Trade Me's high hand has customers spooked

People appear divided over who is behaving badly in the stoush that has arisen between Trade Me and real estate agents, following an increase in Trade Me's property listings fees.

Comments on show two positions, depending on whether they are more indignant about Trade Me's fees or agents' commissions.

The underlying reality, however, is excessive confidence, and perhaps the unrealistic expectations for profit growth placed on Trade Me's management by its board have resulted in the company overplaying its hand and frightening the horses. Customers and investors are spooked.

Many real estate agents felt Trade Me was being greedy when it announced in November that it would switch from an arrangement under which agents could list as many properties as they liked for a flat-rate fee, to charging $159 plus GST, per listing.

Eighteen real estate offices, mostly independent agents in Hamilton and Hawke's Bay, have responded by pulling their listings from Trade Me altogether, with some complaining the changes would quadruple their fees.

Trade Me says that, together, those agents accounted for only about 1 per cent of its property business. But the negotiations have only just begun.

Spokesman Paul Ford said agents were being transitioned to the new pricing over about six months. It appears most if not all of the five large chains are still on the "old" pricing.

Chief executive Jon Macdonald said though details of the transition were commercially sensitive, a "decent chunk" of agents had moved to the new fee structure and it expected about a quarter to be paying less than they had under the flat-rate tariff.

Trade Me feels it is a bit "off" that some agents responded to the fee changes by pulling listings that Trade Me said had already been paid for.

After some loose talk on the part of the real estate industry, the Commerce Commission is investigating whether agents may have broken the Commerce Act by colluding on a boycott.

But it is only natural Trade Me's price hike might prompt the real estate industry to consider the long-term implications of advertising on its website.

The risk for Trade Me is not in a sudden boycott, but that large agents may conclude they will be better served by gradually beefing up rival site, which is owned by the real estate industry, and that they will direct a greater proportion of their adverts there over time.

Trade Me's decision to write directly to 1300 affected homeowners in Hamilton and Hawke's Bay, pointing out their listings had been pulled and offering to reinstate them for free was cheeky, even though it insists its objective was not to cause trouble between agents and their clients.

Founder and director Sam Morgan has only added fuel to the flames by calling agents "turkeys", saying they cut off their nose to spite their face.

It is not the first time Morgan has made comments that may have clicked with the public but caused Trade Me embarrassment. It is understood he was chastised in 2012 for labelling rival site auction Wheedle a "joke", in a tweet he later said he regretted.

Analysts are divided on the damage done. Morningstar analyst Nachiket Moghe believes the big agents realise they "can't get away with not advertising on Trade Me" and that smaller agents will come to the same conclusion over time. "They have got such a strong brand and so many ‘eyeballs'."

But another analyst said it was a moot point within the investment community whether Trade Me would succeed in driving through the fee increases. It was a big issue, given property listings had been viewed as one of the major drivers of profit growth for Trade Me, he said.

"The general items marketplace is very mature. ‘Jobs' is very competitive; they can't do much there because of [rival] Seek, so you are left with motors and real estate."

Trade Me clearly has a deeper beef with the way the real estate industry works. It is relevant to consider is not open to private listings. But trying to serve the industry while also berating it is a difficult tightrope to walk.