Mike DelPrete analyzes the near-monopoly of the most popular portals in the market and how that translates into pricing power.
This article was shared here with permission from Mike Delprete of Inman Intel, Inman’s data and research division, providing deep insight and market intelligence into the business of residential real estate and proptech. Subscribe now.
Real estate portals hold strong market positions around the world and have incredible pricing power.
Why it matters: That power equates to ever-increasing prices, as measured by average revenue per advertiser (ARPA), and is the driving force behind revenue growth for portals around the world.
ARPA growth is a combination of base price increases and additional value-added products such as premium listings with greater exposure. The leading portal’s ARPA growth across five global markets – Australia, Germany, Sweden, UK and US – has increased by an average of 14% each year.
Digging deeper reveals the rich potential of vendor-funded markets (where homeowners pay for online marketing).
Australia and Sweden are two vendor-funded markets (of which there are only a few in the world) where local portals are seeing ARPA growth of 20% (versus around 10% in other markets).
Sweden’s Hemnet is clearly a standout, having grown ARPA by a whopping 7x since being acquired by private equity firm General Atlantic in 2016.
This is a beautiful graph for investors. Homeowners may disagree.
UK’s Rightmove is perhaps the most stable operator in the sector, with stable ARPA growth of around 9% per year.
However, Portal will face headwinds in 2024 and growth will decline. The UK market has been complaining loudly about Rightmove’s prices for years, but a look at its global peers suggests it could be even worse.
In the US, we calculated a rough estimate of ARPA based on the portal’s real estate lead generation revenue divided by the total number of transactions in the market.
Zillow and realtor.com both rode the pandemic wave with record revenues, and Zillow has maintained strong pricing power ever since.
Bottom line: As outlined in my 190+ slide Real Estate Portal Strategy Handbook, 93% of portal revenue growth comes from core listing and lead generation products, with most of that coming from ARPA growth .
The leading real estate portals have a near monopoly on the market, giving consumers unparalleled exposure and reach. This strong proposition translates into pricing power, and over time, prices only increase in one direction.
Mike DelPrete is a strategic advisor and global expert in real estate technology, including Zavvie, an iBuyer offer aggregator. Connect with him on LinkedIn.
