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In Which I Clarify My Worries Over Syndication and IDX, And Connect The Dots

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The average denizen of the RE.net cybercafe — that includes you, since you’re reading this on a blog — knows that the hot topic du jour is syndication. I wrote about it here and here already, but frankly, have been talking about this issue for quite some time. And influential bloggers like Jay Thompson and Kris Berg have weighed in, and Facebook groups are all over this issue.

And I’ve gotten a couple of phone calls, a number of emails, and Facebook messages and such debating my one critical issue with me. I wrote that the issue here isn’t syndication, which is more or less dead in its current form, but IDX. And that one cannot be against syndication but for IDX. Jay Thompson agreed, while Kris Berg (to take but one example) disagreed.

So I’d like to explore this connection more, to clarify why the distinction between syndication and IDX does not, and cannot, hold. And what that then means for the future of the industry, by connecting a couple of dots.

Syndication vs. IDX

Because Kris Berg’s argument that syndication is different from IDX is an excellent one, and one that echoes most of the others who take the same position, I’ll focus on that (and repeat much of what I wrote in the comments to her post).

Kris writes that there are major differences between syndication to a third party and IDX:

On topic, I understand the similarities you point out between IDX and syndication, at least where the issue of who is taking the calls is concerned. Point noted. However, that is where the similarities end. Data is the IDX feed is not fraught with the same accuracy problems as TruZilia. So should we just send the IDX on over, problem solved? Of course not, at least not in my opinion. Further, one could argue (one being me) that an MLS member displaying IDX data on their site is far different than a third-party site repurposing that data for their own profit. OK, tomatoes, tomahtoes. But right or wrong, there is one reason IDX will never go away: VOWs. Take IDX away from the Brokers/agents, and you will still have IDX on every virtual office website. Think Redfin. So this is in that respect, I suppose, a “participant” issue.

As you are well aware, this is a complex issue with a lot of players affected. It is probably better argued broken down into chunks lest we get into circular arguments. However, and as a footnote, donning my self-serving hat for a minute, the biggest difference I see between IDX and TruZilia is the purpose for which the data is being used. Brokers and agents use IDX to further their own real estate business; the latter use the data to profit from our real estate business. So what? I think it’s a big distinction. By syndicating my listings, I am giving permission to these sites to auction off my business. It is the virtual equivalent of allowing an agent to slap their name rider on my yard sign and then having the sign company charge me to remove it. No sane agent would allow that, yet we seem to have no problem allowing it to occur online.

I distill the argument into three issues — break it down into chunks, as it were, like Kris suggested.

Data Accuracy

First, the argument is that syndication is fraught with inaccurate data, while IDX is accurate data. While people like Jay Thompson do point out that the MLS itself isn’t exactly the hallowed paragon of clean data, let’s take it as a given that syndication is inaccurate while IDX is accurate.

The trouble is, if the issue is one of data accuracy, the solution is simple: provide the IDX feed to syndicators. If the reason why brokers like ARG oppose syndication is because the data is inaccurate, then they would and should be agitating for syndication websites to be included in the accurate IDX feed… not to pull syndication from those websites. Of course, as we saw with Franchise IDX, the very idea of sending IDX feeds to a non-participant would result in instant rebellion by huge numbers of important brokerages. (And for good reason, by the way.)

Furthermore, the source for both feeds in many, many, many cases is the same: the MLS. As it stands, a number of syndication sites get their syndication feeds directly from the MLS, using the same data that is provided to the MLS by the brokerage. If you look through the debates about syndication for the past year or two, what you’ll notice is influential consultants like Victor Lund and Greg Larson telling brokers to look at where they syndicate their data to. What you’ll also notice is companies like ListHub fairly begging brokers to login to their control panels on the MLS and selecting the sites to which they want their data — their MLS data — sent.

A ton of problems arise from things like resyndication, and weak license terms that allow the publisher to do whatever the hell they feel like doing with the data once they get it. But the idea that the source feed for syndication is inaccurate, while the source for IDX feed is accurate, simply doesn’t bear out in the facts.

Also, it isn’t as if these third party portals are some new entity that just popped up in the last couple of years. It isn’t as if brokers and agents and consumers haven’t been complaining about overstatement of inventory, inaccurate data, and the like for at least a decade — from the very start of companies like Trulia and Zillow.

And finally, the “inaccurate data” argument always names Zillow and Trulia… and conveniently leaves out Realtor.com which gets its data via the NAR agreement… directly from the MLS. If the IDX feed, sourced from MLS data, is accurate… then so is Realtor.com.

As a result, I believe that the real reason to pull data from syndicators is not inaccurate data, but something else.

Purpose to Which Data Is Used, Or How You Make Money

Even if the data were accurate, Kris and others feel that it is a really significant difference how the recipient uses that data to make money. The problem isn’t data accuracy; the problem is that third parties are making money, charging brokers and agents, on the backs of the very brokers and agents who send them the data to make their business possible in the first place.

That there are abusive practices in the world of syndication is not debatable. Some publishers do some really horrific things with the data they get from the real estate industry. That brokers do not pay enough attention to things like Terms of Use is absolutely true.

