Free Consulting to Move, Inc.

So it seems my little tweet the other day has engendered a bit more discussion — you can find the fascinating back and forth here on AgentGenius.  One of the more interesting comments there comes from Russell Shaw, who says:

REALTOR.com is cluttered on every page with banner and tower ads that endlessly attempt to “distract” the shopper (who was attracted there in the first place with our listings) to click on the banner ad and wind up on that agent’s site. In short, our listings are nothing but bait for MOVE to sell ads to other agents so they can attempt to poach the client that would have naturally been ours.

Setting aside the utterly idiotic fees they charge, if it weren’t for NAR’s original bungling of REALTOR.com (*giving* it to Homestore, aka, MOVE) all these “other sites” like Trulia, Zillow, etc. would not even exist. Not at all. They were created because NAR gave away our name.

In Canada, http://www.realtors.ca/ is FREE, as in included with their dues to Canadian Realtors. Enhanced listings and all. (Emphasis added)

Verrra interesting… so here’s some unpaid, free “consulting” for Move, Inc.  It’s worth every penny you’ve paid for it. :)

Current Revenues

The first place to begin, of course, is where Move gets its current revenues.  According to Move’s 2008 Annual Report, Move generated $217M from “Real Estate Services” which includes Realtor.com and Top Producer.  The company describes it thus:

Real Estate Services consists of products and services that promote and connect real estate professionals to consumers through our REALTOR.com ® , Move.com and SeniorHousingNet.com web sites, in addition to the customer relationship management applications for REALTORS ® offered through the TOP PRODUCER ®  business. The Company’s revenue is derived from a variety of advertising and software services, including enhanced listings, company and property display advertising, customer management software and web site sales which are sold to those businesses interested in reaching the Company’s targeted audience or those professionals interested in being more effective in managing their contact with consumers.

But from that $217M, there were various expenses:

Revenue $217,233,000
Cost of revenue $38,394,000
Gross profit (loss) $178,839,000
Sales and marketing $75,956,000
Product and web site development $21,763,000
General and administrative $27,851,000
Restructuring $301,000
Total Expenses $125,871,000
Profit $52,968,000

The two that appear to be giving various REALTORS agita and heartburn are “Cost of Sales” — those pushy salespeople making phone calls — and “Sales and Marketing”.  Related is the $21.8M spent on “Product and web site development” — REALTORS are unhappy with the features and benefits provided by Realtor.com.

Making Real Estate Services Part of NAR Membership

So as Russell suggested, what if the NAR Membership simply included all access to Realtor.com, as Canada does with Realtors.ca?  While you’re at it, you can throw in Top Producer and whatever else is in “Real Estate Services” as part of the cost of being a REALTOR.

To do this, of course, you can’t simply give up $217M in revenues; what would it cost to replace it?

Turns out, there were some 1.197M REALTORS in 2008; we don’t know how many there were in 2009, but let’s assume a slight decrease to 1.1M members of NAR.  We know that the dues for NAR membership is $80 for the 2009-2010 period.

To make full access to Realtor.com (and Top Producer) part of the benefit of being a NAR member, dues would have to go to $277 for Move to maintain its revenues at $217M.  Whether NAR members would welcome more than tripling their annual dues for the benefit of full access to Realtor.com or not is unknown.

However, it isn’t that straightforward.  Turns out, if Move is able to replace the $217M from its Real Estate Services operations from dues payment by NAR members, it can wholly eliminate advertising on Realtor.com, entirely eliminate “enhanced listings” (since everyone would have the ability to enhance the listing as part of their NAR membership), and eliminate any need for direct sales.  Move can also eliminate much of its Realtor-oriented marketing, as that audience is simply paying over the $197 per year in revenues it wants to generate, and focus the marketing towards consumers (buyers and sellers) to visit Realtor.com.

