Rightmove’s shares are under pressure from short-sellers, indicating that the company’s response to its potential competition is being viewed negatively by some significant investors.
An interesting analysis of Financial Conduct Authority (FCA) data by The Spectator this week, shows that Rightmove is the fifth most-shorted stock, with investors owning 3% of its stock taking such positions. The other four organisations in the top-five tell a story too – Ocado, Kingfisher, Sainsburys and Burberry can’t be accused of being cutting-edge tech plays, so there is something highly unusual about a digital business such as RM, with 73% profit margin to boot, being targeted in this way.
The article speculates that new tech may come to challenge Rightmove’s double-decade dominance, though it specifies apps and social media platforms as threats, both of which been around for a while. More relevant, I’d posit, is the breaking wave of artificial intelligence (AI) which allows people to search incredibly specifically – if they’re looking for a “4-bed detached home by the river, near an outstanding school and fifteen minutes’ walk to a train station”, they’ve got no chance using Rightmove’s filters.
They will then start to gravitate towards solutions that do allow them to discover their, usually very personal, ‘dream homes’.
Rightmove’s AI dilemma is not dissimilar to Google’s. The latter’s dominance in a very specific type of search led to its perceived unassailable position as the default search engine for everything on the internet. However, a quick use of the new breed of AI search and chat assistants, such as Pi and Perplexity, shows that these are tremendously helpful at discovery – more so than Google’s ad-heavy summary pages and dubious, SEO-pumped organic search results.
The risk of AI to Google has resulted in them, last week, announcing a complete overhaul of their search with something called ‘AI Overview’ being the default result at the top, highlighting one answer to whatever the enquirer is looking for.
This is not a luxury that Rightmove has. So much of its revenue is based around escalating add-on ‘packages’ such as standard, enhanced, premium, optimiser, etc. These all provide increased exposure, theoretically – more spots on its (still utterly pointless) interstitial page, bigger images, coloured boxes …
However, if people are now just looking for very personalised results about their ‘dream home’, the default search results pages on Rightmove become even more difficult to serve up. Searchers want quick, specific answers that don’t ignore their requirements. Showing a ‘Featured Property’ because an agent has paid for it, rather than because the applicant is interested in it, will make people long for subject experts – local agents – rather than appreciate the liberties RM has taken with their enquiry.
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This all plays into the hands of local, dedicated estate agency. And perhaps this understanding is the reason for the shorting of Rightmove’s stock. If RM is no longer helping people discover the property that they’re really interested in, then buyers will look for ‘domain experts’, those that know there are seven “4-bed detached homes by the river, near an outstanding school and fifteen minutes’ walk to a train station” in the area. And, possibly, two of the owners – who moved in with the agent many years ago – might be tempted to sell at the right price.
This is why AI is pushing people into finding niche services that understand what they’re really looking for – and get them there quickly – rather than ones which vomit out results that are based on profitability rather than specificity.
Of course, CoStar’s looming battle with RM – unmentioned in the Spectator article – is also underpinning the potential for shorting the business. But more structural changes to how search is conducted, as a result of AI, are weighing heavy too.
I remember when newspapers and magazines had agents over a barrel with their brutal charging practices in the late ‘90’s … until digital technology came along and suddenly everything changed. I think AI will do the same to Rightmove. And some shrewd investors can see that very real possibility too.
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