Zoopla Property Group and transferring the listing fees to ‘On the Market’.

There are approximately 12,000 physical estate agent branches in the UK with 4,000 joining On the Market and approximately 20 new branches joining ‘On the Market’ per day. I have no doubt the share price for both Rightmove and Zoopla Property Group will drop considerably throughout 2015 as well as the income for both businesses.

EDITED –

I’m very pleased to report, after writing this article, having only bought sold shares once before, I decided to short the Zoopla stock, buying at 220p per share and selling out at 172p per share, making circ £12,000 profit. Very pleased and chuffed with myself.

 

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Posted: 29th September 2014

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