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In the Name of All That is Holy, You Should Stop Blogging

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The inimitable and simply delightful Teri Lussier recently posted her observations of RE BlogWorld ’08 in Las Vegas. In it, she mentioned a “reverse Black Pearl” by yours truly:

And finally, I’ll leave you with this brutally honest reverse Black Pearl from Notorious R.O.B., who, during Jeff’s session, shared his opinion about the quality of writing on some real estate blogs: “In the name of all that’s holy, you should stop blogging!” Ouch, Rob.

As Teri mentioned, I need not explain that statement, but I wanted to. It’s one of the topics that’s been swirling around in my head for a while. And judging by the knowing laughter that greeted that statement during REBlogWorld, I’m thinking that I am not alone.

So… I stand by my statement fully. 🙂

The Context as Pretext

The context of the plea was when Jeff Turner had gone over a number of new, innovative tools that might help real estate agents with their online efforts. Jeff kept describing one tool after another, all of which had to do with audio or video as content for a blog.

The question that naturally arose, of course, which I asked him, was whether he thought these were great tools for realtor blogs because something inherent in audio or video, or because the quality of written content on these websites is low.

Hence, I asked, “I know there are some realtor blogs out there that are so badly written that they make us all go, ‘In the name of all that’s holy, you should stop blogging’. Is that one of the reasons why you’re recommending so many audio/video solutions here, because agents are somehow able to talk better than they can write?”

Bad Writing is Not Good Branding

Thing is, this is a somewhat serious point. A bad blog is not an asset — it’s a liability. Someone who may have been your ideal client might look at your utterly crappy website or horrid blog and conclude that you are a major league idiot, even if you happen to be the most knowledgeable real estate professional in history. They don’t know you; if all they get to see of you is a terrible blog, then as far as they’re concerned, you’re a terrible agent. Period. End of story.

It would be a major step forward for such an agent to suspend blogging. Indefinitely. And try to scrub the Interwebs of all clues as to the existence of such a blog once upon a time.

So if you’re a bad writer, then you would be doing yourself a favor (as well as the rest of the industry) by stopping your blogging activities and doing something else that would show off your scintillating personality. Maybe that’s audio. Maybe that’s video. But if you can’t write, please, please do not blog.

For your own good.

And mine.

Bad Writing Usually Means Bad Content

The tragic correlation, of course, is that people who can’t write rarely produce amazing non-written content. Unless there are unusual extenuating circumstances (e.g., you are blind, or can’t read/write English though you can speak it some with a nice accent, etc.), bad writers are typically bad content producers, period.

Because good writing requires a few things. For example:

  • logic
  • coherent thought
  • imagination
  • narrative ability
  • understanding of the audience

All of these things also come into play when creating any sort of content. Think about all the truly horrible movies you’ve seen. Most lacked one or more of the above. Most bad sci-fi movies lack logic for example (e.g., Star Wars has giant lasers that can destroy planets but can’t figure out fully automatic weapons?), while most bad romance movies lack coherent thought (see, e.g., What Happens in Vegas).

So the thought that a realtor who can’t write worth a damn is going to create a fascinating video blog, or vlog, is too optimistic by half. Unless the realtor in question looks like Gisele, in which case I suppose some folks would watch that vlog if she were explaining the ins and outs of the home inspection process in a dry monotone. But if she does look like that, she probably should think about a different career. One that involves meeting Leonardo Dicaprio for lunch on a regular basis.

So What Do I Do If I Sux?

There are two choices, as I see it, if you take a good long look in the mirror and realize that you don’t look like Gisele Bundchen, and that you can’t write.

Choice #1: Become a better writer

Let’s be honest — none of us are in the running for the Nobel Prize in Literature. We’re bloggers, who write about real estate. It isn’t that difficult to become a better blogger. Reading good writers — both bloggers and dead-tree authors — really helps improve one’s own writing. The rest is just practice. Then practice. And even more practice.

Choice #2: Stop blogging, start working

The other choice is to stop blogging. Fact is, the web-centric real estate model may be the future, but it isn’t necessarily the be-all, end-all right now, today. Russell Shaw had a great post up recently where he touched on this.  While that post was about the power of being the listing agent, the subtext woven throughout goes something like this: “The tried and true still works”.

