Sunday, December 17, 2006

Why Zillow Will Never be the National MLS

There’s been a lot of discussion around Zillow’s latest announcement and there have been a lot of people asking for Point2’s perspective. This is my personal perspective on the issue and why I’m not that concerned about Zillow adding listings to its portal.

Much of the discussion sparked by Zillow’s announcement has been around the emergence of a national MLS or a portal that will replace the current MLS systems -company that all real estate buyers and sellers will use.

Why I’m not waiting for Zillow to be ‘THE’ place.

The September 2006 monthly internet portal statistics from Realtor.org claims the total traffic to the real estate vertical was over 40 million visits. The list contains 25 portals in the vertical. The highest trafficked portal is Realtor.com with 6.1 million visitors, accounting for roughly 15% of the total. But there are many noticeable exceptions to this list: real estate sites such as Zillow.com, Point2Homes.com, busy media sites like the NewYorkTimes.com, Boston.com, major classified search sites such as Oodle.com, Craigslist, Backpage.com, LiveDeal.com, vertical search engines such as Google Base and Edgeio, large regional brokerages such as RealLiving.com.

Give the above, Realtor.com’s share of the real estate vertical traffic is much smaller than 15%. In fact it’s infinitely smaller if you want to include all of the thousands of brokerage websites and all the personal websites from over 1.2 million REALTORS®; 80% or more have a site they market. You see, real estate is a local business and that’s why there isn’t one national search site with all the data and all of the eyeballs. All those REALTORS® don’t have for sale signs with the Realtor.com url on it and they won’t be advertising Zillow.com either. I’m not saying that Zillow can’t or won’t ever operate a wildly successful portal. But being the one spot for real estate is more than a challenge.

Why Zillow is NOT the national MLS

The exercise above is all academic. More importantly, the issue around an MLS replacement is moot if we are talking about Zillow. Zillow is a consumer search portal gathering data, making it freely accessible for buyers and sellers. They are now allowing sellers to post homes for sale, will allow buyers to search and contact the poster of the listing directly.

An MLS on the other hand is NOT a consumer search portal. An MLS is a system that facilitates the cooperative sharing of information and the cooperative marketing of listings between real estate brokers. Marketing is the most important part of that definition. While the cooperative sharing of information may change as times change, because more information is being made universally accessible, the cooperative marketing is key. Organized real estate adds value to consumers because you can have hundreds or even thousands of local professionals working together to sell homes. Real estate is a local business that involves the sale of complex capital assets. Those assets can’t be purchased over the Internet. Homes need to be seen and it is preferred by most home owners, that the transaction is further facilitated by a real estate professional.

While commissions may change, and brokerage models may change, and methods of marketing may change, real estate brokers will continue to be essential by cooperatively marketing listings and offering to share compensation. Consumers will become more informed, new real estate portals will come and some will go, but the real estate professionals will remain essential. An MLS system is required to allow real estate professionals to cooperate.

It would appear that Zillow’s focus is on the consumer and not on building a system that facilitates brokerage cooperation. Bottom line: a consumer search portal is not an MLS.

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Tuesday, December 05, 2006

An Edgeio Analysis

I read a blog post on the new Edgeio purchase on Transparent RE.com. The writer discusses the purchase of ARES by Edgeio and the possible implications. I have a few comments:

Edgeio is a vertical search engine. It currently works to drive traffic back to the listing source. On the listing example that mentioned, it only links to 1 source - www.point2homes.com (not 3 as suggested). Point2 is the service provider that has syndicated the listing to Edgeio. The listing was inputed by a Keller Williams Agent using Point2 software. In this case, the agent is using a free version of the software so the link back is going to the listing detail view with more information at Point2 Homes. If the agent was paying for a website with Point2, the listing on Edgeio would link directly to the listing agent's website.

I suspect that Edgeio will use the MLS IDX feed to eliminate the duplicate entry problem and syndicate listings for the Broker of Record. The challenge is that the listing will not index as well because the MLS does not gather enough local, search information.

I don't see Edgeio syndicating an entire MLS inventory via the broker's IDX feed (as the writer suggests). It opens up a whole can of worms around a listing broker's ability to control how and where their listing is advertised. Yahoo Real Estate currently uses IDX feeds from Prudential. In the process, they have ostracized the rest of the industry. You can't do that in an industry that is this fragmented, with 1.2 million professionals that spend collectively around $11.9B / year on advertising and promotion.

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