The Achilles heel of the Rightmove model

Posted on October 10th, 2008 by Mike Carter

According to Wikipedia, the definition of Achilles’ heel is -

is a fatal weakness in spite of overall strength, actually or potentially leading to downfall.

It seems like the heel could be exposed over at Rightmove. According to Estate Agent Today, 75% of Rightmove subscribers are threatening to leave. If this happens, one of my biggest concerns with their model will devastate them virtually over night. According to the Carter-pedia rules of online ad models :

if you are a pay to list website, those ‘payees’ supply all your content. if that content goes away, so does that audience

I remember last year, asking the sales reps at the Rightmove booth (at Agent Expo) about the contract lengths. According to them, 80% of their customers were on a month-to-month basis. And he said that with a smile. Of course he did not notice I was from Zoomf :-)

A sure sign of keeping clients happy is the willingness for them to sign longer-term contracts with you. It’s what we did at Doubleclick and I think anyone would tell you this is good business practice for online advertising.

Now let’s do a simple napkin analysis. If 75% fell away, what happens :

  • obviously revenues are hit and RM cannot advertise as much
  • audience (traffic) will drop.
  • instead of 700k properties to look at (or whatever the number is), you’ve got that much less inventory
  • gumtree starts receiving a lot more advertising
  • google de-ranks them across natural search due to decrease in breadth of content
  • stickers come down and hopefully ours go up

Now that’s the short list and we’ve all heard about Rightmove being in a weak position before so all of this is said with a grain of salt. However, the Achilles’ heel is the part that starts the domino effect for them.

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3 Responses to “The Achilles heel of the Rightmove model”

  1. carlos f, on October 10th, 2008 at 5:59 pm Said:

    Mike, you describe a bunch of risks in the pay to list world (RM, FAP, PF et al), but I hear rumours of massive drops in online ad revenue. Where do these leave the free to list sites? I’m sure it’ll come as no surprise to you that my sources (banking types, perhaps former banking types!!) tell me a few are being hawked around for more cash.

    Carlos

  2. Mike Carter, on October 11th, 2008 at 8:26 am Said:

    Hi Carlos,
    You’re right. The ‘freemium’ model needs to be embraced or the free-to-list model will never go anywhere. The basic tenet is that part of your service is free and additional traffic driving mechanisms are at a cost. Again, similar to a Google AdWords type environment.

    Online ad revenue is not immune from the downturn and it will suffer. Part of why most of Silicon Valley is tightening it’s belts.

  3. John Wards, on October 14th, 2008 at 9:02 am Said:

    The free to list model would work if you keep costs (staff) down to a minimum and got coverage from a good number of estate agents.

    Look at plentyoffish for example, dating I know but they have a minimum number of staff and are fully reliant on advertising.

    If you get the numbers correct you can run an only advertising supported website.

    Also advertising on the internet means you can track your ROI better than any offline advertising, which in a tough market is rather handy.

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