Don’t Brokerages Compete With Each Other?


Over on Facebook, an interesting and intelligent discussion broke out — which is news in and of itself, I realize. We weren’t discussing The Dress or llamas. Amazing.

What we were discussing is MLS taking over syndication, something that Kipp Cooper at North Alabama pioneered. Here’s how it began:


The responses were really interesting, and raised an issue that I think is worth talking about further. So let’s do that.

What Began The Question

It might be useful to set the background up a bit. I got a notification about a webinar that RETechnology is hosting for Trulia. Here’s the screen:


The description for this webinar is as follows:

The options for listing distribution seem endless. They all offer varying features, benefits and service levels, making it hard for brokers to determine what will give their businesses a competitive edge.

Today, more tech savvy brokerages are experimenting with direct-to-portal data feeds, while more traditional firms are turning to their MLSs to help them compete. Direct feeds ensure the accuracy of data and are the fastest way to deal with the urgent need to get listings in front of consumers first.

Join us for this panel discussion on what the best path for achieving this is. You’ll hear the perspectives of 4 industry experts with over 70 years of combined experience in a wide variety of roles. [Emphasis mine]

So the takeaway is that profusion of listing distribution (ignoring the fact that as of now, there’s Listhub… and Listhub… and two MLSs that offer MLS Direct Syndication… and Listhub won’t be distributing listings to the two largest real estate websites in a few weeks…) leads to broker confusion about what will give their businesses a competitive edge.

My question was, competitive edge over whom?

Isn’t Syndication the Next MLS Public Facing Website?

With the upcoming changes to Listhub’s market coverage — largely due to Zillow deciding to kick the Listhub agreement to the curb, and then acquiring Trulia — one of the hottest topics in real estate is whether the MLS should be undertaking syndication on behalf of its members. I’ll say it right now, I’m completely neutral as to whether the MLS should or should not do syndication. I think it’s great if the MLS does, and just fine if it doesn’t. As yet, I have no real opinion on the question.

What I do find interesting is that syndication today might be a matter of competitive advantage. As the webinar above suggests, tech-savvy brokerages who setup direct-to-portal syndication have a competitive edge, as their listings get in front of consumers more quickly, and are more accurate. (There’s some debate on that last point.)

Let’s assume for the time being that the ability to syndicate listings directly to the publishers is a competitive advantage for brokerages.

If that’s the case, then why would those tech-savvy brokerages who have that capability want their MLS to provide it to everyone else?

Aren’t the companies that they have a competitive edge against exactly those other brokerages who are members of the MLS?

If I’m a large, tech-savvy brokerage, that spends huge sums of money to hire a technology expert and a team of programmers and database folks, so that I can make sure the listings of my agents get out there faster, with greater accuracy, and greater control over what data goes where, AND that is a competitive advantage, would I not want to oppose my MLS using my dues dollars to offer that capability to every Tom, Dick and Harry and their tiny 10-agent brokerage that still competes with me for listings, for buyers, and for agents?

After all, that’s precisely what happened (and continues to happen) with MLS Public Facing Websites. The argument from large brokerages was that they spent millions of dollars on their websites to compete against other brokerages, and that it was unfair and unjust for the MLS/Association to use their dues dollars to compete against them.

All for One, One for All?

The argument from the pro-syndication-by-MLS side appears to have three main points:

  1. The MLS has more negotiating leverage than any brokerage.
  2. The MLS is better equipped than a brokerage to make sure that the data being syndicated is accurate.
  3. The industry as a whole benefits if the MLS provides accurate and timely syndication to everybody.

Kipp Cooper makes the first two arguments very cogently:

The data is only as good as the time delay and accuracy of their hand entered back-end systems. The truth of the matter Rob is that only the MLS’s enforce and fines agents for lack of timeliness and accuracy. I can show you time and time again where a broker or franchise feed through ListHub or direct from franchise to z or t over rode our MLS direct feed that was accurate and more up to date. The other issue to consider is the local market leverage that an MLS has in negotiations with the portals on behalf of their brokers…. It is far greater than all of that markets franchises combined.

