Notorious R.O.B.

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.

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

Whatever do you suppose this is?

Zillow is a living, growing database of all homes — not just homes for sale (we currently have data on more than 80 million homes). More than 1.3 million owners have claimed their homes on Zillow and many have updated their home facts.

Kudos to Zillow for opening up their API’s.  One can quibble with Zillow (for example, their neighborhood data, which appears to be… let’s say odd…) but the decision as a whole is brilliant.

Just add Offers of Compensation and what do you get?

-rsh

Joe Ferrara asks whether listings are like airline tickets in his post about American Airlines pulling its ticket listings from Kayak:

Are home listings like airline tickets to be freely given by listing brokers and agents to any and all third party listing sites? Do listing brokers have any reason to complain so long as they get exposure of home listings to consumers and a link to their websites?

My take is that home listings are completely unlike airline ticket listings for one very important reason: the listing broker does not own the underlying property.

For American Airlines, who provides the actual service of transportation, to get pissy with Kayak is its decision.  If the decision to pull its ticket listings from Kayak results in fewer sales of American’s seats, that only affects American Airlines and its shareholders.

In contrast, a listing broker who pulls listings from TruZillia or some other online aggregator has to answer to the ultimate client: the home seller who has engaged the listing broker to represent his property.  If pulling listings results in fewer leads and fewer inquiries and therefore a lower sale price than might have been possible, I’m 99.99% certain that any court anywhere in the United States would be finding for the homeseller plaintiff against his “fiduciary” broker.

I note that there is a difference between failing to list on some website (which could theoretically be justified as there are a plethora of websites out there, and the broker might not have heard of XYZ listing aggregator) and pulling listings off of a site.  I would think that the broker would have to show that the listing aggregator was 100% ineffective at generating additional leads, so that pulling listings from it had no impact whatsoever on the exposure (and ultimately the offer) that his client received on his house.  And how in the world do you show that?

In short, pull listings off of aggregators at your own peril, brokers.

-rsh

Breaking news from Inman Blogger Connect: Trulia has announced that it is launching a blog platform. I don’t have a link, because this was on a piece of paper, but there will be an official announcement later.

I actually had a chance to speak with Vicky Gkiza, Sr. Product Manager for Community, at Trulia and… well… she’s a lovely, lovely person. In more than one way, actually — take a look:

She was really nice, very kind with her time, and extraordinarily smart — as is sort of par for the course for the boys and girls at Trulia.  But the point is not to talk about Vicky.

The point is this: Trulia may not intend to put ActiveRain (and others of its ilk) out of business, but the impact of this blog product is to do precisely that. As a matter of fact, I have a bet with Vicky now that I plan to collect at Inman in 2010.

Here’s the thing: Trulia has 5 million unique users each month, by their own count. If you’re a real estate agent doing a consumer-oriented blog, then what you’re after are consumer readers. ActiveRain, Agentgenius, and any of those guys may have a great platform, but until and unless they can provide consumer traffic to the tune of 5 million uniques per month… I’m afraid the value simply ceases the exist.

I have to take pains to point out again that Trulia probably doesn’t intend malice upon ActiveRain or other similar consumer-oriented agent blog networks.  As they see it, they just want to help their agent members connect with their consumer visitors.  Once you have listings, then have Trulia Voices, then Trulia Q&A, the agent blog is the obvious next step.

I’m just pointing out the obvious: if you’re an agent, and you want to have a blog somewhere, why would you do it anywhere other than at Trulia Blogs?  ActiveRain, as it is, has a tendency to be realtors talking to other realtors.  Which is fine, and might be great for an industry-focused blog like this one, or the Onboard Informatics corporate blog, but… for an agent who wants to blog to drive leads and grow business, I just don’t see the value anymore.

What this product does is divide the RE.net in half: those who are focused on consumers, and those who are focused on industry.  The agent blogs have to find a reason NOT to blog on Trulia.  (Presumably, a good one might be Zillow‘s answer, if they have one.)  The industry blogs may want to continue at places like ActiveRain or independently.

Perhaps after Inman is over, I’ll have to do some thinking about what this means in the even bigger picture: now that Trulia is creating a compelling platform for agent blogging, together with listings, together with Q&A, together with consumer traffic… what is the next evolution for the Big Brokerages like Century 21 and so on?

