Notorious R.O.B.

As a blogger, rather than a “credentialed journalist” (whatever that means), I have the freedom to just pass on rumors, as long as I label them as such. Well, consider this one of those rumors I have not confirmed yet. [UPDATE] I just got a second person to confirm the rumor. Two people saying the same thing now moves this past the realm of rumor into a confirmed report. More detail below..

I’ve heard from a reliable source earlier this evening that there are some major changes afoot at NAR. The biggest upshot of the changes is that starting in 2012, portions of the dues from NAR members will go towards supporting RPR, REALTORS Federal Credit Union, and other so-called “Second Century” Initiatives. A few minutes of Googling suggests that the original Second Century Initiatives program — which included a line item for “The creation of a national gateway for real estate information, not a national MLS” – was funded by a $16 increase in dues in 2008.

But from the start, RPR was presented as a wholly-owned for-profit business unit of NAR that would be self-sustaining, after the initial investment of roughly $25 million to buy the Cyberhomes assets from LPS and a few million for LPS data. The idea was that the data generated by RPR would be very valuable when sold to financial institutions, government agencies, and the like, and the operation would throw off enough cash not only to continue providing the system to REALTORS at no charge, but also to generate enough profit to pay back NAR.

For reference, here’s a report of a Q&A session with Dale Ross, CEO of RPR, back in March of 2010:

Why should Second Century need to be paid back?

NAR’s Second Century fund is a venture capital fund which must paid back for its investments. However, that’s not the source of RPR’s funding. RPR money comes from an NAR technology fund set up with $100 million fund (from investments); NAR’s Finance Committee stipulated that monies must be paid back to replenish fund.

Since you’re providing RPR for free, where is money coming from? What happens if your revenue models are way off?

Three scenarios: app doesn’t work, we shut down; app works and rev model works, win-win; app works but rev model off. We project we’ll need $50 million/yr to run it… if it is valuable and not generating cash, we’ll figure up another funding source. If members want it and NAR Directors decide that is best way, that could be a member dues increase. I have never seen pro formas work; I have pushed the numbers around based on a 36-month breakeven. We’ll see. (Underline added for emphasis)

Well, if the rumors that member dues will start paying for RPR starting 2012 are true, then I’m gonna take a wild stab and suggest that the 36-month pro formas were way optimistic. Since we’re looking at a dues increase in two years (launch in 2009, dues funding decision in 2011 to take place in 2012) to support RPR.

A few questions arise. The first of which is, “So uh, is this true?” I’d love for anyone who can confirm or deny the rumor. Please feel free to contact me privately via email, twitter, Facebook, phone, whatever. My contact information is on the About page. More questions follow, all of which assume this rumor of dues funding for RPR and other Second Century Initiatives is indeed true.

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Recently, I mused on the nature of innovation and how it goes hand-in-hand with destruction.  The key thought, as pointed out by a savvy commenter, in that post is:

Or thought of another way, when you look at the innovations in the industry today — whether mobile apps, CRM technologies, social media, RPR, or whatever — you might ask, “What part of the industry does this innovation destroy?”

If the answer is “none”, then that thing, whatever it is, is not innovation.  It is, rather, incremental improvement; a marginal gain in efficiency.  It isn’t the automobile, but faster horses.

It seems to me that the corollary of “if it doesn’t destroy, it isn’t innovative” is that the degree of innovation is related to the degree of destructive potential.

So where would some of the recent much-discussed innovations rank on the “Shiva Scale” — the degree to which said innovation would destroy one or more parts of the real estate industry?  Let’s say the Shiva Rank goes from 1 to 10 where 1 might be “as harmless as a baby bunny” and 10 might be “thermonuclear bombardment from orbit”.  Where would some of the recent innovations rank?

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I’m going to try to do a bit of a stream-of-consciousness “live-blog” here at Houston Association of REALTORS Real Estate Investment Symposium.  I put that in quotes because (a) I’m distracted often, and (b) the bandwidth isn’t the best off my little MiFi device.

I’ve already missed a couple of the early presentations from Zillow, Google, and Move, but a couple of interesting things from this morning.

Sam Sebastian from Google suggests that the future of real estate broker is as an ‘information broker’; I asked if he could elaborate on that, since the experience of the past ten or so years is the opposite: information that used to be held by realtors is now all over the public via the Internet.  Isn’t the trend more and more towards realtors becoming customer service people rather than information brokers?

The answer — and it’s a good one — basically seems to be (at least interpreting Sam) that by “information broker” he meant something more like an analyst.  That the future of the realtor is as an interpreter of all of the information and data that’s all over the place on the Internet.

Interestingly, Google’s search on real estate terms is up 20% year over year, despite the terrible market.  Incidentally, I think that’s contradictory to the experience of the other big real estate websites (or at least used to be a few years back), but I haven’t seen recent stats.