So… honestly, if you’re no good at the whole content-creation thing… why bother?  Just work on increasing your sphere of influence, going on more lunches, networking via offline methods, and all of the other things that have helped realtors be successful for decades — long before Sergey Brin was even out of diapers.

Final Words

I was recently at a speech where the keynote told the following story (which I am completely paraphrasing from memory):

I saw Larry Ellison, CEO of Oracle, at a education conference tell a room full of teachers that he believed teachers are underpaid.  In fact, Larry thought teachers should make over $1m a year.  The crowd went wild with applause.  The catch was, Larry continued, with the power of the Internet, he only needed 100 of them in the entire United States.  Dead silence in the room.

Think about it.  How many real estate bloggers does the country really need?

-rsh

Into the Maelstrom, We Go

18
There, but for the grace of God, go I.
There, but for the grace of God, go I.

If you are at all interested in the real estate industry, then you need to be reading Dan Green on a regular basis. I just met him at RE Blogworld, and have put his blog into my reader ASAP (and linked it here). Dan is brilliant, and understands the financial markets and mortgage markets better than most people in the world.

And even he finds himself getting verbal whiplash these days from having to contradict himself more than Obama does.

Exhibit 1: Dan’s post of Sept 16, 2008 titled, “How Mortgage Rates Are Responding To Lehman Brothers, Merrill Lynch, And AIG” which says, in part:

It’s a shame because the post went deep on Wall Street’s recent troubles and how each piece of bad news actually helps everyday homeowners. When I went to publish, the post vanished. And by that point, markets were already open, mortgage rates were already plunging, and I wanted to be the phone with clients. I did manage to Twitter, however.

A one-paragraph recap follows:

The government’s takeover of Fannie Mae and Freddie Mac rendered mortgage bonds among the safest investments in the world. Therefore, when political or economic uncertainty exists, mortgage rates should fall in safe haven buying.

The post was especially timely because safe haven buying driving mortgage rates down yesterday. As the stock markets shed $800 billion in value, investors moved into safer instruments like bonds — including mortgage bonds. With more demand, prices were up and rate were down. And how.

Because mortgage debt is now government-guaranteed, the sell-off in stocks was terrific news for both active home buyers and for homeowners that missed last week’s gold rush. However, it did little to soothe Wall Street’s nerves. That job falls to Ben Bernanke.

Then, a mere seven days later, on Sept 23, 2008, Dan posts “Mortgage Rates Respond To A Rapidly-Devaluing U.S. Dollar” which says in part:

And lastly, the mortgage market got hit.   Because mortgage bonds are repaid in U.S. dollars, the value of those repayments dropped.  This forced mortgage rates higher because the only way to entice investors to buy devalued mortgage-backed bonds is to offer them with a higher interest rate.

If you’re wondering why conforming mortgage rates are up by 0.750 percent since last week, this is it — it’s because mortgage rates are responding to the expectations of a weaker dollar going forward.  This is the reverse of what happened in August.

Simply amazing, in part because Dan is spot on, and in part because politicians in government simply do not seem to understand the economy and markets, despite being Wall Street tycoons and brilliant academics and the like.

Why wouldn’t inflation rise when the government has just signed a blank check to big American corporations?  Of course it would.  And as inflation rises, interest rates — including mortgage rates — are bound to go up as well.  People don’t enjoy getting paid 10 years out in dollars that are worth half what they are worth today, do they?

This whole fiasco with the bailout reminds me of my favorite Thomas Sowell quote, “The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

At the Blogworld event that just happened, the panelists on the Financial Blogs panel were unanimous in excoriating the government — and they appeared to be politically all over the board — for its latest actions in intervention.  One panelist called it (paraphrasing) “the absolute triumph of socialism.”

I think we’re seeing the absolute triumph of idiocy as well — and all parties, all branches of government, are indicted in this.

Until things stabilize — and no one knows when that will be — we’re in for a wild ride.  The markets behave in unpredictable (although common-sensical) ways to economic shocks like a $700B bailout of financials by the government.

But a couple of things seem possible, at least when one thinks about our industry.

