Editor’s note: The following excerpt written by Inman News founder and publisher Bradley Inman originally appeared on the Inman News Blog, an interactive forum for real estate news. Click here to comment on this post and join the discussion.
Small is better
When we (myself and a group of Microsoft employees) designed Microsoft’s HomeAdvisor (online real estate) in the mid-1990s, the plan was to become the end-to-end real estate solution, emulating the entire offline real estate process. We had a plan for home listings, for mapping listings, a choose-a-lender platform much like LendingTree’s, property records and comps, a vast decision-support and image library, questions and answers, etc.
The motto was “Do it all, do it big.” We weren’t the only ones attacking the problem by trying to conquer the world.
Indeed, many Internet companies had the same ambitions in other verticals. The hope for the Web was so boundless that its capabilities were overestimated. In the end, the companies that succeeded took one sliver of the process and did it well.
Today, successful companies are building on that idea: start small and build. Begin with a map and some property listings, and then add this or that. Offer a home-valuation tool, and then add this or that. Introduce a blog, and then add another blogger and another.
This trend has several explanations:
1. Rocking the boat did not yield big dividends; so new players downplay their plans.
2. Listings are the Holy Grail so if you want them act meek.
3. The real estate market and the process are so vast and complex that each and every part offers an opportunity for innovation.
4. Big ideas tend to involve new business models but none in the last 12 years have altered the basic real estate business model, which works like this: Home sellers hire an agent to sell their homes for a commission, entering into a cooperating agreement with agents who are helping buyers, promising to compensate the agent who brings the right buyer from the commission proceeds paid by the seller. This cooperation also creates a home listing, spawning the demand.
The Web has not improved on this mousetrap; it has only worked around the edges, giving consumers quicker access to homes and a better understanding of value and what they can afford. Thanks to the Web, agents spend less time helping buyers find a home but must spend more money online finding new customers. Online companies who have focused on these incremental enhancements have created the most economic value.
I am always keenly interested in the entrepreneur who has a grand scheme to shake down the house. I listen and I encourage, but I also prepare and forewarn.