What this means, practically speaking, is that the profits for Move would be much higher, even at a lower revenue base if the Cost of Sales and Sales & Marketing lines could be dramatically reduced.  In turn, some of that money can be reinvested into Product Development, to offer new features on Realtor.com (and on Top Producer).  Here’s one scenario:

Revenue $176,000,000
Cost of revenue $-
Gross profit (loss) $176,000,000
Sales and marketing $37,978,000
Product and web site development $43,526,000
General and administrative $27,851,000
Restructuring $301,000
Total Expenses $109,656,000
Profit $66,344,000

If we assume that there are 1.1M members of NAR, and that $80 per year is necessary for NAR’s operations, then dues would need to triple to $240 per year.  $160 of that goes to Move for annual revenues from the Real Estate Services division of $176M.

Cost of revenues can be entirely eliminated, since there is no longer any need to employ salespeople to make phone calls to sell enhanced listings packages or whatnot.  In fact, all ads on the site can go away too.

Sales & Marketing is halved, while Product and Web Site Development is doubled, reflecting the reinvestment that can take place.

Even while keeping G&A the same (maybe all those desks currently occupied by telemarketers get used by Customer Service?), and keeping in the $301K for restructuring, we can see that the ultimate operating profit is higher than under the current system: $66.3M vs. $52.9M.

Free Consulting to NAR

What’s even more interesting is that Move’s current market cap is only $412.41M.  This is about 1.7x of Move’s 2008 revenues of $242M.  We also know that the NAR license is absolutely critical to Move’s continuing viability, as discussed here by the management of Move.

So here’s a thought for NAR: Buy Move, then offer its suite of services for real estate professionals as a part of the dues of NAR membership (which, incidentally, triples).  Keep it separate, as a wholly-owned for-profit subsidiary of NAR, if you’d like.

Suppose you can buy all of Move for $450M; if the Move unit can generate somewhere in the $65M to $70M in profits, that’s payback in about 7-8 years.  But, once you eliminate the unhappiness of Realtors, and eliminate distracting ads from the site itself (as you don’t need those anymore under this business model), it’s entirely possible that Realtor.com comes to dominate the real estate search space.

Plus, by most accounts, only about 1.1M of the roughly 2.4M real estate licensees are members of NAR — there are another 1-1.5M people who could become members of NAR.  Those licensees can be offered subscriptions to Realtor.com at (let’s say) $30 per month — or join NAR for $240 for the year, and get all of the benefits of Realtor.com and TopProducers, etc. at no additional charge.

Seems to me that the NAR membership rolls would swell quite nicely, which in turn pushes up the profits that NAR would realize from its Move-based operations.

Win – Win – Win

So this scenario seems to me to be a Win for Realtors bitching about how horrible Realtor.com is, a Win for Move who can achieve higher profitability at lower cost of operations, and a Win for NAR who can grow its membership base while keeping its existing members happy(er).

The only obstacle is the dues, so I’d like to hear from the REALTORS reading this: How willing are you to go from paying $80 a year to $240 a year?

-rsh

  • Elaine Hanson

    Hmmm. I have to think on this one a bit, Rob. Can’t think of a thing Realtor.com has done for me so far, but if the ads, ENORMOUS fees and purchased feature boxes were gone, it might make a really attractive consumer search site – kind of like the national MLS idea that keeps coming up.

  • Elaine Hanson

    Hmmm. I have to think on this one a bit, Rob. Can’t think of a thing Realtor.com has done for me so far, but if the ads, ENORMOUS fees and purchased feature boxes were gone, it might make a really attractive consumer search site – kind of like the national MLS idea that keeps coming up.

  • http://www.realcentralva.com/ Jim Duncan

    I’d be willing to pay $350/year. Or more.

  • http://www.realcentralva.com Jim Duncan

    I’d be willing to pay $350/year. Or more.

  • http://Newscubamarketing.com/ Nick Bostic

    I’m not a realtor, but $240 seems very reasonable. I am a SCUBA instructor on the side and I pay almost the same amount and really get nothing for it beyond updates to my manual. I guess I had forgotten realtors only pay $80/year.

  • http://Newscubamarketing.com Nick Bostic

    I’m not a realtor, but $240 seems very reasonable. I am a SCUBA instructor on the side and I pay almost the same amount and really get nothing for it beyond updates to my manual. I guess I had forgotten realtors only pay $80/year.

  • http://www.SanDiegoLifestyle.info/ Jeffrey Douglass

    Rob, would be more than happy to be the increased dues to support Realtor.com as it truly should be. We have been idiots in giving our information away and having it sold back to us, time and again. If it were any other name other than Realtor.com they would not have gotten away with this.

