The Agent Equity Model

WHAT WAS IT THAT improved the level of customer service at Telstra? A serious competitor in Optus. What caused Microsoft to lose their almost 100 per cent market share in the ‘90s? An experience users wanted more that was created by Apple. What allowed air travel to become more affordable for the average person? An alternative from a rival carrier called Virgin.

Competition is common to all of these. In the real estate publishing space it’s no different, says Domain CEO Antony Catalano; there needs to be competition for better products, better services and to keep prices in check, and it would indeed be an ‘ugly world without it’. Interview by Samantha McLean.

Antony-CatalanoDomain have gained significant ground on their competition in the last 12 months with a 65 percent year on year increase in audience. So I am very keen to learn more about how they are raising the bar against strong competition. One of their strategies is allowing agents participation, or equity, rewarding them for advertising based on value and volume.

In terms of agent participation in the portal space, you only have to pay a quick visit to some of the real estate groups on social media or read agent blogs to know that there is a strong desire to get involved. But most attempts in the past few years, and even in the last 12 months, have not been that successful.
Expressions of Interest in the Equity Model have been out with individual offices and groups for some time, and this seems like a good place to start. Catalano is clear. “The Equity Model serves a number of outcomes for agents. One of the key outcomes is that it gives agents something that they have long wanted, which is that involvement in the digital media space. This is not a new concept; the market leader even started by issuing shares to agents in its pre-IPO days. It is something that agents continue to talk about, and any dissatisfaction they may have with the market leader is always countered by the desire to have the industry come together to create an alternative.”

So while there is the desire, why is it that other attempts at industry models have not been able to gain traction? “I think it’s because the industry generally lacks core publishing expertise. Publishing requires very deep pockets. And it requires agents who have a core business of listing and selling real estate to distract themselves from their day-to-day operations to become publishers.”

Catalano has been CEO of Domain since November 2013, and prior to that was Chief Executive and Publisher of Metro Media Publishing (MMP). MMP was created to address this exact gap in the market, pioneering a partnering model with a group of agents to create a magazine (Review Weekly, which has now expanded to 32 magazines) and an online ‘hyper-local’ presence in the portal reviewproperty.com.au. Catalano himself also had a long career at Fairfax, starting as a journalist and working his way up to being appointed Director of Real Estate, and knows the publishing game well.

“When we started MMP we already had a deep understanding of publishing and the industry, and what we did originally did was to partner up with agents to deliver a better product to market. That success was immediate. The agents we were working with could focus on being agents, we focused on being publishers and together we focused on building a publishing business. Doing it together works; doing it on your own, as history has shown, is problematic.”

In July 2012, the CEO of Fairfax (Greg Hywood) announced there would be a 50 per cent acquisition of MMP, and at the time stated that Fairfax was ‘buying’ the Equity Model and was keen to roll out that model nationally. Today, Fairfax owns 100 per cent of MMP and it is this model that has formed the basis of Domain’s ‘Equity Model’. “We have now spent the last two years perfecting the model and ironing out any ‘bugs’ to ensure it was road-tested appropriately. After two years of trialling it in the Victorian market, we went live with equity models in SA, WA and simultaneously rolled out QLD and NSW. We are now in the process of doing it in NT and Tasmania. So this hasn’t been an overnight thing; MMP and the model are five years old now. In the digital sphere it’s approaching three years in July.”

And the model is growing in popularity, based on some numbers that Catalano starts reeling off the top of his head. “We have hundreds of agents who are participating in the Victorian Market, and we have something in the order of 2,200 estate agents in the residential space that are either already active participants or have pledged to be participants through our Expression of Interest campaign.”

