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British broadcaster ITV will take a stake in online estate agent Purplebricks as part of a broader strategy to swap advertising for equity in digital businesses.
ITV has agreed to subscribe to £1.5mn convertible loan notes in Strike, an online estate agency backed by wealthy entrepreneur Charles Dunstone that acquired Purplebricks last year for £1.
The agreement will be the first deal in 2024 for ITV’s “media for equity” investment fund, which already owns stakes in start-ups such as location app what3words, plant-based meat business THIS, online menswear brand Spoke and car selling site Carwow.
It comes a year after Purplebricks struck a deal to de-list and sell itself to Strike for £1 after its share price collapsed. The company has since stopped accepting new business under the Strike banner to focus on the Purplebricks brand.
The ITV fund takes minority stakes in direct-to-consumer businesses in return for advertising inventory, with its executives saying that these deals often work best for those that needed to grow their operations using more traditional TV advertising having previously relied on digital platforms.
Sheena Amin, director of ITV AdVentures, said that Purplebricks was “well positioned to continue their disruption of the estate agent market and we aim to help build both their brand awareness and market share by using the power of TV to bring their message to millions of viewers”.
A new Purplebricks TV advertising campaign will kick off nationally in summer 2024.
Launched by brothers Michael and Kenny Bruce in 2014, Purplebricks set out to undercut traditional estate agents with cheaper fees and an online service. It won backing from then-star stock picker Neil Woodford when it went public on AIM in 2015. Axel Springer invested £125mn in 2018.
However, the business failed to gain traction and the stock price collapsed. The Bruces acknowledged that they had overexpanded and departed in 2019. After a search for other eligible investor failed, Purplebricks sold itself to Strike for £1.
“Purplebricks is obviously already a household name, but we have pivoted the business model somewhat — allowing people to sell their house for free,” said Sam Mitchell, chief executive of Purplebricks.
He said ITV would “help us take that message to homes across Britain”.
The broadcaster also has the option for an additional two tranches of £1.5mn each, in return for advertising inventory across ITV’s channels and its streaming service ITVX.
Mitchell said the ownership stake that ITV receives will depend on the price of Strike’s equity at its next fundraising round, or “fair value” when the loan converts in 2025.
The equity-for-advertising strategy has so far given ITV a portfolio of equity stakes worth about £20mn, according to its 2023 financial accounts. The broadcaster is under pressure to drive its financial results this year given a steep decline in traditional advertising revenues.
ITV has begun a round of redundancies that could cut as many as 200 jobs as part of a cost-saving programme, targeting £150mn between 2019 and 2026.
However, executives at the group expect results to improve later this year as advertisers return to its channels around the Uefa Euro football tournament.