1.  If it was hard to find buyers who can afford to buy houses before, I’m thinking it’s going to get more difficult, not less, going forward.  Even if the removal of junk mortgages from the market (thanks to the taxpayer bailout) means banks can breathe easy again, the inflation-induced rise in mortgage rates (combined with the shellshock of banks coming out of this mess) likely means fewer buyers for homes.

Of course, that means home prices are about to take another pounding.  If I were a seller, I’d be shaving another several thousand dollars off the listing price right about now.

2.  Selling a house in today’s environment — unless you absolutely have to — became far more complicated and likely less attractive.  For example, I locked in 30-year fixed rates long  before this crash (something in the 6% range, I believe).  Inflation could very well hit 6-7% annually, as most financial experts appear to think the $700b figure is actually the floor not the ceiling of this bailout.  If inflation = my interest rate, then my loan is effectively free.  Unless I can get a bank to give me free money (zero-interest loans) to buy my next house, I just can’t see how it benefits me to be selling in this market.  At all.

All in all, I have a feeling that realtors are going to have to get educated on this in a hurry.  Some of them really understand finance, the markets, and macroeconomic factors and may be able to help clients make the right decision.  But the ones who think “yield” is only a street sign are going to have a tough time getting people to trust them as real estate experts.

As Alex Periello likes to stress, real estate markets are all local.  That remains true, of course.  But giant macroeconomic factors will play a role, at least if your client is paying in (or looking to get paid in) U.S. Dollars.  It’s high time to get boned up on financial matters.

-rsh

From Blogworld: Financial Blogs Influence Markets? O Rly?

0

I’m actually sitting in the session with Barry Graubart, Paul Kedrosky, James Ledbetter, Howard Lindzon, and Felix Salmon listening to them talking about a variety of topics. None of which appears to connect to the title of the damn session: “How Financial Blogs Influence the Markets”.

Because coming at this from our side of the blogosphere, where we’ve been dealing with an out-and-out hostile media who refuses to do any homework, do any in-depth investigation into topics connected to real estate, and just goes on like a chicken sans head… I’m not convinced that the blogs influence the markets to begin with. So the “How” a blog influences a market is presumptive, in the extreme.

Let me see if I can ask them the question and see if we get a coherent answer.

–> Asked the question, got my answer.

The short answer: “The blogs do not affect markets, at all.”

So what the hell am I doing in this session? 🙂  Well, it’s fun to hear people yammer on about the market.

For what it’s worth, I think we in the RE.net have moved past the finance markets in one respect.  The financial markets are dominated by institutions moving huge sums of money.  The primary consumer of market data are giant banks and hedge funds and whatnot.  As one of the panelists here pointed out, those individuals rarely have time to be reading blogs.

Our industry is based firmly on consumers — American families and individuals who are looking to buy and sell their homes.  So the primary consumer of data and information are consumers.  If we can get much better at disseminating market data, and solid market-related opinions, I actually think RE.net can move markets.  Maybe not national markets, but certainly local markets.  And all real estate is local.

Individual homesellers should be trusting market data from Rain City Guide, for example, instead of Case-Schiller index.  That will help move the markets in the Seattle area because we’re right on the frontlines.

More than ever, I am convinced that we as an industry — and especially those of us in the RE.net — have to think about how we can influence our local markets by providing data, advice, and information.  That this socially beneficial function is closely tied to the real estate blogger’s profit motive is a good thing, in my opinion.

-rsh

Words Don't Come Easy To Me

5

The immortal F. R. David… my god, this brings me back to junior high school.

Okay, maybe “immortal” is too strong a term… but that isn’t the point.  The point is that a subtext woven throughout Jeff Turner’s amazing presentation on tools for real estate web is that audio and video content is easier to create than written content.

I just have to wonder if that’s true.  Of course, I’m biased since I like to write, and I do it for fun.  Maybe realtors hate to write, and they do it for work.  Maybe they’re just better at talking than they are at writing.

Could that be the truth?

All of the truly horrible agent blogs out there, where there is zero evidence of any thought, any coherence, any logic, or any taste… would they be transformed into great local citizen media sites through the power of audio and video?

I’m just not sure.  I guess I’m an old-school guy — if I can blog using pen and paper, I just might….

-rsh

Words Don’t Come Easy To Me

5

The immortal F. R. David… my god, this brings me back to junior high school.

