MLS Is More Than Technology

Mar 24, 2007  |  Michael Wurzer

Yes, that’s right, FBS, a technology company, is saying that the MLS is much more than the technology we or others may provide. I’ll demonstrate why first by commenting on the recent news that the Real Estate Board of New York (REBNY) announced (PDF) they are hiring Trulia to build a public listings portal. In Trulia’s blog post on the topic, they state: “For the non-New York readers out there it’s worth noting that Manhattan’s hugely important real estate market does not have a widely used MLS that would allow access to all listings through any single Web site today.”

I think this statement has the potential to mislead readers through two negative implications:

  1. That Trulia is now creating an MLS where there wasn’t one before; and
  2. That Trulia’s portal will have “all listings” where no site previously had them all.

Neither of these implicationsare true. First, Trulia isn’t creating an MLS system, they are helping REBNY create a public advertising portal of active listings, basically shifting their advertising dollars from the New York Times to Trulia. I’ve previously discussed why an advertising portal is not an MLS and REBNY provides a further difference in that their members do not share information regarding sold listings and there isn’t any indication that’s going to change with the Trulia public portal. Second, this deal will not include “all listings” in NYC because REBNY members will be able to opt out of the new portal and not all brokers in NYC are members of REBNY. That the REBNY/Trulia deal is neither an MLS nor a complete listing portal for NYC is made clear by comparison to the Manhattan MLS, which offers competition to REBNY and supplies listing data to Realtor.com, which continues to be the largest listing portal collecting information from hundreds of MLSs across the country.

In a comment I made in reply to Greg Swann’s post on the Trulia announcement, I said that the oddities of the NYC real estate practice make changes there a poor predictor of what may happen in the rest of the country. However, after reading a bit more about this, I now see that the story and conflicts in NYC are similar to the debates occurring in the rest of the country. I posted last week about the success the Houston Association of REALTORS® has had with their public listing portal and how that contrasts with the traditional thinking that MLSs should stay out of the listing portal business to avoid taking traffic away from broker and agent sites. The news of Trulia and REBNY’s venture seems to strengthen the conclusion that MLS listing portals are a critical issue as consumers look for independent sources of information. Also, the membership demand that REBNY allow opt outs is reminiscent of the debate that is at the center of the DOJ litigation against the NAR.

As I mentioned in one of my earlier posts on MLS regionalization, all of these issues are closely related to each other:

  • Brokers are trying to figure out how they can cooperate with each other more easily and also stake their claim in the web gold rush at the same time.
  • MLSs are trying to figure out how they can serve their members and stay relevant in the shifting sands.
  • New portals like Trulia and Zillow are making it harder for brokers to distinguish their brands to consumers as destination sites for real estate information.
  • The Department of Justice likes that the brokers and MLSs cooperate on collecting listing information, but doesn’t like the compromises struck to date to allow that cooperation.

As Brian Larson pointed out in a comment to my Death of the MLS? post, Point2 presents a model that is attempting to bridge this gap, creating broker and agent sites that allow them to share listings with each other and hopefully stay top of mind for consumers.

What’s missing from the Point2 model, however, is the cooperative framework of the MLS (ironically, exactly what the DOJ complains about). Point2 tries to use software to be the MLS but the MLS needs more than just software to create an atmosphere of trust that makes brokers and agents willing to share data with each other and reach a critical mass of listings. As an example, check out Point2’s few hundred listings for Houston compared to HAR’s 30,000+. This critical mass of listings is only able to be reached because of the trust created by the process that is the MLS.

Some of you familiar with MLS politics may be thinking, “Are you kidding? We don’t trust the MLS!” Ahh, but the majority do, and that’s the key. The MLS leadership (in almost all cases) was elected by their local peers. They’ve been entrusted with making decisions for the entire group. This little bit of representative democracy is what differentiates the MLS from non-cooperative models, and it has nothing to do with technology. This bit of politics is critical to establishing critical mass for two reasons:

