Franchise IDX Is Dead! Long Live Franchise IDX!

Posted By Rob Hahn October 21, 2011, Filed under: Marketing, Real Estate, Technology@ 4:02 AM

At first glance, the biggest change in the new IDX Policy to be proposed at NAR Anaheim is that it removes entirely the section allowing Franchise IDX. The entire section is struck.

There will be much rejoicing in the anti-Franchise IDX partisans, and much gnashing of teeth in parts of New Jersey, Texas, Colorado, and elsewhere. Except that both the rejoicing and the gnashing will be premature. Naturally, there will be differences of opinion on the subject, but I do believe that much like royal succession, the death of the old king results immediately in the new king taking power.

The valuable lesson that the Franchises will have learned from this whole affair is not to ask NAR for permission before spending millions of dollars on a new approach to listing data. That does, of course, concern me, but let’s delve into the analysis first.

Ye Olde Franchise IDX Language, And Its Demise

First, for anyone new to the industry, some background on the whole Franchise IDX kerfuffle. I tried to cover it as best as I could.

Second, the new IDX Policy document strikes out the entire section. But in order to understand what the new policy might be, it would be useful to see what was taken out. Here it is:

Display of IDX Information by Real Estate Franchise Organizations

Participants may provide IDX information to their real estate franchise organizations (“franchisors”) to be indexed for display on franchisors’ websites. For purposes of this policy, “real estate franchisor” is defined as a company granting real estate brokerage franchises under the franchisor’s trademarks pursuant to a franchise disclosure document meeting applicable Federal trade Commission rules. Display of IDX information by franchisors is subject to the following requirements and limitations. Failure of a franchisor to comply with the following requirements and limitations can, at the discretion of the MLS, result in suspension or termination of the participant’s(s’) authority to provide IDX information to the franchisor:

  1. Initial search results that provide minimal information (e.g., “thumbnails”) are exempt from MLS-required disclosures (e.g., listing firm, listing agent, source of information, notice that information is deemed reliable but is not guaranteed accurate) provided that a direct link to a detailed (“full view”) display that includes all required disclosures is provided.
  2. Consumers can link directly to the detailed (“full view”) display that complies with MLS disclosure/display rules of the source MLS.
  3. IDX information is not used for any unauthorized purpose.
  4. Inaccurate or incomplete information related to any listing is promptly corrected by the franchisor at the request of the source MLS.
  5. No advertising may appear on pages displaying IDX information.
  6. IDX listing information will not be modified, manipulated, or permanently retained. (Adopted 11/10) M

That entire section, all of those words, were brutally massacred in this go-around of the IDX Policy.

The obvious new policy, simply through negation, is that participants may not provide IDX information to their real estate franchisors. That is, if the above language had never been passed, there would have been a question as to whether brokers could provide IDX to the franchisor; passing the above policy meant a positive affirmation of a right that was not previously codified into the IDX Policy. And now with its repeal, one simply cannot argue that the IDX policy doesn’t contemplate a broker/participant providing IDX information. It did, and it does, and the answer as of November will be, “Thou Shalt Not.”

Trouble is, the policy was always about giving, then taking away, the right of a MLS participant to do X, Y, and Z. It was always silent on what the franchisor may or may not do. That probably makes sense since the franchisors are not participants, not members of NAR, and therefore impossible to be bound: NAR has no jurisdiction or authority over the franchisors.

The idea, I think, from both the anti-Franchise IDX people and the committee charged with dealing with this thorny issue, was that franchisors should be treated like any other third party listing aggregator, such as Trulia or Zillow: get the data via syndication. Of course, it’s entirely unclear whether being a syndication channel was ever acceptable for the franchisors, as they (rightfully) feared that others would just opt out of authorizing the franchisor websites as a syndication destination.

But… the Committee left a giant exception within the new IDX Policy. It will become the exception that swallows the rule, if the franchisors really believe that competing with the portals is critical to their survival.

I refer, of course, to the Search Engine Indexing clause.

The Troublesome Search Engine Exception

Back at Midyear, I wrote that Franchise IDX is an outgrowth of the earlier decision by NAR to allow search engine indexing. Well, the language about search engine indexing is alive and well in the current IDX Policy:

MLS participants may not use IDX-provided listings for any purpose other than IDX display on their websites. This does not require participants to prevent indexing of IDX listings by recognized search engines. (Amended 11/09) (Emphasis added)

Brian Larson wrote around the same time arguing that Franchise IDX had nothing to do with search engine indexing:

The result is not a policy that permits indexing as contemplated in the 2009 policy. As I noted in 2009, the reason that search engines can index websites without violating copyright law is primarily that their use is transformative. That is, the search engine is not a replacement for the sites it indexes. For example, when I search “123 Elm Street Minneapolis” on Google, Google sees its job as returning to me all the relevant pages on the web that refer to that address, not just real estate listing advertisements. When I search the same address on a national franchisor web site, the result is actually intended to replace local IDX sites. (Mr. Periello conceded as much in May 2010, when he argued this policy was necessary for the franchise sites to improve the consumers’ experiences there to compete with Zillow, Trulia, etc.)

