Monthly Archives: October 2008

NAR Social Media Manager – A Concerned Endorsement

I am endorsing Todd Carpenter of Lenderama for the Social Media Manager position for the National Association of REALTORS. His plan is a solid one, and his experience with the RE.net makes him an invaluable resource.

However, I am rather concerned for Todd, and I make the endorsement with a good deal of reluctance and hesitation.

The concern and hesitation have nothing to do with Todd — he’s the ideal, perfect candidate in so many ways. Rather, what gives me pause is NAR itself. I don’t know how serious they are about embracing the fundamental changes necessary to make social media meaningful.

Reason #1: The Position

By rights, this should be at least a VP position in NAR, perhaps reporting to Frank Sibley, SVP of Communications, or to Bob Goldberg, Senior Vice President, Marketing & Business Development & Commercial Services, & President & COO, REALTORS® Information Network. Actually, if I were running NAR, this would be a Senior Vice President position on par with Frank and Bob, because it encompasses so much more that simple communications, more than marketing, more than business development.

“Social Media” as a phrase gets thrown around quite a bit, and I rather think most people either have no idea what it actually means, or use it as a convenient shorthand for “blogs, Twitter, and all that web stuff”.

What they don’t understand perhaps is that “Social Media” is media first and foremost. It arose out of the infancy of the blogosphere when individual bloggers were pounding the mainstream media (“MSM”) into the ground with their analyses, factchecking, and highlighting of little-reported stories. It has since evolved into an actual newsgathering operation on many fronts (see, e.g., Michael Yon).

If I take NAR at face value, creating a Social Media strategy means that it wants to supplant the MSM as the source of information on all things real estate to the American consumer. I do not believe this is NAR’s goal, and if it were, I do not believe that NAR is well-suited to running such an operation for a variety of factors. (Least of which is the inherent bias of real estate agents in reporting on real estate.)

So I have to take NAR not at face value, but at some code phrase value, thinking that what NAR really wants to do is come up with a strategy for helping REALTORS market more effectively to consumers by using the Web. Let us, then, instead use the term “Social Marketing”.

Because what NAR is really looking for is a “Social Marketing” strategy, I do not believe that the position has enough power within the organization to be truly effective. I could be dead wrong on that, of course, especially if the senior leadership from Dale Stinton on down are completely, 100% behind the effort, and are willing to listen to the Social Marketing Manager (“SMM”) and implement his/her plans.

My experience with large organizations, however, suggests to me that unless a position has (a) significant budget control, and (b) significant staff, it lacks power.  The job description is silent on either point.  Further, given that there are titles such as “Managing Director” at NAR, it leads me to believe that this position is at best a mid-level worker-bee position, rather than a strategic leadership position.

Todd can be the SVP of Social Marketing for NAR; he has the experience, the insight, the knowledge, and the connections.  He’s almost too qualified for this role.  So I endorse him, but with concern that he’ll spend most of his tenure banging his head against a brick wall… and silenced because he’s now part of the Establishment, instead of being a voice from outside the walls.

Reason #2: Fundamental Shift

So why does this position need to go from being a Social Media Manager to SVP of Social Marketing?

Because a social marketing strategy, in order to be effective, has to be disruptive to all of the existing marketing of NAR, most of its infrastructure, and vast parts of the membership.

I just don’t know if the people at NAR understand just how fundamental a shift it represents to go from the traditional marketing/communications model to a social marketing model.  I fear that they see this as more or less a “hey, we need to teach agents how to blog” distraction, rather than the kind of seismic change that will impact everything from membership to government relations.  And if NAR doesn’t see that, then it is far more likely that the needed initiatives will be stifled at birth within the organization, rather than given the juice and the horsepower to proceed.

To pick just one example, is NAR willing to completely suspend their idiotic advertising campaigns because the Social Media Manager insists that those ads are ruining the basis of social marketing: TRUST?

Again, I could be wrong, and I hope to be wrong — but the signs are not good.

Reason #3: Social Marketing Is Unproven

Finally, the uncomfortable truth of the matter is that social marketing in real estate is still unproven.  Anecdotes are not the plural of evidence.  That some blogger-agents are able to do enormous business does not establish in and of itself that social marketing is what is responsible for their success.  For all we know, it’s all of the other things that the blogging agents do that makes them a success, such as getting local knowledge, having professional ethics, and a rock-solid understanding of real estate fundamentals.

