In Which I Point Out the Obvious, With Numbers

James Dwiggins, CEO of Nexthome, has become one of my favorite commentators on the state of the industry. He’s extremely smart, has years and years of experience as a broker and now as a franchise operator, and is without question one of the tallest men in the real estate industry. (Maybe Walt Baczkowski, CEO of San Francisco Association, and Curt Beardsley of Zillow might give James a run for the height award… but that’s about it.)


Notice that James is sitting down, because if he were standing, his head would be out of the frame of the photograph. Anyhoo….

His most recent article for Inman is entitled “Zillow Group’s Game of Chicken” (Inman Select only) and lays out a few things. The most interesting of them is his recommendation for how, now under new management, could “get competitive with Zillow Group”:

  • Start a national Realtor advertising campaign called: “It’s your data, and, therefore, those are your leads.”
  • Showcase all listings on the site immediately — or, to put it another way, remove all competing agents from each listing. Make Zillow Group’s business model more contentious than it’s ever been. Send all buyer inquiries directly to the listing agent. Display the listing agent’s photo, contact information, social media links and brokerage information, and make it all extremely Realtor-friendly.
  • Advertise these benefits extensively to the Realtor membership. Sure, Realtors will need to pay for additional products and advertising opportunities to make up for lost revenue, but not when it comes to inquiries on their listings. The Realtor community would start to rally around if everyone were receiving these benefits. (And Realtors would consider pulling their data from other sites that don’t follow suit.)
  • Provide the traffic data on every listing back to the agent, brokerage and franchisor. Give it to them in different formats and make it easy for the agents to provide this information to the seller in traffic reports. Use ListHub to your advantage — you already have the product.
  • Put a home value estimation tool on the site. Make it extremely Realtor-friendly — in other words, make sure the consumer truly understands that it is an automated tool and simply a starting point in determining a home’s value. Show a percentage range of expected accuracy by ZIP code.
  • Ask the consumer to create an account on to receive an actual CMA (comparative market analysis) from a local Realtor to help balance the automated valuation. Realtors can pay for this service to receive exclusive seller leads. Realtors need to be the focal point of home valuations, so give the consumer an estimate and follow it up with a real CMA or multiple. By giving consumers an actual CMA, Realtors increase their value proposition, and they will love you for it.

Go read the whole thing if your’e an Inman subscriber. Become one if you’re not. (Go go gadget subscription model!)

I suppose it’s up to curmudgeons like me to point out the obvious. Well, it’s obvious to me at least.

Move’s Earnings

While James sort of buries the issue, the key and most obvious question is how Move/ will replace the lost revenues if it goes to a full-on “your listings, your leads” mode.

Since Move is now a division of News Corp, the latest full-on earnings report is from Q3 of last year, and it reads thus:


Revenue increased $5.1 million, or 9%, to $63.9 million for the three months ended September 30, 2014, compared to $58.8 million for the three months ended September 30, 2013.

Revenue attributable to our Consumer Advertising products increased $4.0 million, or 9%, to $49.7 million for the three months ended September 30, 2014, compared to $45.6 million for the three months ended September 30, 2013.  The increase in revenue was primarily due to increases in our Co-Broke and Media advertisement products in our® business.  These increases were partially offset by revenue decreases from our Showcase and Featured products (i.e. Featured Homes, Featured Community, and Featured CMA).  In addition, there were revenue decreases in the Moving.comTM and rentals businesses.

Revenue for our Software and Services products increased $1.0 million, or 8%, to $14.2 million for the three months ended September 30, 2014, compared to $13.2 million for the three months ended September 30, 2013.  The increase in revenue was from all three of our SaaS product offerings:  TigerLead®, ListHubTM and Top Producer®.

So, in the three months ending 9/30/2014, “Consumer Advertising” was 78% of the total revenues of Move. Furthermore, the increase in Q3/2014 was attributable primarily to Co-Broke product and banner Media ads. Co-Broke, of course, is’s version of the “other buyer agents on my listings” deal and its attempt to monetize all those listings where the listing agent hasn’t paid a dime to upgrade it.

