The recent
proposed merger between Zillow and Trulia is a game-changer, in my opinion.
While the
average buyer or seller on the street might not give it much thought or
understand its ramifications, as someone who has been in the business for two
decades, to me it represents the beginning of the end for traditional real
estate brokerages.
The reason
for this is that, for the past decade, NAR and real estate brokerages all over
the country have been pouring millions of dollars into building
brokerage-centric websites, trying to capture eyeballs and, ultimately,
business from the ever-expanding pool of consumers who are searching for homes
online.
Those fat
costs have been passed through to agents, both through higher Realtor dues and
larger franchise and brokerage fees.
Agents, in effect, have shouldered the cost of experimentation as
brokerages built sites focused on the BRAND, not the CONSUMER.
What Zillow
has skillfully done for the past eight years is build a consumer-centric site,
or at least what appears to be a consumer-centric site. What Zillow has done is create value for the
consumer, with a massive online data platform that went soft on selling and big
on educating.
Exactly what
the consumer wanted.
Meantime,
brands and brokerages built sites that screamed “CALL US!”, “CLICK HERE!”, and “REGISTER
FOR MORE INFORMATION!”, but which should have said “LET US HAVE OUR AGENTS
PURSUE YOU UNTIL YOU BUY OR DIE!”
Don’t kid
yourself. Zillow has been selling,
too. They have just taken a more subtle
approach, and because they are not directly affiliated with a single brokerage,
it has been harder for the consumer to see their motivations.
What Zillow
always wanted was the eyeballs, and over time they got them.
Now it’s time to leverage that traffic.
It’s time to cash in.
The merger
between Zillow (#1 in online traffic) and Trulia (#2) means that “God-Zillow”, “Zoolia”, “Trillow”,
or whatever you want to call it… will have the resources and leverage to deal
directly with agents in terms of selling advertising and, ultimately, leads. Brokerages have been cut out of the
loop.
If Zillow
and Trulia become the most important suppliers of leads to you as an agent, then
what value does your brokerage offer?
This is
where it gets dicey for the big brands.
I love the
RE/MAX brand and what it stands for. I
love that RE/MAX has set up a model that rewards agents who sells houses, and
drives unproductive agents out of the system.
I often tell my clients that RE/MAX is like the “New York Yankees of
Real Estate”, able to bring in the best talent and most proven agents because
of their unique compensation model which works ONLY if you are selling large
numbers of houses.
But if
Zillow and Trulia control the online world, why should agents write fat checks
each month to brokerages who will continue to spend that money chasing after table scraps?
Now
fortunately for me, the core of my business has been and always will be
referral-based. 90% of my business is by
direct referral from past clients and networking partners or from people who discover me through this blog of from my online reviews. I don't need to be "fed" leads to survive, but it does matter to me since I am being asked to write checks each month to support the pursuit of people I will probably never work with.
So if Zillow
and Trulia are the new power brokers of online traffic, the value of the
individual brokerage has been greatly diminished. Which means that there is a huge opportunity
for a low cost brokerage with good technology to become a major player rather
quickly.
As I said at
the beginning of this post, this is technical stuff and the consumer may or may
not see the ramifications. But it’s a
game-changer for those of us in real estate, because increasingly, agents without strong referral bases are
going to have to decide if they want to spend their money supporting a dying
brokerage model, or spend their money buying leads from the new bullies on the
block, who become increasingly empowered every time another agent signs an
advertising contract.
