Estate agents to challenge Rightmove and Zoopla with OnTheMarket

Any technology that creates economic winners also creates losers, as a swath of companies across sectors ranging from taxis to hotels have recently discovered.

The British public's booming obsession with property has made portal websites Rightmove and Zoopla into winners - the pair have emerged as two of the UK's most popular sites over the past decade. Rightmove receives 90m visits a month while Zoopla attracts 43m.

On Monday some of Britain's best known brands will challenge this duopoly when they launch a rival portal, in an attempt to cut costs and regain control of their market share.

Almost 4,500 estate agents, including Savills and Knight Frank, will back the mutually owned, not-for-profit portal.

The portals have been "milking us for all they're worth", said William Wells, residential director of Mullucks, a small estate agent in Hertfordshire with four branches which will list its properties on OnTheMarket from next week.

His fees have been "jacked up" by about 20 per cent a year, he said, arguing that the new portal would give agents "some market influence".

"You can get too greedy and that can come back and bite you later on," said Mr Wells.

Both Rightmove and Zoopla have seen strong turnover growth recently. Rightmove's rose 20 per cent to £80m in the half-year to end-June 2014, while Zoopla saw 24 per cent growth to £80.2m in the year to end-September 2014.

Lawrence Hall of Zoopla argues that agents advertising on the site pay on average less than £10 a month for each property, "less than ever as a percentage of their revenues".

Eddie Ellis, a director at Manchester agents JP & Brimelow, is less concerned about the major portals' costs. "You can choose what fees you want to pay [for various levels of service] so you can control your expenditure," he said. But he has still chosen to join OnTheMarket. It is "a good opportunity" for agents to "get together and give another portal a chance", he said.

The new site's founders are playing hardball: members will in future only be allowed to advertise their homes on one other portal. In effect, this means that agents joining OnTheMarket must leave either Rightmove or Zoopla.

Mr Hall said OnTheMarket was "seeking to . . . stand in the way of any innovation in the property market".

But OnTheMarket board member Ed Mead, a director of Douglas & Gordon estate agents, argued that the restriction was necessary in order to give the site a chance to compete.

He recalled when a similar situation arose in the 1990s with a London property listings magazine, which agents felt was charging them too much. A group of agents launched a rival publication, the London Magazine, which is still in business and still owned by a consortium of agents.

"We're paying more and more for the privilege of putting our properties in [the portals'] shop window, and that was undermining our ability to invest in our businesses," Mr Mead said.

Mr Wells, Mr Ellis and Mr Mead have all chosen to quit Zoopla rather than Rightmove. They have been joined by big brands such as Knight Frank and Spicerhaart. Rival Chestertons has chosen to quit Rightmove.

Numbers are not yet comprehensive, but so far, Zoopla seems to be hardest hit - 80 per cent of the 800 agents to announce their defections so far are leaving Zoopla, analysts at Barclays estimate. As a result it has cut its forecasts for the portal's 2015 earnings per share by 10 per cent, while leaving Rightmove unchanged.

The market challenger - it went public less than a year ago in a £919m IPO - anticipated rapid revenue growth to scale its £652m market capitalisation to closer to Rightmove's £2.2bn scale.

The competition from OnTheMarket threatens that goal. This is reflected in Zoopla's share price, which has been on a downward track since September. The company is now trading at about 156p a share - 30 per cent lower than its launch price. Rightmove's shares are down 11 per cent since the start of September.

The existing sites say they are unfazed by the start-up, pointing out that more than three-quarters of Britain's estimated 19,000 estate agency branches have not joined.

David Sansome, managing director of Hampshire and Berkshire chain Sansome & George, is among those staying loyal. "Most of our clients want maximum exposure for their properties, we couldn't tell them we'd dropped one of the major sites," said Mr Sansome.

Richard a Brassard, a director of south London agent Courtenay, believes the existing sites are good value, particularly for smaller chains. "Twenty years ago, nobody had heard of us more than about half a mile away," he said. "The internet has made the playing field a lot more level."

He will not be joining OnTheMarket unless it drops its restrictive membership rule, which he calls "almost cartel-like".

The ultimate success of OnTheMarket will rely on homebuyers voting with their feet - and the established portals' high profile gives them a strong defensive position.

"If it fails in 12 months' time then at least we'll know we've given it the best go that we could," says Mr Ellis, the Manchester agent and OnTheMarket member.

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Investors back online estate agents

High-profile investors have backed online estate agents in the past year - most recently Carphone Warehouse founder Charles Dunstone, who last week invested £5m into HouseSimple, writes Kate Allen.

Their disruptive approach to the business of home-selling has fuelled tensions with traditional high street agents. As a result online agents have been banned outright from new start-up portal OnTheMarket.

Market leader eMoov has filed a complaint with the Competition and Markets Authority about this, arguing that OnTheMarket is "anti-competitive".

Alex Gosling, HouseSimple's chief executive, said the launch of OnTheMarket was "high street agents' cynical, anti-competitive and desperate reaction to a market that is changing".

Fellow online agent Adam Day, managing director of Hatched, this week quit the National Association of Estate Agents in protest at its support for OnTheMarket.

Rob Ellice, easyProperty's chief executive, wrote to OnTheMarket chief executive Ian Springett earlier this month to complain that the new portal's restrictive rules would damage estate agents' reputation.

"The digital age is about choice, value and transparency; OnTheMarket artificially limits choice," Mr Ellice said.

OnTheMarket's founding agents justify its ban on the basis of the quality of service they want to provide.

"The vast majority of people will always prefer to have a local human to deal with," said Ed Mead, an OnTheMarket board member and director of the Douglas & Gordon chain.

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