Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Trade Me fee hike may reap $22.5M more real estate ad sales

Trade Me may reap $22.5M more real estate ad revenue by hiking fees, fending off rivals

By Tina Morrison

March 12 (BusinessDesk) – Trade Me Group will probably succeed in forcing real estate agents to accept higher fees, adding $22.5 million of property advertising revenue by 2017 as it pushes back on a challenge from smaller, industry-owned rival realestate.co.nz.

Property is seen as the key growth engine for Trade Me’s classified advertising business as it faces flat revenues in its other main general auctions business. In a sign that rivalry for online property listings has heated up in the past six months, realestate.co.nz poached Trade Me’s former property head Brendon Skipper, prompting Trade Me to hire former QV executive Nigel Jeffries, who has 15 years’ experience in senior technology and property data roles, as a replacement.

“Given the calibre of the candidate, we think this sends a clear signal that Trade Me aims to build a large and very valuable property business over the next three to five years,” Craigs Investment Partners research analyst Stephen Ridgewell said in a report. “We see property as a ‘winner takes all’ market in New Zealand rather than one where two major players can co-exist.”

Ridgewell estimates Trade Me will spend $5.2 million on marketing in the second half of this financial year after promotional costs jumped 153 percent to $3.2 million in the first half as it sought to lure real estate agents to its auction site and overhauled its fee structure. The prize is an extra $22.5 million in sales over the next three years, he says.

Trade Me currently earns about $50 from a property agency listing as the firms take advantage of a $999 cap on their total spend, according to Ridgewell’s estimate. The company wants to move to a straight fee of about $159 for each agency property listing, which it expects agents to pass on to sellers. Home owners currently pay about $400 for a private listing and may pay 10 times that for an urban newspaper campaign.

“We’re aiming to grow our piece of the pie but we think online should receive a bigger slice of marketing spend in relation to house sales to better reflect the value it delivers,” said Trade Me chief executive Jon Macdonald. “We envisage a situation where vendors pay less overall to market their house, but upweight their spend on online marketing in line with the value it delivers.”

He told an earnings conference call last month that where Trade Me is competing with print media for the vendor’s marketing spend, “we have scope to substantially increase our yield while reducing the direct cost borne by the agent.”

Some 68 percent of buyers use Trade Me as their primary channel for property hunting, while 6 percent use realestate.co.nz and 4 percent use newspapers, according to data Trade Me commissioned from Perceptive Research.

Trade Me estimates it has about a 15 percent, or $18 million, share of the total $115 million property-for-sale classified advertising market in New Zealand. Macdonald declined to give a future target level.

Agents started moving to Trade Me’s new charging regime in November and by the beginning of February, real estate offices accounting for over half of all ‘for-sale’ listings were on the new pricing plan, Macdonald said.

Though there had been a “strong reaction” against the change by some agents, they were the exception rather than the rule, accounting for less than 2 percent of real estate agency offices and holding less than 2 percent of total inventory, Macdonald said. The company was currently in “sensitive discussions” with major agencies.

The timing and quantum of Trade Me fee negotiations with agents is the key swing factor in determining the company’s earnings for the second half of its financial year, Craigs’ Ridgewell said.

He pulled back his expectations for extra revenue on concern Trade Me might not be able to push through all the increases it seeks with the ‘big six’ agencies, who control 80 percent of listings. Existing agreements with the large national franchises all expire by the end of 2014 and Trade Me is seeking to progressively renegotiate terms.

Should the company prove successful, Trade Me could pull in $39.9 million of total ‘for sale’ revenue by 2017, from $15.8 million in its 2013 financial year, Ridgewell estimates. If it loses its battle with agents, leading to volumes falling 50 percent and resulting in flat yields, revenue would likely grow to just $17.4 million by 2017, he said.

“Trade Me has a strong market position and should eventually come out on top,” Ridgewell said.

Trade Me’s main online competitor, realestate.co.nz, achieves just $3 million in annual for-sale listings revenue, according to a blog by Alistair Helm, the founder of the rival site who departed prior to the appointment of Trade Me’s Skipper. Trade Me’s property service has more than five times the traffic of realestate.co.nz and also includes private listings.

The shares fell 0.5 percent to $3.93 today and have fallen 2.7 percent this year.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Economic Update: RBNZ Says Rate Cut Seems Likely

The Reserve Bank will likely cut interest rates further as a persistently strong kiwi dollar makes it difficult for the bank to meet its inflation target, it said. The local currency fell. More>>

ALSO:

House Price Action Plan: RBNZ Signals National Lending Restrictions

The central bank wants to cap bank lending to property investors with a deposit of less than 40 percent at 5 percent and restore the 10 percent limit for owner-occupiers wanting to take out a mortgage with a deposit of less than 20 percent, according to a consultation paper released today. More>>

ALSO:

Sparks Fly: Gordon Campbell On China Steel Dumping Allegations

No doubt, officials on the China desk at MFAT have prided themselves on fashioning a niche position for New Zealand right in between the US and China – and leveraging off both of them! Well, as the Aussies would say, of MFAT: tell ‘em they’re dreaming. More>>

ALSO:

Loan Sharks: Finance Companies Found Guilty Of Breaching Fair Trading Act

Finance companies Budget Loans and Evolution Finance, run by former 1980s corporate high-flyer Allan Hawkins, have been found guilty of 106 charges of breaching the Fair Trading Act for misleading 21 borrowers while enforcing loan contracts. More>>

ALSO:

Post Panama Papers: Govt To Adopt Shewan's Foreign Trust Recommendations

The government will adopt all of the recommendations from former PwC chairman John Shewan to increase disclosure and introduce a register for foreign trusts with new legislation to be introduced next month. More>>

ALSO:

The Price Of Cheese: Cheddar At Eight-Year Low

Food prices decreased 0.5 percent in the year to June 2016, influenced by lower grocery food prices (down 2.3 percent), Statistics New Zealand said today. Compared with June 2015, cheese prices were down 9.5 percent, fresh milk was down 3.9 percent, and yoghurt was down 9.2 percent. More>>

ALSO:

Financial Advisers: New 'Customer-First' Obligations

Goldsmith plans to do away with the current adviser designations which he says have been "unsatisfactory" in that some advisers are obliged to disclose potential conflicts of interest and act in their customers' best interests, but others are not. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news