[EDIT: This is getting very long, so it continues after the fold.  And forgive me for the ugliness of the post; it's the nature of a "live-blog".]

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See that green pattern on the bark! That's 3.2(b)(iii) of the License!

Once again, I find myself in the curious position of praising the good folks at RPR while at the same time ending up on a negative note.  On the one hand, RPR’s posting their Content License Agreement (complete with redlined corrections) is by far the most transparent thing that I’ve seen a company do in real estate industry thus far.  Kudos not just to Reggie Nicolay, the Social Media director of RPR, but also to Marty Frame and to Dale Ross, the executives in charge of RPR.  These guys talk the talk, and walk the walk of being open and transparent.  Thank you guys, and I really mean that.

If you’d like to look at the entire Agreement, including the Terms of Use for the RPR Website, go to the Google Doc here.

Some of the critiques already on the web may be entirely valid, but I think they largely miss the point.  For example, Mike Wurzer’s post suggesting that the new License Agreement allows RPR to sell listing-level data to various customers may be accurate (or may not be, as Marty Frame points out in the comments), but… this falls into the category of missing the forest because you’re too busy looking at whether the tree is a douglas fir or a pine tree.

There are three major, fundamental issues that the License Agreement does not address — primarily because those issues stem from RPR’s business model and its basic value proposition.  If the goal is to nitpick the language of the Agreement in the hopes of finding a provision on which one can base a future lawsuit, I suppose the detailed analysis being done now is interesting.  If the goal, however, is to understand the fundamental challenge of RPR, then we need to raise our eyes up a bit.

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So how does this RPR thing affect us and our brokerage?

In part 1, I tried my level best to keep my opinions restricted to what RPR actually is, based on the demo.  And what RPR is is a fantastic piece of web engineering.  In this part, I get more into the opinionating and what Reggie Nicolay might term, “fearmongering”.

Let us examine the possible impact of RPR on brokers and agents, based on what we know thus far.

Caveat Lector: What We Know That We Don’t Know

One thing I learned at REBarCamp NYC that just happened last week, from Reggie himself, was that the Terms of Use for RPR have not yet been set.  And while the RPR has announced API’s, the terms of use on those have not been set or published.  We also don’t know what those API’s will actually do in terms of data provisioning over the API’s to third party tools or websites.

Therefore, one of the biggest pieces to the puzzle — the legal rights and responsibilities of RPR’s users — is as yet unknown, except in glimpses.  We also don’t know how flexible the RPR system will ultimately be.  It may be incredibly flexible, or it may be a closed system.

We don’t know yet whether brokerages (or even agents) can participate directly in RPR, or if they have to wait for their MLS to first sign up with RPR in order to utilize the full range of functionality.

For that matter, since all we’ve really seen is a video demo and some screenshots, we don’t really know at the end of the day what the finished product will actually look like and how it will work.

Enough caveats?  Okay, let’s get into this…

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All your castles are belonging to us now!

After a fairly lengthy silence, the team at RPR has released a deluge of new information on their new blog.  A couple of things before we delve in.

First, Reggie Nicolay and his team deserve a ton of credit for the new blog.  It’s well-designed, the content is rich and detailed, and many of the tools I would expect from a professional social media engagement site are there.  So kudos to Reggie and the gang on the marketing side.  (Minor quibble: can you not use videos that can be embedded? Or provide more sharing tools, like WordPress, Posterous, and the like?  The goal of RPR blog isn’t to drive traffic, right, but to get the word out?)

Second, from the movie of a live demo of the software, it seems evident that the development team has not had a easy and relaxing holidays.  They’ve been hard at work, and what I saw on the demo (we’ll spill many pixels on this) is slick, polished, and truly excellent.  They too deserve immense credit for what they’ve managed to accomplish in such a short period of time.

Now, as you probably know, I’m on the skeptical side of things as far as RPR is concerned, having announced its death and all.  And the demo itself, as amazing as it is, doesn’t completely change my mind on that front.  However, from the start, I have had nothing but praise for the software itself, and I’d like to make that crystal clear:  The RPR software is by far the most impressive piece of design and web development I have seen in real estate since the launch of Trulia.  I have nothing bad to say about it as a piece of software.

In this part, I’d like to simply review the RPR based on the demo that was recently posted.  Since I haven’t driven it myself, I’m not clear on what I may be missing.  So keep that in mind as you read.

Let’s dive in.

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[UPDATED 11/20/09: More facts added.]