  1. Representative Decisions. Brokers and agents compete fiercely on a daily basis. In that day to day environment, reaching broad consensus on issues like data sharing is challenging. While you might get a good number of people to agree, getting all to agree is unlikely, resulting in fragmented and incomplete data. Within the context of the MLS, however, decisions can be made by the majority that apply to the whole. In other words, compromises can be reached that will not evolve purely from individual decisions. This may be over the top, but I liken this to the U.S. Senate, which is created to be the more deliberative body, charged with taking the long view.
  2. Local Elections and Representation. Of course, leaders can err, trust can be breached, and the minority can feel oppressed and seek revolt. We see some of this now in the MLS world, where some brokers feel unrepresented, where the fast changing technology makes decisions by leadership complicated and more prone to error. Ironically, one of the sources of complaint currently is that MLSs are protecting their turf and being too parochial by not allowing broad, regional cooperation. I see this as ironic because I believe the local representation of the MLS is what allowed for the “critical mass” cooperation in the first instance. Cooperation with your neighbors is so much easier than cooperation with strangers. Although the web is stretching our definitions of neighbors and strangers, we should not lose sight of the benefits of local leaders giving voice through local representation. We can improve our cooperation through broader data aggregation and distribution, while, at the same time, maintaining the trust established by local representation.

The representative decision-making process of the MLS is what allows for the broad cooperation necessary to create critical mass in terms of data sharing. Without this, I believe we’ll simply have a mishmash of data strewn here and there, with no possibility of a national repository or any other useful portal. The MLS embraces the duality of competition and cooperation, and strikes a limited balance that enables critical mass to be established. This feat should not be underestimated. Fully cognizant that I may be stretching the importance of this issue, the words of no less than George Washington in his letter of transmittal of the Constitution for ratification may be instructive here:

In all our deliberations on this subject we kept steadily in our view, that which appears to us the greatest interest of every true American, the consolidation of our Union, in which is involved our prosperity, felicity, safety, perhaps our national existence. This important consideration, seriously and deeply impressed on our minds, led each state in the Convention to be less rigid on points of inferior magnitude, than might have been otherwise expected; and thus the Constitution, which we now present, is the result of a spirit of amity, and of that mutual deference and concession which the peculiarity of our political situation rendered indispensable.

That it will meet the full and entire approbation of every state is not perhaps to be expected; but each will doubtless consider that had her interest been alone consulted, the consequences might have been particularly disagreeable or injurious to others; that it is liable to as few exceptions as could reasonably have been expected, we hope and believe; that it may promote the lasting welfare of that country so dear to us all, and secure her freedom and happiness, is our most ardent wish.

Of course, just as our Constitution has been tested and stressed through changing times, so, too, has the MLS. We’re clearly in such a time right now as our relationships are being transformed by the web. Many are questioning whether the MLS should be Association owned or whether the MLSs should become broker owned. This is a good question and should be answered by whichever approach gives voice to those being led. If this is done, just as the Constitution and our country have survived, so, too, will the MLS, because the MLS brings something to the table that cannot be replaced by technology: Trust. Technology can foster trust, but it cannot form it. True competition requires some cooperation. Not a lot, but some.

This is why I believe the MLS will survive and even thrive. As HAR has shown, the MLS is in the best position to create strong listing portals that benefit brokers, agents and consumers. The MLS is in the best position to do this because they can present the data in an independent way, representative of all the competing brands. When it comes to effective local search, brand emphasis is no longer very effective. Companies like Trulia may turn out to be a great partner for MLSs in building these portals, but I don’t think so, because I don’t see the current business models they are forming as fostering cooperation in the long run.

For example, one of the most interesting, as yet unconfirmed, aspects of the Trulia/REBNY deal is that there is some sort of revenue share involved. Will the revenue share result in funds flowing back to brokers? Who will direct the advertising on Trulia’s site, which presumably is what will generate the revenue to be shared? Will that advertising be from brokers participating in the revenue share, such that they’ll effectively be getting back part of their ad spend? If broker advertising is allowed, how will that effect the opt out rates? If an ad supported revenue share is involved, I think that would be a mistake. I suggest the successful model for a listing portal is not advertising supported. The site should focus on promoting the homes for sale and the brokers and agents listing and selling them. As the controversies swirling around Realtor.com have shown, introducing advertising introduces too many sources of tensions that break down cooperation.

Similarly, the more I learn about the deal between Realogy and Trulia, the more I think it cries out for a strong, independent MLS portal. Over on the Bloodhound, Greg Swann suggested that Realogy would be selling leads from Trulia back to their franchisees. I responded that I thought that was unlikely, because many brokers are already getting leads directly back to their web sites when Trulia scrapes their sites for listings, and wouldn’t want to see that change just because Realogy was now supplying the listings. However, someone else commented:

To clarify a few points mentioned in the comments above, let it be known that all C21 and ERA listings link back to their respective corporate sites (c21.com, era.com), unless–and herein lies the rub–the broker pays Trulia an advertising fee. Presumably, after paying this fee, Trulia will then link the listings back to the brokers’ site and display the brokers’ company logo (i.e. C21 DBA). But, until and unless the broker ponies up, Trulia is contractually obligated (yes, Trulia and Realogy have signed a contract) to link all listings to the corporate site.

