The news today that Amazon is tiptoeing into the real estate service territory should be of no surprise. Yes, it is a moderate-to-big deal and the announcement makes sense.
TurnKey, a new platform that rolls out today, promises to simplify the process of buying and moving into a new home. It also adds a potentially big lead generation business for Realogy, Amazon’s partner in this new adventure.
As the big private equity firms invested billions in real estate services the last few years, it was only a matter of time before one of the FANG gang (Facebook, Amazon, Netflix and Google) stuck its toe in the $100 billion real estate commission pond.
The surprise to some is that Turnkey is not an e-commerce move by Amazon but instead a lead generation enterprise, sending customers to the largest brick and mortar real estate company in the world, Realogy. After the news popped, Amazon downplayed how deep it is getting into real estate.
Amazon’s offer is interesting. First, it refers a good agent, who is selected and trained by Realogy. Then, it will help with the household move and give away some smart home goodies. However, $5,000 is the limit on the moving services and home bennies.
In real estate, you never know what the consumer will bite on. In down markets, developers have dangled new cars, trips to Hawaii and 200,000 airline mileage points. Juicing the buy decision is not easy when home buyers are so singularly focused on two things — saving enough money and understanding the process well-enough to move forward with a big life decision.
The stock market liked the Amazon/Realogy announcement, pushing up the depressed Realogy stock 25 percent in early trading but settled down to only a 15 percent gain after the market opened.
The big tech mamas have muscled into real estate before. Both Facebook and Google make a killing off agent advertising, and Microsoft was all in back in the middle 1990s with its Homeadvisor product, which fizzled and was sold off. Netflix? It has the reality real estate show Selling Sunset.
Realogy, of course, has the most to gain. And it may offer some relief for embattled CEO Ryan Schneider who needed a big win, against his collapsing stock.
The New Jersey-based company is a master at the referral business with its corporate relocation arm, Cartus, which has the expertise to manage and master lead gen at the consumer level. For the Cartus principal broker owners, this is good news, because in phase one, they will get the Amazon leads. These are the brokerages that carry one of the Realogy franchise flags and are part of the Cartus corporate referral program.
Zillow, on the surface, has the most to lose and Wall Street signaled that on the early news, pushing down its stock almost 3.75 percent in pre-market trading. But, it quickly recovered and is now trading in positive territory. The Street and everyone else (me included) is still trying to figure out the news.
This move, I guess, could accelerate Zillow’s pivot into its new business model of buying and selling homes. In its old business of leads, it now has a new competitor, who theoretically matches Zillow on overall consumer distribution.
What Amazon does not have is a discreet, loyal real estate consumer audience, like Zillow. This is not in any way a Zillow killer.
The Amazon/Realogy deal also puts pressure on Compass, Keller Williams, Berkshire Hathaway and RE/MAX to keep innovating on all fronts. Plus, agent recruitment could get more interesting: Now who’s the best technology partner?
The entire industry is buzzing like a $100,000 payout at a Las Vegas slot machine.
More to come, I am sure.