New Venture Venture Project Final Report
E-Roomie: The Future of Online House Hunting
By Jason Baker, Baker, Calvin Leung, Jerry Liu, Jj Li and Kate Protacio For Minwoo Choi Lab D05
Executive Summary Thousands of students face the herculean task of finding lodgings and suitable roommates. Similarly, Similarly, hundreds of landlords face the extremely difficult task of finding suitable tenants to fill their empty leases. This is especially especiall y prevalent in the Kitchener-Waterloo Kitchener-Waterloo region, with a constant flow of students moving into and out of the area. Research shows that more than 30, 000 students secure housing in this region every ever y year, many of whom struggle with the house-hunting house-hu nting process. While there are many websites that try to find housing for potential tenants, very v ery few of them offer either significant roommate matching or equal treatment of landlords and tenants. E-Roomie is an online service for both landlords and tenants. Unlike some of its competitors, tenants are matched to potential roommates based on living habits, and landlords are matched to tenants in pre-defined groups. E-Roomie is the best contender to meet the needs of these students and landlords by automating the search process, and reducing the hassle of that landlords and students face when searching for one other. Simplicity and ease-of-use are both stressed throughout this project. The revenue for e-Roomie will rely mainly on advertising, which is a large and growing market. This revenue will be used to offset costs, as well as research and develop the website to make it more attractive to students and landlords. We are confident that with a focus on easily connecting students s tudents and landlords, e-Roomie will make the lives of both parties pa rties much easier. As a result, traffic on the website will increase, causing constant increases in advertising profits into the future, with many avenues for expansion.
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Table of Contents i. Executive Summary 1. Introduction 2. Description of Product 2.1 Overview 2.2 Potential Customers
3. Technological Feasibility 4. Consumer Market and the Value Created 5. PEST Analysis 5.1 Political Factors 5.2 Economic Factors 5.3 Social Factors 5.4 Technological Factors
6. Five Forces Analysis 6.1 Threats from Industry Competition 6.2 Threats from New Entrants 6.3 Threats from Substitutes 6.4 Threats from Buyers and Suppliers
7. Competitive Advantages 8. Financial Feasibility 8.1 Market Size and feasibility 8.2 Trends in the Real Estate Industry 8.3 Revenue Model
9. Conclusion 10. Works Cited
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1. Introduction The student market is a notoriously thrifty one, and one that is attractive to advertisers for its size and concentration of needs. However, one of the challenges of starting at university is finding desirable accommodations and roommates. Similarly, one of the challenges of renting is finding desirable and respectful tenants. Our new venture will solve s olve all three of these problems; our simple interface will allow both groups to list what the y are looking for, and our unique matching algorithm will bring together the right tenants, the right roommates, and the right landlords. Simultaneously, it creates a central area for advertisers to reach this desirable student market.
2. Description of Product 2.1 Product Overview As mentioned above, our website will draw a large group of students into one area, thereby making it attractive to advertisers. We We will accomplish this with our unique un ique features, including: •
Matching roommates
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Servicing landlords
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Allowing group renting
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Adding security
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Providing simplicity
2.1.1 Matching Roommates
Finding a roommate is a critical, albeit difficult, part of the apartment-hunting process. It is not always possible to room with your friends, therefore many people are forced to find complete strangers. Because of this unpredictability, students are occasionally forced to live with someone who they do not 4
get along with, leading to stressful s tressful living arrangements and a stressful term. This is why our website will offer a matching service to connect compatible roommates. Students will complete a survey of their habits and preferences, which our algorithm will take and use to generate a list of roommates, tailored specifically to their responses. Students may complete this survey to as much or as little detail as they wish, but more responses will generate more personalized results and better matches. 2.1.2 Servicing Landlords
Other real estate listing services use a model where prospective tenants search for the landlords that they want to rent from. Our website will provide unique value to landlords by extending our matching service to their advantage, generating a list of compatible tenants. In addition, we will provide the means for landlords and tenants to contact each other securely and privately to arrange meetings. 2.1.3 Allowing Group Registration
