💌Proptech Market, Zigbang and Dabang Find Their Way Through the Crisis🏃

2024/10/08

INF Academy
9 min readOct 8, 2024

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Today’s P.ACE Knowledge: learn about the revenue models and business strategies of the leading real estate brokerage platforms, Zigbang and Dabang!
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🔎 Today’s P.ACE Knowledge

Proptech Market, Zigbang and Dabang Find Their Way Through the Crisis🏃

#proptech market #real estate brokerage platforms #zigbang #dabang

Proptech is a portmanteau of Property and Technology that combines the real estate industry with IT services such as big data and artificial intelligence. It ranges from big data-driven real estate brokerage services such as Zigbang and Dabang, accommodation and office sharing platforms like Airbnb and WeWork, and interior-related businesses selling furniture and IoT appliances like Bucketplace(Ohouse).

<PropTech Map, Source: Korea PropTech Forum>

The Proptech industry has shown remarkable growth in recent years. According to the ‘Korea Proptech Startup Overview 2023’ report by the Korea Proptech Forum, the cumulative amount invested in Proptech companies from 2013 to 2022 was KRW 5.7278 trillion, with a total of 456 investments made. In addition, the size of the Proptech industry itself has expanded significantly as the number of member companies of the Proptech Forum, which started with 26 companies in 2018, has increased to 374 as of 2023.

However, since 2022, the Proptech industry has been struggling as macroeconomic factors such as high interest rates and high prices have reduced the liquidity of the real estate market. This has led to reduced investment and a decline in corporate value. WeWork, a global Proptech company, went bankrupt in 2023 due to rapid macroeconomy changes, cost structure limitations, and opaque governance. Korea’s leading real estate platform, Zigbang, also had to restructure about 10% of its employees last year as its losses grew, and Proptech investment, which peaked at KRW 2.6943 trillion in 2021, dropped to KRW 1.204 trillion in 2022.

<Source: Korea Proptech Forum>

In particular, Proptech companies have a business model that is optimized for booms and busts. While it is easy to attract investment by providing services that are not related to revenue during a boom, in a downturn, it is necessary to generate clear revenue to survive. Many Proptech companies are looking for strategies to secure a revenue model and respond to the crisis by moving away from services that are not related to revenue.

Today, we are going to take a look at the revenue model of two of the leading real estate brokerage platforms in the Proptech industry, Zigbang and Dabang, and how they are doing in the midst of the recession!

The Revenue Model of the Leading Brokerage Platforms, Zigbang and Dabang💰

The number one domestic brokerage platform market share is Zigbang. Founded in 2010, Zigbang started with the monthly rent information platform ‘Channel Breeze(CH.BREEZE)’ and in 2012, it launched the real estate brokerage platform ‘Zigbang’ through a mobile platform and website for the first time in the real estate industry. At the time, the young generation in their 20s and 30s were not accustomed to seeking real estate brokerage from brokerage offices, but Zigbang quickly settled into the market as it met their needs. In 2021, Zigang was selected as a ‘unicorn company’ by the Ministry of SMEs and Startups, which refers to an unlisted startup with a corporate value of KRW 1 trillion or more.

Until becoming a unicorn company in 2021, Zigbang had only one main source of revenue: ‘service revenue’. In the case of real estate market brokerage platforms, they are structured so that they cannot receive brokerage fees. Since the revision of the Real Estate Brokerage Act in January 2014, it has become impossible to receive brokerage fees like delivery apps. Therefore, service revenue mainly consists of platform advertising fees for residential properties such as one-room apartments, efficiency apartments, and villas paid by real estate brokers.

Another leading Korean brokerage platform, Dabang, was founded in 2013 and entered the brokerage platform market around the same time as Zigbang. Like Zigbang, Dabang’s main source of revenue was advertising fees. It sold ad products, or ad slots*, where authorized brokers could list various listings, allowing them to expose their listings to consumers.

*What is an ad slot? It refers to a spot or opportunity to display an ad. On a real estate platform, it is an ad space that a real estate agent or landlord buys to show their listings to users.

Both Zigbang and Dabang have been growing based on ad commissions, but they realized that the ad revenue model alone was not sustainable, so they started looking for new ways to grow.

<Source: https://m.ajunews.com/view/20191209153946851>

New Business Strategies to Diversify Your Revenue Model📈

#Zigbang — Going Beyond Brokerage to Become a ‘Housing Platform’

Zigbang continues to pursue new business by expanding its scope into various real estate-related services with the value of being a comprehensive Proptech company.

First, to gain a foothold, Zigbang has a Bolt-on Strategy* of acquiring companies in the same or related industries to increase its size and revenue.

*Bolt-on Strategy refers to the practice of acquiring a core company and then acquiring competitors in the same industry to increase market share, revenue, and operating income, thereby increasing the value of the company. This strategy was originally used by private equity firms, but in recent years, it has become increasingly common for large startups to acquire companies in the same industry.

