First look at the Rightmove "Moat Attack"
We're going to see how defensible these classifieds really are
There’s been quite a bit of hoopla of late over CoStar’s entrance into the UK Property Portal market. As per CoStar’s website:
CoStar Group, a leading global provider of online real estate marketplaces, information and analytics, has announced plans to buy OnTheMarket, the third-most visited residential property portal in the United Kingdom, for £1.10 per share in cash or approximately £100 million.
CoStar has also mentioned that this is simply the first bridgehead into Europe; success in the UK could mean success elsewhere.
We believe that Real Estate Portals across Europe will soon be entering a period of consolidation.
Andrew Florance, Founder and CEO of the CoStar Group
This episode is worth close examination. Property Portals (ex of the US) have been spectacular economic goldmines since the very earliest days of the internet. Indeed, the UK’s leading Property Portal Rightmove boasts an impressive operating margin of nearly 73%. For the most part dominant regional Property Portals haven’t needed innovative technology or outstanding management. Most years they experience varying levels of dissatisfaction from buyers, sellers, and agents yet they putter along maintaining unusual levels profitability. An analyst from Bank of America aptly put it:
“Unseating incumbents in the classified space is no easy feat.”
In short, we’re going to see how strong these franchises truly are in the face of well funded and energetic competition.
CoStar’s Strategy
Florance has already outlined the rationale for their decision to acquire OTM:
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