What do you see as the real benefit for agents? “As an agent, I’ve got something I have been asking for, which is an industry play. I have an alternative, with a very good publisher who has the longest history in the category. A publisher with relationships with agents right across the country and a deep understanding of the industry. I have the ability to work with that publisher through the advisory boards that have been set up in each state to make recommendations and to provide feedback that will be listened to because it is a joint venture. That will result in partnership, competition and potentially a share of profits.”
Catalano continues, “MMP from day one took a collaborative view of this business; we’ve had weekly and monthly meetings with our agents since we launched in April 2010. We don’t see ourselves as standalone publishers dictating to our client base what we think is good for them. We work with the industry to develop the products, and we take a very collaborative approach to this.”

We then go on to discuss aspects of competition in the industry. “We first conceived the digital model in February 2012. The market leader was in the market with their most expensive product at $2,300. At that time, it had never ever responded to the market as far as pricing was concerned. However, the immediate impact of industry participation in the Victorian market was for the first time the market leader dropped their price.”

“Agents need to embrace this for their future because the alternative is that they have one dominant player and no say in price. Domain can already take credit for helping the industry fight back. At one point, the market leader was charging $8,000 for a digital ad in Toorak; 12 months later it has come back to $2,500.”

Domain has also invested approximately $150m of capital over last 12 months into acquisitions and another $15m in increased expenditure, adding 140 staff (a 216 percent increase) since January of last year. Added to that, Catalano says, there has been a 65 percent increase in the audience year on year, giving the industry real choice. “We will fight it out with our competition for market relevance and we will continue to invest heavily; we’ve got more staff coming in, millions of dollars more being invested in product and it’s a win for agents. This has given the industry a genuine alternative and with this comes a choice to have around the marketing schedule, or importantly push back against what could be a monopoly operation. The industry gets a better product and at a better price.”

Catalano continues, “Those who don’t embrace Domain are doing the industry and themselves a disservice because yes, we are absolutely in it for commercial benefit and profitability, but our very existence and our competitive stance brings about benefits for the industry and that is inescapable. It would be an ugly world for agents without competition.”

Recently the industry has seen some great initiatives from Domain, including coffee carts at auctions and increased consumer marketing with both the ‘Good Move’ campaigns and sponsorship of Paterson Stadium in Perth, which for the upcoming AFL season will be known as Domain Stadium. Given the level of investment in people and products, what else should we look out for from Domain in the next 12 months?

“We do consider ourselves market leaders in a few different areas,” says Catalano, “Particularly at all the things we’ve done with school zones, enhanced listings, agent profiling. We’ve been first to market with the Apple Watch (just!), we’ve announced the Home Price Guide; every single property in Australia will be on our site, whether on the market or not. That ‘first to market’ philosophy is very much in our thinking now. We want to be first to market with new things and it’s a direct reflection of the investment that we’ve had.

“We have a very clearly articulated strategy in terms of priorities,” Catalano continues. “We talk about getting 100 percent of agents on the platform as a priority; we’re at 95 or 96 percent of the market at the moment. Once you get to 100 per cent every listing is either on our site or the competitor’s site, and it then boils down to user experience. Which site do people prefer? We focus very heavily on the development of our browser product and in particular our apps: 25,000 reviews of the app rate us more highly than our competition, with a four-star average on the App Store and 5.5 for Android. So, as a consumer, when you have that choice which one do you choose? The one you like.”

“In addition to that is the continuing roll-out of the Equity Model; we will also look to integrate all our platforms, My Desktop, APM Pricefinder and Domain, into an easy to access ‘one-stop shop’ for agents.”

And then there is just one last bit of icing on the cake. “We will also continue to make sure the audience is engaged by having real journalism – we are a trusted source, we don’t have bloggers, we have real journalists reporting on property. Our content strategy leverages the fact that we have got the best real estate journalists in the country providing unbiased coverage and leveraging all the prestige outlets within Fairfax – for example the SMH, the Age, the AFR, and the hundreds of newspapers around the country – to provide better information for consumers on real estate transactions. We will continue to make sure that the audience is engaged, and that in return gives agents a better chance to engage as well.”

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Samantha McLean

Samantha McLean is the Co-Founder and Managing Editor of Elite Agent and Host of the Elevate Podcast.