Okay, maybe “immortal” is too strong a term… but that isn’t the point.  The point is that a subtext woven throughout Jeff Turner’s amazing presentation on tools for real estate web is that audio and video content is easier to create than written content.

I just have to wonder if that’s true.  Of course, I’m biased since I like to write, and I do it for fun.  Maybe realtors hate to write, and they do it for work.  Maybe they’re just better at talking than they are at writing.

Could that be the truth?

All of the truly horrible agent blogs out there, where there is zero evidence of any thought, any coherence, any logic, or any taste… would they be transformed into great local citizen media sites through the power of audio and video?

I’m just not sure.  I guess I’m an old-school guy — if I can blog using pen and paper, I just might….

-rsh

Here, There Be Monsters

15
Yarr, matey!
Yarr, matey!

First day, first session of RE Blog World, and Mariana Wagner is giving a great talk on taking someone from a random click to a closed customer. The talk itself is really solid, and Marianna is an engaging, conversational speaker. The session is being videotaped, so I’m sure RE Blog World will be posting it up.

But her talk is spurring a thought for me — something I’ve been churning over in my head.

Mariana presented some great “real data” from three weeks of her own operations, her own blog, her own website. The numbers are quite amazing. 154 signups, 66 with real email and phone numbers, etc. leading to twelve contracts (8 in contract, 3 closed, and 1 in negotiation).

Here’s what I’m wondering about:

Mariana is co-owner of the #1 Team in Colorado Springs. She has other “team members”. What does she need them for?

According to Jeff Wheeler, President and COO of Coldwell Banker United (the #1 affiliate of the entire Coldwell Banker network), it is important to keep history of the brokerage industry in mind. As a 20+ year veteran of the industry, he’s seen it all. In his view, before the 80’s, the industry was “broker-centric” — agents were simply workers for the broker. In the 80’s into the late 90’s, with the advent of RE/MAX’s direct-to-agent model, the industry became “agent-centric”. We are today living with the residue of the “agent-centric” industry model, under serious pressure from the new model that is arising: “web-centric” brokerage.

Jeff’s view is that in the current model of the industry, the broker hires agents to bring in leads. Hence, the focus on things like “sphere of influence” and “agent teams”.

But when lead generation happens from the web… what is the value of the agent?

Mariana in a Q&A said that they get 100% of their leads from the website and the blog. Not one lead walks in, not one lead comes from an agent they employ.  So her employees are really doing the transaction itself.  There is value in that, of course, but it isn’t the same value as agents command in an agent-centric model.

The rubber meets the road when we start thinking about the business side of things.

Consider that today, the average brokerage has profit margins in the neighborhood of 3%.  For every dollar they bring in, they end up with 3 cents in profit.  For that, the broker has to take on all of the liability, all of the real estate costs, and all of the technology costs.  That, frankly, is an unattractive business to be in.

In contrast, the average franchise model has profit margins north of 60%.

Why is that?

In my mind, the issue turns on agent splits.  I really can’t see a way for a broker to make a profit on an agent who has a 90/10 split.  Maybe someone will show me the books of a brokerage who is making a profit on that, but I’m not seeing it.

In an agent-centric model, it is the agent who is responsible for business development — for bringing in the leads, bringing in the business.  A broker has quite a bit of incentive in compensating a large salesforce of agents who go out and bring in new business.  It may be that the 90/10 split ends up paying for all of the marketing that the broker would have had to do otherwise.

All of this is now changing with the impact of the web on the industry.  Now, brokers (at least the smart ones who pay attention to things like profit margins) have every incentive to figure out ways to raise that paltry 3% to something more attractive.  Maybe they’ll never get to the 60% margins of pure franchise plays.  But maybe they can get to 10%.

That 7% margin, for a major brokerage that is doing $2-3 billion transaction value, translating to perhaps $60 million in GCI, means $4.2m in additional profits.  Ladies and gentlemen… that’s real incentive.

This is why I believe we are headed towards a “web-centric” model of real estate.  Mariana’s team practice is pointing the way to what the future of brokerage looks like.  Lead generation comes off of the web assets — those web assets require professional management by a small group of professionals who may or may not be licensed realtors.  The leads then get passed to the agents who are simply service providers who do the transaction itself.  The relationship is held at the broker level, through the web.  The value of the agent to the broker is no longer as a source of business, but as a transaction service provider.