There has never been, to date, a systematic study of the ROI from blogging and other social marketing activites.  None.

The ‘good anecdotes’ are counter-balanced by the ‘bad anecdotes’ that show that some agents who are major RE.net figures, with top-notch SEO leading to excellent Google rankings, and are elite Twiterati nonetheless sell a fraction of the houses that the non-techie agent down the street sells.

No major (say Top 20) real estate brokerage has a track record showing the impact of social marketing on their revenues, on their profitability, on their efficiency, on customer retention, etc. etc.

Even if Todd is the greatest social media guru who has ever lived, and NAR is completely and 100% behind his efforts… it simply may be the case that social marketing does not have a dramatic impact in real estate.

After all, we are still talking about seven year cycles in between purchases.  How much blog reading about houses is the consumer going to do once he’s bought the damn house?  This is a market fundamental that no amount of Twittering can change.

I have faith in the transformative power of the web and the connectivity between humans it enables.  I believe that social marketing does have a positive impact on brokerage, done correctly.  I have faith; what I don’t have are facts.

Todd is the Right Man; Is this the Right Job?

So I am left with endorsing Todd as being the right guy with the right plan and the right skills.  He’s a leader, an inspiration, and a mentor to so many of us in RE.net.

Question is… is Social Media Manager the right job?

-rsh

Inside the Brokerage Numbers, Part 2 (AKA, Our People Are Our Most Valuable Resources. NOT!)

In part 1 of this series, I looked at per-person productivity numbers which simply made no sense. Thankfully, people like Russell Shaw and Jay Thompson stepped in to provide at least an explanation. Simply put, there are too many agents chasing the same number of deals.

So despite large improvements in personal productivity of a realtor thanks to technology, sales per agent had to go down as the denominator (# of agents) increased throughout the industry.

Seems logical to me.

So I looked at recruiting and training figures. Oh, how fun!

Show Me The Money

Again, according to the 2007 REALTrends Brokerage Performance Report, the average and median spends (as a percentage of GCI) look like this:

Recruiting

Average: 0.39%, Median: 0.19%

Training

Average: 0.45%, Median: 0.30%

REALTrends thinks that recruiting costs went up “somewhat” over the past few years, while training costs are back to 2004 levels. Then they make this statement:

With the assumption that training and recruiting are linked together, it follows that where brokerage firms are spending less to recruit or have less success in recruiting due to market conditions, then some proportionate decrease in training will occur. (p. 28 of Report)

If true, then here lies another significant issue for brokerages. In this post on OnBlog, I ran through some assumptions to get at what the GCI involved is, and came up with $12.6m in GCI for the “average” or “median” respondent. Let’s go with that for the purposes of illustration.

That means the average brokerage spent $56,700 on training in 2007 (0.45% of $12.6m). We have no way of knowing how many employees that represents, but the company I picked to generate that GCI number (#250 on the PowerBrokers 500 list) had 255 total agents with two offices. That means this hypothetical brokerage spent $222 in training costs per agent. Keep this number in mind.

According to this study by the American Society for Training and Development:

The average direct expenditure per employee in the consolidated sample of organizations rose to $1,103 per employee in 2007, an increase of 6.0 percent from 2006. The average learning expenditure per employee in both ASTD Benchmarking Forum (BMF) and ASTD BEST Award-winning organizations was higher than the consolidated average. For BMF organizations, average direct expenditure per employee was $1,609 in 2007. The BEST Award winners spent an average of $1,451 per employee on learning and development.

In other words, real estate companies spend one-fifth what other companies spend on training. There’s more.

According to this report by Bersin & Associates, “The average spending per learner is $1,273. The highest spending sector is technology ($2,763) and the lowest is retail ($519).”

Because of the jankiness of my data (all sorts of assumptions going on there), I can’t say for sure that real estate brokerages actually spend less than half ($222) of what McDonald’s or The Gap spends ($519) on training. But I think it’s pretty clear that brokerages are closer to retail than they are to technology in terms of training expenditure per person.

