Property24 defends price increases
“Outrageous” and “exorbitant” were among the comments from the real estate industry upon hearing of Property24’s latest subscription fee increases with some declaring they will end their subscription.
The country’s largest property portal is certainly aware of the unhappiness with their subscription increases, but once explained JP Farinha, CEO of Property24 says their customers generally understand the rationale behind it.
“Outrageous” and “exorbitant” were among the comments from the real estate industry upon hearing of Property24’s latest subscription fee increases to become effective on 1 April. Meaning an average increase of as much as 20% and even more in the highest lead bracket (251-750 for sales and +300 for rentals in high interest areas), some estate agencies have indicated they are going to cancel their subscription.
One of them is Johan van Schalkwyk, owner of Leapfrog real estate agency in Roodepoort. He says come 1 April, his monthly expenses will rise by 34% thanks to Property24’s new tariff increases, and that is excluding the new 15% VAT.
Van Schalkwyk told Property Professional they do get many enquiries from clients via Property24, but they also get sufficient interest via other property portals such as Private Property and their own website. He believes eventually the right buyer will find the right property whether through viewing a show house or via one of the other property websites.
He says they will spend the money saved on their Property24 subscription on social media marketing and more show house sitters. After two months he will check whether there was an impact on their business.
Others like Johann Neethling from Metro Real Estate disagree saying he will keep subscribing to Property24 as he considers it to be a superior product compared to others and therefore an expense that is vital to his company and his agents.
Property24 subscription fees are tiered
According to Farinha those with 20% and higher increases make up 9% of Property24’s customers. He says it is important to note that their subscription fees are tiered into categories of leads generated, and that different increases apply to different segments.
“If we segment our customers by percentage increase, we can see the following:
- 91% of customers will experience a 15% or less price increase and 19% of these customers will experience a 5.7% price increase
- 1.2% of customers will experience a greater than 20% price increase
- 7.8% of customers will experience a 20% increase
“The customers with the largest price increases are also those who get the most leads and whose cost-per-lead is extremely low when compared to the average. So although in percentage terms 9% of customer increases look high, in real terms for a large office the subscription fee is actually very low when you take into account the cost per lead and the actual subscription fee.”
He added most of these large offices also buy additional products from Property24 and according to him in most cases their additional spend is far higher than the subscription fee, so if you take into account their total spend, the increase is substantially lower.
Rising costs necessitate annual subscription increases
Farinha says their annual pricing must reflect their continued investment in the platform, which leads to improved products and growing a wider audience. Their biggest spend is on IT, technical staff and marketing with annual cost increases above the official inflation rate. “Our subscription fee increases will therefore likely always be more than inflation,” he explains.
Another factor they must consider when setting pricing, is that on an average cost-per-lead basis, their competitor (Private Property), is in most instances charging more than them in respect of for-sale leads.
Lastly Property24’s subscription pricing started on a very low base and in a lot of cases does not reflect the real value being generated. “Given all these points it is likely that there will be further increases but they will be applied according to actual input cost increases, value being generated and competitor prices. There will not be large indiscriminate price increases across the board as many in the industry suggest,” concludes Farinha.
Private Property explains how their price increases work
Mark Coetzee, COO of Private Property, the country’s second largest property portal, told Property Professional, their price increase for 2018 will be in line with previous years and for most of their customers will be below 10%. According to Coetzee Private Property has a very transparent billing model. They charge a set fee for their membership which includes all sales and rental listings. The fee remains the same, irrespective of a clients’ success with listings and buyer interest. There is no additional charge for rental listings.
Coetzee added that trends around the world indicate that portals who overcharge for their services face a strong pushback from the industry they serve.
“The future will be interesting for portals like Property24 who continue to demand exorbitant rate increases. We however, remain committed to delivering a great product to our advertisers at a reasonable rate.”
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