  • http://www.SanDiegoLifestyle.info Jeffrey Douglass

    Rob, would be more than happy to be the increased dues to support Realtor.com as it truly should be. We have been idiots in giving our information away and having it sold back to us, time and again. If it were any other name other than Realtor.com they would not have gotten away with this.

  • Randy Hooker

    I don’t know, Rob. Superficially it sounds like a great proposal. But… is your idea just a way to monetize NAR’s hidden agenda [aka self propagation]? Is NAR ever really going to be supportive of individual,independent Brokers/Agents? I have my doubts. Given their propensity for self-sustaining, self-serving and self-indulgent behavior, do I really want to support them in any way? Not sure, my friend. But you do make a compelling case for fulfilling my own personal agenda, and a potential way to ‘compete’ with the likes of Trulia and Zillow, et al.

  • Randy Hooker

    I don’t know, Rob. Superficially it sounds like a great proposal. But… is your idea just a way to monetize NAR’s hidden agenda [aka self propagation]? Is NAR ever really going to be supportive of individual,independent Brokers/Agents? I have my doubts. Given their propensity for self-sustaining, self-serving and self-indulgent behavior, do I really want to support them in any way? Not sure, my friend. But you do make a compelling case for fulfilling my own personal agenda, and a potential way to ‘compete’ with the likes of Trulia and Zillow, et al.

  • http://www.smarterchoicerealestate.com/ Steve Wiley

    I would LOVE to pay more for every service, including NAR membership.

    I think this would produce better outcomes across the board. One such benefit to what I will call “true market” cost of business would be to drive the marginal Realtors out of the marketplace and keep the less committed from entering.

    This might also stop the endless “revolving door” of 12 – 24 month term Realtors who exit the business due to financially failure only after beginning to learn to practice business at a reasonable level of competence. With that factor removed maybe the public would see a higher level of service and feel the value of the price paid for our services.

    The unrealistically low threshold to enter our profession – both financially and education / licensing – is not good for us or for the public. So, I say BRING ON HIGHER FEES for NAR membership and elsewhere, too.

    Closing Note: Would NAR buying Move, Inc. (Realtor.com) have any unintended consequences for NAR members or the public? I think we need some more free consulting from Notorious Rob to answer that one.

  • http://www.smarterchoicerealestate.com Steve Wiley

    I would LOVE to pay more for every service, including NAR membership.

    I think this would produce better outcomes across the board. One such benefit to what I will call “true market” cost of business would be to drive the marginal Realtors out of the marketplace and keep the less committed from entering.

    This might also stop the endless “revolving door” of 12 – 24 month term Realtors who exit the business due to financially failure only after beginning to learn to practice business at a reasonable level of competence. With that factor removed maybe the public would see a higher level of service and feel the value of the price paid for our services.

    The unrealistically low threshold to enter our profession – both financially and education / licensing – is not good for us or for the public. So, I say BRING ON HIGHER FEES for NAR membership and elsewhere, too.

    Closing Note: Would NAR buying Move, Inc. (Realtor.com) have any unintended consequences for NAR members or the public? I think we need some more free consulting from Notorious Rob to answer that one.

  • http://www.notorious-rob.com/ Rob Hahn

    First of all, thank you all for sharing your thoughts. I find it absolutely amazing that “consumers” would clamor to pay MORE — this has to be unique in the annals of business history. :)

    Second, @Randy, I think NAR’s agenda of self-propagation is hardly hidden. Hehe. Every organization has to keep growing, or it dies. An organization based on membership (like an Association) has to keep growing, or at least maintaining its membership count, for financial and political power. That’s why I think buying MOVE makes sense for NAR.

    Third, @Steve… while some more free consulting might be fun, I’d rather see some paid consulting from either organization to explore all of the details and implications. :) . LOL.

