JP Farinha on Bad Estate Agents, Re-Inventing Business Models and the International Disrupter Lurking Just Around the Corner
The CEO of Property24 doesn’t look like the Big Bad Wolf any traditional real estate agent would tell you he is. At his office in Newlands, Cape Town, the businessman talked almost reverentially of the property industry and doing whatever it takes to create an easy, user-friendly experience for his customers. His open and comfortable nature reflects something of a philosophy in the digital space – that information shouldn’t be hoarded, rather, freely offered to an increasingly sophisticated user.
‘Our timing was incredibly good when we started investing in Property24, the industry was on the cusp of change because of digital,’ says Farinha. ‘Private Property had already come in and was affecting the industry, we just came along after that and disrupted that business.’ What has happened is estate agents have realised they need to actively market properties on the digital side, he says. ‘They understand now that it’s a lot more complex in the online world – it’s not just Property24, it’s facebook, it’s Instagram, it’s Twitter that they need to get their heads around. So the biggest change didn’t come from us, it came from the internet.’
Near the end of the 80’s Farinha left the army with no idea of what to do. He completed a course in computers and joined the Johannesburg Stock Exchange as a programmer. He ran iAfrica.com when he was noticed by Naspers and headhunted to work for Mweb. He ran 24.com before he moved into Property24 and invested his life savings into a shareholding of Korbitec, the tech business Property24 merged with in 2010 to become the property portal almost every South African with a mouse is aware of. ‘That was probably the best investment I made from a value creation perspective.’
The Naspers shares he received when he joined the company (at a tidy R40) didn’t do his portfolio too badly either. He didn’t sell the shares at their peak in 2017, but at around R3 260, he’s not complaining.
Property24 started in 2000 as part of the Media24 stable but it looked very different from the major property sales portal it is now. Back then it made most of its money from mortgage refinancing, but in 2008 when the property market crashed and banks reduced exposure to originators, the business started making a loss. ‘We had to re-look at what Property24’s primary business model was,’ says Farinha. In the process of developing another business model, a lot of money was invested in creating Property24 as a portal, aggregating listings for consumers. ‘At the time there was a primary competitor in the market, Private Property, they were quite innovative, they had launched a private listings business where they wanted to disintermediate the estate agents, but they realised that the model didn’t really work, there were too few people who wanted to transact without an estate agent involved. So they switched their model to allow estate agents to list on their site. They were probably three to five years ahead of where we were in terms of platform, user interface, organisational structure etcetera. They were quite impressive in their innovation. We were less than half their size in terms of audience. And we took a look at this and thought ‘wow we might have missed the boat here’, it was quite daunting,’ says Farinha. ‘But we knew it was the way to go because it was working internationally.’ So Property24 had to completely transform to start competing properly. The group called on its resources from Korbitec, the technology business Property24 merged with. They started the process of retooling the business from the ground up. ‘It was a bit like changing the engine while flying. At the same time we didn’t want to completely kill what we had in the business, but we were also competing with the incumbent.’
A major reason for Property24’s success was getting a lot of stock listed on the site. In exchange for property listed by estate agents, Property24 charged a smaller fee than their competitors. They also offered different business lines like digital instructions to recover some of the fees. The model was interesting but very ambitious. ‘Like many of these things you only find out what the pitfalls are once you start implementing. But what did happen is it got us all together and it got all the big estate agents to start using the product. At the same time we really focused on the user experience and Google SEO and SEM. All the things that makes a good website and give the user a good experience. It was actually harder than starting from scratch. That took us about two years to get right,’ he says.
At the end of 2011 Poperty24 ran its first TV campaign, and it seemed to work. The business saw a major jump in brand awareness and traffic. This success gave it the confidence to invest further and spend more money on marketing and the user experience side. ‘The two go hand-in-hand because if you’re spending a lot of money getting your consumer to your site, it doesn’t help if it’s a bad experience. It has to be good enough to retain the user and give them a good experience.’ A team of people are constantly focusing on the tiniest details on the website to make it a very responsive user experience. For example, images have to be the right size. ‘We find there’s a direct correlation between speed and conversion,’ says Farinha.
Farinha says the surprisingly difficult part of reinventing Property24 wasn’t the human aspect, the organisational issues, but rather getting their product right. ‘If you go onto the site and use it, you’ll think it’s so simple and that anyone can create it. But to get the site simple was incredibly complex’. Simplicity improves human engagement, according to Farinha.
According to Farinha, the South African property industry should always be nervous about a big international disruptor that could come in and eat our lunch. ‘This is where we had quite a big disconnect with the real estate industry: we realise that a big company can come in and disrupt us tomorrow. So we have to do everything to stay as competitive as possible. And sometimes that means making decisions that the real estate industry doesn’t like. For example: valuations or stats or trends. Consumers want more information, they need to be informed and they’re going to get it; it’s just a case of where they get it from. So, if you don’t offer that service, then you open that door to a competitor from overseas and then it’s too late for the industry and for us.’
‘The internet flattens everything, there’s no home field advantage,’ says Farinha. ‘The only defence you have is to be as competitive as you can and you do that through focusing on your consumers’ needs.’
Although some in the estate agent industry are not happy about Property24’s success, if it wasn’t Property24, it would’ve been someone else who saw the gap and did it.
‘Estate agents have had to become more efficient because an online platform puts pressure on them. In the past the big brands had an advantage due to expensive print costs and the smaller, independent operator found it quite hard to compete. But with online the small operators have a more equal footing. So I think the competition has increased immensely from online, and that means service to consumers should have improved,’ says Farinha. ‘Although we still see some bad service from certain estate agents. It still happens today that some agents don’t return calls to a lead. But I think the incidence of that is declining. Because they’ve realised the importance of speed, service, the consumer expects more these days. You’ve got to be more on your toes in servicing the consumer.’
Farinha also touched on the tough economic times and Eskom woes the country has been experiencing. His advice to entrepreneurs is that you have to stay positive and determined, because although there are tough times, they do not last forever.
As the Go-To-Guy of a large business, Farinha’s learnt to harness his stress to help him focus. It’s easier to manage at work because it’s a structured environment. ‘At work you have a role to play and you can manage that,’ he says. ‘But I think it’s when you get out of the office that you have to manage the stress. Do you then take it home and let it influence your family life? There I think it’s really important to stay healthy and take time out.’ According to Farinha weekends are sacred at Property24. ‘Weekends are not for work, if you’re working on weekends then something’s wrong, that’s an abnormality.’
Even through the most stressful times in the company’s past, the tech employees weren’t placed under massive stress and weren’t pressured into working extra hours. ‘We get through it, we deal with it. Otherwise you create an environment and culture that is reactive and that operates that way. And then you’re not going to get the people you want, because people don’t want to work like that, they want a balanced lifestyle.’