Using Moneysupermarket.com, this online service group provide consumer advice and information with the help of Patrick Stewart.
Felt cute so wanted to do a write up on Moneysupermarket:
Moneysupermarket was founded in 1993 in Nottingham by Simon Nixon, starting out as a weekly newsletter on mortgage deals (my man was making ÂŁ10k/month posting lettersâŚ!). Moneysupermarket (MONY) has evolved to become whatâs known as a price comparison website (PCW). PCWs are effectively insurance (as well as energy, loans, etc) aggregators, i.e. they show you a range of the cheapest deals. Whilst some worry that PCW commision fees are ultimately passed onto consumers, or that insurers buy their way to the top of results, the overwhelming consensus is that PCWs have championed more competitive, and therefore cheaper, pricing for consumers. The magic of their business model lies in its ability to generate repeat business
The UK PCW market is dominated by a few websites collectively dubbed âthe big fourâ: Comparethemarket, MONY, GoCompare and Confused.com - Comparethemarket being the market leader by most metrics. MONY, Gocompare and Confused.com (owned by Admiral Group) are all listed businesses Interestingly, Europe has remained immature as a PCW market (perhaps UK PCWs are too preoccupied with their domestic market?) , with Peter Thiel (famed early investor in Facebook and SpaceX) backed CompareEurope primed to dominate the continental market. Hereâs a breakdown of market share by revenue
As success ultimately is derived from traffic (more people = more policies sold = more commission), the PCWs have had to engage in an advertising war, which has led to some of the ukâs most memorable TV ad campaigns. For this reason, it is a good idea to keep an eye on PCW marketing spend.
This is a Super Smash Brothers game I would love to play
Fun fact: ComparetheMeerkatâs campaign was especially ingenious; driving traffic to their site through Google searches of âmeerkatâ rather than âmarketâ has made their online advertising cheaper, given the lower cost of the adword âmarketâ. Also, Aleksandr Orlov is BAE.
The numbers
MONYâs share price performance has been pretty tidy over the past 10 years, roughly multiplying 5 times over. Using 2009 as a starting point is misleading, yes, but I canât be arsed to dig out that 2007, 2008, data. Anyway, hereâs what MONYâs money has done over the years
MONYâs Fundamentals are in now small part down to how good they are at spending money to make money; Iâm talking about the return on capital employed (ROCE). Itâs often said a decent ROCE is anything over 15%⌠MONYâs is over 50%. They also have equally healthy profit margins (>20%), strong cash flow and sustainable dividend payments (yield sitting @ 3.31%). Itâs price to earnings is hovering around a palatable 20.
Going forward, growth will likely come from MONYâs digitised mortgage service (think Habito); 55% of people overpay their mortgage by ÂŁ294 - a huge market therefore. They have also invested heavily into their B2B proposition (revenue here growing ~30 YOY), which has led to a partnership with YOLT, a leading openbanking/personal finance app. MONY have a seasoned CEO at the helm, with experience from Ebay and John Lewis. The threat of disruption may well rely on managementâs execution.
The Bear Case
Possibly the most prominent long term threat to PCWs is competition. Indeed, Amazon have been rumoured to be gearing up to launch a PCW in the UK and US. This could obviously have catastrophic implications for PCWs, but just know that a small company called Google failed to realise this ambition;
Google launched Google Compare in 2012, offering mortgage, credit and insurance comparison. They closed it down in 2016, struggling to make money despite a lot of web visits
Google Compare in action for Credit Cards.
Fintechs and Insuretechs are key threats. Brolly is an AI driven insurance aggregator app founded by an Aviva employee and backed by Peter Thiel. The app is effectively an insurance robo-advisor and hopes to become the way many buy their insurance. Other fintechs like Plum propose switching to a cheaper energy provider based on your transaction data. The use of smart energy metering could see data used in a similar way to disrupt PCWâs energy services. Autoswitching sites like Flipper (a GoCompare investee), which autoswitches your energy provider, have gained traction - although the incumbents are already responding.
Marketing Spend is a key risk Iâd say; heavy marketing is a must in this hypercompetitive space. A worrying trend is that PCW traffic is increasingly coming from paid search (e.g. Google Ads), which is hella expensive mostly because you often pay per click and visitors donât necessarily buy a policy (âconversionâ). This could chew up profits something fierce.
Another notable risk in my view is Regulators (OFGEM for energy, OFCOM for mobile/Broadband, CMA for market competition, etc), such as their negative view of MFN clauses - a contract for exclusive low price deals between individual insurers and PCWs, especially in motor and home insurance. This kind of regulatory pressure is good for consumers, but bad for PCWs. Often regulation benefits PCWs too, such as OFCOM recently making switching mobile networks as easy as sending a text.
Thereâs also the standard risk of Brexit blah blah Uncertainty Blah Recession Blah blah Blah etcetera etcetera.
Thatâs all iâve got - thanks for reading. Please let me know what you think; whether itâs to tell me how sad it is to spend my saturday morning writing this, how shit it is, or even just your favourite insuretech right now (Psst, mineâs Zego and Brolly)
Disclaimer
I have no affiliation with MoneySupermarket. This is not financial advice; search deep down, you know this to be true. This is not an official Freetrade weekend read either, although iâm a proud user; researched MONY and wanted to share is all - I love researching companies . Capital at risk.
Thanks for post. Iâve not invested in it because I feel it may have had its day and there are lots of competitors. Growth prospects surely limited? Things move quickly online and i wont be surprised if google moved down this route too. That could really kill competition very quickly. The financial clout of Alphabet or Amazon is so huge they can assemble a developing team to come up with anything very fast
Excellent writeup, you could go semi-pro.
