Purplebricks should not be counted out of the US yet, says analyst Mike DelPrete.
He says that the challenge for Purplebricks in America is simple: its massive marketing spend is not generating enough customers.
The result is that it has a customer acquisition cost over twice as much as rival Redfin.
DelPrete says: “The company recently pivoted its business model in the US, from an upfront fixed fee (paid regardless of the home selling), to a success fee paid only when a home sells – both at a discount.
“This move brings Purplebricks squarely in line with the traditional industry it was attempting to disrupt. The proposition is now also identical to Redfin.
“In December of 2018, I estimated Purplebricks generated between 1,200 and 1,400 new listings over the preceding six-month period. During that same time, Redfin reported around 22,000 closed transactions.
“Also during that period, Purplebricks spent over $20m in marketing, compared to Redfin’s $16m. The result is a customer acquisition cost of $15,000 for Purplebricks, compared to $730 for Redfin.”
DelPrete says both Redfin and Purplebricks give American consumers the same message: “Traditional agents are expensive; we offer the same service at a discount; use us instead.”
In an interesting piece in Inman, DelPrete says of Purplebricks’ sortie into the American market: “Purplebricks is still dangerous: it has deep pockets, a willingness to spend and the self-awareness to pivot when things aren’t working.
“I wouldn’t count it out of the US quite yet.”
DelPrete also says that in the UK, Purplebricks is working – it is making money and at scale is profitable.
“The only challenge facing the UK business is growth, which is clearly slowing down as the company saturates the market. All online agents are not doomed to failure because of some fundamental flaw.”
https://www.inman.com/2019/04/25/is-purplebricks-really-in-turmoil-a-closer-look/
Comments (19)
Mike Delprete is bias and he shouldn’t be allowed to comment on Purplebricks and view is flawed since he has been long on their company since day one.
1. He works closely with Axel Springer, Purplebricks 3rd largest investor
2. Purplebricks weakness is their founders (Bruce brothers), mismanaging their global operations – why CEOs and LPEs exited. Other former executives (shepherd, Kavanagh, farrow, cartwright, and Bruce brothers family and friends), all cashed in well before Michael and Kenny Bruce sold their shares last year and brought the stock down
3. Mike D. was involved in their acquisition with Comfree in Canada. He made intro and has conflicted relationship
4. Mike D. is trying to make a name for himself and following in the industry – he has done good work on ibuyer space, but not qualified to comment on brokerage. He is seeking consulting assignments
Mike D. thinks highly of himself, just ask him. He is in no position to comment on Purplebricks with his conflicting dealing and the fact publications are giving him a stage to stand on is surprising. Just look at the company’s fundamentals, burn rate, lack of leadership today and overseas markets are failing with Bruce brothers controlling all.
Meanwhile he has posted 25th April 2019:
Purplebricks’ overall challenge for success is business growth, which is clearly slowing down in the UK (edit: so business is not growing and continues to be loss making)
. All online agents are not doomed to failure because of some fundamental flaw. (edit: yes they are, as being proven in the UK)
Market share can only get so high. In November 2018, I was quoted in the Financial Times saying, “I rolled my eyes when analysts were talking about 20 percent”. Depending on the source, Purplebricks’ U.K. market share is anywhere from 3.2 to 4.5 percent. (edit: that’s what we have all being saying from day one and why they and all the others are doomed to failure because of some fundamental flaw)
The biggest implication in the US could be the massive amount of money being spent on marketing by disruptive players (over $100 million between Purplebricks and Redfin alone in 2019).
He goes on to say PB spend twice as much (edit: other peoples money) Redfin, who gain twice as much business than PB.
This guy is a self proclaimed expert…. he peddles opinion as if he knows what he is talking about and rides on it. He has confirmed PB as a business is doomed to fail.
Where is the DUCK for his knowledge on Bricks!!
In November PB were hoping to achieve revenues of upto £185 million.
In December they revised this to a maximum of £175 million.
Just 2 months later(Feb 21st) that was revised down to a maximum of £140 million.
Now 10 weeks later we have reached the end of their financial year (April 30th) – if they don’t hit the revised revenue target, will more heads roll?
If the FD has anything about him – he will have made sure the target is achievable and his backside is covered !
Either way that’s another £30m gone up in smoke since 1st Jan this year.
Not Mike DelPrete again! Purple Bricks may have had deep pockets. They are being rapidly emptied.
The problem they have now is making up the shortfall in revenue now they have switched from pay anyway to pay on completion.
This will become evident when they annnounce their financial results.The financial year ending tomorrow
Also experiencing a churn of agents across the pond. This guy showing as a realtor for Bricks in New York although upped sticks to join Ellimans in December .
Clearly so impressed with his short time at Bricks didn’t even warrant a mention on his linkedin profile
https://software-east.purplebricks.com/search-local-expert
https://www.linkedin.com/in/joshua-whalley-41404361/
I was interested to note on Mike’s website that he states ” It is my pleasure to join world class investors like Axel Springer “.
His article really should have mentioned a connection I feel !!!
Well that kind of answers my question. It’s just all so obvious.
JustPlainSavage and when their accounts are due.
When are they announced to the public?
The next round of funding – if it is even possible – is going to be very illuminating.
Despite claiming that their American fantasy could still work, he doesnt state how! Purplebricks may have deep pockets, but they are getting shallower by the month
With other people’s money!! Not far off a Ponzi scheme!
Mike seems to be piping up lately when their share price isn’t too well. Should he declare his involvement in Purplebricks before making these statements?
This is the same analyst that rightly critised the Codlling/Jeffries advice on Countrywide shares….buy / sell/ hold etc.
It’s the old Big Ben complex. Too many faces!
The title should be:
Purplebricks’ American dream ‘could still work out’ if they keep on dreaming.
Without scrolling to the story who else guessed who the analyst was going to be? I’m convinced he’s playing that Maureen Lipman, “he’s got an ology” grandma character on the BT telly advert.
Strange that a silicon valley unicorn hasn’t done this already .
they like to spend billions and make no profit as well .
Maybe the yanks actually put service in a service industry higher then catching an uber or hosting a website.