-rsh

In commercial real estate, there is a standard analysis that brokers conduct: the Lease-Buy analysis. It is meant to show the client the financial impact of leasing space vs. buying the building outright. For whatever reason, this is not a standard analysis that residential agents conduct on behalf of their clients. You can find online calculators like this one or this one, but they appear to be intended for consumer use and doesn’t get anywhere near the level of analysis that I expect from a professional.

Diane Tuman over at Zillow blog talks a bit about their Wiki article on Owning vs. Renting. It’s a clever way to get people over to Zillow’s wiki, but it has the benefit of offering what may be helpful advice. I went over and checked it out.

Diane’s take on the wiki article is that you can boil down a lot of the advice to the following:

Lifestyle — If you are happy-go-lucky, don’t like to mow the lawn or do maintenance, have an uncertain income and need flexibility, renting is probably for you.

Location — If you live in a vibrant real estate market where the home values have been consistently strong for decades, and you have the means and desire to own, then buying might be the right choice.

I think she’s being a bit generous. I find the ‘advice’ in the Wiki to be of the Oprah variety and not of the useful variety. Here are some of what the Zillow wiki (and the editors thereof) thinks are reasons to rent:

• Flexibility. Check out neighborhoods if you are new to town or are researching where you want to buy. By renting you can test an area without committing to it.
• Uncertainty in your career. If you think you might need to move in the near future, or are mulling job changes that span several areas of town or are located elsewhere in the country, you might want to rent, since buying ties you down to a greater extent.

You don’t say! How could anyone have figured this out on their own without the helpful expert advice of professionals.

• No maintenance. When the pipe leaks under the sink, you don’t head to Home Depot, you head for the telephone and call the landlord.

And the landlord tells you that he’ll have someone take a look. 8 hours later, the pipe is still leaking, and all you’re getting is the voicemail of the landlord’s phone. Now what? If you decide to let the place just flood, guess what, there goes your security deposit.

You do not get to trash the rental unit just because you don’t own it. You will be liable to the landlord in that case.

• Incidental expenses. The landlord pays for many utilities such as water, sewer, garbage, and in some cases heat and hot water as well.

Whoever wrote this understands not a thing about rentals. Does anyone really believe that the landlord pays for utilities out of his own pocket, instead of just passing the cost to you in the form of rent?

• Not subject to downward movements in home prices. If we are in a housing bubble, you don’t lose money. (On the other hand, if house prices keep going up, you lose money).
• May be less expensive than owning. If the cost of renting is less than the cost of buying, you can use the excess money for other purposes, such as investment or furniture.
• If you are in a market with declining real estate values. If home values in your area are dropping you may get a better deal on the home if you wait. Let someone else take the loss instead of you.

These three “reasons” are the worst of all, in a way, because they pretend expertise that is unproven. Rental prices are not subject to dropping home prices? Where’s the evidence of that? Landlords owning depreciating assets won’t try to recoup some of the loss via higher rent? Especially if they know that the housing market is unfriendly to buyers, leaving people no choice but the continue renting? What may be a true statement is simply unproven, and zero attempt to support such a sweeping generalization is made.

Renting “may be” less expensive than owning? Is that even advice? “If the cost of renting is less than the cost of buying, you can use the excess money for other purposes” — gee thanks. No way anyone could have figured that out on her own.

Isn’t this begging the question entirely? If a consumer actually wanted to know whether she should be buying or renting in XYZ market right now, is an agent supposed to tell her, “Well, renting might be less expensive… but then again, it might not be. But if the cost of renting is less than cost of buying, you can use the leftover money for other things!”

In my ever so humble opinion, residential brokerages might want to consider investing in some systems and tools to conduct residential sensitivity/lease-buy analysis. Simple things.

For example, not being an agent, I might start with the questions in one of the online calculators (E-Loan’s is a decent one) then ask further questions, such as:

• What is your current pre-tax and post-tax income?
• Any other tax shelters?
• What are your other investments?
• What is the current inflation rate? What is the benchmark money market interest rate? What is the 3 year average of returns from equities? From bonds?
• Local tax rates
• Local property rates
• Insurance costs, both homeowner and renter
• Maintenance costs
• How much have homes appreciated/depreciated in the specific area, with as specific a set of comparables as possible, in the past 1/3/5 years?
• Trends in rents for the past 1/3/5 years?

