Notorious R.O.B.

Matt Dollinger, of @Properties in Chicago, raised a very interesting question at the Leading RE conference that just concluded.  He then raised it again over Twitter (Matt is @mattdollinger) and the discussion threatened to overwhelm the 140-char limit.  It’s time for bloggery.

Matt’s question was this (in essence):

In 2015, with companies like Trulia, Zillow, Roost and others really advancing the technology of real estate search, should brokers have their own search site?

Since the panel was titled “Real Estate 3.0″, it naturally lends itself to these kinds of speculative questions.

This is an important question.  Money is not unlimited.  Brokers have to make decisions today to align their strategy going forward.  And as Matt himself pointed out during session, brokerages are not technology companies at heart.

The answer seemed to be from the panelists that brokers have to do both: create a top-notch brokerage website that is optimized for SEO, has great user experience, and captures leads all over the place, but also send listings to all of the aggregators to drive additional leads, because the big guys have national (global) reach and can grab so many more eyeballs than a single brokerage site could.

Trouble is… that just doesn’t jive logically.

Internet is Not Local

Fact is, while a brokerage may be local, and real estate may be local, the Internet is most assuredly not local.  There is no reason why someone searching for “chicago real estate” from New Jersey would not find a local website.

Granted, @Properties apparently needs some SEO consultancy love, seeing as how it doesn’t appear on page one, two, or three, but other local brokerage sites are right there: Baird & Warner, Rubloff, Dreamtown Realty, etc. all show up.

And Trulia also shows up.

As a consumer, if I go into a local brokerage site like Dreamtown’s, then go into Trulia, there is a world of difference there from a user experience standpoint.

The one has all manner of busy advertising, bullshit marketing messages that I would immediately ignore, and so on.  The other has a clean interface, a nice Google map mashup, and easy to use search filters right there on the page.

For Dreamtown to come up to par with Trulia, it would need to spend a pretty serious amount of money and time.  And the Dreamtown website is actually pretty darn good as far as local brokerage sites go.  Having worked on corporate brokerage sites, I think it is no stretch to say that a top-notch custom-coded website with developers, designers, UI design, SEO, and the like can easily top $250K in cost.

That isn’t even taking into consideration what it would cost to develop something actually new and innovative.  A new kind of search, a totally new way to interface with listings data, etc. could mean literally millions of dollars in R&D costs.

In theory, the aggregators and web portals like Trulia are technology companies first and foremost, and have core competencies in design and development.  They should always be ahead of the brokers in terms of technology and user interface.  (And in theory, they should dominate the brokers in SERPS… though often, they do not.)

Branding & CRM

Matt would argue — and correctly — that a brokerage company still needs a website for branding and CRM purposes.

For instance, you have to have a site where your existing seller clients can go, login, view all activity reports on their listings, see where the transaction is, download paperwork, upload paperwork, etc.  (You all do have this, right?)

And it would be difficult to brand your brokerage and your agents as local experts (since real estate is local, even if the Internet is not) without providing some heavy duty in-depth information and data about your local market.

But neither of these things need a SEARCH experience.

In theory, @Properties could have an awesome local website, filled with information about the area, a series of hyperlocal blogs written by their agents, and so on.  But rather than a search experience, just offer a “Search Our Chicago Listings on Trulia” or some such.

Either/Or?

Of course, most folks would assume that like in all debates, the real answer is a “bit of both” rather than an “either/or”.

So a broker would go invest a few thousand bucks to get a templated site from some low-cost website creator, or frame in a search solution from some IDX search provider, and still spend thousands more to feature listings on Realtor, or on Trulia, or pay for leads from some aggregator.

This is, however, a case of “either/or”. One of the following is true:

1. The money spent on putting in a search into the local broker site is wasted, since consumers would naturally prefer (and only find by year 2015) the tech-sites that emphasize the whole search user experience and functionality, and leads would be sent directly to the broker.  Instead, spend that money on enhancing local info, the brand presence, and the CRM applications.
2. The money spent buying traffic/leads from Third Parties is wasted, since all searches begin with Google anyhow.  The name of the game is to rank higher in Google, and not having search and all those results pages kills you.  Plus, you don’t need super-duper search; you just need good clean intuitive search that connects the consumer to your agent as quickly as possible.

Both cannot be true as a matter of logic.

Traffic vs. Lead

An important distinction here is between ‘traffic’ and ‘leads’.  Louis Cammarosano of HomeGain is fond of pointhing this out.  A broker or agent, in his view, could care less about a site sending him a billion visitors if all of them are bored-ass tirekickers who wouldn’t convert to a customer anyhow.  They would rather that HomeGain (or whoever) send them ten people who are solid ready-to-buy or ready-to-sell consumers.