And here there be monsters.  We are entering uncharted waters.

What does the overhead for a “web-centric” brokerage look like?  What sort of capital investments must a ‘web-centric’ brokerage make, as compared to the current ‘agent-centric’ model?  What sort of ongoing costs do these brokerages have?

If the agent is a transaction service provider, what is the value of that to a broker?  What, then, will be the resulting agent splits?  Do we start to see the rise of salaried agents who may not be able to bring in business if their lives depended on it, but can work with clients with superior service?

I certainly don’t know.  And prognostication is fun.  But this is an exciting time to be in real estate and technology, because nothing is known.

Here there be monsters, matey.  Yarrr.

-rsh

Back to Blogland

0

My short vacation in the mountains (hills?) of Pennsylvania is now over, and I’m sitting at the Westin in Las Vegas.  The RE Blog World show opens in a few minutes, and I’m sure blogs everywhere in the RE.net will be blazing with news and info.

I do have a ton of things to get caught up on, but am looking forward to the show.  More later, then.

-rsh

Vacation!

2

Just a brief note to let you know I’ll be on vacation until heading out to RE Blog World on Thursday.  So posting will be light or non-existent.  It’s hard to find the Internet up here in the mountains. 🙂

-rsh

Zillow's Newspaper Gambit: A Possible Parallel

7

Eric Blackwell of Bloodhound picks up on this story that Zillow has entered into a relationship with a number of newspapers and asks a series of pointed questions. The comments section has some hot and heavy action going on therein, and it makes for an entertaining read.

I saw this deal cross the news earlier as well, and thought it was interesting on many fronts. For one thing, unless I’m very mistaken about the nature of the deal, it simply means a co-marketing arrangement where the partners simply add ammunition to their sales teams:

The agreement expands the network to include display non-real estate related advertising. Greg Schwartz, vice president of advertising sales at Zillow, said the Web site will focus on “moving-specific” advertisers like home improvement and furniture companies in search of national coverage. Meanwhile, newspapers, such as the San Francisco Chronicle, for example, can offer a furniture retailer additional coverage through Zillow’s San Francisco channel.

So a ad sales guy sitting in the LA Times office can sell a million impressions on Zillow.com, and a Zillow sales person can sell Home Depot on a package deal of Zillow ads plus say 150 newspaper ads.

It isn’t clear whether this covers only online, or print also, but either way, all we’re talking about here is a “Hey, you can sell my stuff, and I can sell yours” deal. Makes a lot of sense to me without a tremendous amount of downside.

Now, David G. from Zillow goes on to say in the comments of the Bloodhound post above that:

Today’s announcement relates to a large advertising network advertising for reaching real estate consumers but there are also technology and content aspects to these partnerships. Later this year, Zillow will begin to power the online real estate sections of our newspaper partners’ websites. And listing content is already pushed to Zillow via newspapers that are selling featured listings on the site.

This tidbit is interesting as well. Because as it happens, there is an almost exact parallel on this play that might prove illuminating (or not).

Cityfeet.com did this exact play in commercial real estate a few years ago. They went out and signed up newspaper partners, powering the online real estate sections of these newspapers for commercial real estate search. I’m guessing that Cityfeet couldn’t get the online residential real estate sections, because those were too closely connected to major revenue centers for the newspapers. That Zillow was able to wrest those away from the newspapers is extraordinary. And extraordinarily interesting as commentary about the newspaper business.

It appears that newspapers are headed for some sort of a cliff.

Thats a double black-diamond slope, son!
That's a double black-diamond slope, son!

The news industry is panicking, to say the least:

The new bad news is the decline in online revenues.

In the best of times, online never contributed more than 10% of most publishers’ total revenues, but with double-digit growth, it was the sole bright spot in the middle years of the decade, holding the promise that interactive revenues might some day make up the losses on the print side.

Unfortunately, most of the growth in the online revenues was due to “up-sells” from print classified listings. As the volume of print listings declines at an ever-faster pace, that means there are fewer opportunities for online “up-sells.”

