The Pricing Power of Real Estate Portals

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Real estate portals occupy strong market positions globally, giving them incredible pricing power.

Why it matters: That power equates to ever-increasing prices – as measured by Average Revenue per Advertiser (ARPA) – and is the engine for portal revenue growth around the world.

  • ARPA growth is a combination of base price increases and additional, value-add products, such as premium listings with greater exposure.
     

  • For the leading portals across five global markets – Australia, Germany, Sweden, the U.K. and the U.S. – ARPA growth has increased an average of 14 percent each year.

 
 

A deeper dive highlights the rich potential of vendor-funded markets (where the homeowner pays their online marketing costs).

  • Australia and Sweden are two vendor-funded markets (there are only a handful in the world), with the local portals converging on 20 percent ARPA growth – compared to about 10 percent in the other markets.

 
 

Sweden’s Hemnet is the clear standout, having grown its ARPA a massive 7x since being acquired by private equity firm General Atlantic in 2016.

  • That’s a beautiful looking graph for investors; homeowners may disagree.

 
 

The U.K.’s Rightmove may be the most consistent operator in the space with steady annual ARPA increases of about nine percent.

  • However, the portal is facing headwinds in 2024 with a lower rate of growth.
     

  • The U.K. market has loudly complained about Rightmove’s prices for years, but a look at its global peers suggests that it could be worse!

 
 

In the U.S., I’ve calculated a rough approximation of ARPA based on a portal’s real estate lead gen revenue divided by the total number of transactions in the market. 

  • Both Zillow and realtor.com rode the pandemic wave with record revenues, and since then Zillow has maintained its robust pricing power.

 
 

The bottom line: As I outlined in my 190+ slide Real Estate Portal Strategy Handbook, 93 percent of portal revenue growth has come from core listings and lead gen products – and most of that from ARPA increases.

  • Leading real estate portals are near-monopolies in their markets, offering consumers unparalleled and unrivaled exposure and reach.
     

  • This powerful proposition translates to pricing power, and over time, those prices only move in one direction: up.