• How have transactional marketplaces evolved since the pandemic?
  • Marketplaces are combining with tech-enabled brokerages for profitability
  • Taking a share of the agent’s commission no longer “taboo”

BANGKOK — Property marketplaces that aren’t thinking about transactional models, such as commission-sharing, risk missing out on future monetization opportunities. At least, that was the view from the Property Portal Watch conference in Bangkok, the first in the Thai capital since the pandemic.

The event, which brought together around 130 c-level attendees from marketplaces and proptech companies in Asia and beyond, heard how the marketplace industry has evolved in the past three years, in particular the emergence of commission-sharing transaction models at property marketplaces.

Multiple models evolve

“The taboo of the portal getting a share of the [agent’s] commission is over,” Malcolm Myers, the CEO and tech consultancy European Internet Ventures, said during his keynote address. “And that’s opened up lots of opportunities for classified marketplaces.”

Since the pandemic, several transactional models have become more dominant:

  • Tech-enabled brokerages, such as Compass and Exp.
  • Seller leads, such as Scout24’s ImmoverKauf and Aviv Group’s Meilleurs Agents.
  • Rental tools, such as those offered by Rightmove and Scout24.
  • Inhouse tech-enabled brokerage, such as Beike and Juwai IQI.

On their own, most tech-enabled brokerages have struggled to become profitable — Myers cited Compass in the U.S., which remains unprofitable, as one example. Even those that are profitable don’t have especially favorable unit economics.

“The economics of tech-enabled brokerages are not very compelling, compared with the classifieds model,” Myers said. Exp is giving 90% of its revenue back to agents. “Put it this way, if nobody made money in 2021, then they’re not going to be making money anytime soon.”

“But the classifieds combined with a tech-enabled brokerage approach provides a shortcut to becoming fully transactional,” he added. That’s especially the case for classified marketplaces in emerging markets, where monetizing listings remains enormously challenging.

“We didn’t really want to sell property,” Shwe Property CEO Justin Sway told a panel, “but we couldn’t make any money from listings.”

Cambodia-based RealEstate.com.kh entered into a JV with FazWaz, a tech-enabled brokerage from Thailand, with the intention of operating them as separate entities. “Then Covid happened, and we realized we had to take a hybrid approach,” said Tom O’Sullivan, the CEO of the Cambodian arm of Digital Classifieds Group, the operators of RealEstate.com.kh, as revenue from classified listings dried up.

Juwai IQI focuses on the gross margin

Juwai IQI, the entity that was formed after merging marketplace Juwai and project management company IQI, had only just begun to shift its business model from classified advertising to transactions the last time Chmiel attended the conference in 2020.

“We can now show that this model, of combining the property portal with a brokerage, is sustainable,” executive chairman Georg Chmiel said during his keynote address.

When the two companies first merged, Juwai IQI had a presence in five countries. It now operates in 22 countries and has a network of 21,000 agents. The company, which is still private, is profitable, Chmiel said, with a gross EBITDA margin of around 35%.

Chmiel said the company was able to scale the business and enter new markets by understanding the market structure of each country and focus on gross EBITDA margin. “There should always be enough cash generation if the business is to scale,” he said.

PropertyScout expands to sales

The main ingredient to making the model work is having the right team, with deep experience in real estate and technology, Marco Barth, COO of Thailand-based PropertyScout, said.

He said around 90% of what an agent does can be automated, but inspections and consulting with buyers and sellers requires human touch: “We use technology to empower their agents to focus on the human element.”

PropertyScout began by focusing on rentals and has since moved into residential sales. With its marketplace crucial to finding tenants and buyers, the company needed to ensure it had every listing in Thailand. But a major problem is the proliferation of fake and unverified listings.

To deal with this, the company built what it calls a “databased of verified listings.” They had a team of 150 people working on the project, scouring multiple sources to get listings directly from landlords, developers, social media and property management companies. AI and machine learning algorithms helped verify listings were real.

“We wanted to make sure that any time a property is available to rent or buy in Thailand, PropertyScout knows about it,” Barth said.

Avoiding conflicts of interest

How do the companies deal with perceived conflicts of interest, by advertising projects their brokerage team are selling on their marketplaces?

“Upsetting agents was one challenge,” Sway said, but the Myanmar-based company got around it by creating a separate brand for its brokerage business, Myanmar Real Estate.

Shwe Property uses its own marketplace and Facebook to generate leads. O’Sullivan said RealEstate.com.kh does the same, but they’re also looking at advertising on other platforms.

Choosing the correct projects is also vital to ensure the model is sustainable, since commissions are only paid once the properties transact. “Some projects might generate a lot of leads, because they have great pictures, but it might turn out it’s not a project you want to sell because maybe the builder didn’t have a construction licence,” Sway said.

A bird’s eye view of the marketplace

There were other interesting presentations at the event.

Germany-based ProperBird, for example, crawls real estate marketplaces to develop business intelligence to help marketplaces make better business decisions and accelerate growth.

By collecting every single real estate listing in Germany, cleaning the data and analyzing it, the company was able to help ImmoWelt, the No. 2 property marketplace, increase its share of exclusive listings, grow agent customers, and maintain a stable share of listings in the market.

Pivoting when the incumbents strike back

In Kazakhstan, Homsters, a property marketplace that launched in 2016 with a pay-per-lead business model, is competing with incumbents that offered a traditional classified model.

In 2019, when its rivals began shifted their business model, the company rethought its strategy and launched several new products:

  • A market analytics product that helps developers decide where to buy land, the type of housing demand in an area, and how it should price its developments.
  • Online promotional products, where the company creates an email campaign for developers and sends it to Homsters’ database of buyers, effectively combining a property marketplace with a digital market agency.
  • Launched a tech-brokerage, by building a team of in-house agents, in addition to partnering with third-party agents, to sell homes on behalf of developers.

Offering a display advertising product for SMEs

Australia-based REA Group developed a display advertising product to service the SME market, estimated to be worth A$14 billion.

The company, which already had a successful digital display business, couldn’t service the SME market because the minimum monthly ad spend on its platform was A$5,000. By comparison, an SME has an average monthly spend of A$400.

To create a banner ad and get it live on the site was also required REA to participate in about eight of the 12-step process.

The company developed a self-serve product, called Promote, that automates the process so REA can serve these advertisers. The company is now only involved in one stage of the process — approving ads the customers create.

The company still uses humans to verify and approve advertisements, to ensure they comply with its guidelines — for example, real estate agents and developers aren’t allowed to use the product, as it would cannibalize its existing display business.

After the success of the product, the company is looking to modify it and roll out to its commercial agent clients.

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