How The Spark Platform Helps Brokers and MLSs Deliver Long-Term Value to Agents and Consumers
One of the first posts I wrote on the FBS Blog over five years ago asked whether industry forces prevalent at the time (e.g., rise of consumer real estate web sites like Zillow, broker demand for MLS simplification, and legal threats from the DOJ) meant the Death of the MLS. Of course, since then, the DOJ lawsuit against the NAR has been settled, consumer portals are working hard to improve the accuracy of their listing data by establishing relationships with MLSs, and MLS regionalization remains regional and not national. In other words, as expected, those prognosticating the death of the MLS and the disintermediation of brokers and agents were wrong.
At the same time, the Internet clearly isn’t done changing the real estate profession. Consumers continue to flock to national real estate portals like Zillow, which has attracted a ton of capital to invest in innovations. In an article dated April 26, 2012, from Business Insider and entitled, “Zillow Chief: Here’s Why We Can Be A Billion-Dollar Company”, Zillow’s CEO, Spencer Rascoff, is quoted as saying:
We’re trying to move to a world where agents wake up, roll out of bed, and pull out their tablet or PC and manage their day and their workflow based on the tools that Zillow provides to them.
This same statement would make a good mission for most brokers and, of course, the mission of MLS organizations is to help brokers with their mission. Of course, Zillow, RPR or other national sites can be good partners with brokers and MLS organizations in providing value to agents and consumers, and so the two are not necessarily in conflict. That being said, the Internet has proven one thing pretty well, and that’s that pure middlemen (those not adding true value) do get dis-intermediated over time. So, there’s no question that brokers and MLSs need to continue to provide independent value and how MLSs, brokers and agents create value in the coming years will be a decisive question for survival.
In trying to assess the outcome of a battle, a good place to start is with relative strengths and weaknesses of each participant. Reviewing the relative strengths and weaknesses also will help illuminate the value of the Spark Platform, which has been designed to enhance the strengths and counter the weaknesses of the MLS, brokers and agents.
Strengths of the MLS and Broker and Agent Members
- Cooperation is the primary strength of the MLS. More specifically, MLS organizations have proven to be the most effective at getting competitors in the real estate industry to cooperate with each other. This is accomplished through a bit of representative democracy, whereby the competitors have a key voice in defining the ground rules for cooperation. What we’ve seen over and over again through the years is that the further the competitors are away from the rule-making for cooperation, the less effective it is. This is one of the main reasons MLSs have remained local. Establishing cooperation at a national level is exceedingly difficult.
Weaknesses of the MLS and Broker and Agent Members
- Fragmentation is the primary weakness of the MLS and of the cooperation among brokers and agents. The problem is that the cooperation literally only extends so far, and then shifts to another MLS, which creates different rules, different data formats, and other sources of fragmentation. This fragmentation (sometimes called overlapping market disorder) is a big problem for brokers. Facing shrinking margins for years, brokers have been expanding territory and running smack dab into MLS fragmentation, which increases costs exactly when brokers most need to reduce cost.
- Smaller Market; Less Choice. Fragmentation among MLSs also makes development of software and other tools and processes less efficient and so lowers the amount of innovation and choices for brokers and agents. Every new entrant into the real estate software market has to deal with the wide disparity of listing data and rules among the hundreds of MLSs, which necessarily lowers the number of competitors willing or able to enter the market and solidifies the positions of those who have already entered the market. The result is less competition, innovation and ultimately choice.
Strengths of National Sites
- Scale of investment is the core strength of national sites like Zillow. By definition, national sites are building products for all agents and consumers in the market, and so can support a much larger investment in technology and other innovations than ever would be prudent for a single or even a regional group of MLSs.
Weaknesses of National Sites
- Data, of course. The national sites are all seeking data from the MLS organizations, which have proven to be the only organizations able to establish the framework for cooperation necessary to create a complete and reliable aggregation of listings from competitors in any given market. The national sites, especially those focused on advertising, have not been able to establish the level of trust necessary to supplant the MLS, because it is not in the best interest of competitors to all choose one site for advertising.
From the above, we can see that the strength of the MLS, brokers and agents (cooperation and data) is the weakness of the national sites, and the weakness of the MLS, brokers and agents (fragmentation) is the strength of the national sites.
Joining the Battle
We built the Spark Platform to enhance the strengths and counter the weaknesses of MLS organizations and their broker and agent members. More specifically, the Spark Platform enhances MLS cooperation, reduces fragmentation, and “sparks” innovation in the real estate software industry.
First, the Spark API reduces fragmentation by implementing the RESO data dictionary to standardize as much data as possible. Using the Spark API, software developers can create products for all MLSs from one API instead of having to address them all individually.
Importantly, the Spark Platform is as much a process as it is a product. Though both FBS and the participating MLS organizations will be working together to map the existing data to the RESO data standards, the reality is that not all fields will map to the dictionary right away. However, the idea here is to create an ecosystem driven by mutual incentives to create more standardized data over time.
For example, mobile development is the biggest frontier for real estate technology today, and the Spark API is designed specifically to make mobile development easier. As more developers use the API, more standard data will be needed, and the brokers and MLSs in each local MLS will now have a direct incentive to provide that standard data to get new mobile products for their MLS members.
Second, the Spark Platform enhances cooperation by ensuring that the MLS rules (the basis for cooperation among the brokers) are supported and that data is only accessed and used by those properly licensed. Central to the Platform is the API Manager, which allows each MLS to specify the roles and rules for data access (e.g., MLS members, VOWs, IDX, etc.) that are then enforced through the API. In addition, the license agreements required by the MLS are integrated into the purchasing process through the store and during authentication from each use of the application. In this way, the MLS rules are enforced for data access and yet the data and rules are made available to developer applications through a single API, store and app bar, streamlining the development, sale, and delivery of applications.
Third, the Spark Store expands the market for real estate software (reduces fragmentation), which expanded market should increase the investment into new technologies for agents, creating more choice, more competition, and thereby lower costs for better products.
I mentioned mobile development above as one example where more innovation is important for MLSs. A related area for innovation is the creation of VOWs or customer portals. We all know how controversial IDX policies have become over the last few years, and VOWs offer a clearer alternative for brokers and agents to serve real estate consumers without all the IDX controversy. The Spark Platform is ideal for creating customer portals because of the standard data and built-in licensing through the authentication process of the API to ensure only those properly licensed get access to the data. Further imagine this: Once brokers and agents have their customers engaged in a customer portal, they could then extend the Platform to deliver and even sell real estate technology to their customers through the portal, creating an entirely new market for real estate software for consumers delivered by brokers and agents.
Undoubtedly, there are many ways other than mobile and customer portals in which the Spark Platform will ignite innovation in the real estate industry. In fact, that’s really the point. No one company or MLS can dream let alone create all the innovation real estate practitioners need. Instead, we need an ecosystem of innovation supported by competition and clear incentives for each party in the transaction. The Spark Platform creates such an ecosystem and we’re excited to see what innovation it brings.
As mentioned in my post yesterday, we’re in an alpha phase right now and are very excited by the interest expressed by so many MLSs to work with us on this project. We’re also working with a variety of developers to add products to the store, and we’re looking for more development partners now. If you’re interested in working with us or learning more, please inquire here and follow us here on the FBS Blog as we’ll soon be announcing some developer incentive programs.