The “recognized search engines” in the world (Google, Bing, etc.) generally do not seek to replace the function of the sites whose content they index. In fact, if they did so, they would likely be violating the underlying copyrights in the indexed sites. NAR implicitly acknowleges this fact, because the November 2010 makes no reference to “indexing” either in its title or its text. It’s all about franchisor “display of IDX data”.

I disagreed with Brian then, and with further reflection, find no reason to change my position. If the point is that the existing Franchise websites implemented their search and display badly, relying on the Franchise IDX rule, then I agree 100%. But if the idea is that franchises cannot index IDX and manipulate the display of information to advantage their franchisees, then I see nothing to prevent such a thing.

All that the franchisors would need to do is to declare their websites (and corresponding mobile applications) a “search engine”, crawl the IDX listings, and provide links to those listings… ordered however it wants to order them.

The IDX Policy contemplates only “recognized search engines”. The obvious problem is, recognized by whom? Under what parameters? Does a “search engine” have to have certain amount of market share before it is a “recognized” search engine? The September search engine market share report shows that AOL has 1.5% or so of the market. Does a MLS have to conduct a scientifically valid survey of Internet users to find out which search engines can be identified by consumers?

Meanwhile, this list of search engines shows dozens of “search engines”, such as Lycos, GigaBlast, and Alexa. Is Alexa “recognized”? What about Lycos? How about international search engines, should they choose to enter the US market? Are Baidu, Daum, Guruji, Naver, and others, used by billions of people worldwide to search for information online, not ‘recognized’?

What about startups? Is Wolfram Alpha not a search engine? What if IBM introduces a new search engine using its Watson technology, something that the IBM brass has said is the whole point behind Watson. Is that kind of semantic search not a “recognized search engine”?

As becomes quickly evident, language like “recognized search engines” falls apart like Greek austerity plans. It turns out to be empty phraseology devoid of real meaning.

Don’t Replace Me, Bro!

But what about Brian Larson’s argument that search engines are “not seeking to replace the function of the sites whose content they index?” Maybe the language could be tightened to exclude those sites that are “replacement” websites.

Except that the concept of “replacement” is a slippery one. Back in 2009, at least one guy — Rupert Murdoch, of News Corp — accused Google, Yahoo, and other “recognized search engines” of stealing content from the newspapers. That ignited a firestorm of controversy and debate, which ended with Google backing down.

But let’s say that the newspaper issue was a unique one, where Google was reproducing whole articles from newspapers. Within regular “search”, where Google only provides a link with maybe a sentence of keywords, maybe the “replacement theory” would hold.

That would require making a distinction between a “replacement search engine” and a “non-replacement search engine”. Brian analyzes a Ninth Circuit decision in Kelly v. Arriba Soft Corp. (336 F.3d 811) and says that the key is how much the indexer transforms the original work:

First, just because Arriba’s use was commercial, it did not necessarily lose on this factor. Quoting an earlier case by the U.S. Supreme Court, the Ninth Circuit said the central purpose of this factor is to determine

whether the new work merely supersede[s] the objects of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is transformative. (BNL’s emphasis)

The Ninth Circuit said that the “more transformative the new work, the less important the other factors… become.” As we shall see, this is an important observation. The court compared Kelly’s purpose in the works (“intended to inform and to engage the viewer in an aesthetic experience”) with Arriba’s (intended “as a tool to help index and improve access to images on the internet and their related web sites”), and found Arriba’s copying to be highly transformative.

But there was something else in the Kelly decision that I think is worth noting. Arriba, the defendant in the case, was an image search engine. The plaintiff, Kelly, was a photographer.

The importance of that fact is that it undercuts Brian’s assertion that “recognized search engines” return all documents related to a real estate search, not just the listings. Arriba was held to be a search engine, even though it only returned images, and its indexing of Kelly’s photographs were held to be fair use. Under that logic, I see no reason why a real estate vertical search engine would not be considered transformative as well.

Discerning Purpose

So the whole dispute turns on the notion of purpose. I think Brian would argue that the purpose of Google or AltaVista is not to become a destination for real estate search, while the purpose of Coldwell Banker (to just pick on one franchise) is exactly to become a destination, in order to compete against the Zillows and Trulias of the world.