And Mike Bowler argues the third point:

Our Association of REALTORS has been successful for over 100 years because it has protected the best interest of all concerned. We’re now at a fork in the road that gives everyone an opportunity to get educated on the issues so they can make the right decisions that will offer consumers what they expect, yet protects the data in a fashion that provides secure, clean and accurate distribution.

Kipp adds:

If 50-80 % of a market is small brokers than as a big broker why would you want 50-80% of the listings not accurate on the portals? You and your agents will have to show a house that is not one of your listings at some point.

At the end of the day Rob, what is in it for big brokers and franchises is the MLS is already their trusted source and guardian of reliable data. While there is a big rush to get listings on the portals because of the latest ListHub debacle, the big brokers will not be able to stop agents of another smaller company from hand entering their clients listings. So all that will be achieved is more frustration when the information is even less accurate than it already is today. Now some may argue “well that’s great, if the information is less accurate the consumers will finally stop going to those sites and Zillow and Trulia and all the portals will shutter their doors and go away”. And the problem with that mindset is … No they won’t and now all the industry has done is made the consumer even less trusting of the information our members provide and more skeptical of the value of service because sloppy information that they will blame every realtor and every company for… And they won’t blame the portals.

Let’s make sure we present this Pro side as well as we could.

The idea is that the MLS is already the trusted source and guardian of reliable data, and because it covers everyone in the MLS’s market area, the MLS has greater negotiating leverage against the portals than even the largest of brokerages. So even though the MLS won’t ever pay a portal for things like exclusive listings (no other agents shown on a listing), it can get better terms from the portals than the brokerage can. Furthermore, it hurts even those tech-savvy big brokerages to have the smaller brokerage data be inaccurate on Zillow because their agents will need to show a house that isn’t one of theirs at some point. Finally, even if big brokerages have these direct feed relationships setup, they can’t prevent agents of a smaller non-techy brokerage from hand-entering the listings into Zillow.

I hope I summarized that argument as best as I could. Now, let’s deconstruct it. 🙂

Deconstruction Time!

Let’s take things in reverse order.

1. That a big brokerage cannot stop the agent for a small brokerage from hand-entering the listing is irrelevant to the issue of competitive advantage. In fact, it seems to me that the fact that said agent has to hand-enter the listings into Zillow, while agents of Big Brokerage have listings fed automagically to all sorts of portals is something that the Officer Manager of Big Brokerage might bring up when trying to recruit the said agent to his company. The fiercest competition between brokerages is for recruiting and retention; any sort of advantage in that game isn’t something brokerages like to give up.

2. Syndication is not the MLS. Just because there’s inaccurate data on a website somewhere does not mean that the data inside the MLS is inaccurate. We know this, we see this every single day, with Zillow and Trulia. That an agent of Big Brokerage might have to show a home that isn’t one that belongs to Big Brokerage has zero impact on syndication as an issue, as long as the information is accurate inside the MLS — you know, behind the Clareity Security protected login/password screen, for subscribers only?

3. I have no idea whether the MLS really has more negotiating leverage than Big Brokerage. But let me just say that I find it very, very difficult to believe that some 800-person MLS has more negotiating leverage than Realogy, which handles one out of four transactions in the U.S., or Keller Williams with its 100,000+ agents, or Remax, or Berkshire Hathaway, etc. etc. I find it very difficult to imagine Zillow telling Long & Foster with its tens of thousands of agents to go pound sand, while they bend over backwards for a couple of thousand agents.

So the main argument that is left is Mike Bowler’s idea: REALTORS have been successful for over 100 years because it has protected the best interests of all concerned. Brokers compete, yes, but they want fair competition, or as Kipp Cooper put it, “competitive fair play and cooperation.”

On Competition, Fair Play, and Cooperation

What exactly is “competitive fair play” in the world of business?

