The Curious Case of Third Party Ads on Real Estate Portals

Google shunts the first three organic results down its SERPs to make way for ads and we still use it.

Reputable broadsheet newspapers like the Guardian now make as much from digital ad revenue as they do from any other revenue stream and we still read them. WeTransfer plays a movie trailer in the background and we just sit there and watch it while we download a file.

In a world where the largest company in the world generates 70% of its revenue from online advertising, you would be forgiven for thinking that online third-party ads were now culturally accepted. No longer a reason to close a window but a ubiquitous backdrop to the internet, either doing their job and engaging us with a product or service that captures our interest, going by unperceived or, at worst, a slightly obtrusive interstitial that we accept as a necessary evil or block with a plugin.

There are still a few corners of the internet holding out against the blanket coverage though and one particular corner is not a tiny internet niche where advertisers wouldn’t be interested...

Property portals by and large display few third-party ads on their pages despite the enormous revenues they would undoubtedly generate by increasing the ad space on their pages. With increasing ad penetration online and with their customers ever more averse to price increases, why are portals holding out, and will we see an increase in ads on portal sites?

Sniffy Agents or Something Else?

The obvious answer to this question is that portals would love to put third-party ads on their site. Many of them have tried to get away with as much as they can in the past, but had push-back from their agent customers who consider their listings and the space around them sacrosanct.

Back in 2018 Zoopla, a company that has never been afraid to diversify its cash streams, took down third party ads that weren’t related to housing as a concession to its customers. The quote from Zoopla’s then MD makes it clear who was calling the shots on the decision. In a competitive market where Rightmove did not display ads and OnTheMarket was taking customers away, anything Zoopla could do to satisfy agents was going to get waved through.

I contacted a few portals to get their policies around third-party ads from the source. A few do allow 3rd party ads, but always in small sections of inventory:

Lanka Property Web (Sri Lanka): MD Daham Gunaratna said that they do allow third-party ads on their portal, that revenue from Google’s AdSense service has been decreasing and that the portal monetises the space better by using “direct placed ads.” Asked if he could see portals’ attitudes to third-party ads changing Gunaratna said:

“If the CPM or per click amounts were better than Adsense more portals might be interested. However, with Ad Blockers and Banner Blindness, our approach has been to place more ‘native ads’ (ads that look the same as other content) than banners.”

Immoweb (Belgium): Told us that they use native advertising for services related to the transaction such as mortgages as well as having a small amount of inventory space available through Google. According to the Belgian market-leader, the two pain points for them are filtering the ads coming from competitors or clients and making sure the ads don’t impact the page load times.

REW (Canada): Told us that they do have ad space on their results pages which are usually filled with products purchased by REW customers themselves. When this inventory isn’t filled, however, REW does fill it with 3rd party ads to generate revenue for unsold space. Asked whether 3rd party ads might become more prevalent, REW told us that while 3rd party ads are not a cornerstone of their business strategy, “balancing the quality of your experience against a financial desire to shore up the bottom line is one that any online portal has to carefully consider”.

Homesearch (UK): Told us that a key reason for their initial success has been “Having a clean, fast, and responsive platform, without third-party ads and distractions”. Their attitude towards ads in general is perhaps admirable: “People are bombarded by enough ads everywhere else; they don't need it from us.”

While portals are right to think that third-party ads on portal results pages can distract from their listings, there may be a case to be made that third-party ads on the pages of property portals could work in their favour.

But What If..?

We’ve seen how the discounts given out by portals to agents over the lockdown period have affected bottom lines. Let’s take the UK’s market leader as our example here.

Rightmove’s half year revenue was down 34% and a leading investment bank has doubts about the sustainability of the portal company’s business model. Rightmove’s tactic over the past decade has been to steadily grow its audience and then increase ARPA (average revenue per advertiser) and in doing so it has generated a groundswell of angry agents ready to leave if it doesn’t make concessions around fair pricing.

Things are fine for now thanks to a bumper summer in the housing market but with the ending of furlough schemes and the impact of Brexit around the corner, there will almost certainly be a time when things get worse. Rightmove has to keep its stock ticker going up and agents need to stay afloat.

What if agents backed down on the portal displaying ads on its pages and in doing so gave Rightmove enough wiggle room to generate the revenue its new CFO needed to justify some more sustainable pricing without upsetting investors?

So How Big is the Opportunity?

So a lot of portals around the world don’t use third-party ads to supplement revenue and if they do, there are strict limitations and parameters. If there are any meetings in the corridors of power at a Rightmove or Zillow about this though, the fundamental economics around the money to be made with ads could change some minds.

A 2018 report from dealroom.co in conjunction with Schibsted showed that there is $9 trillion spent on consumer household spending with 30% of that being on housing (easily the largest segment). The main thrust of the report is that the housing market, although easily the largest, is the least sophisticated when it comes to money changing hands online. In other words, a lot of money is being left on the table.

To get a true sense of the opportunity here, I spoke to Ramón de la Guardia, co-Founder of Advance Media and an expert in online ad revenue with 15 years of experience in the industry including in two of the big 5 agencies. According to Ramón, the opportunity is huge as property portals have the perfect audience:

“decision-makers or influencers in their homes so the portal has the key persons, not just thinking about selling them a house but all related services such as utility companies (electricity, telecom) financial products, etc”.

The nature of the portals’ audience is not the only draw for ad publishers, as Ramón explained: “companies are willing to have alternatives to Google or Facebook to not have all their assets in the same basket”.

Is There an Example Showing the Way?

Although not really a portal and hardly comparable in terms of scale, Amazon is essentially a website that does something very similar to portal sites. In 2019 the company saw its advertising revenues grow 39% to $14.1 billion.

Even if you don’t see Amazon as a great comparison because of its size and the similarity of what portals already do around advertising, there are other similar companies who have experimented successfully with other types of advertising. The vertical search sites may not get the same numbers in their user engagement metrics as the portals, but tell that to their adsense revenue. Before it was bought out by Lifull in 2019, Mitula consistently generated around a third of its revenues from Adsense doing the same thing as the portals: advertising property.

Some portals themselves have been forthright in the benefits they’ve derived from third-party adverts. As the Head of Commercial at the Australian car portal, CarSales said in a 2018 interview:

“For a number of years, we ran a nicely profitable display ad business by putting, for want of a better word, banner ads around listings and it worked really well.”

The other side of the argument is that it’s all very well for a portal company to accept that it might benefit from adverts on its website, but is there a demand for inventory from relevant companies with products from adjacent industries? When I put this question to Ramón de la Guardia his answer was pretty succinct: “Yes. Companies are desperate to generate outcomes here”.

So Ads Are The Answer to Falling Revenues?

I didn’t think I’d ever be writing a piece in favour of more adverts showing up on my screen, but it does seem like the obvious and easy way for portals to make up the revenue they’ve been losing through lockdown discounts. If property portal bosses need a devil on the shoulder to remind them of the benefits, they can turn to a figure that Ramón pointed out in our interview “just think of the 23 billion Google made last quarter.”

That doesn’t mean however that third-party ads will work on all property portals in all markets.

Property marketing is a highly specialised and localised game that relies on local knowledge, and for the same reason that huge companies like Zillow have not tried to branch out to Mexico or Canada, third-party ads may not work in some markets as they do in others.

That said, I do think that perhaps the time is right for property portals to have the discussion with their customers around allowing them leeway to use third-party ads as an auxiliary source of revenue to relieve some pricing pressure on an agent-client base which may come under pressure in the next 18 months.