How Compass’ IPO performs this week will tell us a lot about what the future holds.

They may be locked in a lawsuit, but when it comes to the future of the independent agent, Compass and Realogy are more aligned than you may think.

They both believe that independent, commissioned-based agents with broker support, training and technology is the best business model.

Wall Street, generally, disagrees. Instead it has been awarding digital-first enterprises like Zillow, Opendoor and Redfin with sky high valuations, while dinging the likes of RE/MAX and Realogy.

So how Compass’ IPO performs this week will tell us a lot about what the future holds.

Which companies investors choose to award is important. It tells us which companies, with which business models, will receive the lion’s share of capital infusions to grow and capture market share. The private capital markets have spoken already, dishing out $1.5 billion to Compass in its multiple funding rounds. But lately, the public markets have not shown the same amount of love towards traditional models.

And the private markets now appear focused on big fat funding rounds to digital-first real estate companies like Knock, Divvy Homes, Homeward and Notarize — and a host of others.  Plus, the SPAC trend of capitalizing companies on the public markets without going through a formal IPO is embracing digital-first real estate business like Opendoor and, soon, Offerpad

This is a face-off between high and low touch

While Compass and Realogy invest in agents, Zillow and other tech enterprises are investing in automation, from showings to closings. Digital experiences like Zillow Offers aspire to excel at a hands-offs approach to the transaction.

The Zillow promise today is: “Whether you’re buying, selling or renting, we can help you move forward.” In this offer, “we” is for the most part a Zillow-branded digital experience.

Redfin is also a digital-first experience with a high-ranking search engine that does more and more without the human touch. And when it does bring in agents, they are paid employees, not independent agents, who use company tech tools and follow a company script for providing their services. More efficient, with less personality and less high-touch. The trade-off equals lower fees to customers. 

Variations on the digital-first theme 

Take Side, which just raised $150 million on a $1 billion valuation. Their promise to agents is, “Stop Working for Someone Else, Work for Yourself.” But it, too, is using its digital platform and tool set to wipe out the broker owners, which is historically another high-touch feature in the transaction. Their shot over the bow at broker owners to agents is clear:  “You Matter More Than Your Brokerage.”

This is the vision of the highly successful e-commerce company Shopify which promises ”Anyone, Anywhere Can Start A Business.” Shopify leans into the merchants, not the consumer like Amazon.

Another version of this idea is eXp Realty, which also has a high Wall Street valuation, but believes in independent agents. However, it has done so without the benefit of offices, another high-touch experience that in the past offered customers the benefits of a cozy place to discuss their real estate plans. A relic today.

One company all-in for agents is Keller Williams 

And then there is Keller Williams

It is laying plans to go public. Yesterday, it hired four key executives in moves that have IPO written all over it. Gary Keller will be watching the Compass IPO closely, as his fate is inextricably wrapped up in the outcome.

In this fast-changing world, the digital face off will become more pronounced for the consumer. Advertising dollars are flowing into the digital alternatives, giving the customer more choices with a mix of competing benefits. Efficiency versus human touch; higher versus lower fees; and the old way versus something new and often untested.

In the last week, I spent time with two agents. One was on his phone constantly, texting and talking, as I toured a house. Another agent put her phone away and was visibly present. She was tuned in to me but not smothering, almost telepathic about my concerns, anticipating my questions.

In the future, a pure digital experience would be my preference over the first agent who himself is dangerously digitized and threw away his high-touch advantage. 

For now, I would opt for the second agent over a digital-first experience. She gets it and will be around for a long time to come.

Email Brad Inman

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