Even when it is possible pos sible to room with friends, most sites s ites offering similar services only allow users to register individually. individually. This can become problematic, p roblematic, requiring landlords to view and manage mana ge each member of the group separately, and requiring students to keep track of groups in their heads. In order to provide a convenient solution to this problem, our site will allow users to self-organize into groups. Although each member of the group will be a separate sepa rate user, they will be listed collectively, collectively, and will interact with landlords as one unit. This will allow for more effective communication, convenience for all parties, and potentially lower costs for students by renting in groups. 2.1.4 Adding Security By requiring students to register with their univers ity emails, users of our site will be b e guaranteed to be matched with other university students. This offers a measure of security, so that students will feel safe contacting people they discover through our service and allowing them to independently verify the identity of their potential roommates. Although this is a good safety net for students, it falls through when considering landlords. In order 5
to provide a similar level of security, we will allow tenants to rate their lan dlords, to indicate the quality of the lodgings. A similar service will be provided to allow landlords to rate their tenants. 2.1.5 Providing Simplicity Although creating a profile will be a simple task for most of our users, our website will be designed with a maximally user-friendly interface. Out of consideration for our less tech-savvy users, we will design our site with them in mind, since some of our customers will be part of a generation that did not grow up with the Internet. Our website will also maximize convenience by automating the traditionally tedious search for roommates, apartments and tenants. This saves time for the notoriously busy students, and for landlords with other commitments, thus making our website more attractive than other websites where users must do all the searching for themselves.
In summary, our service is able to add value to the lives of students and landlords using the website. This greatly increases our user base, giving our advertisers access to a valuable market.
2.2 Potential Customers One of the challenges of creating a company dependent on advertising revenue is finding interested advertisers. Options include small/local businesses, as well as large businesses. For the specific purposes of this venture, once a suitable traffic base is built up, our new venture will attempt to pitch to large companies, especially in the telecommunications and banking industries, and later move to attract small businesses. The reasons for this choice are as follows: •
Big businesses in telecommunications/banking industries like to target students and landlords
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Small businesses prefer forms of advertising that they can track
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2.2.1 Big Businesses in Banking/Telecommunications Banking/Telecommunications Target Target Students/Landlords
There are industries that specifically target tenants and landlords. Some industries offer goods and services that are complimentary to the actual properties, such as the telecommunications industry. As most students in the target universities are not from the Kitchener-Waterloo Kitchener-Waterloo area, many will need a new phone number in order to communicate. Most students also sign on with a carrier plan, turning them into long-term customers. Most lodgings require certain services, such as internet access and utilities, meaning those corporations would also als o like to target the residents. Another industry that our new venture would target is the banking industry. The age that most students enter university is also the age of majority, which means that they are able to access a multitude of financial products, including lines of credit and credit cards. Also, customer loyalty is rather high in this industry, making it important to attract customers early-on According to these facts, the telecommunications and banking industries should be prime targets for advertisements. 2.2.2 Small Business Busines s and Tracking Advertisements Advertisements
Knowing the effectiveness of their advertisements is important for small businesses. Mike Tsingtaris, the owner own er of The Grill, a small restaurant, said “I want ads I can track, track, like coupons. When someone comes in with a coupon, I record it and I can see how many coupons actually came back”(personal communication, Oct 28th 2011). Since their revenues and profits are rather small, they want identifiable returns for all expenditures. Consequ ently, ently, small businesses may be a target customer once we can prove significant traffic on our site, giving them something to measure.
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3. Technological Technological Feasibility As a website, our product produc t will require a web server, a user interface, and the algorithms mentioned previously. The core of any website webs ite is the server. Fortunately, Fortunately, server space is neither rare nor expensive; there are many independent companies offering internet hosting services, with various amounts of server space included. When we grow to the point that we have outstripped what is offered by those companies, setting up our own server is a relatively simple task. Creating a user interface is equally easy; the expertise required is available from many independent companies online, or can be easily designed in-house. The algorithms, however, are more challenging. Fortunately, we are closely linked to a large network of talented programmers, and can draw on their expertise when developing our matching and ranking algorithms. For reference, these algorithms will act similarly to those used by online dating sites, and the ranking system will be similar to the customer feedback options used by many ecommerce services.