    -rsh

  • http://www.notorious-rob.com Rob Hahn

    First of all, thank you all for sharing your thoughts. I find it absolutely amazing that “consumers” would clamor to pay MORE — this has to be unique in the annals of business history. :)

    Second, @Randy, I think NAR’s agenda of self-propagation is hardly hidden. Hehe. Every organization has to keep growing, or it dies. An organization based on membership (like an Association) has to keep growing, or at least maintaining its membership count, for financial and political power. That’s why I think buying MOVE makes sense for NAR.

    Third, @Steve… while some more free consulting might be fun, I’d rather see some paid consulting from either organization to explore all of the details and implications. :) . LOL.

    -rsh

  • http://www.LiquidBlueRealty.com/ John Kalinowski

    @Rob – You’re missing an important point – Our dues are already much more than $80 per year. We are also required to pay the state and local chapters’ dues. Here’s what I pay:

    NAR $80
    NAR ’09 Public Awareness Campaign $35
    OAR (OH association of Realtors) $110
    CABOR (Cleveland Area Board of Realtors) $163

    GRAND TOTAL: $388

    Not to mention the $360/year we pay for MLS membership.

    So, would I be willing to increase my fees for just another real estate search site (which is what I view Realtor.com to be)? NO WAY!

  • http://www.LiquidBlueRealty.com John Kalinowski

    @Rob – You’re missing an important point – Our dues are already much more than $80 per year. We are also required to pay the state and local chapters’ dues. Here’s what I pay:

    NAR $80
    NAR ’09 Public Awareness Campaign $35
    OAR (OH association of Realtors) $110
    CABOR (Cleveland Area Board of Realtors) $163

    GRAND TOTAL: $388

    Not to mention the $360/year we pay for MLS membership.

    So, would I be willing to increase my fees for just another real estate search site (which is what I view Realtor.com to be)? NO WAY!

  • http://www.phoenixrealestateguy.com/ Jay Thompson

    Yeah, it’s a tired argument, but let’s break it down a little.

    If some clown from r.com calls me once every 2 weeks and spends 3 minutes trying to convince me to buy a lousy product before my patience runs out and I hang up, that amounts to 78 wasted minutes of my time per year.

    The $160/yr dues increase divided by 78 = $2.05 per minute.

    Personally I value my time at a higher rate than $120/hr.

    So for me, an extra $160 a year to finally once and for all end the phone calls is a great deal.

    Now let’s look at another “service” r.com offers.

    The last time I decided to listen to the pitch for some sort of “enhancement” / advertising package that was going to result in untold wealth for my agents, it was going to cost me something like $38K. At $160/yr, it would take 236 agents to pay for that. But I’ve only got 15 agents. So they proposed what amounted to a per agent per year cost of $2,533 (actually, you can probably double that as at the time they proposed this I had about half the agent count).

    Now *IF* (and boy howdy it is one HUGE if) the R.com “package” does the wonders they claim it would, then $160/year is an absolute steal.

    Bottom line? Would *I* pay an extra $160/year to get what r.com offers? Only if they would promise not to call me any more. In that event I’d gladly pay the extra and I’d even pick up the extra for all my agents. Yeah, it’s that annoying.

    Would *most* agents be willing to pay an extra $160/year? I seriously doubt it. I think you’d hear a huge outcry from agents across the country.

  • http://www.phoenixrealestateguy.com Jay Thompson

    Yeah, it’s a tired argument, but let’s break it down a little.

    If some clown from r.com calls me once every 2 weeks and spends 3 minutes trying to convince me to buy a lousy product before my patience runs out and I hang up, that amounts to 78 wasted minutes of my time per year.

    The $160/yr dues increase divided by 78 = $2.05 per minute.

    Personally I value my time at a higher rate than $120/hr.

    So for me, an extra $160 a year to finally once and for all end the phone calls is a great deal.

    Now let’s look at another “service” r.com offers.

    The last time I decided to listen to the pitch for some sort of “enhancement” / advertising package that was going to result in untold wealth for my agents, it was going to cost me something like $38K. At $160/yr, it would take 236 agents to pay for that. But I’ve only got 15 agents. So they proposed what amounted to a per agent per year cost of $2,533 (actually, you can probably double that as at the time they proposed this I had about half the agent count).

    Now *IF* (and boy howdy it is one HUGE if) the R.com “package” does the wonders they claim it would, then $160/year is an absolute steal.