Sure, anything illegal is probably not fair play — that’s why they’re illegal. “I’ll either have your signature or your brains all over this contract” might be an extremely effective negotiating ploy, but it’ll also land you behind bars.

Cover_Book_2.354165800_stdBut outside of the lines on a sports field, isn’t the goal of every business to gain and maintain an unfair competitive advantage? If you can offer the same quality product as a competitor, but do it for half the cost, is that unfair? What if you can do it for 1/10th the cost? Is that unfair? What if you can give it away for free? Is that unfair?

Because Google did just that with website analytics, when it bought, then gave away Urchin rebranded as Google Analytics.

Real estate is somewhat unique in the world of business because of the extent to which competitor cooperate: it’s built into the very nature of the business, and certainly into the MLS system, and actually named “Cooperation and Compensation”.

But there are actually very few areas where brokerages actually cooperate. They cooperate in making listings available to each other via the MLS, and sharing commissions. They do this because cooperation benefits them individually. Big Brokerage might want to double-end all the deals in the world, but they make more money as a company by participating in the MLS, to see what other properties are for sale, and offering compensation on their own listings. In every instance of cooperation, there is something in it for those who cooperate that exceeds the costs of cooperation.

That doesn’t apply everywhere. In fact, it applies to very few instances, like sharing listings and commissions. It doesn’t apply to CRM systems, broker websites, email marketing platforms, recruiting and retention, transaction management, coaching systems, etc. etc. and so on and so forth. Wherever a brokerage can achieve unfair competitive advantage over its rival brokerages, where the benefits outweigh the costs, it would do just that.

Again, the best example that is directly on point is the brokerage website. If Big Brokerage developed some technology that improved traffic and conversion by 40% vs. competitors, it wouldn’t be trying to share that with everybody else. It would hold on to it tightly and use it to crush the competing brokerages in the marketplace.

In that case, if the MLS were to step in and provide that same technology to everybody, thereby “leveling the playing field” and erasing the competitive advantage of Big Brokerage… well, there will be blood.

Okay, So the Point Is?

The real point here is that much of the analysis of the industry, of the trends, of the initiatives are flawed because of the “all for one, one for all” mentality that seeps in to the thinking.

In so much of the discussion and debate about syndication, for example, there are lines drawn that are “portals vs. brokerages”. Or if there’s a dispute between MLS and brokers, it’s portrayed as a “brokers vs. the MLS”. Consultants and thinkers often say things like, “brokerages want XYZ”.

That ignores the fundamental truth about brokerages: they compete with each other, fiercely, in everything except a few key exceptions where cooperation results in greater gains than direct competition does.

When the Association or the MLS, therefore, undertakes an initiative “for the benefit of members”, it really ought to undertake a cost-benefit analysis from the perspective of different brokerages. What does it look like for Big Brokerage vs. Small Boutique? What does it look like for XYZ business model vs. ABC business model?

We ought never to forget that not a single agent, not a single brokerage in America, is engaged in this whole thing as a charitable exercise. They’re in it for business, to make money. Competition isn’t a regrettable disruption of the usual ways; it is the usual way. It is cooperation that is the unusual disruption of the natural order of things, and ought to be celebrated as such.

My point: remember that brokerages compete with other brokerages in any and all analysis about Association/MLS action.

What About Syndication?

I have no idea right now how it’ll all resolve itself. But I do think that unless MLS Direct Syndication offers benefits to Big Brokerage and national franchises that outweigh the costs to those companies, including the opportunity cost of lost competitive advantage (if one exists), it ends up being another MLS public facing website that some folks think is the cat’s meow, and others despise like it’s Satan’s belly button crud.

Maybe the MLS is the right vehicle for syndication, like Kipp Cooper says and proves every day. Maybe syndication isn’t a big enough competitive advantage for any Big Brokerage to oppose. Who knows?

But… if direct-to-portal syndication does end up being a real competitive advantage, an “unfair advantage” even… then I’d expect The Realty Alliance, Realogy, the big national franchises, and others to… ah… what’s the word… object.


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Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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