To do what James is suggesting, Move would have to make up about $250 million in annual revenues from “additional products and advertising opportunities” from REALTORS who now would get Showcase for free, and Co-Broke would go away.

So that’s $250 per year for each member of NAR, 80% of whom are nonproductive. So realistically speaking, we’re talking about 200,000 producing agents paying Move roughly $1,250 per year for products/advertising that is unrelated to listings and leads.

I’ll offer 3:1 odds that News Corp actually expands Co-Broke to be even more directly competitive with Zillow Group, selling leads on listings all over the place, before it goes down the path prescribed above.

So that’s the first Obvious thing. To me at least.

And Now, A Word From Someone Who Put His Money Where His Mouth Is

In November of last year, a certain Michael Messara took the stage at the Sohn London Investment Conference. Mr. Messara is the senior portfolio manager for a hedge fund called Caledonia Investments. Caledonia is the largest shareholder in Zillow, with almost 20% of the outstanding shares — a bet on Zillow worth north of $1 billion.

According to the Australian website Business Review Weekly, Messara said that Zillow will be a $50 billion company, implying that its shares would be somewhere in the $770 per share range. Now, what I find super-interesting are his comments and justifications as to why Caledonia made a billion dollar bet.

“It is not often that things play out in the US last, especially online. But that is certainly the case here. For us, it is a little like going back in time. We have seen this movie over and over and we know how it ends.”

“We have heard the same bear arguments in every geography and we know exactly why they are wrong. That is why Australians are the key players in the ownership of US property portal industry,”

“We have all seen how this vertical has played out in Australia since 1998 and we understand exactly how mobile is changing the game in the US and what it means for market structure and value creation in the medium term.”

“So, we have a company with 72 per cent of the home buyer audience but only 4 per cent of the agent advertising spend. This is equivalent to a TV station with 72 per cent ratings and only 4 per cent ad share. Advertising dollars inevitably follow eyeballs across every medium, across every country.”

The key insight is that last one: advertising dollars inevitably follow eyeballs across every medium, across every country.

The basic intuition of the real estate industry is that Zillow will be out of business without listings. The basic intuition of Caledonia (and Zillow, and Move, and News Corp) is that advertising dollars always go to where buyers congregate, whatever the cost. (See, e.g., Superbowl ads.)

So Obvious Thing #2, to me, at least is that the only way can be competitive with Zillow is to get more eyeballs. Brokers and agents are never going to loooove if it commits financial suicide. They don’t loooove Zillow now. They advertise on Zillow because that’s where 90 million uniques go. If was drawing 120 million uniques per month, there would be zero discussion about needing to change the strategy, or offering “your listings, your leads” or any such thing, because after you cut through all the BS, you have to get to this place:

“Mr. Seller, I’m going to advertise your home so you get as much money as you can, in the shortest amount of time possible.”

If Superbowl ads cost $150, every agent in America would be advertising their homes for sale there as the Patriots crush the hopes and dreams of Seattle fans. Conversely, I can offer ads on my site for $5, promise “your listings, your leads” and all of that, and no agent is going to advertise their listings here, because I don’t get the buyer traffic that others do.

Love, Loyalty, and the Corleone Family Motto

The point is that ideas about love, loyalty, brand presence, etc. etc. are all window dressing to the essential truth of business. We find no better expression of that than here:

All our people are businessmen. Their loyalty is based on that.

The love of REALTORS, the admiration of brokerages, the applause from Associations are great to have… but their love, admiration and loyalty is based on business. Either they gain more from the relationship than it costs them, or they end it. If your product or service benefits them more than it costs them, they will be loyal. If it does not, they will find someone else. It’s human nature, and the essential truth of business.

You know where else that applies? To home buyers and home sellers. A REALTOR can spend decades “building a relationship” with someone in her sphere of influence. But that loyalty is also based on business, unless we’re talking about family or best friends or some such thing. They will love you and happily work with you, if working with you benefits them more than costs them. The minute that stops, they’ll find someone else too.

Here endeth the message of St. Corleone.


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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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