Considering that real estate advertising in newspapers fell by a whopping 36% in Q2, if online advertising also fell for newspapers, it isn’t clear that there is a sustainable business here for the dead-tree media companies.

So… Cityfeet couldn’t wrest away residential real estate sections from newspapers. Zillow did. In large part, this is because Zillow is many times larger and better funded than Cityfeet ever was.

However, let’s pause a moment and consider this.

  • Newspapers lose 36% of real estate ad sales.

  • Newspapers lose online ad sales for first time in years.

  • Newspapers do a deal with Zillow that is essentially “We take 50% commission for selling your ad space, Zillow.”

  • Zillow stands ready to “power newspaper real estate sections” — meaning all of that traffic probably goes to Zillow.

This looks like a total abdication of the real estate space by the newspaper industry, at least to me.

While that’s a big win for Zillow, I have to sound a cautionary note.

Cityfeet, you see, sputtered along for a couple of years before getting bought by Loopnet for $15m. (Since Cityfeet at the time boasted 100 newspaper relationships, including the big names like New York Times, Boston Globe, and the like, that means each relationship was worth about $150,000. Maybe. It isn’t yet clear that Loopnet has made back its $15m investment in Cityfeet.) The reason, quite simply, was that the brokers and agents who listed on Cityfeet were not seeing a lot of traction. Newspaper readers and newspaper website visitors tend not to be serious consumers for commercial real estate.

Now, given the differences between commercial and residential real estate, this may not be a problem for Zillow. 80% of commercial buyers/lessees do not start their search on the Web, for one example. But this should sound some warning gongs:

“This partnership allows advertisers with our papers to reach not only local real estate consumers who live in particular markets, but also consumers who may be moving to particular markets, via their searches on Zillow.com,” Lincoln Millstein, senior vice president of Hearst Newspapers, said in statement. “This is a significant opportunity for advertisers to target a very large number of consumers on the verge of major home-related commerce.”

Um, Lincoln… I don’t know how to break this to ya but… I doubt that visitors to Zillow.com can be described as being “on the verge of major home-related commerce.” Maybe Zillow has statistics that prove me wrong, which I would welcome, but going to a Zillow or Trulia or any of the major consumer real estate websites strikes me as merely the first step in a fairly long journey that may or may not end in “major home-related commerce”. If by “being on the verge”, Lincoln Millstein meant “within three to six months” then his expectations are properly set. If he means more like, “a matter of weeks”, I think he might be disappointed.

And his advertisers might be disappointed. Will consumers remember seeing some ad for a mortgage product on Zillow.com three months later as they’re finally sitting down with their realtor and going over mortgage paperwork? I really, really doubt that one.

As with all prognostications, I might be dead wrong on this one. But all in all, I’m not sure I see this major win here that the newspapers and Zillow would like us to see. Time will tell, but the trends are not encouraging for either party.

-rsh

Zillow’s Newspaper Gambit: A Possible Parallel

7

Eric Blackwell of Bloodhound picks up on this story that Zillow has entered into a relationship with a number of newspapers and asks a series of pointed questions. The comments section has some hot and heavy action going on therein, and it makes for an entertaining read.

I saw this deal cross the news earlier as well, and thought it was interesting on many fronts. For one thing, unless I’m very mistaken about the nature of the deal, it simply means a co-marketing arrangement where the partners simply add ammunition to their sales teams:

The agreement expands the network to include display non-real estate related advertising. Greg Schwartz, vice president of advertising sales at Zillow, said the Web site will focus on “moving-specific” advertisers like home improvement and furniture companies in search of national coverage. Meanwhile, newspapers, such as the San Francisco Chronicle, for example, can offer a furniture retailer additional coverage through Zillow’s San Francisco channel.

So a ad sales guy sitting in the LA Times office can sell a million impressions on Zillow.com, and a Zillow sales person can sell Home Depot on a package deal of Zillow ads plus say 150 newspaper ads.

It isn’t clear whether this covers only online, or print also, but either way, all we’re talking about here is a “Hey, you can sell my stuff, and I can sell yours” deal. Makes a lot of sense to me without a tremendous amount of downside.