4. Consumer Market and the Value Value Created The primary market for our services is university students searching for housing. ho using. However, the twosided implementation of our website also introduces us to the market for landlords looking for tenants. This gives us a steady supply of both potential tenants and potential landlords. Our service is designed to attract these consumers through the unique services discussed discus sed previously, which will create value for our target user base. Although the users of our site will be students and landlords within the tri-city area, our actual customers, and main source of revenue, will be companies advertising to the student market. Instead, 8
students and landlords will be our suppliers, offering not only the resources we need to give to the other students and landlords, but also the consumer market required by the advertisers.
5. PEST Analysis 5.1 Political Factors In Canada, there are two major elements of the political environment that this venture must consider: privacy law and intellectual property law. 5.1.1 Privacy Law
Privacy law in Canada can become a hurdle for any company that handles as much personal data as we do. Therefore, we must ensure that we comply with the legislation most applicable to corporate users, the Personal Information Privacy and Electronic Documents Act. The Act requires that the company respect the privacy and confidentiality of personal documents and also comply with the Privacy Commissioner at all times (PIPEDA , 2000). The implication of this law is that we will have to take certain ce rtain precautions against data theft: all employees working with our databases will have to sign a confidentiality agreement, we will have to secure our servers against attack using all reasonable means and we will have to implement a secure means for users to provide their information. 5.1.2 Intellectual Property Law
The Canadian Intellectual Property Office states that comp uter programs and algorithms are eligible for copyright protections (CIPO Guide p.2), applicable for the life of the last las t remaining author of the work plus fifty years (CIPO Guide p. 3). It also costs a mere fifty dollars to register a cop yright (CIPO ), which makes it easy to protect our algorithms and software from theft. Tariff ),
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5.2 Economic Factors While the economy is slowly recovering from the 2008 recession, there are other economic trends in the Canadian market that must be considered: •
Low savings rates
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Inflated housing prices
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Rising tuition costs
5.2.1 Low Savings Rates
Despite the 2008 recession, Canadians are saving less and accumulating more debt at an alarming rate (“Consumer Lifestyles - Canada”, p g. 2). According to Anthony Ariganello, "The growth in household debt had been strong during 'good times,' showed a remarkable resilience during 'challenging times,' and seems to be set to continue its upward trend as we navigate 'interesting times'" (pg. 2). The low interest rates introduced during the financial crisis have probably made this problem worse, as low interest rates induce people to spend what they do not have (pg. 3). The one thing that many Canadians are saving are RESPs, since there are many incentives to create one (pg. 97). 5.2.2 Inflating Housing Prices
The price of housing in Canada is inflating at an alarming rate, especially in larger cities with universities (“Consumer Lifestyles - Canada”, pg. 98). In fact, in Canada, the housing market stayed strong despite the recession (pg. 3); for example, the price of o f housing in Toronto jumped 19% in 2010 (pg. 98). Increases in the price of housing are prevalent across the country which, combined with low savings rates and high household debt, has inspired fears that the Canadian housing bubble will burst in the same way the American one did in 2008 (pg. 97). The market for rental housing is also not as strong now as it has been in the past, because more people are expecting to have houses and are saving for that investment (“Consumer Lifestyles -
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Canada”, pg. 33). This means that now is an ideal time for students to rent, since the market demand is not as strong and thus prices would be lower (pg. 34). However, if the housing bubble bursts in the future, the demand for housing rentals will increase dramatically. 5.2.3 Rising Tuition Costs
In Canada, tuition fees are rising. According to Statistics Canada, “more than 90% of university students paid higher tuition fees in 2010 than in 2009” (“Consumer Lifestyles - Canada”, pg. 55). Undergraduate students in Ontario paid the most in tuition fees, coming just ahead of students in New Brunswick (pg. 55). However, graduate students are amon gst the hardest hit by b y tuition increases; their tuition increased by 6.6% percent in contrast to undergraduate students' 4.0% in the past year (pg. 55).
