This post stems out from my personal experience of finding a house to rent in Delhi. When my search was on during the month of October 2013, the only place with maximum listing of properties online was 99acres. It made me hopeful of finding a suitable place without wasting too much time. However, after going through almost all the listed properties for South Delhi and contacting individual owners and property agents, my search didn’t reap any favourable results. In the end I had to resort to the traditional method of roaming around the streets to find independent agents who can help. This got me thinking of how big of an opportunity lies in the Indian real estate market.
Just to understand the magnitude of the opportunity I would explain what happened with me during my offline search. While I was trying to find a house to rent in Lajpat Nagar area, I spoke to 8 different real estate agents in a span of 3 hours who showed me 12 different properties which were not listed on any online real estate website (I specifically asked them if they have listed it online). While I was sitting in the office of an agent, an old man entered the office and asked the agent to get tenants for his property. I spoke to the gentleman and was able to see that both parties (the tenants and the landlords) have different expectations from the whole process.
In small areas the acquisition of property for rent or purchase happens purely with the help of real estate agents and this is why there has been a steep rise in the number of property agents. While I walked a stretch of 2 kilometers I found these 8 different agents in close proximity and yet none of the properties they showed me overlapped with what the other agent had shown me. Every agent showed me a new property which shows that the majority of real estate is still out of the reach of online websites like 99acres.
Going further I will detail out a plan on how 99acres work, where they’re lacking and what they should be doing in order to tap this market more efficiently. I don’t know if most of what I’ll suggest has already been implemented and some of it might be vague and non-economical but that’s the challenging part, figuring out how to go about it. Also, I’m completely oblivious to this market segment so all the suggestions and ideas are based on research, guesses and self-understanding of how real estate market works. If you feel I have made an error, notify me in comments or hit me up on twitter.
What is 99acres doing?
Basically, all the real estate websites tries to bridge a gap between people looking for real estate and people/companies selling/renting it. To a layman like me this is how online real estate websites work:
- If you are an agent, you want to sell or lease out more properties so you turn to online real estate websites and list properties there to get more customers.
- If you are looking for a house you would normally go to one of the real estate websites and try to find a house within your budget (using price filters) in your preferable locality.
- If you are a builder you list your properties for sale/rent on the websites and promote them heavily by paying a premium price for ads, featured listings and sponsored listings on the website itself.
How does 99acres make money?
99acres make money through the following channels:
- Different types of ads and banners.
- Featured listings and sponsored properties.
- Branding for builders/brokers by building microsites for them.
- Selling access to the buyers’ database.
- Selling leads. When you contact anyone through the website they will also send you a list of top property agents in the same area through email and SMS which is obviously paid and not based on algorithms or rankings.
So mostly they make money off builders and brokers by bringing in buyers. Like most of the two-sided platforms they face chicken and egg problem as well which they tackle through marketing.
Also I’m assuming that most of their revenue comes from builders specifically and not from property agents because most of the property agents are not tech-savvy and individually they are very small entity and would not be willing to pay initially. Revenue sharing model won’t work either because there is no way to track if the lead sent to the agent was successfully converted and agent can always deny that it didn’t.
Where is 99acres lacking?
A few major points that come to my mind:
- 99acres is lacking innovation. They follow the traditional revenue model as mentioned above without innovating new ways of monetization. If you think I’m lacking in depth feel free to correct me.
- Majority of the real estate market is still untapped. They need to figure out a way to get those non tech-savvy property agents online. More on this in the solution part below.
- I have to confess I don’t like the UI and UX of their website. It’s non intuitive, cluttered and sometimes even difficult to use. I’m pretty sure their engagement is only because people are in dire need to get a house. Where the hell are rankings for the property agents? Why is the water mark on the photos so obtrusive? And why don’t they have images for the listed properties? They need to address all these problems.
- They have to find a solution for people like me who are in dire need to get a house on a very short notice but are unsuccessful in getting any break through. I don’t mind paying for it.