But here’s a way to gut check the numbers. Let’s pick a brokerage at random from the PowerBrokers 500 list. (Shake, shake, shake… roll dice — #173) Okay, #173 has 480 agents doing $580m in transaction volume. If this company were to spend the American corporate average, as per Bersin & Associates, its training budget would be $611,040. Does anyone believe that any real estate brokerage company spent $600K on training in 2007?

Our Assets Walk Out the Door Every Day

Back in the day, when I was thinking of law, a senior partner at a major NYC firm told me, “Our assets walk out the door every day.” Which seems obvious. Can’t really have a law firm if you ain’t got no lawyers.

The same holds true for real estate brokerage. Again, this seems obvious. No agents = no brokerage. The best website in the world, the best marketing, the best office space, the most comfortable chairs — none of these things will mean a thing if the people stop showing up for work.

So what gives?

I know a part of it is that the agents are all 1099 independent contractors who can walk at any time. So a brokerage has very little incentive to train an agent only to see her walk out the door and across the street to a competitor. I believe this is a fundamental weakness of the brokerage model — but there are small companies and teams that overcome that weakness.

Perhaps another part is that the training happens prior to someone being hired, as people have to study for the real estate license exam.  But a licensing exam isn’t the answer.  One, licensing exam tests factual knowledge, not sales technique or customer management.  Two, it is a well-known fact that real estate licenses are notoriously easy to get.  Easier in some states than getting a hairdresser license.  So relying on licensing schemes strikes me as a non-good way of getting ‘trained’ professionals.

Maybe a third is NAR training to get the REALTOR designation.  I haven’t heard anyone talk about how hard the REALTOR designation is to get, so I’m classifying this one as “too easy, too many” type of a deal.

From my perspective, the apparent lack of training (if true) really helps me to understand a bunch of things that I couldn’t understand before. Like, why do so many agents suck so bad? Why are so few of them informed about their own market? Why do so few of them do an adequate job of followup and CRM and marketing? Why is it that so few of them can speak intelligently to intelligent professionals?

I had a lot of trouble squaring the number of poor experiences I’ve had personally over the years with various real estate agents with the smart, professional realtors I’ve met over the years working in the industry.

Well, no longer. The pieces are falling into place.  They are not trained.  They are not trained.  They. Are. Not. Trained.

When it appears that the average fry cook at McDonald’s is better trained than the average real estate agent who is handling the most important purchase of a consumer’s life, the claim that realtors are licensed professionals is a joke.

The apparent lack of training — if real — points to a fundamental problem in the industry.  This isn’t something that can be fixed with a blog.  Or a nifty agent website.  When the basis of the business is on trustworthiness, expertise, and professionalism, spending so little on training is going to yield precisely the expected result: crappy agents.

No wonder that the Per Person Productivity numbers are down across the board.

-rsh

Inside the Brokerage Numbers, Part 1 (AKA, Umm… WTF?)

Numbers make me hot!

Numbers make me hot!

Over at the OnBlog, I posted an item discussing the difference between how much brokerages spend on print advertising vs. their website. That was for the clients (past, present and future) of Onboard Informatics. This blog is where I get to talk speculative BS with friends in the RE.net.

So… let me start out by saying how much I love the REALTrends guys. They are providing an invaluable service to the industry with their research into productivity numbers and metrics. If you don’t subscribe, and you have anything to do with brokerage operations, you probably should. Go. Subscribe. Buy their reports. Tell ‘em the Notorious One sent ya.

I am getting most of my inspiration from the 2007 REALTrends Brokerage Performance Report. (I’m sure this stuff is copyrighted, but I have no desire to hurt REALTrends; I’m considering my usage of their stuff as fair use in order to discuss the issues.)

Ummm…

So the first thing I noticed is from the Executive Summary, where RealTrends noted that Productivity Per Person (PPP) dropped again in 2006, and noted that this drop “continue[d] the downward trend of nearly 10 years”.

Wait a second. Nearly 10 years? Ten?

So we’re talking about 1998 – 2008… during which time period we have had the single biggest real estate bubble in the history of the United States, nay, the world resulting in the financial cataclysm of 2008. I don’t quite understand. This means that the PPP is divorced from the real estate market as such — even during the height of the real estate bubble, the PPP dropped.