5.3 Social Factors As this venture deals mainly with human interaction, there are some important social trends to be aware of, both for the current situation and for future opportunities. •
Visible minorities are increasing increasin g
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Population densities are changing
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Teenagers are more tech-savvy
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People are staying single
5.3.1 Visible Minorities Are Increasing
Canada has always considered itself more of a mosaic than a melting pot, unlike our Southern neighbour, and the data shows that. 69% of the increase in population in 2010 was due to immigration, and 20% of Canadians are foreign-born (“Consumer Lifestyles - Canada”, pg.18). 60% of these immigrants live in Ontario, half of who migrated towards Toronto (pg. 19).
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Also, Canadian universities are making a concerted effort to attract foreign students, particularly p articularly Chinese and Indian students. Chinese students already make up approximately 25% of the 200, 000 international students studying in Canada, thanks to a Student Partners Program designed to attract them (“Consumer Lifestyles - Canada”, pg. 54). A similar program based in India brought 8000 8 000 Indian students to Canada (pg. 24). 5.3.2 Population Densities are Changing
While Ontario’s Ontario’s growth has slowed, it maintains the highest population in Canada (pg. 17). However, Alberta’s Alberta’s growth has been the largest for the eighth consecutive year (pg. 18). In fact, British Colombia, Alberta, Alberta, and Manitoba have all outstripped Ontario in terms of growth, (pg. 18) meaning people are migrating from Ontario to other provinces. This represents a trend that should be capitalized upon in the future. 5.3.3 Teenagers Are More Tech-Savvy
Nowadays, teenagers are very comfortable with the internet and technology; it has, in fact, become an integral part of their lives (“Consumer Lifestyles - Canada”, pg. 11). It has also helped them develop a wide range of interests and entertainments, and means they communicate through many more channels than their parents (pg. 11). Also, the number of teenagers will s well in the next 15 years, with the 0- to 14-year-old cohort growing through 2017 (pg. 19). 5.3.4 People Are Staying Single
While marriage is an institution that remains strong, the number of people who choose to remain single is on the rise (“Consumer Lifestyles - Canada”, pg. 20). They stay single in order to further their education, better their careers, attain financial stabilit y and enjoy the single life (pg 20). Therefore, the number of single people will rise which represents a future growth avenue for our venture.
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5.4 Technological Factors In recent years, the importance of technology has drastically increased in the lives of students; in 2010, almost 83% of students in 4-year college programs in North America had personal computers, up from 36% in 2003 (Leiboff). Students today spend a great deal of their time on the Internet for social networking, research, and entertainment purposes. The idea of bringing buyers and sellers of a product together is not new; competing sites such as Kijiji have already explored these frontiers. However, Howev er, these services are mainly generalist ones, whereas our site will be more specialized. Just as specialists were able to use catalogues as an advertising medium after customers grew used to the Sears catalogue, a specialist service such as ours can take advantage of the large population that already uses similar generalist services, such as Kijiji, or a similar medium, such as Facebook. However, the popularity of the Internet has lead to customer expectations of certain standards, such as loading time, increasing year after year. This means that our ou r site must be constantly improving in order to keep up with the changing environment; we must introduce new features or make improvements to our site as time passes, such as altering the website design, improving the physical server that hosts the website, and especially adding new and desired services to the existing ones. This will allow us to not only maintain our market share, but potentially increase our user base.
6. Five Forces Analysis In terms of the Five Forces model, our venture is well-placed. Each of Porter's Five Forces are not threatening. The complete details of the analysis are presented below, but broadly speaking we have the potential to establish a significant market position.