Earlier this week, Reggie Nicolay (@ReggieRPR), the Director of Social Media for the REALTORS Property Resource, LLC, wrote:

I happen to agree 100%.  Also, a commenter on one of my earlier posts by the name of Kris Goodfellow wrote:

Rob,
I’ve got to say, that there is much in the way of speculation and little in the way of “facts” here. DOA, really? That’s pure conjecture. Marty got a standing O today from the 2000 leaders from every state and local associations. In the big broker’s session, the comments included “WOW!” and RPR was compared to Neil Armstrong walking on the moon.
I might be just an old fashioned, ex-newspaper journalist, but I’ve got to say that a year this post is going to look as silly as the “Dewey Defeats Truman” headline. Tell the story, man, don’t try to be a fortune teller.

So let’s say I agree with both Reggie and Kris.

My take is that you kill drama and hype by showing the facts, not by calling questions and opinions “drama and hype”.  So in the interest of moving the conversation along, and also to emphasize once again that I am no opponent of RPR, I have put together all of the facts as I know them with sources, along with questions about what we do not know.  This way, anyone who is interested might be able to discern for himself what is real and what is drama.

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RPR! We hardly knew ye!

Without a doubt, the topic of conversation at this year’s NAR National Convention has been the REALTOR Property Resource (Link: PDF) or RPR, the ambitious $20mm program rolled out with much fanfare by NAR.  You couldn’t avoid talking about RPR even if you tried.  And I wasn’t really trying that hard, because RPR is a fascinating product, an awesome user interface, and one where the team led by Marty Frame deserves a whole lot of credit for pulling such a great product together in such a short period of time (roughly 4 months).  Despite my concerns that RPR will trigger a civil war in the real estate industry, I thought (and continue to think) very highly of RPR.

However, it is now time to bury RPR.  It is dead on arrival in its current incarnation.

Suspicious Minds

Having presented at, and then having sat through the presentation of Dale Ross and Marty Frame on RPR, at the MLS Executives Meeting at NAR yesterday, I believe that the general mood of the MLS operators ranges between open hostility to cautious neutrality.  The larger MLS’s are biding their time, to see what some of the details are, possibly to see what is being offered by RPR for early adopters.  (Full disclosure: a large MLS, MRIS, is a client of 7DS, but I am writing this post, as I have every post on this topic, based on what I personally saw and heard, and public information, as opposed to anything discussed with them.)  The smaller MLS’s are worried what RPR could mean for them, and miffed that there is no revenue sharing arrangement for the sale of “their” data.

Brokerages are not bursting over with enthusiasm either.  They also wonder what’s in RPR for them, since they feel that the data that the MLS is supposed to provide RPR belongs to them.  The broker-owned MLS’s can’t make a decision without getting their shareholders on board, and the mood appears dark, to say the least.

The fatal flaw of RPR, I think, is the lack of revenue share.  Brokers, MLS executives, and Association executives might all look with favor or at least interest on a proposal that promised revenue streams that would allow them all to either make greater profits, or reduce the cost of service to their members.  Dale Ross made it crystal clear to the MLS executives that there is no revenue share for them; he urged them, in fact, to cooperate and collaborate with RPR for the good of the members because RPR will provide tools to help the members of MLS’s become better practitioners.  Ross’s concession that maybe five years down the line, after RPR’s revenues and profits are stabilized, he may consider revenue share did not, it seemed to me, to go over all that well with the audience.

Trouble is, those types of answers do not appear to assuage the suspicion on the part of MLS executives and brokerages that what NAR intends to do with RPR is to create a national MLS.

Into this environment of suspicion comes a critical piece of information.

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Dale Ross

Dale Ross takes the podium; he’s an imposing man.

He says it took 4 months to negotiate with LPS/Cyberhomes.  There are seventeen separate agreements, which cover topics like license terms, source code ownership, and so forth.

Ross stresses that while RPR has partners, they are partners via contract rather than by having equity shares in RPR.  RPR is 100% owned by NAR.

He says NAR put in $20mm over 5 years.  The business model is data sales to government and Wall Street.  Ross says LPS came to NAR and said, “there’s a way to use derivative analytics data products”; LPS has these relationships already set up, and has a huge marketing arm.

He feels there seems to be a need in the market for RVM, a value for each of the 147mm properties in the country.

1. Take the LPS records
2. Take the MLS data, and merge it together to form RPR record
3.  Then do analytics
4.  Create derivative data product; sell that product

$250mm spent by Wall St. on real-estate related data; LPS believes that in the 4-5 yr cycle, $60-90mm market for the analytics product; split is 50/50 between LPS and RPR.

License agreements what RPR can and cannot do with the data.  Ross stresses that no raw data will be given to anyone; only custom, derivative datasets.

No fee to MLS for the public records; but there will be a fee for integration.  (Wonder what this means?  Integration of the public data will be custom by MLS?  No API access?)