Then I might combine all of that and run some sort of analysis looking for the various breakpoints, then sit down with the client and go over the analysis, explaining the various assumptions made. Play with the variables some with the client, and show how the picture changes.

(Incidentally, I have to assume that some software company out there produces this kind of a tool for residential brokers. Right? Doesn’t someone offer this tool? If not… there’s an opportunity here for one of you tool makers to the industry.)

Even if that client ends up deciding to rent instead of purchase, you have proven your expertise without a doubt and your trustworthiness. They know, walking out of your office, that you just steered them away from making a bad financial choice. If an agent did that for me, I would absolutely look for him when it did come time to buy. That’s the guy I’d want to work with.

Furthermore, such an analysis forms a perfect basis for CRM efforts. Maybe the key variable that led the client to walk away from purchase was the mortgage interest rate compared to the stock market returns; you should then be able to contact them when those rates change materially.

Finally, it’s just the right thing to do as a real estate professional.

And before the client walked out of my office, I would have them sit down and watch this:

(ED: The original video was taken down on YouTube.  If you are wondering what it is, the song is “Life for Rent” by Dido.  Just a beautiful, lovely song.  The live acoustic version above isn’t bad at all.)

Homeownership is not just a dollars and cents issue. It’s a deeply emotional one. People are going to be willing to take a “loss” in order to have equity, to have a home that is theirs. The lease/buy analysis is simply going to make clear what they’re willing to spend for that emotional fulfillment of owning your own home.

Of course, this was also just a great reason to post a great song and video.

-rsh

Move, Inc. — the folks behind Realtor.com and Top Producer — held its Q4 2007 earnings conference call recently. The transcript is available on Seeking Alpha. I think it’s well worth your time to check it out in full.

Move did $286M in 2007, vs. $280M in 2006. Considering the shape that the real estate market was in during the second half of 2007, that’s quite an accomplishment. What’s more amazing is that Move grew Q4 revenues by 2.4% to $71.7M in 2007. Michael Long, Move’s CEO, boasted:

In 2007, the toughest real estate market in 50 years, we grew revenues in our core real estate businesses, Realtor.com, Top Producer, and New Homes, amid unprecedented disruption and volatility. Revenue from Realtor.com and Top Producer on a combined basis was 10% higher than 2006. For the year we also delivered the highest EBITDA margin in our history and generated positive cash flow for the third consecutive year.

They’re in great shape.

Beyond the fact that they’re making money during tough times, I found three really, really interesting things from that call.

Read the rest of this entry »

Now, this is good news from NAR:

The integrity of data is a foundation to the orderly Real Estate market. The Real Estate Transaction Standards (RETS) provides a vendor neutral, secure approach to exchanging listing information between the broker and the MLS. In order to ensure that the goal of maintaining an orderly marketplace is maintained, and to further establish REALTOR® information as the trusted data source, MLS organizations owned and operated by associations of REALTOR® will comply with the RETS standards by June 2009, and keep current with the standard’s new versions by implementing new releases of RETS within one year from ratification.

So, by June of 2009, all MLS operated by Realtor associations will be RETS compliant.

Currently, only 63% of MLSes are RETS compliant.

If you’re a betting man, here’s an interesting wager.

Which standard will see 90% adoption by brokerage companies first?

(a) RETS

(b) Yahoo!/Trulia/Zillow standard

Now, do keep in mind that being “RETS-compliant” is still being worked out:

What it literally means, well that is still being defined. The RESO Certification Workgroup has been busy identifying what being a Compliant MLS means. Such as, the tests that the vendors need to pass to be a compliant product, and the tests/criteria that must be met to be a certified-compliant site (MLS). There will probably be much discussion regarding all this during the April 2008 RETS meeting in Philadelphia.

Not sure if Yahoo! et. al. have published what being “Yahoo! compliant” might mean.  Presumably, if you use their standard to publish and share listings data, that makes you Yahoo! compliant.  But who knows?

So… place yer bets!

And all you folks in commercial real estate… please accept my condolences for the state of data exchange in your industry.

