A couple of points.

1. Combine communications in four areas (marketing, prospecting, CRM, lead management)
2. Build a platform that allows a single agent to master/utilize that platform from anywhere on the planet
3. Make it possible for agents to deliver their services across the globe in 60 seconds

I like these features a great deal. I’m not sure I’m buying the “globe/planet” aspect of it, but anything on the Web is inherently global, so, I’m good there.

I’d like to understand a bit more your comments re: predictability. I’ll confess to not understanding that point.

Google is perfectly predictable. So is Ebay. So is BMW. None of those companies have any trouble dominating their industry.

I think what you’re pointing to isn’t predictability per se, but commodification. That is something I’ve been discussing on this blog for some time now, and I completely agree with you there.

At the same time, I don’t believe that commodification can or should be fought with something like information access. Goldman Sachs and Morgan Stanley work with almost entirely commoditized data, but have no trouble beating down competitors. I think the same thing applies in real estate. Put simply, it’s this (with apologies to James Carville):

It’s the service, stupid!

Note, however, that while agents and brokers can survive and thrive based on superior service, the MOF cannot. For the MOF, it isn’t the service per se, but the platform itself. The features, the benefits, the ease of use, etc. that all takes time and money to develop. And if the platform is solid (e.g., your platform that you’ve designed) and is a winner in the marketplace, your company will grow swiftly at the expense of your competitors. Then you will become the elephant gun.

So I see no disagreement here. When it comes to service providers, you’re on the money. But when it comes to technology providers, i.e., the MLS of the Future, then the bottom line is that “He who hath, shall get.”

-rsh

An elephant gun is not needed. A unified communications system can overcome economies of scale AND big money.Here’s how:
1. Combine communications in four areas (marketing, prospecting, CRM, lead management)
2. Build a platform that allows a single agent to master/utilize that platform from anywhere on the planet
3. Make it possible for agents to deliver their services across the globe in 60 seconds

This platform accomplishes three key goals:
1. Increases agents value
2. Lowers operational/implementation costs
3. High Tech and High Touch become a single entity

Large brokerages are able take advantage of much smaller players because of one thing; a linear predictable wrokflow; a workflow that’s prevalent throughout the industry. Agents are caught up in the turbulent never-ending battle of new business( leads) vs. current business(listings,buyers) and are forced to wear many hats. This constant repositioning is expensive and cumbersome, but that’s not the worst of it;the worst of it is that their actions are predicatable. Anyone that is predictable can be easily defeated by copying. Is there any wonder lead resellers came along to sap 30% of gross commissions with a simple tagline “We’ll tell you what your home’s worth”? This was made possible because the CMA is absolutely predictable. The same thing is happening now with the listings( sent out to multiple sites). How is it possible to differentiate yourself by having your listings posted to 25 different sites; it’s not.

The bottom line is that predictability equals economical suicide, so don’t be predictable. Agents will acomplish this by producing ,publishing, and distributing information over the web in 60 seconds or less. I know because I’ve designed it.

You presented this scenario in a very clear manner that actually makes sense and is more than likely very close to what our MOF will be.

First of all, kudos for just a wonderful set of observations. Indeed, that should be a blog post in and of itself. What a fantastic comment, sir.

Having said that, I am now going to disagree with you on a few points.

It is by no means a fact that only large players can innovate.

If innovation were the key, then you would be absolutely correct. But I don’t believe that innovation is the key when it comes to the MOF or anything that requires a large footprint to work. Execution is.

The classic example is Betamax. Despite being more innovative than VHS, it failed to gain traction because of missteps in marketing, adoption, and partnership formation. Or compare Microsoft vs. Apple.

Because what we are talking about is existing business practice — putting in property data into a database, then distributing it — we’re not talking about disruptive technology that no one could imagine. The classic tale of the “little guy” taking on the Big Corp and winning is almost always based on some disruptive technology that no one took seriously at the time. The reason for Microsoft’s success was that IBM’s people never thought in a million years that the Personal Computer would take off. It took a web search company to finally threaten Microsoft’s dominance in desktop software, because the Microsoft people didn’t see the threat until it was almost too late.

A National MLS is hardly a new, disruptive, innovative idea that no one in the industry has thought about. If anything, thousands of people have thought about it — we just haven’t had the will, the leadership, to do something about that.

Furthermore, if you pick a moronic badly run company as the counterexample, I can only agree. Any small company will run rings around Big Dinobot staffed with Mr. Steering Committee Members. But assuming for the moment that both companies are run relatively professionally, the resource advantage will most definitely come into play.

Give me $50m and a staff of 200; you take $500,000 and a staff of 4. Chances are, I’m going to have a better initial product than you. Even if your team of 4 work around the clock, innovate like mad, and create a better initial product, my guys will reverse engineer your stuff and have a copy out in the marketplace within 90 days. Then, I will release new features every six weeks, while running consumer focus groups, usability testing, and deploying a larger, better-trained sales force.

Lest you want to consider Trulia and Zillow as “little nimble guys”, may I point out that their funding is many times larger than the technology budgets of the biggest of the big brokerages? They’re not so little in terms of resources spent.