Let us keep in mind that this ten year period is when the PC revolution truly hit home: “Productivity grew from 1.33 percent to 2.07 percent between the periods 1975-1993 and 1995-2000, according to Dale Jorgensen of Harvard University, Mun Ho of Resources for the Future, and Kevin Stiroh of the Federal Reserve Bank of New York.” If you’re so inclined, you can read the original report here (PDF).  It’s actually really good.

Anyhow… so it appears that in the midst of the biggest increase in worker productivity in a generation, real estate brokerages suffer a drop in productivity.  What explains this phenomenon?

Could it be that real estate is somehow immune to productivity gains from technology? Having email, computer, smartphones, and all the rest simply do not make buyers want to buy any more houses, or buy them faster, or with less work on the part of the agent?  Did real estate agents decide that with all the productivity gains they were making thanks to technology, they weren’t going to work any harder, but spend more time on the golf course?

Again, the market conditions of the past couple of years can’t explain this. This drop in productivity was happening throughout the biggest boom in real estate in memory. So what explains the PPP numbers?

WTF?

If those numbers make you scratch your head, this one will blow your mind.  Again, according to the REALTrends Report, “Profitability slid to 4.3% [in 2006] from 7.4% [2005] and 7.8% [2004] for the previous two years respectively.”

Now.

From the exact same executive summary, we learn that

(a) employment costs dropped 0.4% of GCI from 2005 to 2006;

(b) advertising expenses dropped 0.55% of GCI from 2005 to 2006; and

(c) occupancy costs (i.e., office rent) rose 0.3% of GCI from 2005 to 2006.

These three things taken together make up 75% of all costs of operation in 2006.

So in summary we have a whopping 41.8% drop in profitability for all brokerages in spite of their cutting employment costs and advertising costs, because office rent went up by 0.3% of GCI?

It seemingly makes no sense, until you consider that apparently, at least the Top 100 Brokers (that is, the Top 100 of the REAL Trends 500 list) actually added agents and offices between 2005 and 2006.

In 2005, there were a total of 210,154 agents working for the Top 100; in 2006, that number was 212,431.  The number of offices went from 4,034 to 4,077.  Meanwhile, PPP (Per Person Productivity) went from 9.5 to 8.1 — a drop of 14.8% — and total # of closed units went from 1.99 million to 1.73 million (a drop of 13%).

Incidentally, the 2005 numbers were worse than 2004 numbers.  PPP went from 10.0 to 9.5; total closed units went from 2.08 million to 1.99 million.  But agent numbers went from 208,000 to 210,000 and office numbers went from 3,998 to 4,034.

So let me get this straight.  Brokers were adding costs while their productivity and revenues were falling… not as an aberration, but as part of a trend?  And people were trying to become real estate agents in the midst of what was clearly a bubble bursting?  And other people were hiring them?

o.0

Maybe the three-to-one spend on print advertising over website is not the biggest problem that brokerages have.  And maybe our industry needs fewer Web 2.0 consultants and more straight-up business consultants that understand arcana like “cash flow” and “ROE”.

-rsh

On Corporate Social Media

Broker and blogger Bill Lublin often has very wise things to say, and this post is no exception:

A study created by Adam Sarner, an analyst with market research firm Gartner, indicates that more than 75 percent of Fortune 1000 companies will have a social-networking initiative for marketing or customer relations purposes. However Sarner predicted that 50 percent of those campaigns will be classified as failures because of a disconnect between the goals of the companies and the communities they attempt to serve.

To those of us who are active in Social Media but are not corporate marketing executives, perhaps its easier to understand the path of the relationship between participants. The identity that we build from our profile establishes a reputation through our posting, sharing and commenting which becomes the basis of how we are perceived by other participants in the social arena – hopefully earning their trust so that when they need our product or service they think of us.

I think Bill is right on the money here (and so is Adam Sarner, the Gartner analyst whom Bill quotes). Thing is, I’ve been a corporate marketing guy, and arguably, I still am. And I’m active in “social media” (again, I am reminded of the quote from Princess Bride… I do not think it means what you think it means, but that’s neither here nor there). I don’t believe that the disconnect between the goals of the company and the community is a fundamental one, but I do believe that both sides have to understand that.

Without a background of agreement, connecting is impossible.