Whether this will lead to C21 or ERA collecting referral fees on leads generated from these listings (which brings up another interesting point about who owns the data, the franchisor or franchisee) is an unknown. My sense is, however, should this happen it would upset an awful lot of independently owned and operated companies who, not to be ommitted, already pay substantial royalty and advertising fees purportedly for corporate marketing efforts.

Frankly, I find this incredible. Think about this: Trulia’s brand is trumping the franchise brand, requiring payments to Trulia, and the franchise brand is trumping the brokers’ and agents’ brands, requiring payments to the franchise. At the same time, the brokers and agents in the field are building the business relationships that form the foundations of the all the brands. They’re doing all the work and they’re having to pay very dearly for lead generation that the web is supposed to be making more efficient. Efficiency for Trulia and Realogy, perhaps, but it doesn’t look very efficient for the brokers and agents.

These business models don’t work in the long run. There’s a fascinating post today on O’Reilly Radar about how Google and others, in their quest to “free” information, need to be careful not to destroy content creation. The post quotes someone quoting a Google employee on the evolution of Google’s thinking on this issue I find highly relevant to MLS today: “”Some think of Google as selling search. Some business types think it sells ads. I think it needs to be in the business of ensuring there’s something to sell ads around.” Yes, exactly. We need to protect content creation, especially the content that’s hard to create, like broad, deep and standard listing information.

Sooner or later, the brokers and agents will figure out that they are paying too much money to Trulia or their franchises for these leads and that they can do it more efficiently through cooperation. This brings me back to the MLS, back to local decisions in the best interest of all competitors. The MLS can and will figure out a way through these challenges. The specific business model for data aggregation and sharing on a broader scale may not exist yet, but the solution exists in a framework of trust allowing MLSs to foster a national non-advertising listing portal controlled by the brokers and agents.

15 Responses to “MLS Is More Than Technology”

  1. Afthird says:

    Great post. I fully agree on the issues you’ve raised about Trulia.

    The key issue is Trulia and Zillow’s business models don’t work in the long run. There are serious doubts if Zillow or Trulia can ever be profitable given their current advertising models.

    See a great discussion on this subject in the comments of this rain city post:
    http://www.raincityguide.com/2007/02/10/adventures-in-digital-listing-land/

    The real question is how do Trulia and Zillow plan to get to the revenue their venture backers are looking for? Start ups are finding out that being a venture backed, ad supported Internet business like Zillow and Trulia is difficult to impossible. See background on these challenges here:

    http://lsvp.wordpress.com/2007/02/26/three-ways-to-build-an-online-media-business-to-50m-in-revenue/
    http://radar.oreilly.com/archives/2007/03/the_economics_o_3.html

    Zillow and Trulia each need to get to 400-800 million page views/month to generate $50 million/year in revenue from ads. Without a shot at getting to $50m revenue they can’t continue to get more cash to burn from their venture backers.

    Here’s the problem, realtor.com doesn’t even have that much traffic!

    Jan 2007 page views:
    realtor.com – 132m
    Zillow – 16m
    Trulia – 6m

    Traffic sources:
    http://www.realtor.org/realtororg.NSF/pages/sitetraffic?OpenDocument
    http://snapshot.compete.com/trulia.com+zillow.com+realtor.com

    From my take, Zillow and Trulia either need to change their business models to get a cut of the transaction or sell out to a big brokerage.

    I disagree with MLS run listing portals, though. In my market there are hundreds of great IDX solutions. A agent or broker can have an IDX site for $50/month through any number of vendors, all of which are better than our local MLS portal because of the competition between vendors. Many tech savy agents have created custom IDX sites that are nearly as good as Trulia, without Trulia’s venture backing.

    I’d argue Houston would be far better off without out har.com. With har.com out of the way the brokers in Houston would be better able to compete and innovate with IDX. The innovation and critical mass from hundreds of IDX sites is the way the MLS will stay ahead of Trulia and Zillow, IMO.

  2. Good read. I’ve been a subscriber since day one and I’ve had a hard time figuring out if I like your style or not. You tend to write articles much longer than what I’m used to. It’s not the quick read and on to the next. I have to take a deep breath and relax when I read your stuff. I’m starting to enjoy it.

  3. Afthird: Thanks for pointing me to the discussion on RCG about this topic. After seeing it again, I recall reading at least part of it at one time. Whew, there’s so much stuff out there, it’s hard to keep track of everything, even with great search tools, feed readers, etc. One of the cool things about this medium, though, is that I don’t have to remember everything, because the community will help! Thanks!

