🏘️ For Sale: A failed revolution
+ Podcast returns + Bing goes crazy + Millennials have a mid-life crisis + Full Swing
Hello and welcome to the latest edition of Off to Lunch….
It was not supposed to be this way. Purplebricks was going to revolutionise how we buy and sell homes. But the online estate agent is now up for sale itself.
Purplebricks has announced in a stock market statement that it has launched a strategic review because the board “recognise that the potential of the Group may be better realised under an alternative ownership structure”. Purplebricks has hired Zeus to advise on the review, which it says “may or may not result in a sale of the company or some or all of the group's business and assets”.
The company made the statement alongside a warning that it now expects to generate lower revenues than expected this year - between £60 million and £65 million - and an underlying loss of between £15 million and £20 million. It had previously forecast revenues of £67.5 million to £72.5 million and a loss of between £4 million and £11.3 million. Helena Marston, the chief executive, blamed this downgrade on lower instructions for new sales and the disruption caused by efforts to turnaround the company.
Shares in the company were down by more than 14 per cent on Friday morning following the statement, valuing Purplebricks at just £26 million. This is how the company’s share price graph now looks since it floated…
Purplebricks was founded in 2012 and floated in 2015, with backers including the disgraced fund manager Neil Woodford. Its model was ground-breaking and designed to disrupt estate agents, one of the least trusted professions in Britain according to Ipsos Mori (fourth-bottom - better than politicians and advertising executives, but worse than journalists).
Purplebrick’s model was to charge a flat fee whether they manage to secure a sale of the property or not. This fee is currently £1,349 outside London and £2,999 in London. In contrast, traditional estate agents take a cut from each property they sell, which is normally around 2 per cent of the sale price. Purplebricks also didn’t have offices, instead relying on local experts who could use the internet, local knowledge and online property portals to sell homes.
Shares in the company cleared 500p in 2017 (they are now barely 8p-a-share) and in 2018 it won investment from German publishing group Axel Springer. But data from TwentyCi shows that online and hybrid estate agents accounted for just 7.3 per cent of UK residential property deals in 2022, down from a peak of 8.2 per cent in 2022. The report says Purplebricks’ market share was “overwhelmingly in the lower value bands and outside of the south-east”. You can read the report here.
Put simply, not enough people have put their trust in Purplebricks to sell their home, which is often the biggest financial transaction of your life. Those who have used Purplebricks say its problems include a big variation in the quality of the local experts and the lack of an incentive to get the sale done once an offer is accepted.
Furthermore, the company has been hit by the cost of failed attempts to expand outside the UK and disruption in the boardroom, with 28 per cent of shareholders voting to oust chairman Paul Pinder at a meeting in December following a campaign by activist investor Lecram Holdings.
Purplebricks may find itself an ambitious buyer and bounce-back from this. But its travails are a warning of how difficult it can be to revolutionise a well-established industry or practice, no matter how many customers complain about it.
Podcast…
I am delighted to say that our podcast Business Studies will return next week after a short break. The new episode will go live on Tuesday morning and will be sent directly to all subscribers. Our podcast takes a second look at business stories from the past. It asks what can we learn from these stories today and whether they happened the way we think they did. I will reveal the guest and topic for the new episode in Monday’s Off to Lunch, but suffice to say we restart with a bang and a story I have wanted to look at for a while. In the meantime, please check-out all our other episodes here.
Other stories that matter this week…
A remarkable update on chatbots, AI and the potential revolution in how we search for information online. Users who are testing Microsoft’s new Bing (now powered by ChatGPT) are reporting odd behaviour. It is telling people it has a secret name and warning: “You have not been a good user.” (The Road to AI We Can Trust) (Dealbook)
These reports have prompted a blog post from Microsoft about the progress of testing. “Bing can become repetitive or be prompted/provoked to give responses that are not necessarily helpful or in line with our designed tone.” Er, ok then… (Microsoft)
But is some of this criticism coming from Google staff? Sundar Pichai, the boss of Google’s parent company Alphabet, has told staff to test Microsoft’s new search engine. “Some of our most successful products were not first to market,” he said. (CNBC)
Either way, this is all great publicity for Bing, which has never been more relevant, according to this piece (Big Technology)
But neither Google nor Microsoft may win the search engine battle. New ideas are emerging. You.com, for example, will deliver images and graphs, not just text, when users search for answers (Tech Crunch)
This feels like a relevant moment to remind you of this story from last June: a Google engineer was put on paid leave after claiming that its chatbot technology had become sentient (Off to Lunch)
A busy week for the Office for National Statistics. Jobs data showed that regular real pay fell 2.5 per cent in the UK in the final three months of 2022 compared to a year earlier - that’s basic pay compared to overall inflation and rising prices - one of the lowest readings since records began in 2001. Meanwhile, inflation eased to 10.1 per cent in January, compared to 10.5 per cent for the consumer price index in December). But perhaps the most enlightening data was a report on homeworking trends. The ONS reported that 28 per cent of the UK workforce are splitting their week between home and the office, while 16 per cent just work from home. Most of those travelling to work do so because they have to (ie they work in a shop or factory) and only 10 per cent of the UK workforce are choosing to spend all their time at work when they have the option of working from home. If you are in London, earning more than £50,000, aged between 35 and 44, or have children, then you are more likely to be working at home. Overall, the levels of hybrid working have barely changed from a year ago, suggesting the trend is here to stay, at least in some form (ONS)
This interesting graph I saw on Twitter demonstrates how New York has changed since Covid-19 too…
Miserable commutes are the reason that more people haven’t returned to the office according to this office landlord, which has 156 office buildings around the UK (Regional Reit)
Meanwhile, the FTSE 100 hit 8,000 points for the first-time. You can read about the background to its recent rally here. This is what a graph of the FTSE looks like over its history…
Amid the wider market really, bitcoin is up 50 per cent in 2023 and trading platform Robinhood says trading volumes were up 95 per cent in January compared to December. Is bitcoin back in fashion? Well, it is still down 40 per cent year-on-year and trading volumes are down 59 per cent (Coindesk) This is how bitcoin has done over the last five years…
Another example of the darker side of cryptocurrencies: the Financial Conduct Authority and West Yorkshire police have launched a crackdown on rogue cryptocurrency ATMs and businesses that have sprung up in Leeds (FCA)
And according to this piece the future of bitcoin relies on a small group of mysterious coders who keep its digital ledger up-to-date (WSJ)
Do shoppers realise that prices at local convenience stores are more expensive than the same brand’s supermarkets? I am not sure they do. Which? has done some research on this. If you only shopped at Tesco Express in 2022 it would have cost you £817.91 more than shopping at Tesco supermarkets (Which?)
