Mike DelPrete analyzes how the new-monopoly sites dominate their markets and how that translates into pricing power.
This article is shared here with permission from Mike DelPrete of Inman Intel, Inman’s data and research division that provides deep insights and market intelligence on the residential real estate and proptech business. Register today.
Real estate sites are in strong market positions around the world, giving them incredible pricing power.
Why is it important: That power equates to ever-increasing prices – as measured by Average Revenue Per Advertiser (ARPA) – and is the engine of portal revenue growth worldwide.
- ARPA growth is a combination of base price increases and additional, value-adding products, such as highly disclosed premium listings.
- In the leading sites in all five global markets – Australia, Germany, Sweden, the UK and the US – ARPA growth increased by an average of 14 percent each year.
A deep dive highlights the rich potential of merchant-sponsored marketplaces (where the homeowner pays the cost of online marketing).
- Australia and Sweden are the two markets supported by retailers (only a few in the world), with local sites converting to ARPA growth of 20 percent – compared to about 10 percent in other markets.
Hemnet of Sweden a clear highlight, as it has grown its ARPA a whopping 7X since being acquired by private equity firm General Atlantic in 2016.
- That’s a good-looking graph for investors; landlords may disagree.
UK Rightmove it may be the most consistent operator in the space with a steady annual increase in ARPA of nearly nine percent.
- However, the site faces headwinds in 2024 with a low growth rate.
- The UK market has complained about Rightmove’s prices for years, but a look at its global peers suggests it could be worse.
In the USI calculated a rough estimate of ARPA based on the revenue of the portal’s real estate lead type divided by the total number of jobs in the market.
- Both Zillow and realtor.com rode the wave of the pandemic with record revenues, and since then Zillow has maintained its strong pricing power.
An important point: As I mentioned in my 190+ slide book Real Estate Portal Strategy, 93 percent of portal revenue growth has come from core listings and premium brands – and most of that from ARPA is increasing.
- The leading real estate portals are near-monopolies in their markets, offering buyers unparalleled and unparalleled exposure and access.
- This strong proposition translates into price power, and over time, those prices only go one way: up.
Mike DelPrete is a strategic consultant and global expert in real estate technology, including Zavvie, the iBuyer offer aggregator. Connect with him on LinkedIn.