In theory, the third-party sites can send enormous amounts of traffic to the spiffy brokerage site with a great search experience.  Since these are just random visitors, the brokerage site would need to do a lot more — including offering a search experience — in order to convert them to actual leads.  And it is possible that these sites could send millions of visitors, not one of whom will ever hit “Request More Info” or “Request a Showing” or pick up the phone.

That traffic, however, is sourced more or less from Google, which brings us right back to “SERPS are what matters, not SEARCH”.

Or, the third party sites are sending enormous amount of leads, which are consumers asking to be contacted.  In which case, they’re past the whole “search for a home” deal and into the “I need more information” deal.  And the brokerage’s spiffy new search technology is completely bypassed.

Real Estate in 2015

So let’s fast forward.  2015.  Hard to make assumptions based on technology today, with our rapid speed of change.  But let’s go with it.  Let’s assume that search technology is so advanced by 2015, and computing has totally changed, with multi-touch computing the norm.

What happens to search-based broker/agent website then?  The answer is directly related to what happens to the big aggregators by then.  And where search technology is by then.

As the fast and furious twitterstream on this topic indicates, this is a bigger issue than one might think initially, with implications across the entire spectrum of online real estate.

I’m looking forward to the discussion and exploration.

-rsh

Louis Cammarosano is a really smart dude. I know you might think you know that. But, really. He’s a smart smart guy. In this interview he briefly mentions his history prior to HomeGain:

Upon graduation from the Fordham University School of Law, I worked at Cravath Swaine and Moore in New York and London. I spent most of the 1990’s as a corporate Mergers and Acquisition and securities attorney working in London, Paris and Warsaw.

Cravath, Swaine & Moore is one of a half dozen law firms in the world that routinely goes by a single name: “Cravath”. Everyone in the legal industry knows who you’re talking about. (The others, incidentally, are Wachtel, Skadden, Sully, Cleary, and Latham. Granted, there are firms that use two names and are as well-known, such as Paul, Weiss or Davis, Polk… but I digress!) In every survey I have ever read, as well as personal conversations, Cravath is generally considered the best law firm in the country (and therefore the world). Certain firms are stronger in some practice areas (e.g., Weil, Gotshal is generally conceded as having the top bankruptcy department), and Wachtel would give Cravath a run for its money in overall prestige, but all-around, Cravath is simply the best law firm in the world. It equates to McKinsey & Co in management consulting and to Goldman Sachs in investment banking.

Cravath lawyers are known for their incredible brilliance combined with an incredible fortitude. A friend of mine worked at Cravath for a couple of years, until after a particularly brutal two week period of work, he came home to find a strange woman in his bed. Naturally, he asked her who she was. Whereupon she replied, “I’m your *#@$()&% wife, and you’re quitting that (#@&)(%@ firm.” You simply do not spend ten years working at Cravath unless you’re very very smart, very very hardworking, and very very dedicated.

Louis is such a man.

Therefore, it is no surprise that the latest offering from HomeGain — AgentView — reflects those smarts. Others have written about what’s good about it already, and as I tend to agree generally, I want to focus on something else. (Oh fine, I’ll quibble and nitpick later on.)

As I see it, with AgentView, HomeGain throws down the gauntlet to the major brands in real estate brokerage.

This may not have been their intent, but it is the impact.

Consider what services a brand provides to a real estate agent:

• a logo (or “flag”)
• national advertising
• national website
• marketing tools & materials
• training
• leads

Except for the “flag”, AgentView and HomeGain now provides everything else. If HomeGain starts to pick up brokerage licenses, it can provide a “flag” as well. I see no reason why a HomeGain yard sign would be any less effective than any other yard sign.

In terms of national advertising, Brian Brady rightly points out that HomeGain is a Google Rank 7/10 site that is going to be funneling traffic to these AgentView pages. Should I point out that Coldwell Banker is only 6/10? That Remax is only 6/10?

In fact, AgentView is also something larger brokers ought to be concerned about. It seems we’re in the age of brokers treating their agents like independent businesses. If that’s how your business works, then great. But then you’re going to have to do some serious thinking about the price those independent businesses are willing to pay for your services.

HomeGain is charging $29/month per zip code. Brian thinks the average cost for an agent will be $40-$50 a month. Let’s go with Brian and call it $600 per year for the agent.