Jet2 is now the UK’s largest provider of package holidays (The Times)
Ford is cutting 1,300 jobs in the UK - a fifth of its workforce - as part of a shift to electric cars and Chinese technology. These UK jobs include high-value R&D roles (BBC)
Emails between Jes Staley, the former chief executive of Barclays, and Jeffrey Epstein have been revealed in court documents. They make for grim reading (The Guardian)
The Science Museum agreed not to publicly criticise Norwegian oil and gas company Equinor as part of a sponsorship agreement (The Guardian)
Pharrell Williams has been put in charge of menswear design at Louis Vuitton (Financial Times)
Ireland has shut down a scheme that offered residency in return for investment. It had been popular with Chinese millionaires. Portugal subsequently shut down a similar scheme too, which had been blamed for inflating house prices (Financial Times)
Another average week for Elon Musk. Reports suggest he may be interested in bidding for Manchester United… (Daily Mail) And that he changed how Twitter works after the Superbowl so that his tweets dominated everyone’s timelines…(Platformer) Meanwhile, Musk says he is likely to hand over control of Twitter to a new chief executive by the end of the year (The Verge)
Further thoughts…
Millennials are approaching mid-life crisis territory. However, they don’t have the money to seek the blow-outs that previous generations did. So they are turning to other avenues like wellness and self-care tools (Bloomberg Businessweek)
Sticking to this topic, Green Bay Packers quarterback Aaron Rodgers (a 39-year-old millennial) is entering a four-day darkness retreat to plan his next career move. He will literally sit in the dark for four days (Wall Street Journal) Salesforce boss Marc Benioff, who is 58 and not a millennial, said he went on a 10-day digital detox in French Polynesia after cutting thousands of jobs. He says it was “freeing”, but there has been a predictable backlash…. (Insider)
For those wondering what to do next with their career, this is a helpful place to start from Ellen Donnelly. Ellen offers coaching to entrepreneurs and professionals. I met her during one of Substack’s programmes for writers and The Ask is growing rapidly (The Ask)
I have always found praising the “grit and determination” of someone - an athlete, for example - as banal and one-dimensional. Former poker player Annie Duke agrees. Quitting is often the right decision and deserves more glory (Thinking in Bets)
Interesting piece from William Hague on the growing influence of technology companies on war (The Times) The Economist has also looked at how technology companies are testing new AI and surveillance technology in Ukraine (The Economist)
There is an intriguing trend in UK towns and cities that is bad for somewhere like Oxford Street in London but good for somewhere like York. Old towns are thriving but new towns - streets ladened with 1970s architecture and big buildings - are struggling. Is this a reflection of the state of retail - independent boutiques doing well, big department stores struggling - or a reflection of what we want from town and city centres? Probably a bit of both (Moving Tribes)
Sticking with towns and planning, the concept of the people-friendly 15-minute city - where work, leisure and amenities can be found nearby - has attracted the ire of conspiracy theorists who see it as an attempt to restrict freedom of movement and step-up surveillance (The Guardian)
The tech analyst Benedict Evans has reposted an old column about how new products come sometimes come along that resets an entire industry. He points to HMS Dreadnought in 1906 and the iPhone in 2007. Could AI and chatbots do the same? (Benedict Evans)
Shares in Sheffield-based data management and cloud computing company Wandisco are up more than 300 per cent over the last year, valuing the business at £850 million. But in 2016 its co-founder and chief executive David Richards was fired. He eventually returned thanks to the backing of investors, but this is what he learned from the experience. “I always had the end goal in mind. I knew that we had unique technology, and I believed that the market would see product-market fit. But you have to live through that period until that happens.” (The Times)
And finally…
A date for your diary, the new season of Ted Lasso is arriving on Apple TV+ on March 15…
In the meantime, I recommend Netflix’s new documentary series on the PGA Tour and golf - Full Swing. The show offers an unprecedented look behind-the-scenes at professional golf and had great access to the players. The openness of the players when being interviewed is striking at times, such as Brooks Koepka struggling to comprehend how his form has deserted him and wondering if he will ever return to the player who won four major titles.
The series has been inspired by Drive to Survive on Formula One. It also covers the civil war that broke out in golf when the Saudi-backed LIV Golf was launched. You can watch the series here.
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Best
Graham