The big news of the week concerns the impending union of two major online real estate sites, Zillow and Trulia. The $3.5 billion stock-for-stock transaction will bring together two notable websites in a merger which raises a crucial question: Will real estate brokers flock to this new online colossus?
The idea that real estate listing data should be available everywhere is hardly a given. The traditional theory was that brokers could maximize profits by keeping listing details close to the vest, a view upheld by helpful real estate regulators. For instance, until the 1970s it was every broker for himself or herself in the District of Columbia because it was literally illegal to have an MLS. In many states real estate regulations provided that only brokers and newspapers could display listing information. Since many newspapers refused to carry ads for self-sellers the brokerage industry had an effective lock on the information marketplace.
But with the growth of the Internet real estate data began to go global. AOL, for one, had an early online MLS in 1992 that was open to both brokers and self-sellers. Real estate regulators elected not to enforce existing rules in light of technological changes as well as potential restraint-of-trade and First Amendment claims. Local, regional and national brokerage firms developed sites to get their data online. Soon a variety of real estate portals opened, sites which used local listing information to attract large numbers of online visitors. With a lot of site traffic portals could then demand fees from brokers for web exposure.
The brokerage industry tried to fight back with the establishment of Realtor.com and what could be seen as the creation of a national MLS, a one-stop site for all things real estate which today hosts listing from more than 800 local MLS systems.
However, while a single major site might be attractive to the brokerage industry the idea has always had a major flaw: Nobody really wants an even playing field. What individual brokerages want — like competitors in any business — is a playing field which favors them. The result is that we have a variety of massive real estate sites from franchises, brokerage chains, regional brokerages, local brokerages and specialty brokerages, each seeking a piece of the online pie.
Today there’s no question that online listings are hugely important to brokers and consumers but there’s a very real question regarding how brokers can best use online services.
We know that online traffic is both enormous and influential. NAR reports in its 2013 “Profile of Home Buyers and Sellers” that “nine in 10 buyers used the Internet at some point while looking for a home. Over half of buyers started their home search online and 43 percent of recent buyers first found the home they purchased online.”
If there is so much buyer activity online it follows that sellers and their brokers must also be on the Internet to capture such traffic. The reason an Internet presence is so important relates to consumer preferences.
There’s no doubt that consumers like and use the Internet, they plainly do. The real question — the question that involves dollars — concerns which broker first captures consumer attention.
The NAR study shows that 66 percent of all buyers only interviewed one broker when searching for a home and sellers were much the same: “Two-thirds of home sellers only contacted one agent before selecting the one to assist with their home sale.”
Such consumer preferences reveal certain online truths:
First, if consumers only contact one broker to buy or sell a home then the odds are overwhelming that if you’re the first broker they speak with you’re also the only broker with whom they speak.
Second, the sites with the most traffic should create the most opportunities to present brokers to the public and some sites are enormous: NAR estimates that in April the three largest sites with more than 87 million unique visitors were Zillow (45.1 million unique site visitors), Realtor.com (22.1 million) and Trulia (19.9 million).
Third, brokers should be willing to pay big money for big traffic.
While the first “truth” is surely on target the second and third are not so certain — and that’s what makes the value of real estate portals so curious.
We usually think of “marketing” as “mass marketing” and equate more traffic, circulation, viewers and listeners with better results. If you’re selling soap or toothpaste then mass marketing is what you want because everyone, hopefully, uses both products.
The catch is that not all products and services require mass marketing. The alternative to national advertising is targeted advertising and for decades the most successful practitioners of this art have been direct mailers.
Targeted marketing seeks to find the right audience for a given product or service. For instance, Dr. Smith has a suburban dental office on Oak Street. He can advertise across his metro area on radio, TV or the local major newspaper but the benefit of his advertising dollars is largely lost because most recipients of his message are nowhere near his office. Instead, he does targeted marketing by mailing to his local ZIP code, or to addresses within one mile of his office. He reaches fewer people but the people he reaches are very much more likely to use his services because he is local. His promotional cost per revenue dollar declines with the use of targeted marketing.
In the world of marketing there’s no service more local than real estate. Real estate itself is simply a localized commodity and the result is that what brokers need most is visibility when someone has an interest in their service area.
For local real estate brokers there’s a tension between huge portals and large traffic counts and the localized nature of what they do. Ideally what brokers want is not visitors who go to major portals but visitors who go directly to their sites.
Huge generalized portals have large marketing budgets and a vast, nationwide presence that no local brokerage can match. With national sites holding such lopsided online shares is there anything local brokers can do to enhance their presence? Is there any way local brokers can level the competition for real estate visitors?
In fact local real estate brokers have a huge ally: Google. Internet-savvy local firms can get tons of traffic by creating sites which achieve good search rankings for the neighborhoods, communities and ZIP codes they serve, traffic that is both free and goes directly to local sites. To be successful brokers need to educate the public so that the consumer’s first preference is to find local sites. To do that brokers must offer solid content and good online tools.
While the merger of Zillow and Trulia has been announced it’s not yet a done deal. There’s always the possibility of anti-trust concerns and Wall Street seems hardly enthused: On July 29th, the day after the merger announcement, shares in both companies declined with Zillow losing 10.45 percent and Trulia down 4.37 percent.
Meanwhile, the most important measure of all remains outstanding. Will brokers support broad, massive sites with continued advertising? Will brokers continue to allow the use of their listings on vast national portals?
Time will tell.