Trulia, Syndication, Confusion

Sami Inkinen, co-founder of Trulia, has written a blogpost about the future of syndication where he raises some important questions about where the real estate industry is headed with distribution of listings:

Now that listing syndication has become a mainstream practice and “syndication sites” like Trulia have grown to serve millions of users, an old question has raised its head again, namely: Is syndication good or bad for me as a real estate broker?

In many recent conversations with brokers and industry leaders, it is clear to me that some people are frustrated and concerned with the direction of listing syndication. (Emphasis in original)

Sami goes on to make a number of points that ultimately fail to answer the question he posed, and further fails to support the conclusion he draws. Nonetheless, given the importance of Trulia to the industry, and the importance of Sami within the company, I think it’s worth reading the whole thing. (Note, you will need to skip over some of the more salesy aspect of the post and focus on the points Sami is making, rather than the promotion of Trulia and its products….) I’ll be here, after the jump.

The Argument & Conclusion

Basically, Sami’s argument appears to be that the future of syndication is one in which “middlemen” disappear, and brokers work directly with publishers to expose their listings to consumers.

1. Consumers want listings on non-industry websites
2. Brokers want to maintain “control/quality” of syndicated data (more on that “control/quality” below)
3. Brokers don’t want other agents getting leads from their listings

Therefore, writes Sami:

While I predict listing syndication will grow in importance, I also believe that the number of “syndication sites” will go down dramatically in the next year or two. Many brokers initially endorsed the view of “syndicate everywhere” and sent their listings to 30 or more websites thinking “more is better,” but now I see the opposite happening for several reasons. Many of the smaller syndication sites simply have no value to deliver or they are faced with a high overhead trying to manage their broker relationships. For example, one of the larger online sites, Roost, recently pivoted its business model while many others are still struggling to keep the lights on without a large-scale audience. I think Brokers will continue this trend of “syndicate selectively” to a few sites so they can control their listing assets. I also believe they should apply selection criteria in choosing these sites based on what delivers the best value for their business, i.e., large audience, quality audience, control of your data.

I do like how Sami bodyslammed Roost, but this conclusion is hardly warranted by the arguments made and strikes me as more of wishful thinking on Trulia’s part than deductive reasoning. Furthermore, the arguments themselves contradict each other in important ways, and fail to take into account some fairly obvious conclusions that may not be to Trulia’s best interests.

Dissecting the Arguments, #1

The first point, that consumers want listings, is so obvious by 2011 that it could be taken for granted. Sami writes:

Instead of paying thousands of dollars to newspapers and other print media to distribute your listings or giving up half of your commission to another company, syndicating to sites like Trulia gives you practically free access to millions of active homebuyers. We think this is a pretty good deal.

To compare a website to newspapers and print media is a powerful argument… if we were still stuck in 2004. If there is a broker who is still using solely print to distribute listings in 2011, I’d like to meet him, so I can compliment him on his handsome horse-drawn carriage. In 2011, the comparison is not between print outlets vs. online outlets, but between online outlets and other online outlets. And in that game, “syndicating to sites like Trulia” is simply not good enough. Because “sites like Trulia” is where all the competition is, and who is better than whom is a matter of some debate, I would imagine, between the good people at Yahoo Real Estate, Trulia, Zillow, Realtor.com, Homegain, FrontDoor, various franchise sites (which, incidentally, now have the ability to index IDX), Estately, and the like, not to mention the literally countless numbers of IDX-powered broker and agent websites. Oh yeah, and public-facing MLS websites.

What is not so obvious, however, is this:

Consumers have clearly voted in favor of syndication sites based on their behavior. In addition to broker and agent websites, many want to conduct research on non-industry, consumer-facing sites. (Emphasis mine)

Have consumers so clearly voted? I’m unaware of any definitive research on the subject. If anything, the success of public-facing MLS sites, such as HAR.com, would suggest pretty strongly that maybe the consumer really doesn’t give a damn whether a site is “non-industry” or “industry”. If Trulia has some research showing a clear preference of consumers towards so-called “non-industry” sites, I think we’d be interested to see that data.

Plus, have consumers really shown that they are in favor of syndication? Or have they simply shown a preference for getting listing data online? The two are not the same thing.

Dissecting the Arguments, #2

The second argument is that brokers want to maintain “control/quality” of the listing data. I put that phrase, which is Sami’s own, in quotes because the two concepts are unrelated to each other and deserve to be examined separately.

I might agree that brokers want to maintain control over the listing data, but cannot agree that brokers want to maintain quality of the listing data. Every single MLS in the country has a very busy, very overworked Compliance department. It’s because brokers often couldn’t care less about data quality; an external organization has to threaten them with fines and sanctions to get them to pressure their agents to go update the listing information.

If brokers really cared about data quality, then they (rather than the MLS) would have a compliance department, or some sort of data quality staff in place. I’d like to hear about the brokerage who has such a person: A Director of Data Quality, or head of Compliance, or some such would do. Just one. Such a company may exist; I’m just not aware of any.