But… the distinction between how a company makes money using property data strikes me as a difference without distinction.

Real estate agents are not putting IDX stats on their websites as a public service. They are doing it to generate buyer leads, which they will then either bring to the seller/listing agent and earn the buy-side commission on, or will put into their databases for longterm farming.

For that matter, everyone in the industry with a shred of awareness knows that there are “brokerage” companies out there, who are officially participants in the MLS, dues-paying members of the Association of REALTORS, whose entire business model is predicated on earning referral fees from other agents to whom they will ship the “lead” to. And that “lead” is generated from the IDX search sites, which some of these guys set up by the hundreds to capture every possible long-tail search term.

Does the fact that such referral-farms have a real estate license, are paying dues to the Association, and paying MLS fees make such a dramatic difference? I don’t see it.

From the listing broker standpoint, the object of putting the listing data out there either through syndication or through IDX isn’t to “help grow the real estate business of competitors”; it is to get buyer inquiries on the properties they are trying to sell for their seller clients. Does it really matter to them whether the buyer came through an agent who paid Zillow to get that buyer or through an agent who put the listing into IDX search on her website? I really, really, really doubt it. Do listing brokers even ask, “Hey, thanks for the interest in 123 Main Street… but, did you get this buyer off Zillow or off your IDX site?” I don’t think so.

Keep in mind that in the marketplace, these companies and agents are doing their level best to put each other out of business by out-competing. No listing agent or broker I know of goes into a listing presentation saying, “You know, I really ought not to take this listing, because I have enough; I think Joe over at Joe Realty should get this listing, since I know he’s hurting for business….” Not a single buyer agent takes a phone call from an interested prospect and tells him, “I’d love to work with you, but REMAX next door hasn’t had a great month, so I’d rather you go work with them instead.” No… every broker would want 100% market share if he could get it; every listing agent would want 100% of the listings if she could get it. Competition prevents that kind of monopoly, but that doesn’t mean brokers and agents stop competing with each other.

If the real reason why listing brokers hate syndication is that a non-licensee makes money from listing data… well, then they all ought to be opting out of RPR (to take but one example), all ought to be raising a huge stink about newspaper companies making money off their ads, and insisting that Zillow open up brokerage offices in various states to get a license and have a Broker-of-Record. [And should Zillow actually do such a thing, the resulting outcry would make this little brouhaha seem like a suburban dinner party by comparison.]

The purpose for which the data is being used is the same whether the company is ABC Realty or Trulia: make money. To say that it is somehow noble to further “their own real estate business” but evil to further an advertising business strikes me as a distinction worthy of Vatican monks arguing over how many angels could dance on the head of a pin.

IDX Will Never Go AWay Because of VOW

Kris points out that even if you think that syndication and IDX are the same thing, one can’t do anything about IDX because VOW (Virtual Office Websites) will always continue to exist. The Federal Government, via the DOJ, has said so. She is right, of course, but therein lies the real core of the syndication crisis.

What Jim Abbott — and quite a few of the anti-syndication folks — are upset about isn’t necessarily data accuracy, and it isn’t necessarily the distinction between licensee making money off the data or non-licensee making money off the data. It is in the large badge on his video: “Official Listing Agent”.

The real issue here is that the inquiry on the property goes to the wrong person. Jim Abbott spent quite a lot of time talking about the agent whose only qualification to discuss the property is that she bought some ad package from Zillow. The person who could best answer the buyer’s question, who knows the most about the property, is the listing agent. A close second would be an agent who works the same market, the same subdivision, the same property type as the listing agent — in other words, a direct competitor. A distant third would be an agent in the general proximity.

Read what Kris Berg herself wrote on this:

First we received an auto-generated response ensuring us that our inquiry had been sent to a “local area expert.” The “expert,” I’m sure, is a very fine company. It just happened to be one I had never heard of, with an office twenty miles away, and one who to my knowledge has never sold a home in this particular area. Next came another email informing us that an account had been set up for us on the referral agent’s website (“Our website has every listing in the San Diego area and it is updated daily”).

To be frank, this is a real problem. Imagine being the buyer who contacts the agent (whether on Zillow or on an IDX site) thinking she knows a thing or two about the property, only to find out that the agent has no frikkin clue of the town, the area, the property, nothing. Would your opinion of real estate agents be particularly high after that encounter? If the consumer never found out that the agent is unqualified to represent his interest in the purchase, is it likely that he will receive the level of service he could and should get from an agent who does know the area, does know the trends, does know the property in question? No.

And Kris is right that even if syndication got smacked down, and then IDX got killed off… brokers and agents would still have the VOW.

Here comes the connect-the-dots.

Geoffrey Lewis, Purpose of the MLS, and IDX

I have mentioned the 2006 Congressional testimony of Geoffrey Lewis from REMAX a few times on this blog. Let’s restate the whole quote:

The concept is simple: you earn a customer, you get to use the MLS with the customer. The concept is not: you get free access to the MLS and then you use it to advertise the properties of your competitors in order to attract customers.

