Fight, compete or cooperate?

Industry has choices with the big portals

Have you been in a partnership — business or personal — in which the other party has the upper hand, and the relationship may be hurting you somehow?  You see no way out.

You consider blowing it up — the nuclear option — but you fear the consequences and do nothing.

War and peace image via Shutterstock.
War and peace image via Shutterstock.

Many brokers and franchises face that quandary today, as they consider whether to pull their real estate listings from the big portals. Only a handful of brokers have pushed the nuclear button. Recently, the prospect of others joining the protest got louder when the merger of Zillow and Trulia leaked out.

As Zillow and Trulia gain more clout with the consumer and with agents, fear has set in and many industry leaders are accelerating their discussions of the alternatives. The Internet has roiled the industry for almost 20 years, and they have yet to figure out a good way to control their customer distribution channels — their destiny. Today, they face the biggest test ever.

online poll by Opinion Stage

 

Agents have always paid for customers and will continue to do so. Portals are only a piece of their marketing investment — but a growing one. The challenge brokers and franchises face is trickier as their value proposition is challenged when agents go directly to the portals and get most of what they need from these fast-growing Internet companies.

Example: Zillow is holding a conference in October in Las Vegas for its premier agents that some brokers worry looks like a typical real estate franchise event.

Last week, I made a case for how tough a Zillow acquisition of Trulia could be for brokers and franchises. The avalanche of feedback I received got me thinking. The industry has choices, none perfect, but three options with the portals: Fight, compete or cooperate with them.

1. Fight. The nuclear option is brokers pulling their listings from the portals. A handful of MLSs and brokers have already done this. Others, now, seem willing to consider the same path.

In a recent Inman News report, Jonathan Boatwright, co-owner of Realty Austin, says his company has flourished since it stopped syndicating listings to Trulia and Zillow: Many consumers recognize that portals are “fun to look at, but not critical to buy or sell.”

ERA broker associate Alexis Bolin says, “If Realogy all by itself decides to stop sending their listing information to Zillow and Trulia, that would remove hundreds of thousands of listings to their site. I, for one, would vote to pull back all of the listings from them. I do not need those sites to sell my listings.”

If the entire industry followed Boatwright’s lead, imagine the industry fights, standoffs with the portals, lawsuits, claims of business interference, collusion, and so on and so on. Ugly, but a different chessboard than today. Some feel the risk is worth it.

For the portal antagonists, it is a race against time as the big three capture more and more consumer mindshare, weakening the prospects of a meaningful outcry.

2. Competing. One ready strategy is pushing the MLSs, which brokers and agents theoretically control, to create public-facing websites. The Houston Association of Realtors did this successfully and it has expanded statewide. The likeable and canny HAR CEO, Bob Hale, faces resistance from some of his big broker members, but he may prove his critics wrong when faced with the alternative of the big portal juggernaut.

3. Cooperation. The truth is most brokers and agents are working with the big portals. They are paying Zillow, Trulia and realtor.com hundreds of millions of dollars to get premium exposure for their listings and their own branding. They are doing what they think their customers want and they are willing to pay the cost of admission.

Lots of agents love Zillow and Trulia. It may be generational — young brokers and agents were raised with the Internet and intuitively understand the realities of digital customer distribution, and it does not seem to scare them as much. They rented their first apartment on Craigslist.

Linsey Ehle, a career coach at Better Homes and Gardens Real Estate Gary Greene, said, “Our job as a listing agent is to market the property. Part of every listing presentation is showcasing our marketing plan to attract prospective buyers. Sellers know that in today’s world that includes Internet marketing. If we don’t include the top three most popular websites for real estate in that plan, what exactly is our marketing plan? How can we be credible?”

Is there a fourth way, let’s call it co-opetition? That is what Realogy is doing by purchasing ZipRealty and by obtaining preferable pricing from the portals, according to Andrew Left, the editor of the often edgy Citron Research newsletter.

Left says at least one of Realogy’s brands is already getting preferable pricing from the big portals and is at the same time making moves to drive more consumer traffic to its own websites. You can read Left’s full report here. His bottom line: Underestimating Realogy is naive.

Left also argues that the fear of Zillow and other portals raising prices is unfounded. “If you look at any real estate industry survey, you will see the ROI on Z/T is less than other methods as Google/Facebook/or personal websites.” Plus, “the combined company is far from a monopoly (only 44 percent) of all real estate Web traffic.”

None of this will be resolved anytime soon. Lots of smart people are trying to figure out the lay of the land and how to plot their next moves. I am sure all sorts of war plans are being cooked up.

And we know for certain that many entrepreneurs are working on new apps and new business models in hopes that they can scare the pants off Zillow and Trulia.


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