The company that was bought for a pound

Launched in 2014, Purplebricks’ online estate agent service stood apart from traditional estate agents. Offering just a flat fee for their services, the company was tipped to drastically disrupt the housing market as a newcomer. With this unique zero-commission pricing structure, they quickly became one of the best-known brands in the UK as even rival estate agents encouraged their franchisees to invest in shares. By 2020, the estate agents had established themselves as a household name: they claimed to have achieved an impressive 98% brand awareness within the UK as well as making 2019’s ‘Superbrands’ list. As the first online estate agency to go public, Purplebricks’ remarkable rise appealed to many investors. The firm was once valued at over £1 billion. Yet, in May 2023, the company was sold for just £1 after longterm financial struggles. So what happened? The story of Purplebricks begins in 2012 with David Shepherd, and brothers Michael and Kenny Bruce. Incorpo- rating technology into estate agency, a sector that had long been dominated by local brick-and-mortar businesses, the company’s hybrid operations set it apart. Originally focusing on areas of Southern England, the start-up secured £8 million in equity investment and expanded into other regions of England and Wales less than a year after its 2014 launch. By November 2015, Purplebricks would cover the entirety of the UK. The online model was promising; early investors included the former CEO of Capita Paul Pindar and Wonga founder Errol Damelin, and its valuation increased tenfold in its first full year of operations. Purplebricks’ initial success can be attributed more to its unique pricing than the online model though. Unlike most high street agents who took a cut of each sale in accordance with its value, Purplebricks simply charged a flat fee of £599 for valuation and listing. Its pricing took advantage of growing frustration amongst British homeowners who faced paying out thousands of pounds in commission to increasingly unpopular local estate agents. It proved popular, and revenues quintupled between 2016 and 2017. Moreover, the firm’s tenacious approach towards advertising more than paid off. Their 2016 ‘Commisery’ campaign surrounding consumer frustration with traditional commission charges contributed to a 218% growth in revenue and won an Effectiveness Award from the Institute of Practitioners in Advertising.

At least initially, the marketing’s centrality to Purplebricks’ business strategy was integral to its growth. Other ambitious efforts by the company involved collaborations with comedian Mo Gilligan and Coronation Street’s first-ever product placement. Purplebricks had entrenched itself into the lives of British homeowners in just a matter of years, and all without the the brick-and mortar presence of their more traditional competitors. At one point, the stock was valued at nearly £50 a share which placed the firm’s value at £1.4 billion. By March 2023, a share could be purchased for just 8p. At its core, Purplebricks’ demise is a tale of poor management and misplaced priorities. A once mighty brand now attempting to pick up the pieces of failed endeavours in North America and Australia whilst dealing with domestic profitability struggles, it is widely expected that the company will report losses of over £20 million. Purplebricks struggled to make an impression outside of Britain. Despite launching its Australian subsidiary in conjunction with the hugely domestically successful ‘Commisery’ campaign, the company made losses of £6.1 million in 2017. Similar losses were also seen in its attempt to expand to the American West Coast and Canada. In fact, ratings in Canada were so poor that the company reportedly bribed its employees with paid days off to ask family and friends for positive reviews. By 2020, its American and Australian subsidiaries had both been shut down and its Canadian branch sold to fully refocus efforts on the UK property market.

However, these not only left the company with significant debts, but caused conflict within its leadership, and thus uncertainty, including then CEO Michael Bruce being laid off. Its decline also exposed a flawed business model that made its initial success look little more than a story of good marketing. Without the incentive of commission, its Local Property Experts (LPEs) had limited interest in completing sales and were more focused on simply maximising the number of homeowners who listed with the company. Properties would be listed on Rightmove and Zoopla, but Purplebricks’ basic package left most of the promotion that local estate agents would usually cover up to sellers themselves. The company continued to suffer from poor feedback. In August 2017, a BBC Watchdog investigation accusing Purplebricks of “misleading claims” regarding how much customers could save added fuel to the fire of dissatisfaction with the estate agents – a story that saw share prices fall 6% overnight. Furthermore, with little regard for the quality of the service provided, Purplebricks’ ‘Local Property Experts’ turned out to be not so ‘local’ after all, with many covering a radius of 30–40 miles. Emerging ‘no sale no fee’ strategies from other estate agents challenged Purplebricks’ market share as competitors caught up in the digital sphere. Whilst this ought to have seemed inevitable, a reluctance to adapt inflamed the company’s struggles despite occasional increases to their listing fee. Purplebricks’ concern with glamorous international ventures and slick advertising campaigns in the face of a struggling business model disgruntled shareholders. Furthermore, the fervent optimism -turned-idealism surrounding many technology companies of the era perhaps places Purplebricks among the likes of WeWork as overvalued from their conception.

In May, the beleaguered estate agency was bought for just £1 by competitor Strike, which has since rebranded all its operations under the Purplebricks name. Despite a turbulent few years, it is evident that the company’s brand recognisability still holds some value. Nonetheless, concerns about the viability of this zero-commission model that drove the estate agents’ initial rise remain; concerns that Strike’s enticing offer of a completely free valuation and listing will only deepen. For now, the future of the Purplebricks name – and 750 jobs – hang in the balance as further job cuts and spiralling losses spell trouble for the merger.