Fact is, brokers and agents have outsourced all data quality control to the MLS, in large part because doing compliance and data quality assurance is a major pain in the rear, and in smaller part because they don’t trust the average real estate agent to do anything at all unless forced to do so. Today’s Broker really doesn’t like to force the agent to do things, as those kinds of forced compliance tends to hurt retention efforts.

So before claiming that brokers want to preserve the “quality” of data, Trulia should probably produce some evidence in support of that position.

But really… do brokers even want control over the listing data? Really? Consider this language from the Trulia Pro Service Terms & Conditions:

6. License and Removal of Submissions. Trulia is not responsible for, and has no obligation to review, edit or comment on, the content of Submissions provided by Trulia users. However, Trulia reserves the right in its discretion to (i) delete, disable access to, move or edit Submissions in its sole discretion for any reason or no reason, or (ii) take any other action that Trulia deems necessary relating to use or misuse of the Trulia Pro Service. You hereby grant to Trulia a non-exclusive, royalty-free license to use, publish, copy, modify, transmit, display and distribute your Submissions in connection with the Trulia Pro Service. In addition, you warrant that all moral rights in any Submissions and uploaded materials have been waived and do hereby waive any such moral rights. (Emphasis mine)

Any broker or agent using Trulia Pro is granting a license (perpetual?) to copy, modify, transmit, display and distribute the listing information. And waiving all moral rights. Maybe it’s just my skeptical nature, but that doesn’t sound much like a deep desire on the part of brokers to control listings. If anything, the fact that so many brokers and agents accept these Terms & Conditions suggests that many brokers could care less about controlling the listing data.

Dissecting the Arguments, #3

Which brings us to the third argument: brokers and agents just don’t want other agents to be freeloading on “their” listing data. They want those leads coming to the listing agent or broker. Well, in this time of economic trouble, I could hardly blame the broker and agent for wanting to maximize their revenues.

There are two problems, however, with this argument: one specific to Trulia, and the other more general.

First, with respect to Trulia itself, here is how Sami’s post opens:

At Trulia, we have operated under a consistent set of principles specifically designed to balance the needs of the industry and consumers since 2005. Pete and I founded Trulia with a focused mission to revolutionize real estate search and empower individuals to make smarter decisions. Our key promise was the following:

For consumers: We want to create the most engaging consumer experience possible to help families through the big, emotional process of buying or selling a home. (Emphasis mine)

To be fair, he does say that “balance” between the needs of the industry and the needs of consumer is important. But I’m not sure I see how funneling all buyer inquiries to the listing broker/agent serves the needs of the consumer at all. Given that sending buyer inquiries to the listing broker/agent creates a fairly significant incentive to engage in dual-agency to get the commission from both sides of the transaction, and given the significant problem that dual-agency creates for traditional real estate agents who owe fiduciary duties to their respective clients… I’m not seeing how limiting leads empowers individuals to make smarter decisions, or helps families through the big, emotional process of buying or selling a home.

Sami spends a couple of paragraphs defending Trulia’s QuickConnect product (which displays agents other than the listing agent on a listing page):

The reason why we introduced QuickConnect is to ensure a great customer experience AND to provide more leads to agents. In addition to making it easy to connect with the listing agent, we want to make sure end users are getting a response from an agent (since nearly 70 percent of leads don’t get an agent response) and have the option to speak with a buyer agent. Plus, we also know that agents can never get enough leads.

Since we launched QuickConnect, leads to both listing agents and other agents have increased by 40 percent. In just about every market, leads have increased. In no case did leads to listing agents decrease as a result of QuickConnect.

That’s fantastic news, I guess. But here’s where things get interesting:

Despite those results, we wanted to deliver on our principle of freedom and control, so we have provided two alternative options for listing brokers:

• Option 1 is completely free: We work with the broker to ensure that all agents claim their listing on Trulia. This is an easy, one-time process. If an agent claims their listing, then we know they are more likely to respond to a customer’s request. When the listing is claimed, only the listing agent is offered as a default agent to contact. In these cases, potential customers typically only send messages to the listing agent.
• Option 2 is a paid upgrade: Brokers can sign up for premium listings, which ensures that only the premium agent is featured on the premium listing with no QuickConnect feature.

There is something faintly distasteful about this business model. If QuickConnect was implemented to improve the consumer user experience, and listing agents are not negatively impacted, then Trulia is in effect allowing Brokers to pay to degrade the user experience? Does this strike anyone else as a form of blackmail?

Are the sellers informed by Trulia, who wants to help them through the big, emotional process of buying or selling a home, when their listing broker elects to make it more difficult for buyers to contact an agent to inquire about their house? If not, why not? Does the listing broker who chooses to pay Trulia to make things worse for buyers have to get permission from his seller client to do this? If not, why not?

