Editor’s note: The following is a guest contribution.
By BRAD W. BLUMBERG
A big recent news event in real estate was the acquisition of Prudential Real Estate and Relocation Services by Canada-based Brookfield Residential Property Services.
Brookfield RPS paid between $110 million and $135 million, according to news reports.
Brookfield now franchises every Prudential brokerage office, including about 50,000 agents who work for those brokers. Many of Prudential’s brokers are, in fact, leaders in their respective markets.
Online real estate site Zillow, meanwhile, on the day the acquisition was announced had a market cap on the New York Stock Exchange exceeding $600 million.
To me, this reaffirms that over time, property listings aggregators devalue the business of being a broker-owner, all the while growing their own stature in the industry.
Look at the travel industry: Expedia (funny — the same guys who operated Expedia started Zillow) served to undercut the brands of some airlines, hotels, etc. It became a race to price bottom, as consumers cared less about brands.
And to their detriment, some brands stopped thinking about how to market themselves and create wonderful consumer experiences. Instead, they relied more and more on leads from aggregators that controlled the consumer.
Today, you notice that those same brands are fighting back with ads about their experience and value, but for many it’s too late.
For seven years Borders Books relied on Amazon to handle its Internet customers. Clearly, Borders never recovered.
Recently, Edina Realty — a large broker in the no-nonsense Midwest, pulled the company’s listings from Trulia and it’s reported the company is considering pulling its listings from Realtor.com (I understand Edina Realty never posted listings on Zillow).
Maybe the company learned a few things about value from being owned by a Berkshire Hathaway subsidiary (business wizard Warren Buffett is behind Berkshire)? I think though Edina realized that it can create value for the brokerage firm by shifting focus and dollars away from aggregators — and focusing on building local tools, local service and local marketing that centers on the company’s brand and its customers’ needs.
Edina clients benefit from this because in the end most buyers and sellers pick a Realtor based on how strong the Realtor is locally.
My mom, for example, was a great broker-owner, and her value started with her brand, which became known for service and knowledge about high-end homes. For those brokerages like Edina, and the one my mom operated, they realize only they can control their own brand — and thus their value to clients.
And you became a broker to make money, right? Have you ever wondered what your brokerage office is worth? Profits, growth and the value of your local brand in the marketplace are what you have to sell. This is a zero-sum game today — the market is not expanding. Who controls first access to the customer is key.
Yes, it may seem to make sense to list on the aggregators for free. It’s hard to turn down "free" leads. But certainly don’t pay Zillow, Trulia or Realtor.com. As one Realtor posted on a blog, when she checks her analytics from Zillow paid advertising leads, the conversion is low.
Even with free leads, don’t think you are getting something for nothing.
You are trading a small fraction of the value of your brand, for that lead — but it adds up.
How much is your brand worth if you do an initial public offering? Are your margins growing as fast as those of Zillow and Trulia? If not, maybe you could reassess the ad money paid to aggregators, instead pulling your listings and plowing that money into your own brand, your own tools, your own websites.
Zillow and Trulia outdid the industry in terms of Web-consumer know-how. Their market value proves that. However, if you want to create value for your own brand, it takes hard work. You can’t let Zillow do that for you via its brand, as that only increases Zillow’s brand value over yours.
Brad W. Blumberg is CEO of Smarter Agent, a company that offers mobile platform solutions that promote real estate brokers’ brands.