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6.1 Threats from Industry Competition At first glance, industry competition appears to be significant. A simple Google search for “housing listings in Canada” returns no less than 248 million pages. pages . With so many players competing for traffic, it is natural to conclude that our ou r newly-established venture will have a difficult time gaining ground. This conclusion however, is false for three significant reasons. The first reason is because growing demand for housing. Standard & Poor's expects that the demand for real estate services such as ours will increase appreciably over the next few years as housing prices stabilize (Shepard). Further, our target user base bas e is, itself, growing. A Statistics Canada report projects p rojects significant growth in post-secondary enrolment over the next twenty years (p. 49), meaning more students looking for temporary housing. With a market expanding so rapidly, rapidly, we will have little issue gaining the attention and traffic of our projected users. The second reason is the competitive advantage given by our matching algorithm. Examination of our competition clearly shows that they tend to follow the same model as the newspaper classifieds: potential landlords put up listings, and potential renters must search through an enormous archive of such listings before they find the ones they will follow up on. Many real estate websites offer a primitive search function, but generally that has a negligible impact on the sheer number of listings to look through. This process is understandably time-consuming, and we know from first-hand experience that most students simply do not have the time to devote to an effective apartment hunt. Our main draw, draw, then, is convenience, and we are confident this is something our users will value. The third reason is because of the nature of our service. In any hunt, the key is to maximize exposure; when trying to lease an apartment, this means putting up listings in every possible location. When searching for housing, this means exploring every possible advertising avenue that landlords might post in. What this means for us is that the market for our service s ervice is functionally limitless.
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Because we act as a broker and not a retailer, and because we are a low- or no-cost option, our customers have a high incentive to use our service in conjunction with our competitor's, rather than choosing one or the other. All of these factors lead to one important conclusion: we will have significant traffic, which our revenue model depends on: because we will not charge our users to use our service, our largest and most important customers will be advertisers. With advertisers, we face the same problems as with students, but we also face the same solutions. The level of traffic to our site will encourage advertisers to invest in us, but in general the cost of advertising on our service will be more than overshadowed by the benefits of having their ads exposed to more potential customers. cu stomers. Finally, Finally, the amount spent on online advertising is expected to pass $10 billion next year in Canada alone (WSI p.5) and reach $50 billion in the United States by 2015 (eMarketer), meaning corporations will have a larger advertising budget, and by extension be more willing to advertise with newer ventures such as ours once traffic increases. Taking all of these factors together indicates that the industry is not no t only significantly less hostile then it would immediately appear, but is in fact highl y conducive to our venture.
6.2 Threats from New Entrants As new entrants, we know to be careful of other new entrants. While there is little we can do to prevent the creation of a new website offering real estate listings, we will focus o ur efforts on protecting the things that are more important to our revenue model: our algorithms and our user base. With respect to our algorithms, there are certain provisions un der Canadian law that we can use to our advantage. Canadian copyright cop yright law, law, mentioned in the Political section of the PEST analysis, will help us protect our algorithms. Given the rapid evolution of information technology, our algorithm will
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be protected from theft for the life of the product p roduct cycle. Copyright protection may not even be necessary because of the sheer difficulty of reverse-engineering algorithms without access to the code. Because of that difficulty, the only necessary protections against theft would be contractually licensing the work of our programmers. However, since registering a cop yright costs only fifty dollars (CIPO Tariff), the potential benefits are significantly s ignificantly greater than the cost. Also, protecting our algorithms is critical to keeping our customer base. Because our algorithms will be so challenging to steal, any service that would offer something similar would have to develop a brand new algorithm in-house, and prove that it is significantly different from our own solution in order to avoid copyright infringement lawsuits. Although it may not be apparent without the technical background, this process is extremely difficult and time-consuming. As long as we can enact o ur intellectual property protections before another firm does, we will gain a significant time advantage, which we can use to build recognition of, and loyalty to, our brand, thus protecting our largest competitive advantage, and the source of the traffic that our advertising customers are paying for, from emerging ventures.
6.3 Threats from Substitutes Even though the internet is a popular communication medium, the traditional real estate methods of newspaper classifieds sections, fliers in public locations, and word-of-mouth are still prominent substitutes in the house-hunting process. At first glance, it would seem as though these substitutes to online listings would pose a threat to our position, and provide disincentives for advertisers to invest in our service. This is not actually the case; as discussed in previous sections of this analysis, it makes the most sense for all parties to explore as many avenues as possible. The advantage we therefore face is that, by extension, advertisers should invest in many different
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mediums. A well-rounded advertising strategy should encompass as many areas as possible, which means spending at least as much on online advertising as on traditional media. Because of this, substitute products pose pos e very little risk to our profitability.