That distinction doesn’t hold up under examination. The whole point of search engines is to become THE destination for all things online. It may be an interim stop, but it is the first stop and the first destination. If Google’s monopoly makes it difficult to see this, consider AOL with its 1.5% market share. Do they not want consumers to type in “aol.com” into the browser when they’re thinking about buying a home? Of course they do. It’s how all these guys make money: by drawing eyeballs to their site to conduct searches to find the ultimate destination. No search engine seeks to replace the site it is indexing; it seeks, instead, to interpose itself between the consumer and that site to extract economic value from being that intermediary.

Whether the site being interposed is Google.com or Bing.com or ColdwellBanker.com, there is no distinction between the three as to purpose: make money by becoming the gateway to final destinations.

Perhaps it turns on the business model? That is, for some reason, it is pure for a search engine to make money from advertising or paid search, but verboten to make money in some other way? So if coldwellbanker.com were monetizing all this traffic with text ads, that’s all good, but since it sends the consumer doing the search to one of its own franchisees, that’s no good.

I confess I can see no principled way of distinguishing between good business models and bad ones here.

Maybe it turns on some kind of a notion of “neutrality”. That is, Google, Bing, and other “recognized search engines” utilize a display algorithm that is impartial, whereas the franchisors always privilege (or only display) their franchisees.

But all search engines have a mechanism by which they rank the results in some order for display. (Indeed, doesn’t the whole SEO industry exist solely to provide clients with an advantage in where their page ranks in the display?) It appears to be acceptable that a company may privilege its own information, or the information of an affiliated entity, in the search results display. Notice how Google always ranks YouTube videos near the top of results. Same with news items that happen to be in Google News. Same with Google Maps result if the search is geographically identifiable.

More generally, all search engines routinely privilege paying advertisers. It’s the whole business model of Google: pay the money, and your pages come up at the top, although labeled as paid search.

If it’s okay for Google to privilege its own information, as long as it does index and provide a link to every single page (albeit, on page 13 of results), then I see no reason why it wouldn’t be okay for Coldwell Banker to privilege the IDX pages of its own franchisees over the IDX pages of non-franchisees in the results display. If paid search results are okay on Google and Bing, then I see no reason why Coldwell Banker couldn’t push all of its franchisee results to the top of the results labeling them as “From Our Franchisee” or such, as long as the links of non-franchisees were on page 15….

Brian is correct in that the policy in question is about display of IDX data, rather than indexing. But to the extent that the search engine indexing provision survives in the IDX policy, I’m not seeing a barrier to the franchises (or anyone else for that matter) to index all of the IDX listings in a given area, display it how they want, as long as they include links to all other brokerages/agents. That those non-franchisee links would be buried on page 33 is irrelevant.

Furthermore, with the Franchise IDX Policy repealed, the participant (ostensibly a franchisee brokerage) is not allowed to “provide IDX information” to the franchisor. It says nothing about participants having to prevent IDX indexing by the franchisor. To the extent that a franchise website simply crawls websites for IDX listings, and then displays the results in whatever order or format it wishes, and buries any non-franchisee outbound links to page 13 of search results… there is no sensible distinction between the franchisor and a “recognized search engine”.

Did NAR Make a Boo Boo?

A final observation: I really wonder if total repeal will end up being more of a mistake by NAR than we had thought.

Consider that the franchisor is not a member of NAR. Nor is it a participant in the MLS. NAR has no jurisdiction whatsoever over the franchisor.

And yet, the way that the original, now-repealed language of the IDX policy read, it purported to bind the franchisor to a variety of MLS rules. Look at the conditions numbered 3, 4, 5, and 6 above. Those rules bound the franchisor, by threatening sanction against the participant franchisee.

Now that the whole thing has been struck down, what binds the franchisor to any limitation?

Why couldn’t a franchisor now modify or manipulate the IDX information, or retain it permanently? Sure, a MLS could bring a lawsuit under some copyright infringement theory, but the Kelly v. Arriba case seems to lean heavily towards the franchisors. If anything, manipulating and modifying the IDX information would likely be seen as being even more transformative.

As long as there was some sort of a Franchise IDX policy, the franchisors voluntarily submitted to the authority of NAR and of the MLS to dictate what they could and could not do on their websites. Now that the whole thing has gone poof, I wonder what now makes the franchisors submit to anything at all.

This got very long; I apologize. Wait, no I don’t. It was fun, and this issue deserves some more in-depth thought.

Speaking of which, your questions, comments, criticisms, and nerd-rage are all welcome. Sort of.

-rsh

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