How UK real estate disruptor Purplebricks is staking its claim in the US

Four years ago, Purplebricks came onto the real estate scene in the UK with a unique proposition: instead of dealing with pricey commissions, home sellers who go with Purplebricks as their real estate agent only pay a fixed-rate fee of £849, regardless of whether their home is sold.

The model has proven so successful that Purplebricks expanded into Australia just two years after its UK launch in 2014. Last year, the online real estate firm made its first foray into the US when it set up shop Los Angeles. The company has since expanded to San Diego, Sacramento and Fresno in California, and recently announced that it’s now available in select counties across New York, New Jersey and Connecticut.

Aside from its flat-fee approach, Purplebricks differentiates itself from more “traditional” brokerages by offering much of its services online. While all sellers have access to a “dedicated local real estate expert” via Purplebricks, they’re able to arrange showings, make offers and negotiate sales on their own using the company’s website or app. Homeowners who opt to sell their house with Purplebricks also receive things like professional photography, 3D virtual tours, and listings on popular real estate sites like Zillow and Trulia.

“You get all of the same quality of service that you’d expect, but we use technology to help drive efficiency and transparency,” said Jonathan Adler, who joined Purplebricks last year as US chief marketing officer. “Our belief in what consumers want in terms of a much simpler, more transparent relationship between buyer and seller is as prevalent here in the US as it has been in the UK and Australia.”

Making it work

In the US, Purplebricks charges a one-time listing fee of $3,200 instead of commission, but sellers are still responsible for paying the buy-side commission if their home is sold, which is normally 2.5 to 3%.

Purplebricks is advertising its business model in the US through a campaign called ‘Real Misery.’ The quirky ads, created by Muhtayzik Hoffer in San Francisco, feature scenarios where home sellers who didn’t use Purplebricks suffer from “real misery,” a faux phenomenon that Purplebricks describes as the feeling one experiences after paying “too much in commission and get nothing more for your money.”

In one spot, a dad suffering from “real misery” frustratingly kicks his daughter’s basketball into nearby trees after his friend tells him he could’ve “saved thousands” by selling his house with Purplebricks.

The ‘Real Misery’ effort stems from a nearly identical campaign called Commisery’ that Purplebricks is running in the UK and Australia. Since sellers who use Purplebricks in the UK and Australia don’t pay a buy-side commission because of how the real estate markets operate in those geographies, the concept of ‘Commisery’ works since it effectively relays the fact that Purplebricks does away with commissions in favor of a flat fee.

But that concept doesn’t translate in the US since sellers here are responsible for paying a buy-side commission, which explains why the creatives at Muhtayzik Hoffer tweaked the campaign to make it suitable for US audiences. Adler said Purplebricks chose to reimagine the ‘Commisery’ campaign for the US rather than start from scratch since the creative proved to be successful in its other markets.

“Having been a global advertiser throughout my career, coming up with a really rich idea that can resonate across markets is nirvana. I think that’s what we’ve got here,” he said. “Although we didn’t want to use that specific word - that construct of ‘Commisery’ - we certainly used a very similar creative vein here in the US.”

John Matejczyk, co-founder and chief creative officer of Muhtayzik Hoffer, said the agency was tasked with recreating the original campaign - which was created by VCCP’s Snap in London - in a way that would also clearly communicate the nuances of Purplebricks' model in the US.

“When [a brand] has something that has proven effective in two other markets, and they want to continue with that success, the first thing I would do is do exactly what we did,” said Matejczyk. “We needed to stay pretty close to ‘Commisery,’ but do a similar option here in the US. We shot it with the appropriate US actors, situations, language tweaks and lo and behold; it is working quite well.”

In addition to ‘Real Misery,' the agency has also created an FAQ digital series of sorts that answers questions about how Purplebricks operates. The hope is that the series helps clear the air around some aspects of the firm’s business model, like how it’s able to charge so little.

Growing pains

Purplebricks has yet to release any substantial numbers around what kind of success it’s seen in the US since launching last year, but its recent expansion to New York - which came three months ahead of schedule - shows that the firm is confident about its stateside offering.

Even so, Purplebricks has already hit some bumps in the road in its home market. The brand found itself in trouble with the Advertising Standards Authority (ASA) late last year for failing to communicate to consumers that homeowners will still be asked to pay the flat fee even if their home doesn’t sell.

The company also recently came under fire from Jefferies analysts in the UK who questioned its claim that it sold more than three-quarters of homes listed with it. According to a Jefferies research sample, Purplebricks sold 51.6% of the homes listed in November 2016 within ten months, a “similar success rate to the overall market.”

Even as Purplebricks puts out fires in the UK, it’s charging full steam ahead in the US. Last month it secured a growth equity investment of $177m from German publisher Axel Springer, $71m of which will be used to fuel Purplebricks’ US growth.

While Purplebricks will surely compete with other online real estate firms that have cropped up in the US recent years, especially ones like Reali that have a similar way of doing business, Adler said that the firm plans to take on the likes of Century 21 and Coldwell Banker as well.

“I think it’s a really big, ambitious goal to take on some of those large players, but ultimately that’s where I see our future, and that’s where I see our business opportunity,” he said.