6.4 Threats from Buyers and Suppliers The greatest advantages that we face with this venture are the scale and mechanics of the industry. Because of the techniques used by both buyers and suppliers, this industry has an extremely large number of both, and each individual firm faces practically no competition for users and advertising customers. We have many potential users, who in this case are the suppliers for our service. Because of our many competitive advantages, we expect to attract many users and thus, each individual supplier or user has very ve ry limited bargaining power. Similarly, Similarly, we are faced with w ith a large number of potential advertising customers, who are our main buyers. Although there are a large number of these buyers, they are all concerned with the density of users viewing their ads. This means they will not buy from us if we do not deliver high user volume. By attracting suppliers with our competitive advantages, we will ensure that our buyers are satisfied with our service, thereby decreasing the pressure we face from them.
7. Competitive Advantage In order to determine the competitive advantage, it is important to recognize some of the industry competitors of this new venture. For example, Kijiji.com and Craiglist Craiglist allows both landlords and tenants to post and allows searching by location and type of residence. On the other hand, University affiliated sites are geared towards students, but only offer very basic search capabilities and not very extensive roommate matching service. There also exists third party websites that are geared towards
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finding rental properties like rentershotline.com; however, it is still extremely general and is limited in its roommate finding capabilities. Although the above services all have their strengths, each one can be improved upon. Therefore, eRoomie will have many of their strengths, with a social network-esque structure. Our competitive competitive advantages include: •
Economic factors make roommates more desirable
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The student demographic is an excellent target for a social network
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The matching algorithm is competitive
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The security provided
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Implicit costs associated with substitution.
7.1 Roommates are now more desirable due to increased housing prices
Canadian housing prices have increased dramatically over the last few years(Consumer lifestyles in Canada, pg 98). As a result, when purchasing a house, landlords will have higher costs. These costs
will be passed onto the tenants by being a higher rental fee. Consequently, students would be more prone to look for suitable roommates. Because tuition fees are rising, students will have less money and will seek cheap alternatives. Since living with a roommate saves costs, this trend makes the venture even more competitive. 7.2 The Student Demographic is an Excellent Target
Students are especially comfortable with social networks, ne tworks, therefore our similar interface will is especially effective. The current cohort of undergraduate students saw the beginnings of social networks. As they are still quite prevalent, future generations will still have an interest in social networks and be comfortable with using us ing them. With social networks, students can create a literal network of tenants to find a property with. As a result, the social networking interface is one o f the best
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mediums to engage in roommate finding for students. 7.3 The Competitiveness of the Matching Algorithm
None of the services listed above provide a service to match up one’s profile and preferences with that of someone else. This is a fundamental aspect that makes up e-Roomie. With a copyright on this technology, technology, other new entrants have hav e difficulty with copying. As a result, the matching algorithm will be a unique competitive advantage. 7.4 A Sense of Security
Students and landlords find security extremely important. There are already several scams which have occurred, including one where scammers got the landlord’s contact information from them, sent (Wilfrid Laurier Universitythem a cheque from an empty bank account, and then asked for a refund(Wilfrid Scam Warning). Therefore, this security that Kijiji lacks will be incorporated to this venture. Although
the University of Waterloo/Wilfrid Waterloo/Wilfrid Laurier University websites both have this, this venture ven ture will allow them to reach the students of all of these post-secondary institutions with one website. 7.5 Implicit Costs Associated with Substitution
Since this would be a free service, there are no explicit switching costs for students. However, the time it takes for them to make a profile and connect with others gives them rather large implicit costs. Therefore, if students were to begin be gin using this service seriously, and is satisfied, than that s tudent would not likely switch in the near future to another service.
8. Financial Feasibility In order to be financially feasible now and in the future, we must capitalize on present trends within the industry. From the analyses, we can observe any potential changes in the demand of our services and opportunities to grow and become more and more profitable.