The VOW isn’t a problem at all, because in order to provide a VOW feed/access to the consumer, the broker has to establish a “client relationship” with the consumer. In most jurisdictions, that “client relationship” can be established simply by having the consumer provide an email address and registering with the broker’s website. But you still have to get that before you can open up the kimono and show the consumer listing data belonging to other brokers.

In direct contrast, the whole purpose of IDX is to enable “participants” to attract customers using the properties of their competitors. Of course, everyone has the same ability, so as long as you’re opting in to IDX, you can display the properties of your competitors as well, while they display your property.

Things break down here in two ways.

First, the “wrong person” problem exists. IDX is not confined by practice area, by qualifications, or any such thing. The broker 30 miles away who has never sold anything in your zip code can still display your listing to get a buyer inquiry. That problem with IDX is the exact same problem as exists with syndication sites.

Second, IDX works if everyone is contributing roughly the same number of listings to the pool of listings. It breaks down really quickly if only a minority of brokers and agents are contributing the vast majority of listings. And frankly, that is the way things are today.

I have it on good authority that ARG, the brokerage who started this current debate, has 25 agents and 41 listings in the Sandicor marketplace. I don’t know who the large players are in San Diego, but do know that Coldwell Banker Residential (NRT), First Team, and Prudential California are all major companies in California. Suppose for a moment that each of those three large companies contribute 20% of the listings into Sandicor: if the number is 10,000 or so, each one contributes some 2,000 listings into the pool. They may be fine with each other — give 2,000 listings, get 4,000 listings back to display on their respective sites — but are they really fine with ARG, contributing 41 listings and getting back 6,000?

Jim Abbott says in his video that Zillow, Trulia and Realtor.com “need our listings along with our costly professional photography, descriptive language, and virtual tours” to drive traffic to their sites. Couldn’t CB say the same about ARGSD.com? Without the thousands of listings, along with costly professional photography, descriptive language, and virtual tours created and paid for by CB, First Team, and PruCal, would ARG be able to drive as much traffic to its website as it does today?

As Jay Thompson has pointed out in the past, the answer is “Absolutely Not”. Jay has one of the top websites for Phoenix real estate. Without IDX, however, even Jay would have a tough time getting traffic and leads from his website. His business would be imperiled without IDX.

And while Jay isn’t a buyer-specialist who only deals with buyers, there are hundreds, if not thousands, of brokers and agents whose whole business is dependent on IDX to generate traffic and leads… without contributing a single listing back into the pool.

This is, to quote another popular industry saying, bringing a fork to a potluck.

Did You Know About REN?

So while the industry’s eyes are focused on the syndication debate… did you know that a major step that has direct implications on this whole syndication-IDX issue was taken earlier this month?

Here’s the announcement:

CAMPBELL, Calif., Jan. 11, 2012 /PRNewswire/ — ListHub, the largest syndicator of real estate listings, today announced the launch of the Real Estate Network (REN) to extend the syndication of property listings to highly trafficked websites operated by real estate franchisors and brokerage networks. ListHub’s Real Estate Network will be available at no charge and as a voluntary syndication option for brokers and Multiple Listing Services (MLSs). ListHub is operated by Move, Inc., (NASDAQ: MOVE), the leader in online real estate.

Century 21, Coldwell Banker, Realty Executives International, and RE/MAX are among the first publishers to join the network at launch. Together, these publisher websites attract 4.3 million unique visitors[1] each month. ListHub expects to add additional franchisor and broker network websites to the Real Estate Network in the near future.

Victor Lund of WAVGroup, in talking about REN, said, the rules are comparable to IDX and look pretty reasonable. As a matter of fact, they are comparable to IDX, and do look pretty reasonable. Yes, indeed they do.

They are so comparable and so reasonable, in fact, that I wonder what the motivation of Century 21, Coldwell Banker, Realty Executives, and RE/MAX brokers to continue participating in their local MLS’s IDX might be — especially once some of the other larger networks (such as LeadingRE, Realty Alliance, and the like) join up as well. These other large players are bringing substantial number of listings to the party; would the RE/MAX broker in San Diego (for example) really feel like they’re getting a whole lot more from the buyer brokerages and small independents in San Diego who bring a few listings and take thousands out?

Time will tell, I suppose, but what I know of human beings and how they are motivated suggests strongly that they will not continue to support the business model of their competitors without getting much in return.

The Big Question

The above is why I predicted that we’d be talking about the End of IDX by the end of 2012. Looks like I was too conservative in how quickly this would develop.

Some folks have developed the impression that I’m pro-syndication, and am criticizing Jim Abbott’s decision. Nothing could be further from the truth. I believe syndication needs to be controlled and reformed. Some of the most abusive practices have to be ended. I am, if anything, wholly sympathetic to Jim and the frustrations he felt to make the decision that he did.

But all of those things, to me, pale in comparison to the Big Issue, the Big Question. It is the same one posed by Geoffrey Lewis lo these many years ago.

Is the purpose of listing data, of the MLS itself, to help participants serve existing clients… or to help participants attract new clients?

On the resolution of that question hangs the future of real estate. And too many of the partisans on both sides of the syndication issue are simply not aware of the fundamental question at the heart of the syndication issue.

Your questions, thoughts, critiques, and such are — as always — welcome.

-rsh

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