In the same vein as MONY, Go Compare announced a partnership with personal finance/budgeting platform Money Dashboard, which is a competitor to Yolt, in 2018. GoCompare partners with Money Dashboard to strengthen âMachine Learning for Fintechâ â a community-driven machine learning initiative for fintechs
Nice write up, thanks.
Iâve looked at MONY a few times - thereâs no disputing the quality of their operating numbers. They are fantastic. Their business needs relatively little capital to start or to maintain, which is one reason the numbers look so good. However, the same applies to the competition.
My main concern is that they donât seem to have any real competitive advantage - the âmoatâ that is often talked aboutâŚRightmove is a good comparison I think, which does have that competitive advantage through its network effect. If youâre thinking about property - buying, selling, renting - youâre probably going to check out Rightmove.
Overall, I feel the same way - I like everything about the business, but, like you, what makes it hard for me to open a position is that I canât see a sustainable competitive advantage. Even if itâs just a rumour, the Amazon price comparison website threat is concerning, although I quite like the fact that Google tried to launch a price comparison website and failed in the past. Interestingly, Google also came under fire from regulators for manipulating their search results to drive traffic. That being said, Amazon are ace at just taking industries as they please.
I completely agree with you about the competition; The PCWs are getting attacked on all sides, mostly by startups as far as I can tell. That being said, I will facepalm myself unconscious if MoneySupermarket end up acquiring the companies iâm so worried about.
Itâs spooky reading this - we have very similar thought processes! I love Rightmove as a business, I like their duopolistic position with Zoopla. I do believe though, with a disruptive enough proposition, a network effect driven moat can be eroded. My go-to example is Carwowâs success taking market share from Autotrader (who I view as âRightmove for Carsâ - same network effect driven moat, also a market leader, and have a marketplace-type business model). Carwow are far from dethroning Autotrader, though to be fair, but the disruptive potential of a reverse auction marketplace seemed to really work out.
But yeah, really having a hard time opening a position on MONY given the lack of a moat, Iâm on your wavelength exactly there.
Thanks for the kind words, youâre awesome! Love the community here and just want to contribute
But yeah, GoCompare seem to be working really hard. Was interesting to read through MoneyDashboardâs pitch deck when they crowdfunded regarding the partnership. Just my personal opinion: In terms of partnerships, I think MoneySupermarket is stronger - my view is they want to be the price comparison plumbing/API for the fintechs that may ultimately disrupt them; Like Drivewealthâs relationship with Revolut, or Plaidâs relationship with numerous fintechs.
GoCompare are also investing left, right and centre in fintechs - I recall them investing in MortgageGym (which crowdfunded btw!) and also the autoswitching site Flipper I believe. So, in a way, disrupted or not disrupted, theyâre kind of in a win-win situation I suppose?
Great post, thanks for taking the time to write this up
Thanks Phil, much appreciated
Iâve got dozens of notes like these on businesses I either did or didnât end up investing in, would be interesting to tidy them up, post them, and see what peopleâs thoughts are; always on the lookout for tips/critique that sharpens up my research
Thanks for this and Iâd echo some earlier comments that I think you could easily go semi-pro. Iâm about to do a video on MoneySuperMarket, would you mind if I referenced this and some specific information within it?
Youâre too kind!
And ofcourse not, fill your boots! I only wish I wasnât so lazy when it comes to collating my references, iâll try and fish them out and edit the post - came across great information during my deep dive, alot of which I ended up leaving out.
Iâm looking forward to the video, feel free to post it on hthis thread - I might miss it otherwise sry ><
Are we talking postal mails??
Thanks for the write up. Itâs great!
Yeah, itâs really interesting actually!
He started a fortnightly magazine called âbrokers updateâ in ~1987, literally just photocopied sheets stapled together at first. Turned out that 10% were willing to pay, so he charged ÂŁ11/month for a subscription, so he had 1k subscribers (mostly fellow brokers) when he was making ÂŁ10k. At its peak, he had 3k subscribers, I.e. ÂŁ33k monthly, but it was a more professional deal with more overheads.
When the Internet came around, Nixonâs subscription numbers started to stagnate. He got a mate to build âmortgage2000â (the precursor to Moneysupermarket) over the course of a year. This mate received 50% of the business, which he eventually ended up selling for ÂŁ160m I believe - he had very little involvement after having built the website, so pretty decent return.
I think the story really shows Nixonâs entrepreneurial flair - he saw a gap in the market for this product after working only a few months as a mortgage broker, no one else managed to successfully bring such a product to market. His capacity to innovate and/or disrupt in the face of the dotcom boom Is something I also admire!
Appreciate the compliment BTW!
Sure will. Hoping it will be finished this weekend! Thanks so much!
As the poster previously know as NortherWealth (long story), Iâve finally gotten that video done:
Just wanted to say thanks again for letting me reference some of this post. Iâve included a link to the post in the description too.
Epic video, nice one - have liked and subscribed
Thanks for the flattering credit too
Just a note on this company as so many others are cutting or cancelling dividends (ShellâŚ).
Itâs worth mentioning that Moneysupermarket maintained its dividend in the 2008-2009 recession even though its profits and cash flow fell.
Looking at the fundamentals, the firm generates a lot of free cash flow, which is the basis of being a reliable dividend payer. Itâs also a digital outfit, so might be one of the few companies that wonât cut dividends.
This company is on my watchlist, but let me know what you think or if you see any reason to be bearish.
Anyone have any updated views on MONY considering inflation fears/price increases, energy renewals and purchases of new insurances as things open back up again?
Seems like MONY has bounced a bit in price also.
Seems like a great price to buy in at the moment for this uk dividend aristocrat
Well hopefully you all read the above comment today and not last weekâŚ