Now, David G. from Zillow goes on to say in the comments of the Bloodhound post above that:

Today’s announcement relates to a large advertising network advertising for reaching real estate consumers but there are also technology and content aspects to these partnerships. Later this year, Zillow will begin to power the online real estate sections of our newspaper partners’ websites. And listing content is already pushed to Zillow via newspapers that are selling featured listings on the site.

This tidbit is interesting as well. Because as it happens, there is an almost exact parallel on this play that might prove illuminating (or not).

Cityfeet.com did this exact play in commercial real estate a few years ago. They went out and signed up newspaper partners, powering the online real estate sections of these newspapers for commercial real estate search. I’m guessing that Cityfeet couldn’t get the online residential real estate sections, because those were too closely connected to major revenue centers for the newspapers. That Zillow was able to wrest those away from the newspapers is extraordinary. And extraordinarily interesting as commentary about the newspaper business.

It appears that newspapers are headed for some sort of a cliff.

Thats a double black-diamond slope, son!
That's a double black-diamond slope, son!

The news industry is panicking, to say the least:

The new bad news is the decline in online revenues.

In the best of times, online never contributed more than 10% of most publishers’ total revenues, but with double-digit growth, it was the sole bright spot in the middle years of the decade, holding the promise that interactive revenues might some day make up the losses on the print side.

Unfortunately, most of the growth in the online revenues was due to “up-sells” from print classified listings. As the volume of print listings declines at an ever-faster pace, that means there are fewer opportunities for online “up-sells.”

Considering that real estate advertising in newspapers fell by a whopping 36% in Q2, if online advertising also fell for newspapers, it isn’t clear that there is a sustainable business here for the dead-tree media companies.

So… Cityfeet couldn’t wrest away residential real estate sections from newspapers. Zillow did. In large part, this is because Zillow is many times larger and better funded than Cityfeet ever was.

However, let’s pause a moment and consider this.

  • Newspapers lose 36% of real estate ad sales.

  • Newspapers lose online ad sales for first time in years.

  • Newspapers do a deal with Zillow that is essentially “We take 50% commission for selling your ad space, Zillow.”

  • Zillow stands ready to “power newspaper real estate sections” — meaning all of that traffic probably goes to Zillow.

This looks like a total abdication of the real estate space by the newspaper industry, at least to me.

While that’s a big win for Zillow, I have to sound a cautionary note.

Cityfeet, you see, sputtered along for a couple of years before getting bought by Loopnet for $15m. (Since Cityfeet at the time boasted 100 newspaper relationships, including the big names like New York Times, Boston Globe, and the like, that means each relationship was worth about $150,000. Maybe. It isn’t yet clear that Loopnet has made back its $15m investment in Cityfeet.) The reason, quite simply, was that the brokers and agents who listed on Cityfeet were not seeing a lot of traction. Newspaper readers and newspaper website visitors tend not to be serious consumers for commercial real estate.

Now, given the differences between commercial and residential real estate, this may not be a problem for Zillow. 80% of commercial buyers/lessees do not start their search on the Web, for one example. But this should sound some warning gongs:

“This partnership allows advertisers with our papers to reach not only local real estate consumers who live in particular markets, but also consumers who may be moving to particular markets, via their searches on Zillow.com,” Lincoln Millstein, senior vice president of Hearst Newspapers, said in statement. “This is a significant opportunity for advertisers to target a very large number of consumers on the verge of major home-related commerce.”

Um, Lincoln… I don’t know how to break this to ya but… I doubt that visitors to Zillow.com can be described as being “on the verge of major home-related commerce.” Maybe Zillow has statistics that prove me wrong, which I would welcome, but going to a Zillow or Trulia or any of the major consumer real estate websites strikes me as merely the first step in a fairly long journey that may or may not end in “major home-related commerce”. If by “being on the verge”, Lincoln Millstein meant “within three to six months” then his expectations are properly set. If he means more like, “a matter of weeks”, I think he might be disappointed.

And his advertisers might be disappointed. Will consumers remember seeing some ad for a mortgage product on Zillow.com three months later as they’re finally sitting down with their realtor and going over mortgage paperwork? I really, really doubt that one.

As with all prognostications, I might be dead wrong on this one. But all in all, I’m not sure I see this major win here that the newspapers and Zillow would like us to see. Time will tell, but the trends are not encouraging for either party.

-rsh