Rightmove (LSE: RMV)- UK’s largest online real estate portal has long been a major feature of the country’s property search market, with a 86% share, yet, while the business boasts of remarkable fundamentals, its stock price has remained stagnant over the past five years, underperforming the FTSE 100.
While the FTSE 100 is up by 8.14% compared to five years ago, Rightmove has barely moved, up by only 0.88%.
Now, analysts are predicting a crucial year for Rightmove in 2025 with the emergence of OnTheMarket as a veritable challenger of Rightmove’s near monopoly status.
How Rightmove’s business model has ensured its dominance
Rightmove operates as a near-monopoly, benefiting from a self-reinforcing cycle.
More traffic drives more listings, which in turn attracts even greater user engagement.
The company’s impressive operating margins which exceed 70% reflects this dominance, also putting the company far ahead of industry heavyweights like Nvidia and Microsoft.
Nvidia’ operating margin for he quarter ending October, 2024, was 62.34%, while Microsoft’s for the quarter ending September, 2024, was 46.58%.
High operating margins mean that a company can charge substantially more for its product or service than it costs to provide, highlighting its competitive edge.
For years, this model has ensured steady growth and profitability.
Even during turbulent times, such as the pandemic, Rightmove demonstrated resilience, solidifying its status as a leader in the sector.
However, its ability to sustain these high margins depends on maintaining its traffic lead, a position now under scrutiny as competitors gather momentum.
Rightmove faces increasing threat from OnTheMarket
The acquisition of OnTheMarket by US-based CoStar Group in 2023 has changed the landscape that Rightmove operates in.
CoStar, a property analytics giant, has publicly set its sights on dethroning Rightmove as the UK’s leading online property platform.
Armed with significant financial resources, CoStar’s strategy is aggressive: rapidly expanding OnTheMarket’s traffic and agent participation.
Speaking at the Proptech and Portal Watch conference in Barcelona last year, CEO and founder of CoStar, Andy Florance, told Online Marketplaces’ chairman Simon Baker:
Rightmove is operating at a margin I would never be comfortable operating at, you’re super vulnerable by operating at 74% – it means you’re not working towards growth and you’re not building for the future.
Florance said agents in the UK have expressed “overwhelmingly” to them that they are dissatisfied with the way pricing works at Rightmove.
Rightmove has suggested it will increase prices by 35% in the next couple of years – what additional value are they offering for that increase? It’s questionable…We [CoStar] represent the competition.
Florance’s confidence is not entirely misplaced as results so far have been promising.
Over the past year, OnTheMarket has seen a 90% surge in total visits and a 27% increase in agents joining its platform.
While it remains far from overtaking Rightmove, its trajectory so far has been promising.
Significantly, during this period of growth for its competitor, Rightmove reported a modest 1% decline in traffic—a rare setback for the industry giant.
2025: The year of reckoning
The year ahead will be pivotal for Rightmove.
The company faces two possible scenarios: either it fends off the competition and maintains its dominance, or it succumbs to pressure, allowing OnTheMarket to chip away at its lead, says Stephen Wright, analyst at The Motley Fool,
If that happens, the equation might start to look a lot less favourable. So I think anyone considering investing in Rightmove shares should pay close attention to what’s going on with OnTheMarket.
If OnTheMarket’s momentum continues, Rightmove may see its high margins eroded, forcing it to reconsider its pricing strategy or invest heavily to protect its market share.
On the other hand, successfully defending its position could reaffirm its competitive edge and restore investor confidence, potentially making the stock more attractive after years of underperformance.
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