The kind of “little guy” MLS of the Future you’re thinking of, the one where the small, nimble, brilliant bunch of kids in a garage develop something so innovative that the Big Dinobots can’t cope with… you know what? When that MOF comes out, none of us will even recognize it as an MLS, nevermind the MLS of the Future. We simply can’t even conceive of it. Just like if you asked Ezra Cornell of Western Union in 1861, when they laid the first transcontinental telegraph line and held a monopoly in communications, what the Telegraph of the Future would look like, I really doubt Ezra would have answered, “Twitter”.

On the question of economies of scale and efficiencies, I offer another example from the MLS environment.

That’s a very interesting story. But as your story illustrates, here we have a case of two MLSes, both of which offer comparable services, including technology, which both presumably buy from the same set of national vendors. But one of them is 10 times larger. It’s a wonder that they only charge 4 times the price of the tinyMLS.

This is a classic case of the network effect. Considering that the whole value of a MLS to a subscriber is access to buyers and sellers via the other agents who are subscribers… I suspect that tinyMLS will soon be driven out of business, unless it comes up with something super-special that the BigMLS does not have. I mean… I really don’t care how nimble and smart your executive team is — I am not funding an online auction play against Ebay unless you can show me how you’re going to overcome the enormous network effect of Ebay.

I believe if we can get folks to settle on a standard like RETS (as Mike Wurzer has compellingly argued), and open the ‘valves’ to let the data flow (as the NAR/DOJ VOW settlement is inclined to do), it is the small and medium-sized players who will innovate us into the next generation.

Now, as it were, I happen to agree with you 100%. Once the data issues can get resolved, then I do think it may be the smaller guys who create the true killer app of the next generation.

My point, however, is that that company will not remain small for long. Competition will see to it. That small company can be the winner, with the winning product full of innovative value, in which case it will continually grow, adding subscribers, until it expands outside its initial market, first into the regional, then ultimately into the national market. And one day, its CEO will look around and go, “Jesus, when did we hire employee #3,000?” Or, it will not be the winner, in which case some other company will grow, add business, and ultimately come knocking with offers to buy out the shareholders, and it will become part of a large company. Either way, the MOF will be a Big Company.

Of course… if the industry never settles down on a common data standard… then I believe one will be imposed on us by a single large company that has created a compelling product, executed its plans, and acquired enough critical mass of customers. That will be the Microsoft model.

I really did like that movie, by the way, Sword in the Stone. In the real world, however, Russia beats Georgia. Every. Single. Time.

-rsh

Everyone is talking that a new RETS standard will save the day and make things easier. The major problem is that the RETS standard is pretty loose.

I always thought that all these boards and comities were a waste of time and resources.

Rob,
I don’t know if, as you predict, a monopolistic national MOF or an oligopoly of national MOFs will arise, but I take issue for your premise of why it has to or should.

It is by no means a fact that only large players can innovate. In fact, I think you can look around and see just the opposite. Large companies lack the nimbleness of smaller ones, and their costs for development can actually be higher. For example, I am familiar with a Fortune 100, publicly traded company that has just scrapped a software technology project designed to ‘harmonize’ its internal systems. After four years, 1/2 billion (that’s Billion with a B) dollars, and not a single piece of the software in production, management at this company decided to start over. No one was even fired as a result, because the project was the responsibility of a “steering committee” of executives within the corporation. A small company could never have afforded this kind of stupidity, nor could the responsbility have been so easily hidden in the corporate bureaucracy.

Arguing that the MOF has to be really big is also like arguing that only large brokerage firms will survive in the industry. Many medium and smaller brokerages are proving quite profitable (or were until the market tanked) just doing real estate brokerage, while much bigger firms talk about brokerage as a ‘loss leader’ for ancillary services like mortage and title. How can smaller firms be making money on each brokerage transaction, while big firms are losing it? Sounds like an inverse economy of scale to me.

On the question of economies of scale and efficiencies, I offer another example from the MLS environment. I have an MLS client that has fewer than 3,000 agents subscribing to it. It is adjacent to an MLS that has more than 30,000 agents subscribing to it. One of these MLSs charges FOUR TIMES the fees the other one charges… (imagine here the now-cliche sound effect of a needle being drawn across a record on a turntable) THE LARGER MLS CHARGES MORE. Why? Because it has neither competition nor any fear of competition. The smaller one, beset on all sides by bigger organizations, supplies a comparable range of services, including technology services, which it purchases from a competitive marketplace of national technology vendors.

I believe if we can get folks to settle on a standard like RETS (as Mike Wurzer has compellingly argued), and open the ‘valves’ to let the data flow (as the NAR/DOJ VOW settlement is inclined to do), it is the small and medium-sized players who will innovate us into the next generation.

I’m reminded of the Disney classic the Sword in the Stone. The wizard Merlin challenges the witch Madame Mim to a magical duel. They change into all sorts of animals, each attempting to overcome the other. Finally, Mim cheats and transforms into a dragon (breaking the rules of the dual); she thinks she has found the ‘big gun.’ Merlin transforms into a germ, making Mim sick and winning the duel.

I think the lowly little germ will prevail over the big gun much of the time.

-Brian

So, no doubt, your scenario or something like it…what ever it is, it won’t be what we see now.

Rock ON rob.