    Bottom line? Would *I* pay an extra $160/year to get what r.com offers? Only if they would promise not to call me any more. In that event I’d gladly pay the extra and I’d even pick up the extra for all my agents. Yeah, it’s that annoying.

    Would *most* agents be willing to pay an extra $160/year? I seriously doubt it. I think you’d hear a huge outcry from agents across the country.

  • http://www.phoenixrealestateguy.com/ Jay Thompson

    @Nick – “I guess I had forgotten realtors only pay $80/year.”

    You may also be forgetting local and state association dues. The NAR “Public Awareness Campaign” fee (yes, I help pay for “It’s a GREAT time to buy!!” no matter how stupid it is), MLS dues, lock box key fees, renewal hour fees, etc etc.

    Oh then there are the PAC fund requests they slide into the bills. Not required, but they sure do a nice job of making it look that way…

  • http://www.phoenixrealestateguy.com Jay Thompson

    @Nick – “I guess I had forgotten realtors only pay $80/year.”

    You may also be forgetting local and state association dues. The NAR “Public Awareness Campaign” fee (yes, I help pay for “It’s a GREAT time to buy!!” no matter how stupid it is), MLS dues, lock box key fees, renewal hour fees, etc etc.

    Oh then there are the PAC fund requests they slide into the bills. Not required, but they sure do a nice job of making it look that way…

  • http://www.MoreUtahListings.com/ rob aubrey

    Ditto Jay,
    $620 Dues
    Plus Lock Box Privileges
    MLS Fees
    Our MLS Charges $12,000 for an FTP IDX Feed, then $200 per user.
    Then they compete with us with the public site
    Don’t forget there is an actual MLS Fee for being an agent.

    REALTOR.com is a parasite and offers no real value to the industry. They do not represent Realtors, they are not Realtors they simply are a lead generating company using our listings to drive traffic to their site and sell you back the lead.

    Wake up agents, stop paying them and put them sons of $%*&#*@ out of business.

    My therapist said I should start expressing myself more. Wow that felt really good.

    For all the lead generating agents
    See ya at the trough

  • http://www.MoreUtahListings.com rob aubrey

    Ditto Jay,
    $620 Dues
    Plus Lock Box Privileges
    MLS Fees
    Our MLS Charges $12,000 for an FTP IDX Feed, then $200 per user.
    Then they compete with us with the public site
    Don’t forget there is an actual MLS Fee for being an agent.

    REALTOR.com is a parasite and offers no real value to the industry. They do not represent Realtors, they are not Realtors they simply are a lead generating company using our listings to drive traffic to their site and sell you back the lead.

    Wake up agents, stop paying them and put them sons of $%*&#*@ out of business.

    My therapist said I should start expressing myself more. Wow that felt really good.

    For all the lead generating agents
    See ya at the trough

  • http://www.realcentralva.com/ Jim Duncan

    @Jay Thompson – the focus on “most” agents dilutes NAR’s ability to work on behalf of “productive” agents.

    @Rob Aubrey – $12k for an IDX feed? That’s criminal!

  • http://www.realcentralva.com Jim Duncan

    @Jay Thompson – the focus on “most” agents dilutes NAR’s ability to work on behalf of “productive” agents.

    @Rob Aubrey – $12k for an IDX feed? That’s criminal!

  • http://maxsell.net/ Brad Nix

    I’ve been clamoring to pay more for years in exchange for a true membership ‘service’ and not the right to purchase a product.

    But let me nudge a little farther… is it conceivable to create a new membership club to solve this same problem? TAR: Technology Association of REALTORS? Could we separate politics and technology services? NAR membership serves political goals and TAR serves r.com goals? Heck, Trulia or Zillow may make more money running TAR than trying to sell ads. I’m just thinking out loud and in public (dangerous I know), but what if?

  • http://maxsell.net Brad Nix

    I’ve been clamoring to pay more for years in exchange for a true membership ‘service’ and not the right to purchase a product.

    But let me nudge a little farther… is it conceivable to create a new membership club to solve this same problem? TAR: Technology Association of REALTORS? Could we separate politics and technology services? NAR membership serves political goals and TAR serves r.com goals? Heck, Trulia or Zillow may make more money running TAR than trying to sell ads. I’m just thinking out loud and in public (dangerous I know), but what if?