    I don’t really know enough about Zillow’s or Trulia’s business models to comment on them substantively, though I have assumed both are acquisition plays. The comments in my post suggest that the business proposition Trulia appears to be offering (emphasis on appears, since I don’t have direct knowledge and am gleaning it from other blogs) is of questionable value for the broker and agent. After just reading the discussion on RCG, and the Trulia reps comments in particular, I think they had a good thing originally for brokers and, until just recently, I generally agreed with Robbie from RCG that the exposure Trulia provided was just another good advertising opportunity for agents or brokers. Importantly, however, that was when Trulia was sending the leads directly back to the brokers who supplied the listings. My view has changed completely with Realogy jumping in the middle. Similarly, if their deal with REBNY does turn out to be a revenue share, I think that’s equally problematic for the brokers and agents. I’m sure it’s great for Trulia (as it should be, from their perspective), but not for the brokers and agents.

    Regarding IDX versus the MLS web site, I think the two can co-exist and benefit each other. Check out the presentation of Jim Sherry on The Future Vision of HAR.com at http://media.har.com/hartv/. You need to use IE to view it but the analysis and data is interesting. I think the big question posed by IDX are the opt outs and how the resulting VOW issues get resolved in the context of the DOJ litigation. I’ve been postponing writing about that, because the area is so filled with land mines. So, I leave that for another day. Thanks again for your comments!

  4. Chris, I’m glad you’re warming to my approach. 🙂 As I’ve been writing, I’ve struggled with the length of my posts, too. I know shorter is often better in the blogging world. I also know I could write the same ideas more succinctly. One of the downsides I see so far about blogging is that I feel the medium is time-sensitive and so I feel some pressure to get my thoughts out faster than maybe I should. I’ll work harder at being succinct.

    One of the huge benefits I’ve found in blogging, though, is that I find myself thinking more intensely about the issues that interest me. Knowing that I’m “going public” with my thoughts makes me fine-tune and research them more thoroughly. Some of that research has led me to even longer posts, as I’ve uncovered more great articles, but I’m hopeful that additional information is helpful to the overall discussion.

    Thanks for reading!

  5. I agree. I also find myself thinking much more intensely while reading a long post…so it goes both ways. I guess it’s all about who or what you want your audience to be. Again, I am really starting to enjoy your long posts as they do provoke much more interesting thought. It’s a place for me to search myself instead of simply scraping the surface and believing I have an opinion about the 5 sentence blog I’m conditioned to read.

  6. Andre says:

    Well i dunno if I agree totally. One, it is free to be on trulia and two, Realogy is sending the leads directly to the brokers through the listing landing page’s on their respective sites through lead router… so where exactly is the downside? do you think that some of the smaller brokers in those networks have the technology or means to send to Trulia? Not all of them, so why not do it this way? My firm is on Trulia and we pay about 1/6th (that’s right a 6th) of what google charges for sponsored placement… and this is bad because………? My broker site is also ranked #1 for our search terms across all 3 major search engines on SERPS and we receive approx. 500,000 uniques a month from our market, around 6,000 buyers a week from trulia. i am sorry but compared to the other options out there i want them to survive…and why the HELL would i want them to charge a referral fee?

    Did you read this: http://blog.sellsiusrealestate.com/trulia/deep-throat-prudential-kicks-trulia-out-of-real-estate-tradeshow/2007/03/20/

    great post anyway, it is a bit looooong though. 🙂 long is okay, but loooooooong is tough!

  7. Andre, I’ve stated previously, if I were a broker, I’d post my listings on Trulia, too, as long as the leads are going directly back to the broker. From the comments over on the Bloodhoud Blog (quoted and linked in my post above), however, my understanding is that this is no longer true for Realogy listings unless the broker pays an advertising fee to Trulia. Perhaps that fee is nominal and makes sense for the brokers, but, unless truly nominal, it’s a bad change to what existed before (no fees, direct links back to brokers), which seemed to be a fair trade of listings for leads. Trulia got listings, which they desperately need, and brokers received leads. Batch feeding listings to Trulia or Google listings is not difficult and certainly not worth paying a recurring fee to anyone.