Zigbang has been actively acquiring other Proptech companies in the same industry, including apartment listing information service Hogangnono, shopping center and office listing service Sugar Hill(Nemo), and share house management company WooZoo, each of which had loyal customers in their respective areas. Especially in 2022, Zigbang announced their entry into the ‘global smart home business’ by acquiring Samsung SDS Home IoT business, which was worth more than KRW 100 billion and attracted a lot of attention because it was a ‘startup acquiring a large company’s business’. In June of this year, Zigbang signed a smart home product supply agreement with Vinlock, a distributor specializing in home networks.

However, the company’s aggressive acquisition spree is causing the operating losses to grow even more, and it will be interesting to see what new businesses and services the company can bring to the table through its acquisitions.

In addition, Zigbang is also paying attention to entering the Southeast Asian market. According to the Vietnam door lock market trend data from the Korea Trade-Investment Promotion Agency(KORTRA), the Vietnamese smart home security market is expected to account for 15.5% of the Southeast Asian market by 2025. Zigbang plans to strengthen its brand competitiveness and accelerate sales channel development in this potential market.

#Dabang — Focusing on Enhancing the Services of Its Real Estate Brokerage Platform

Dabang is focusing on enhancing its services by focusing on its essence as a ‘real estate brokerage platform’, with both horizontal expansions to bring more of the processes surrounding real estate brokerage to the platform and vertical expansion to expand the types of properties on the platform.

First, Dabang has been expanding its scope as a real estate platform, from simply announcing and brokering real estate listings to encompassing online listings and non-face-to-face real estate contracting functions. At the end of 2021, Dabang launched a new growth engine by launching a ‘Dabang Sign’ service for non-face-to-face real estate contracting. Dabang provides a service that enables users to go through the entire process from browsing properties to contracting ‘non-face-to-face’ by applying advanced information technology(IT) such as virtual reality(VR), artificial intelligence(AI), blockchain, and 3D.

In addition, Dabang has recently diversified the types of listings to broaden the scope of its target audience. Until recently, Dabang provided information on month-to-month rentals of one-room, two-room, and efficiency apartments to meet the needs of the 2030 generation, the main user groups. Recently, Dabang has expanded its services to include apartment sales information to target the needs of the 4050 generation.

The Proptech Market is Looking For a New Breakthrough💥

The Proptech market exploded in 2018, thanks to macroeconomic factors such as low interest rates and low inflation. The booming real estate economy, along with abundant liquidity, allowed the Proptech market to grow significantly. However, since 2022, the Proptech industry has been in a recession, as liquidity has shrunk due to high interest rates and high inflation, and the real estate market itself has experienced price declines, fewer transactions, and reduced supply.

One of the reasons why Korean Proptech companies are currently being directly affected by the real estate transaction downturn is due to their business models that rely heavily on advertising revenue. Many of the Korean Proptech companies rely on real estate transaction information and advertising revenue from real estate brokers. According to a report published by Samsung Securities ‘Korea’s Proptechs Shaping Their Revenue Models,’ 65% of Korean Proptech companies are real estate marketing platforms. In other words, it is not an exaggeration to say that the Korean Proptech market has been growing around platform service companies. The companies we introduced today, Zigbang and Dabang, are representative.

Regarding this, Lee Kyung-ja, a researcher at Samsung Securities, emphasized, “While the corporate value of existing Proptech companies was determined based on the number of monthly active users(MAU), now their revenue models are becoming more complete”, and “It is now more important than ever for Korean Proptech to prove specific revenue-generating capabilities rather than just stories”. In other words, Proptech companies are at a critical juncture where they must use this crisis as an opportunity for a new leap forward. It will be worth paying attention to how quickly Korean Proptech companies can diversify their revenue structures and adapt to the changing market environment.

📚 References

이정흔(2022).”부동산 한파 속 ‘신사업’에서 돌파구 찾는 프롭테크들”.한경

이경자(2022).”수익모델을 갖춰가는 한국의 프롭테크”.삼성증권

권일구(2024).”부동산 침체 여파, 국내 프롭테크 산업 ‘주춤’..전년 대비 투자액 55.1% 감소”.NewsQuest

김민주(2021).”직방,다방,네이버 부동산,집토스 뭐가 다를까?”.daterian

오은선(2024).”빙하기 도래한 프롭테크 업계 … ‘콘테크’ 성공여부도 “글쎄””.조선비즈

KMA(2020).”[제147회 리더스포럼] 발품이 아닌 손품을 팔아라: 다방의 부동산 플랫폼 비즈니스 전략_박성민 스테이션3 다방 사업총괄 이사|KMA 한국능률협회”

박소윤(2024).”’실적 고전’ 직방, 글로벌 영역 확장으로 반등 초석 다질까”.파이낸셜투데이

홍선표(2024).”스타트업도 M&A로 클 수 있을까(feat.한국신용데이터,리멤버,직방,프레시지).”outstanding

로아(2023).”[직방] 국내 최대 프롭테크 기업”.Roa

서진우(2023).”국내 프롭테크산업 10년간 6조 투자 유치”.매일경제

프세(2022).”쇼핑몰 솔루션에서 프롭테크 기업으로 성장한 직방”.brunchstory

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