Lessons from the collapse of MyHome
Monday, May 26, 2008/
The MyHome real estate classifieds website will be closed this Friday, proving that the Australian online space is more mature than many think, that the top players are harder to dislodge, and that there is no room for “me too” business models.
Its closure also provides a leg up for Sydney entrepreneur Michael Hannan, who is battling to become a major online player after selling out of print media.
For the past 15 months, owners of MyHome, giants Microsoft and PBL, have spent tens of millions of dollars in an attempt to snatch a share of the $140 million online property advertising market. Smaller players watched enviously as it leveraged the promotional might of PBL’s old media, which included a weekly program on Nine Network plus an aggressive advertising campaign that used print and outdoor advertising.
But money is no substitute for business nouse and first-mover advantage. Critics of MyHome say the management was inexperienced in real estate and that developers created a site that offered nothing new and was difficult to navigate. MyHome was also taking on the RealEstate.com.au website owned by REA Group (57% owned by News) and Fairfax’s Domain.com.au, that had many years’ experience selling real estate and knew how to build face-to-face relationships with agents.
MyHome increasingly found that it could not attract the unique browsers of its competitors. It barely reached half a million per month, while Domain had two million and RealEstate.com.au, more than four million unique browsers. The costs were too high and the cash burn rate unsustainable.
MyHome did try and slow down the cash burn by getting real estate chains to take equity. But many chains were already tied up with established players. And while the franchisor might take a stake, it didn’t mean the franchisees were going to support MyHome. “What did we get out of it?” one franchisee told SmartCompany.
Real estate agent Harcourt bought a small part of MyHome last month, but plans last week for LJ Hooker to buy part of the business fell through and proved the death knell.
RealEstate.com.au chief executive Simon Baker says third place was a difficult rank, especially if there is no need in the market. “From a consumer perspective, if people don’t look at the website and leads don’t get sent to agents, then you are not going to succeed. Besides people are happy looking at us and Domain, so why look anywhere else.”
He says the online marketing space is mature. “In the early days when the market was forming, it was a land grab. But in all the segments now it is hard to dislodge the incumbents. I guess they spent $20 million, but even if someone gave me $100 million, I’d go elsewhere, not here.”
He says the downturn in the market did not help MyHome. “In good times, when advertisers have a lot of money, they are prepared to spread the advertising dollar around. But when the amount spent on marketing falls, they will drop the smaller players in favour of the larger ones. We are seeing that flight to quality in the UK where the smaller ones are struggling even though they have the long tail.”
But that will not deter Homehound, which is now claiming the mantle of third place. Homehound is owned by Independent Digital Media (IDM), which was created two years ago when the Hannan family sold Federal Publishing Company community newspaper and consumer magazine assets to News for an estimated $340 million. Entrepreneur Michael Hannan immediately appointed David Burkett, who headed Time magazine’s Asian division, to run IDM.
Hannan’s goal is to build IDM (the digital media business of the Hannan family’s Independent Print Media Group) into a significant online player through organic growth and acquisition within the next five years.
Burkett says that Homehound stole third place from MyHome earlier this year, assisted by Homehound’s partnerships with major retail franchises including LJ Hooker, Ray White, and Raine & Horne.
As for Baker’s comments that there is only room for two players in the small Australian marketplace? “Well he would say that, wouldn’t he?” Burkett says.
After those top three, the market is very fragmented, with a plethora of smaller companies focused on a single state or niche part of the market. Many of those smaller players have been around a long time but cannot get the scale to mount a serious attack on the big players.
One newcomer is Andrew Blachut, a real estate agent who started PropertyNow two years ago. He has built a business around the trend towards selling properties without an agent.
PropertyNow lets private sellers list their properties for free. It also lists properties of Domain, Homehound and Just Listed for a small fee. It’s been tough going. “We started two years ago and I didn’t have the infrastructure and funding to make it grow quicker,” Blachut says. But he’s still around, while this Friday, MyHome becomes ByeHome.