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8.1 Market Size and Estimates Es timates
In 2010, the Canadian advertising industry reached a market value of $970.2 million, an increase of 7.9%. This industry is forecasted to reach $1,091.7 million by the end of 2015 (Datamonitor, 2011). We will need a very small percentage of this market to be profitable. Our initial market, the tri-city area for Landlords and students is estimated by the following chart. 8.1.1 Students
The site is targeted towards many different types of students. They include students currently in residence who will soon move out, international students, students on international exchange, and other students currently studying in the area. 4777 UW, UW, 73%, first-year students, (“Residence allocation details”, 2011), and 2209 first-year WLU students live in residence (“Laurier's Residences”, Res idences”, 2011). 7.1% of UW students are from out of o f province, and 6.7% of students are from international students. 12584 WLU students are from outside the tri-city area (“Student Geographic Distribution”, 2009). In addition, Cones toga College has 9000 full time students (“Conestoga-College Profile/Stats.”, 2011) Consider that most numbers are of first year students in residence, thus that represents the market a year. For Wilfrid Wilfrid Laurier University, University, 12584 students s tudents need to find housing in the area. Therefore, there is a significant market for to find suppliers for e-Roomie. 8.1.2 Landlords
As much as this venture is supported by the students, it is also supported by the landlords. Kijiji.com alone has seen 1415 Room rental postings, 1304 condo and apartment postings, and 692 House rentals. UW's off-campus website has 227 listings (“Off-Campus Housing”) and WLU's off campus housing website had 102 listings (“Rental Listing”, 2011). Therefore, there are many landlords in this market.
8.2 Trends in the Real Estate Industry In the Canadian Real Estate Es tate and Management Industry, 73.2% of the market’s overall value is 20
represented by the residential leasing sector (Datamonitor, 2006). This proves that there will always be a high demand for rental housing within and outside the student population. The industry as a whole is predicted to continue its growth over the next five years, influenced by business expansion and increase in employment (Datamonitor, 2006). There are several trends that th at we can capitalize on, in conjunction with the PEST analysis. According to the analysis of the Current Universities Data of Ontario in 2009, there were approximately 3, 900 graduate students from the University of Waterloo and 1, 300 graduates students from Wilfrid Wilfrid Laurier University (CUDO, 2008) and economic trends show their tuition is only onl y getting more expensive. As stated by Statistics Canada in 2004, 58% of the population aged 34 and younger rented their homes (Statistics Canada, 2007). Alongside these likely renters, 48% of unattached individuals are more likely to rent compared to those in other household types. According to our social anaylsis, ana ylsis, the number of single people is increasing. Therefore, even though our service is currently directed towards undergraduate students, we can expand our market towards graduate students, single professionals, and professors, since they will also demand residential leasing units, once we capture a large chunk of the undergraduate student market. Also, we can expand into other cities with universities, such as Toronto, London, Montreal and Ottawa, as well as Vancouver, Vancouver, Victoria, Victoria, Calgary, and Edmonton, following the trend of a population moving westward. Our revenue will grow if we can expand into a larger market. In conclusion, by focusing on becoming financially stable, our service will not only not only have a present but also a future.
8.3 Revenue Model The revenue model of this venture is quite simple. The following image describes the general overview of the model:
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For the first few years of operations, the labour for site maintenance will likely be b e greater than the advertising revenue. For this reason, our new venture v enture will use Google AdSense to try and minimize costs. Google AdSense is an automatic advertising aggregate which automatically finds advertising and puts it on their platform. Their platform is integrated into other websites and it automatically streams advertisements. A portion of the advertising revenue is given to the site. In the future, when the venture builds up a substantial user base, our new venture will market towards larger enterprises, for a larger and more substantial form of revenue. We will also implement “Freemiums” that is, while the basic site will remain free, certain premium features, like more prominent ad vertising for landlords or a human mediator for more secure landlord-student meetings. This is when the breakeven plan will be in place, as after this point the advertising revenue will be greater than the total costs
9. Conclusion To conclude, the combination of favourable market position, little competition and un ique services means that our venture will be b e ideally-placed to attract the attention of big-budget advertisers, and generate positive profits.
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