-rsh

It appears that Zillow has broken the 100,000 real estate agent milestone:

Sometime last Friday, real estate agent number 100,000 (yes, one hundred thousand!) registered on Zillow and posted a listing for sale in Niceville, Florida. I’d like to say; “Welcome to Zillow!” to Jamee Graff (pictured at left.) Jamee is a Realtor with The Real Estate Market Inc in Destin, FL.

This is a huge milestone for Zillow but the first 100K agents to register are just the tip of the iceberg. There are in fact another 135K agents who are ‘beneath the surface’ – if you will let me drag out the iceberg metaphor. So, who are these secret agents? They’re agents whose listings are advertised on Zillow but who haven’t registered as a user. Their listings were posted via a data feed supplied by their brokerage, MLS or website.

The good people at Zillow go on to invite these 135,000 subterranean agents to surface by registering at Zillow, and briefly mention some benefits of unmasking onself:

When you do, buyers will not only be able to find your listings on Zillow, they’ll also find you (or at least your profile page) and because your profile is linked to all of your listings, they will easily find your other listings as well. Your profile on Zillow tells a buyer more about you and it can link prospective clients to your website or blog.

Interesting.  Cool even.  I think it’s very smart of Zillow to offer this, and to encourage it.

Having said that… my question: If your listings are all on Zillow, and buyers can find you via your profiles to all your listings, and your profile tells buyer more about you and can link to your website or blog…

What do you need your brand (or broker or MLS) for again?

Okay, I know most states require a full broker’s license — so maybe you just need to park your real estate license at some brokerage and pay them their split.  But… does it then matter whether you’re at a Century 21 or a Keller Williams or a Re/Max?  I’ve had one top producing residential agent tell me at an industry conference that the only reason why she’s with Re/Max is because of liability insurance.  Is that the future of these mega-brands in real estate?  Becoming essentially professional liability insurance cooperatives?

For that matter, if your business is coming from Zillow… how long before you begin to wonder what you need the MLS for?

I’m not a real estate agent, so I don’t know the answers.  But seems to me that Zillow is befriending the agent, but commoditizing the heck out of the big brands and the MLS.  I’m frankly surprised that the big brands, website companies, and MLS’es aren’t going apeshit over this post.

But then, maybe they know something I don’t.

-rsh

I know this is probably old news by now, but I confess that I just found out about it myself.

Apparently, the real estate industry has a new standard data format for the distribution of real estate listings online.  Seems the boys at Yahoo!, Zillow.com, and Trulia.com have gotten together and worked out a new format.  Seems that they have at least one significant fan, one Mr. Craig Cuyar, Chief Information Officer, of Realogy Franchise Group.  Happy days are here!

But… I thought we already had a standard data format for the distribution of listings?

So does one Michael Wurzer, chairman of the Real Estate Standards Organization, as expressed in an open letter to Yahoo!, Google, Zillow, Trulia, et. al.

My purpose in writing is to encourage all of you to join together with the real estate community in supporting the Real Estate Transaction Standard (”RETS”). By focusing on a standardized data format together, we can make it easier for brokers who want to send their listings to your site to do so without duplicate data entry and extra expense in dealing with different data formats for each of your sites. We also can increase the accuracy and timeliness of the data being maintained on your sites.

The reason I recommend the Real Estate Transaction Standard to you is that the RETS community has already worked hard over the last few years developing detailed schema for listing and property information that can be leveraged to solve this problem quickly. The schema has been and continues to be developed with input from a broad cross-section of real estate brokers, franchises, associations, and their technology partners, including MLS vendors, IDX vendors, transaction management and electronic forms vendors, and others. This vibrant community also welcomes your input as to how the schema can be adopted to your particular needs, such as providing a lighter payload like IDX . The RESO Board also recently chartered a new Transport Work Group to allow the new schema to be integrated into the already widely-deployed RETS 1.x systems and to create a new RESTful RETS implementation. The RETS community would welcome your participation in these and other efforts.

Let me get some popcorn.  This is about to get interesting.

I will point out one thing, however.

Apparently, it took three non-real estate Web companies about… oh, a weekend of work to get done what it took the real-estate community “hard work over the past few years” to get not-quite-done.

At issue is the Will to Change.  The webbies have it; the realtors do not.

I wonder why that is….

-rsh