  • http://www.moreutahlistings.com/ rob aubrey

    @Brad Nix, sign me up.

    As pointed out in the articel R.com is owned by Homestore.

    For sh*ts and giggles Google the phrase Home Store Executives Sentenced

    @Jim Duncan yes it is criminal. But I am a silver lining kinda guy. I lobbied the 7 KW offices in the region and we now pay $15 per year per agent, we get a free solution as part of the KW system.

    It sucks for the small shops they can’t compete with that. But we just adapt and move on.

  • http://www.moreutahlistings.com rob aubrey

    @Brad Nix, sign me up.

    As pointed out in the articel R.com is owned by Homestore.

    For sh*ts and giggles Google the phrase Home Store Executives Sentenced

    @Jim Duncan yes it is criminal. But I am a silver lining kinda guy. I lobbied the 7 KW offices in the region and we now pay $15 per year per agent, we get a free solution as part of the KW system.

    It sucks for the small shops they can’t compete with that. But we just adapt and move on.

  • http://www.phoenixrealestateguy.com/ Jay Thompson

    @Jin Duncan – “the focus on “most” agents dilutes NAR’s ability to work on behalf of “productive” agents.”

    True. But what is ratio of productive:most agents? 80/20? 90/10? Should NAR focus on behalf of productive agents or what is (IMO) the vast majority of agents?

  • http://www.phoenixrealestateguy.com Jay Thompson

    @Jin Duncan – “the focus on “most” agents dilutes NAR’s ability to work on behalf of “productive” agents.”

    True. But what is ratio of productive:most agents? 80/20? 90/10? Should NAR focus on behalf of productive agents or what is (IMO) the vast majority of agents?

  • http://www.TheAgentTrainer.com/ Matthew Rathbun

    Why pay more to get R.com in the dues? Concentrate on your own branding and micro-market online advertising. How often do people find r.com when they do a Google search?

    I now a lot of people start their searches at r.com but I never got enough valuable hits from r.com to justify even $200 a year.

  • http://www.TheAgentTrainer.com Matthew Rathbun

    Why pay more to get R.com in the dues? Concentrate on your own branding and micro-market online advertising. How often do people find r.com when they do a Google search?

    I now a lot of people start their searches at r.com but I never got enough valuable hits from r.com to justify even $200 a year.

  • http://www.hawaiilife.com/ Matt Beall

    Great post. It’s exactly what should happen: Raise the dues, and the benefits to Realtors. The barrier-to-entry in real estate is dismally low as it is. Dues are a powerful way to draw a line in the sand, but only if control is given back to the people providing the original content (listings).

  • http://www.hawaiilife.com Matt Beall

    Great post. It’s exactly what should happen: Raise the dues, and the benefits to Realtors. The barrier-to-entry in real estate is dismally low as it is. Dues are a powerful way to draw a line in the sand, but only if control is given back to the people providing the original content (listings).

  • http://www.johnmijac.com/ John Mijac

    Personally, I think it is a little late in the day to expect REALTOR.com to change its stripes voluntarily . . . and I believe their current model is broken. There are way too many other sites available for consumers to choose from to make a strong argument for R.com to win the day with increased dues. As for the National MLS, Real Estate is local, some sort of data share will make listings available everywhere eventually, but a National MLS makes no sense.

  • http://www.johnmijac.com John Mijac

    Personally, I think it is a little late in the day to expect REALTOR.com to change its stripes voluntarily . . . and I believe their current model is broken. There are way too many other sites available for consumers to choose from to make a strong argument for R.com to win the day with increased dues. As for the National MLS, Real Estate is local, some sort of data share will make listings available everywhere eventually, but a National MLS makes no sense.

  • http://www.LocalHomeLink.com/ Brodie Stephens

    We would be happy to pay this amount. We already pay $400/ year for the Showcase with Realtor.com. How can we make this happen?

  • http://www.LocalHomeLink.com Brodie Stephens

    We would be happy to pay this amount. We already pay $400/ year for the Showcase with Realtor.com. How can we make this happen?