Furthermore, there is some contradiction between #1 and #3. Consumers want syndication because it benefits them; supposedly, they want to use non-industry sites (presumably because such sites are a more ‘neutral’ publisher than some franchise or MLS website). But if a non-industry site like Trulia not only allows, but encourages (for its own financial gain), listing brokers and agents to make it harder for buyers… why should consumers be trusting the non-industry sites again? What is the benefit of using a non-industry site over an industry site then?

So right off the bat, if Trulia takes its mission to empower individual consumers seriously, it should take another look at the QuickConnect product.

Second, and more generally, supposing for the moment that brokers and agents do want to prevent freeloaders from getting buyer leads off of their listings… that isn’t an argument against wide syndication alone. It is also an argument against IDX.

Let us take for granted all of Sami’s points. Small crappy website publishers getting syndication feeds from the likes of Point2 and ListHub provide little value to brokers. Fine. But is there really any doubt that IDX provides value to brokers and agents? Would we have seen some of the battles of the past couple of years if IDX provided no value? Of course not.

IDX is the single greatest lead-generator tool allowing brokers and agents to get leads off of someone else’s listing data. That’s the whole point of IDX. It is the reason why IDX was created.

If Sami is correct and listing brokers and agents now want to concentrate all leads into their hands, that means not only that the future of syndication is in doubt, but also that the future of IDX is in doubt. Listing brokers would simply hold all listings in-house, or post them to the MLS with a prohibition against publishing on the Web.

But! Recall from above that we live in the Age of Google. Since Google indexes everything anyhow, if I’m a listing broker and I want to keep all leads to myself… why syndicate at all? In fact, why publish on Trulia at all? Just put the listings on my website, wait for Google to index it, and voila, all leads have to come to me because my site is the only place on the web where that information is available.

Note that New York City brokerages largely work this way.

Ignoring the Real Value

I also believe that this line of reasoning completely ignores the real value of syndication to brokers and agents. Back in 2004 when I was working on syndication of commercial listings for Realogy, we spoke with many of our franchisees. They told us point blank that they loved our syndication platform (which was ahead of its time I guess) even though they got next to no buyer leads from all of the syndication.

They loved it because syndication gave them an advantage in listing presentations: “Cushman & Wakefield can only market your listing on three websites, Mr. CEO, but we can put your property in front of 200 million viewers across 75 top websites!”

I believe this is still the case today, and in residential real estate. A listing agent may not care one bit whether syndication brings even one lead to her. She’s still telling the seller client to whom she is giving a listing presentation that “if you work with me, I can put your house on 3,000 websites with millions and millions of views”.

Every marketing gimmick (the QR Code being the latest) is valuable to listing agents primarily as a way to sound more sophisticated, more advanced, more effective in the listing presentation to the seller — not as a way to generate buyer leads.

Unless Sami can explain how eliminating or narrowing syndication is going to affect the listing presentation, I think it’s a bit of a stretch to believe that the three arguments above will lead to the world of Three Big Websites and brokers working directly with them alone.

The Alternative X-Factor: MLS

Finally, even if we accept all of Sami’s arguments, there is an X-factor that he is completely overlooking. Sami assumes that if those claims are correct, the inevitable result is that brokers will work directly with the big established websites like Trulia, cutting out the syndicators. But as I see it, if all of his arguments are true, there is a far better alternative for brokers and agents: the MLS.

• Consumers want data? Check — public-facing MLS site.
• Brokers want control over data? Check — many, if not most, MLS are broker-governed through the Board of Directors. They do not, however, sit on the Board of Directors of Trulia.
• Brokers want data quality? Check — the only institution that does any data quality assurance on real estate data is the MLS, and they already have the staff, the processes, the rules, and the enforcement mechanisms to ensure data quality.
• Brokers want to keep all the leads? Check — just change the MLS rules through the Board that the brokers control, and you have instant Dual Agency Creator without any worry about syndication. Using the MLS means, by the way, that listing brokers and agents can do this without having to pay any fees whatsoever to Trulia, Zillow, Realtor.com, or anyone else.

So even if arguendo Sami is absolutely correct, the result may not be the elimination of all the small crappy sites and the growth of the Big Boys like Trulia. The result may be the elimination of all real estate portals in favor of public-facing MLS sites with strong anti-sharing rules.

Conclusion

This got overly long, primarily because I’m on a three-day drive to Houston from New Jersey and am hopped up on far too much caffeine. But it is an important, and interesting topic, for the industry to ponder given the source of the prediction: co-founder of Trulia.

I believe, upon analysis, that his arguments are weak, and do not support his conclusion. However, what is more troubling is that simply by making these arguments, Sami raises far more questions about Trulia, its strategy, and its business practices than he does about the future of syndication.

As always, I welcome your responses, thoughts, criticism, clarification, and particularly disagreement (so I can learn what I got wrong). Thanks.

-rsh