Early on in my career, I remember a senior executive saying, “You want to know what the consumer wants? He wants everything for free.” There’s a lot of truth to that. At the same time, what a company really wants is for customers to pay them money for nothing. Those are the two extremes from which any discussion of “goals” has to start. Because few people are willing to pay good money for absolutely nothing, and few companies are willing to give away everything for free, usually both sides end up inching towards the middle where people give money to companies for something of value. (Granted, last couple of years have produced a bewildering array of counterexamples to both of these things… but those consumers will be out of money and those companies will soon be out of business.)

The fault does not lie, IMHO, solely with the Big Bad Corporation. Their customers must come to recognize that much of the fault of the disconnect lies with them.

Both sides have to recognize that their mutual goal is for the company to make money. That is the basis of the relationship, if you will. While every company knows that, not every customer does.

Corporate social media works when the company, its brand, and/or its products are seen as being valuable enough to its customers that they willingly part with their hard-earned dollars.  In some cases, that can become an intensely emotional relationship — just take a look at Appleheads willing to line up for hours to buy the latest iPhone.  Any social media strategy Apple puts into place is likely to work, because the goals of the company and its customers are aligned: make money for Apple.

In contrast, when the customer sees the company as being not much more than a ripoff artist, no social media strategy of any kind is going to work.  For example, no amount of blogging or Twittering or FaceBooking is going to get me to engage with the local used car salesman.  I just don’t trust the dude.  My goal — to avoid getting scammed — is directly in conflict with his goal — to make money.

What Mr. Used Car needs to do is to first turn around the whole basis of the relationship.  He needs a level of transparency that is going to be frightening for him — the commercial equivalent of going full monty on his business.  He can tell me (via his blog, or whatever), look, this is what I paid for the car, this is my cost to store it, clean it, refurbish it, etc., and this is the profit I need to make.  Are you okay with me making that much profit on this deal?  If my answer is no, then he should rightly de-friend me on FaceBook.  I’m no customer; just a vulture.

Real estate brokerage has issues that we are working out as an industry.  We’ll all have a giant hangover for the next several months as we recover from the party that was 2002-2006.  During that time, and frankly into much of 2007 and 2008, more and more consumers came to view realtors as bloodsucking leeches just scamming home sellers and buyers alike.  The level of trust is so low that it isn’t really possible to say that the goals between brokers and customers are aligned right now.

I think this will turnaround.  And I think social media will have a large role to play in it, as agent after agent, and broker after broker starts the painful process of transparency.  The best are already doing it; some are even “firing” their clients if they don’t get it.  I am hearing from more and more industry leaders that agents need to present facts and data about pricing trends, and if the seller still refuses to list at the appropriate price point, that the agents need to walk away and refuse to take the listing.

We still live in a (nominally) capitalist country.  Customers are rational people for the most part.  When presented the facts and information, and asked if an agent should make money helping them with a home purchase, most will answer affirmatively.

And doing social media with those people, the ones who think you should make a buck or two for your time and energy, is a very different thing than trying to do social media with people who think you’re just a scumbag realtor.

-rsh

Blipping Out – How About A Real Estate Blip?

So I promised a more serious post about Blip.fm, the social music network that I’m fairly obsessed with these days. It’s taken a few days for the thoughts to gel, and I’m not convinced that they have fully. But in the interests of starting the discussion, I want to get this out there.

Could a blip.fm type of service work in real estate?

On Blip Itself

First, we must talk a little bit about Blip for those who don’t know that the *blip* I’m ranting about.

Blip is basically Twitter + Online Radio. The concept is really cute — every person signs up and can become a “DJ” by “blipping” various tunes. Each tune, with its 140 character message, goes on a blipstream that is identical to Twitter. Your listeners/followers can hear the songs you’ve blipped in turn.

So rather than listening to a professional DJ on some online radio station (and I guess that makes the term “professional” somewhat loose here), you can listen to music that all of your friends think is cool.

The mechanism for how one actually goes about doing blips is worth a look. First, the box at top is a search box, rather than a Twitter-style message box. That search then activates an in-screen search of songs/artists that match the keywords:

From right here, you can “Preview” — meaning, you can listen to the song — then you can “Blip” which means you actually publish that song as your choice.