- No incentive for the non-paying property agents who are actually listing good properties. (Assuming 99acres don’t have an algorithm to suggest these real heroes and of course why would they, as these agents are not paying anything to 99acres)
What can be done? (Probable Solutions)
Two-sided platforms form a vicious circle. You as a user visit a website to find a property; you are unable to find any good options, so you leave. Now escalate this to 100k users or more. Every time an unsatisfied potential customer abandons your website you lose them for good. On the other hand you as a property agent list the property on the website in incomplete manner, without photos and a detailed description (currently the state of 99acres) and expect to get tons of leads. In the end both parties remain unsatisfied as they both are dependent on the other and the connecting platform (99acres) is not doing a good job in upholding the quality. Ultimately the value of the platform diminishes.
However this value is not actually diminished because new users and property agents are continuously acquired through different channels and everything is balanced out. The minority of people who do get a viable option and becomes a satisfied customer stays with the website and comes back when they have to move again.
So the platform works by the continuous acquisition of new customers and property agents and with the retention of the satisfied customers. It would be very interesting to see the retention reports of 99acres to get the clear picture.
Revenue Models: 99acres is growing and satisfying customers but in order to grow profoundly they should be looking at alternate revenue models like –
- Revenue sharing with the property agents based on the number of leads provided. This model can also be based on the number of leads converted however there is no straight way to track the converted leads. This could be a challenge for 99acres but it can be tackled by injecting more human touch points and by maintaining point of contact with the buyers and the property agents.
- Charging the end users (buyers) to find a suitable property for them based on their requirement. This will take them into offline market and they will themselves be acting as an agent between the buyers and other property agents. This could be tough to implement but equally rewarding. Revenue sharing with other property agents will then become a part of this model as well.
- Apart from acting as an agent, 99acres can also become an auction platform to find the best place for buyers by reducing their brokerage cost to minimum. This model will work on two major factors, availability of the right property (based on buyer’s requirement) and the minimum brokerage cost offered by different property agents. These two factors will together ensure that there is no monopoly of selected agents.
Innovation: 99acres should be taking a lot of inspiration from Airbnb and Redbus both in terms of innovation and UI & UX. Both of the companies maintain an active database of top quality service providers. A proper rating system ensures that the end users can make an informed decision. Airbnb provides complete details with pictures in every service provider’s listing which further helps in filtering out the best places.
All these points constitutes to a better customer experience which I think 99acres is lacking right now. From what anyone can see 99acres majorly focuses on just connecting the two parties overlooking the quality of the service provider (real estate agents). And I suppose all the business people would agree on the fact that quality should never be overlooked in any condition.
Tapping the un-tapped market: Assuming 99acres figure out how to implement the revenue sharing model with the property agents, they can enter the offline market as well. A simple way to start would be to hire a field staff which would hand hold the non tech-savvy property agents and bring them online. This approach would be a little difficult initially as it involves a major change in the dynamics of how the market works and also in the customer behavior. You can’t expect a property agent to become tech-savvy overnight just because you made a presence for him online so the next step would be to maintain constant contact with them and encourage them to list their properties.
The third step would be to incentivize them by sending them more leads if they build a better reputation online. This would in turn encourage them to use 99acres more actively. It would require 99acres to build algorithms which can handle this scenario without a glitch. It will also take care of the fifth problem I mentioned above. This approach turns the vicious circle into a profitable scenario and I believe 99acres have all the resources to implement it.
Now getting to the individual property owners and landlords would be a different ball game altogether which can be tackled if 99acres acquire the market share and awareness. This would require a very unique and innovative approach though.
Hopes are high
99acres have all the resources and data at hand and if they start innovating they can lead the market leaving no scope for the competitors. I just hope they do.
Your comments and feedback are welcomed.
Sanjeev Bikhchandani (Founder 99acres) has read the article and passed it on to his team.
Hitesh Oberoi (CEO InfoEdge) invited me to discuss my feedback along with his senior management team.