  8. Robbie says:

    As for the blog post length, do what feels ‘right’. I think I tend to be long winded at times as well, but it’s worked for me. After all, it’s your blog, do whatever the hell you want! If we don’t like the article length, we can always unsubscribe. 🙂

    The bigger question is who controls the listing? Who should own it? Is the agent? The broker? The franchisee? The franchisor? The Realty.bots don’t really have a stake in the fight between brokers/agents and franchisees/franchisors. The problem, as Jim Duncan pointed out is that these new deals appear to be giving franchisor/brokers more influence in that ongoing power struggle.

  9. Tim says:

    “Realogy is sending the leads directly to the brokers through the listing landing page’s on their respective sites through lead router”

    Michael and Andre,

    I authored the comment quoted above which Michael found on Bloodhound. The information I posted regarding Realogy’s contract with Trulia and Trulia’s advertising policy as it effects listing link backs to either the corporate site or the broker’s site was revealed during conversations I had with both Realogy’s and Trulia’s interactive marketing departments. For the record, I spoke with high-level execs on both sides of the table.

    First, I’d like to address Andre’s comment quoted above. Are you aware that the majority of Realogy’s independent franchisees have not even implemented Leadrouter within their respective operations? I mention this only to emphasize that since the Leadrouter program cannot, as of yet, boast system wide acceptance and usage, it cannot be seen as a security net that protects system member’s leads. Thus far, the adoption rate for this lead-generation service is below 30% across the network. It’s great that your using it, but that’s almost besides the point.

    Perhaps a more important question that should be asked is whether the contract between Realogy and Trulia involves any revenue sharing, and if so is that revenue flowing back to the broker (you know the one’s that pay the royalty and national ad fees)? I think not. So, my question is, who wins here…Realogy? Trulia? The broker-owner??? Or more importantly, who loses (and yes, I believe there are winners and losers here). My guess is the losers are the ones who don’t know that they don’t know. Can you guess in the list of winners or losers I just listed that might be.

    Of course the biggest question to ask, IMHO, is what’s the real play here. Why did Realogy enter into a contractual relationship with Trulia? What was their motivation? Who benefits the most? Why wasn’t there any discussion whatsoever between Realogy and their clients (system member brokers) about this grand plan. Why was the independent franchisee denied any voice in this decision? Why? Why? Why? There are many unaswered questions.

    I am by no means suggesting that this Realogy-Trulia deal is inherently bad for mom and pop. But I’m not saying it’s good either. Time will tell, of course, what the net results will be for all the players–some of whom will most assuredly benefit more than others.

  10. Robbie, thanks for pointing us to Jim Duncan’s post, as it provides confirmation of how the links now work. In the comments to Jim’s post, he indicates he views the new links back to C21’s site as “proper” because the broker owns the listing. But, in that case, shouldn’t the links go back to C21 Manley’s site and not the national franchise site? That’s confusing. There are all kinds of copyright and other questions about “who owns the listing” but I think the practical answer to those questions is, in all cases, the broker. After all, the broker can just pick up his or her marbles and go home or find another game. Of course, the broker has a duty to the seller and they want to sell the home, so that won’t happen, but it demonstrates the practical reality that the broker controls the listing at the end of the day. Taking this “practical” argument to the next level, though, the agent really is the driving force here. I think it stinks that listings where Jim is the listing agent don’t link directly to him. Survey after survey shows that consumers want to be contacted immediately. If the link went back to Jim’s site, the consumer would see the Call Me button he’s got posted prominently on his site and be in contact with him immediately. That’s serving the customer, which is what’s important here. Trulia has some really cool technology but it seemed to work better for brokers, agents and consumers before the Realogy deal. Harking back to my post, I think this is where an independent MLS portal focused on getting leads back to the brokers and agents could be really useful to avoiding a lot of these turf and brand/sub-brand wars. We’re developing some stuff now along these lines that I hope our clients will find really exciting and useful.

    Tim: Thanks for the additional information. The brokers own the listings and they should be getting the links. If they don’t get the links, maybe they’ll pick up their marbles and find another game.

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  12. […] is that it not only is consumer-centric but it’s also the least expensive for brokers and agents.  The MLS fosters the cooperation necessary to tame the competition enough to allow listing aggregation, which is necessary to serve the consumer.  I wrote yesterday […]

  13. […] The emphasis added is mine, because I think it goes to the heart of the matter.  Blogging networks like ActiveRain, etc., seem to most often involve non-competitors, whereas the MLS is a platform for allowing competitors to cooperate. […]

  14. […] but what it lacks is the benefit of the aggregation the MLS structure provides.  I’ve written before that the true value of the MLS has nothing to do with technology but rather is the agreement to […]

  15. bukbuk says:

    Nicely thought out. Very well done with GREAT points. From a finance guy looking in to the Realtor world