Ross says RPR is NOT exclusive with LPS.  (So in theory, First American or Claritas can sell RVM or RPR data to corporate clients?  Could Altos be licensed to sell RPR data to agents and brokers?)  He notes that RPR’s license with MLS is also not exclusive.  (Hmm — what does it mean that RPR’s license with the MLS is also not exclusive?)

Ross says there will be no revenue stream back to the MLS.  The benefit to MLS is that RPR believes it can help the MLS cut some of the costs on public data.  Plus, the toolset (the website) will help MLS save money, and Ross thinks RVM will be popular with agents and appraisers

Marty Frame

Marty Frame sounds tired.  And bored.  It’s as if he’s been giving this presentation over and over and over again to dozens of people and groups.

WHOA! RPR will provide an API for VOW technology vendors.  That’s news.

Member Contacts and Networks built into RPR — why exactly is this tool here?

Expert moderated discussions???  What could Marty mean by this?  Who moderates?  Who are the experts?

Q&A

I’m not going to cover every question, or every word of the answer here.  But these are what I find interesting, and the answers I think are interesting.

Question is what is the critical mass for RPR.

Ross says rollout will be by regions.  So if California is first, then RPR will do California first.  The way he phrased it is interesting: “If REALTORS want it, then the MLS’s cooperate, then we can do California”.

They have a plan of action; they know who the largest MLS’s are; they are talking to everyone and will be contacting MLS’s with live demonstrations and how the system will work.

Question: Will a REALTOR have access to the entire country?

Ross: Yes, the whole country.  But business rules are being worked out.

NON-REALTOR members get less access.  (I didn’t know they would get ANY access.)  I guess these would be the appraisers and such?  Or simply Licensees.

Question: I should give you my Sold Data because…

Ross: It’s not for you, but for your membership.  Because RPR will give your members tools to make them better practitioners.

This tool isn’t built for you and me, but for Gen-Y; they’re entering the industry and they’re going to be consumers.  They’re used to having data, so we need to do this for them.

Question: What do people who are members of NAR (REALTORS), but not subscribers to the MLS, get?

IF you belong to NAR, but not to the MLS, then you get everything in the application, but NOT the MLS data.  They will, however, get the RVM.

So either way, even if MLS’s don’t participate,

Question: The MLS data is what drives this; but you said no revenue share for MLS.  Why is that?

(CLAPPING by audience; I think this group is more hostile to RPR than one might imagine.)

Ross says he’s willing to look at revenue share 5 years out, depending on what the revenue looks like.  I don’t think he won this audience over with that.

Marty Frame just said that RPR will do a bunch of data cleansing and data normalization on MLS data.  WOW.

Question: Can brokers opt out?  Can MLS’s opt out?

Brokers can opt out.

The MLS can opt out and terminate the license agreement if they choose.  Hmm.  I’d like to see the termination provision.

Adjustments to the system “stick” only to your individual change.

The Q&A ends.

Thoughts

That was quite a bit to try and take in.

The three or four key takeaways for me are these:

1.  RPR seems pretty deadset against revenue share.  The notion that MLS’s should cooperate even though there’s nothing in it for them, because there’s a great wonderful doodad for the membership seems… optimistic.  What’s truly amazing about this is that Dale Ross said several times that “we (RPR) can’t do it without you (MLS)”.  I have to wonder, okay… can they (MLS) do it without you (RPR)?

2.  RPR will provide a VOW API.  This strikes me as important, because it’s the first I’ve heard about a way to get data out of the system.  But at the same time, it strikes me as important because if broker/agent websites start pulling VOW data out of RPR instead of out of the MLS, that’s yet another customer touchpoint lost to the MLS.  If RPR can provide a VOW API, why couldn’t it provide an IDX API?

3.  People who are REALTORS (aka, members of NAR) but not subscribers to the MLS will get everything sans MLS data.  That means all of the public records, all the school info, all the demographic and psychographic info, etc.  Wow.  I’m trying to figure out how a smart REALTOR could leverage this to his/her benefit.  One consequence here is that companies like Onboard and eNeighborhoods simply have very little value in the post-RPR world.

4.  This group, the MLS executives, appeared to me to be largely hostile and at best skeptical.  If RPR really wants to launch this by April 1st of 2010, Marty and his team have their work cut out for them.  The civil war I predicted isn’t quite civil war… but this has the smell of the Missouri Compromise era.

-rsh

As many of you know, I wrote a wee little post the other day about REALTOR Property Resource or RPR.  That was the first post based on my impressions from a webinar held on November 6th.

With some further thought, and with the ability to review the actual webinar/webcast itself, I have some further questions.  And I’d like to keep each post to one question, so every post doesn’t end up being 3,000+ words.

So today’s question:  What else did LPS get besides $12mm to participate in RPR?

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