Why Zoopla is buying uSwitch

It claims the deal will create the 'ultimate online property resource.'

by Jack Torrance
Last Updated: 02 Dec 2015

Zoopla is no stranger to acquisitions. The property portal’s rapid growth was spurred on largely by its appetite for consuming its smaller competitors. But today it’s taken a different direction, announcing that it plans to acquire the utilities price comparison site uSwitch for between £160m-£190m.

‘We have always been at the forefront of innovation in our industry and this deal brings together two of UK's best known and fastest growing digital brands as a natural next step towards creating the ultimate platform where consumers can research, find and manage their home,’ said Zoopla’s founder and CEO Alex Chesterman.

Rather than merging (ZooSwitch?), the two brands will continue to operate independently, but their websites will presumably be integrated to some extent – so that homebuyers are also offered utilities quotes and people looking for a gas tariff can be lured across to Zoopla with some property porn.

Majority-owned by Lloyds Banking Group’s private equity arm LDC, uSwitch is Britain’s biggest comparison site for ‘home services’. It made £16.2m in underlying profits last year on revenues of £62.9m, so Zoopla’s at least investing in a company that’s making a decent amount of cash. But it seems the real reason behind the deal is a strategic one.

Zoopla is currently occupying the precarious middle ground in its market. It’s not got the clout of the gigantic Rightmove but also faces competition from a new property portal OnTheMarket, which was launched by estate agents unhappy about paying the bigger portals' fees.

Read more: Is it time to show estate agents the door?

Today’s announcement was accompanied by latest trading figures from Zoopla, which showed that while its traffic figures increased 11% in the six months to the end of March, it lost a pretty drastic 23% of its estate agent members in the same period – presumably because many have left to join OnTheMarket, which only permits its members to be part of one other portal. But buying uSwitch could give Zoopla an edge.

‘We believe this is a good step for the company, as it seeks to differentiate itself from Rightmove and compete effectively with new entrant to the property portal market: Onthemarket.com,’ said Sohil Chotai, an analyst at Edison Investment research. ‘The uSwitch acquisition highlights Zoopla’s commitment to offering useful services for its customers.’

Only time will tell whether that pays off but investors were certainly pleased – Zoopla’s shares were up 13.1% this morning to 209.3p, their highest level since December. It's not going down without a fight.

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