What does the brokerage charge the agent? 30% of the commission on each transaction as a split? 40%? Some charge desk costs plus expenses. Some charge agents referral fees for each lead sent to them.

For that matter, what does a brand charge the agent? The broker isn’t going to eat the whole cost of the royalty fee — not for long anyhow. 6% of the GCI?

Yes, I know — you need a broker’s license and take on liability and all those fun things to become independent. Honestly, I have to ask… is that hard to do? If an agent’s only need is to have a broker’s license and buy liability insurance, since she will have no employees, and work out of her home, and use HomeGain for all her marketing needs… well, you do the math.

This is a great move by Louis and the HomeGain people. It is also a challenge to the entrenched powers in real estate.

Resist the temptation to dismiss HomeGain’s transformation. After all, Trulia and Zillow have agent profile pages with listings. Trulia has Trulia Voices and the new blogging platform. What’s the big deal?

The difference between the three companies lies in how they see themselves, and how they view their relationship with agents.

Trulia and Zillow see themselves fundamentally as real estate media plays. They have home search and content and AVM’s and such, but their business model is all about advertising. Their customers are advertisers — consumers are but eyeballs, and agents are but free content producers. Again, I know the good people at Trulia/Zillow (and they’re all good people, at least the ones I’ve met) don’t think of things that way — but I do, because I tend to focus on essentials.

In contrast, HomeGain sees their customers as the real estate agent. In that comment I linked to, Louis wrote:

Key metric here is not top of funnel visits but delivered visits to agents. If our click through rate goes up 50% we can make the same money on 1/2 the traffic. If that happens we can cut out non profitable sources of traffic and make the same money at a higher margin.

This, ladies and gents, is not how a media company thinks. It is how a brokerage thinks. It is how national franchises think.

Nitpicking

Okay, so I promised a bit of quibbling and nitpicking. Keep in mind that I think AgentView is really solid; it’s a great extension of the HomeGain platform. I expect it will be successful.

Nit #1 to Pick: Buy a zip code? How… charmingly antique! Louis — call me at my dayjob if you guys need neighborhood boundaries. I know realtors tend to know zip codes really well, but I would think that a company with the technical competence of HomeGain would let agents buy neighborhoods (like “Soho” and “Greenwich Village”) that cut across Zip Codes (or are a small part of one zip code), as well as MSA’s, parts of towns, etc. Relatedly… where’s the map?

Nit #2 to Pick: The agent profile box at the top of the AgentView page (click here) strikes me as rather ‘undesigned’. Considering the importance of that information to the whole value proposition, I think it might merit a slight redesign to emphasize the information. Maybe leverage Flex or other technologies to sex it up a bit. Or just throw a designer at it.

Nit #3 to Pick: I love that the Agent Profile mentions how many HomeGain clients the Agent had. It would be awesome (for consumers, and for good agents) to add an Ebay-style feedback section here. Nothing works better than testimonials from actual clients — and if you were horrible, you deserve the black marks.

So… About that Gauntlet

For what it’s worth, I’m glad to see HomeGain throw down the gauntlet. This is a challenge that the big brokers and major brands can’t afford to ignore for long. I hope, I believe, that it will spur another round of innovation from companies that aren’t thought to be particularly innovative. Will they pick up the gauntlet and finally start flexing?

It’s a fun time to be in real estate technology.

-rsh

(Image from Flickr.com, by MarkyBon)

There must be some sort of a zeitgeist (literally, “time spirit”) going around the RE.net, like some sort of a benign virus, on the topic of “Web 2.0″ — what it is, what it is not. I just posted on Web 2.0, only to see Louis Cammarosano from HomeGain, and then Ardell from RCG post some very interesting thoughts on Web 2.0. That we are all thinking similar types of thoughts must mean some sort of a collective subconscious about Web 2.0 and what it means in the real estate context.

In my previous post, I mentioned the Cluetrain Manifesto, and my belief that Web 2.0 is really nothing more than a vulgate expression of that document and its insights. The authors actually wrote a book based on the ideas of the Manifesto itself, and the 95 theses. Since the entire thing is available online, I can easily recommend that you read it. Or if you like dead tree versions, you can find a copy here.

Now, considering the Manifesto was written in 1999, and eight years on the Internet is basically a new geological epoch, each reader must update it from his or her own viewpoint. And apply the insights to his or her own situation.

This is just my own personal take on the Cluetrain, and what it means for the real estate industry, both residential and commercial. It isn’t the complete take, of course, as that would take many posts, but just one particular aspect of the Cluetrain and what it might mean for the real estate industry.

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