The actual Blip then brings up the message window:

Second, the social aspect of Blip.fm is pretty strong. The basic one is that people listen to you — if you’re blipping the tunes that more people like, then they’re more likely to listen to you. The other one is that you can give and get “Props” to other DJ’s for their selections. The props then lead to little stars on your profile pic. Ego-stroking is a very important thing on the Web.

The whole thing is very addicting, especially if you’re into obscure 80’s new wave songs and old school rap and such.

So… RE Blip?

What I was wondering is whether this mechanism can work in real estate, as a replacement for traditional search.

I don’t mean traditional search as in the search box that exists on a website — I mean the actual process of looking for a house: checking websites, driving around neighborhoods, talking to people, and so on.

Why not crowdsource the whole thing, as Blip does for music?

Imagine a scenario where I can go onto reblip.com, do a basic keyword search, find a bunch of listings, find a bunch of neighborhood info pages, etc. and “blip” it with commentary.  Such commentary could be something positive like “This looks like a great deal” to something critical like “I can’t believe someone actually put this piece of crap up for sale”.

Folks who are actually IN the search process can blip the houses they’ve gone to see with commentary; their friends and followers would pick up on that.

Realtors can continuously blip listings that they really like, or interesting neighborhoods, etc. and see if anyone follows them.  That seems obvious.

The traditional “featured listing” mechanism won’t work here — because if you’re just pimping your highest priced property, or blipping a listing only because you’ve promised the seller that you’d do that — then no one is likely to follow you.  What’s the point?

Furthermore, if you’re good at finding neat houses, or underpriced properties, or whatever, then you can get props propelling your visibility upwards as well.

Now… I understand that all of this can actually be done via Twitter.  Just put a tinyurl link of the listing itself into the tweet, and there you go.

Thing is, I don’t think that’s enough.  To me, what makes Blip compelling is that the entire experience is unified and self-contained.  There are no external links for fetching music.  No external search.  In fact, I can listen to the music directly from within Blip.  Twitter can be used for this sort of crowdsourced search of properties, but that makes the experience disjointed.

A single site, with a unified user experience, that is able to showcase at least the highlights directly in the “blipstream” would work better, I think.  Because that lets me, if I’m a follower of various REBlippers, to quickly scan a bunch of properties that those people think are cool for one reason or another.

The Recommendation Engine

There is one other key to Blip: the recommendation engine.  It’s a very simple one for Blip.  Whenever you blip a song, the system tells you (and shows you) who else has blipped that song.  You can then decide to follow them, seeing as how you have similar tastes in music.

For REBlip, this is going to be a bit more complicated.  Non-realtor users are unlikely to blip anything, as they’re the consumers of information.  But even if they did, it strikes me as unlikely that others who blipped the same house have the same taste as you do.  Plus, the properties themselves do not necessarily share commonalities as music does.

A song by Jay-Z and a song by Public Enemy are both rap songs, a distinct genre of music.  But is a 3BR/2BA Tudor in one city the same “genre” of housing as a different 3BR/2BA ranch in another city?

Taken together, these challenges suggests to me that a relatively sophisticated recommendation engine would need to be developed with something like a “House Genome Project” — patterened after Pandora’s pioneering Music Genome Project.  This way, if I’m a consumer user, I can follow certain folks who have a knack for blipping properties I find interesting for one reason or another.

The Dream Search

It probably has to do with the fact that I am a fairly lazy guy when it comes to things like shopping for stuff, but my dream house search looks very much like my dream shopping experience.  Which I’ve actually had at Emporio Armani.  I walk in, find an associate, tell him in vague and general terms what I’m looking for (“Something appropriate for business, but still casual and hip”), have someone hand me a caffe latte, and I sit around and wait for various well-dressed minions to bring me merchandise.  In most cases, the good salespeople bring me items that I personally would never have looked at twice, but end up buying because their fashion eye is better than mine.

I kinda want to be able to tell my friends and various professionals out there in vague general terms what I’m looking for in a house or in a neighborhood, and have them bring me merchandise.  Maybe my friends know me better than I do and blip me properties they think I’d be happy with.  Perhaps the professionals I follow have a knack for finding stuff that is spot on for needs of a thirtysomething officeworker with a family.

But I think something like a REBlip could be pretty cool to have.  Crowdsourced real estate search.  Somebody get on that please.

-rsh