Short Friday Post: What If the Industry Yanked All Their Listings?

I recently found this post on GeekEstate, which was from a while ago, that asked a provocative question:

There are some proponents for the entire industry ceasing syndication entirely (specifically to Zillow). The thinking is generally “with no listings, Zillow would become irrelevant and lose all their traffic, all that traffic would frequent agent/broker websites, and the result would be cheaper leads/clients”.

So, what would happen if the industry as a whole stopped syndicating listings?

I figured, on this rainy Friday morning, rather than trying to put up some massive post about Part 3 of Upstream (Monday maybe), I’d answer this question in my own way.

Drew’s Take

Drew Meyer, the author of that post, took a marketing approach to the question, suggesting that nothing would really change:

In short, absolutely nothing when it comes to the cost to acquire/reach buyer and seller leads/clients.

His rationale is sound: if all listings were pulled, then Zillow wouldn’t have any listings. So they would turn to Google. Various paper brokerages would pop up, use IDX to compete, and brokers and agents would end up spending more money on SEO and their own websites. So, the cost of acquisition and cost per lead would not go down, due to increased spend on websites, SEO, etc. etc. So instead of Zillow making money, Google and Facebook and whoever else would make the money.

Thus he concludes:

And there you go, nothing would actually change from an agent/broker perspective if the entire industry stopped syndicating listings to Zillow.

From a strictly marketing standpoint, I more or less agree with Drew. But that isn’t actually what would happen in the real world.

In the Real World

What would actually happen is that Zillow would stop playing nice and go into open warfare mode.

The very first thing that would happen is a series of anti-trust lawsuits filed either by Zillow or by the DOJ with the prompting of Zillow.

Since the only way that the “entire industry” stops syndicating listings to Zillow is via some sort of concerted and coordinated action, it would be difficult to escape at least an investigation for unlawful collusion. I mean, it isn’t as if the DOJ is a stranger to bringing anti-trust lawsuits against the real estate industry. We all know about the 2006 NAR v. DOJ lawsuit, but throughout the years, there have been quite a few smaller anti-trust lawsuits brought against individual MLSs and Associations. So I’d imagine a series of lawsuits get filed almost immediately.

But lawsuits take time, even if Zillow secures a preliminary injunction or what-have-you. So the nuclear option gets activated.

Zillow’s Nuclear Option

You know how everybody at Zillow, from Spencer on down, has sworn up and down that they have zero interest in operating a brokerage, or becoming a MLS? I really think they mean that. However… if the entire industry yanks the listings from Zillow, then all bets are off.

Realogy, Remax, KW, and everyone else made clear that they’ll tolerate and work with Zillow as long as Zillow stays in the “media” business and doesn’t cross the line. But the minute that Zillow starts to actually compete with these companies, they’ll pull their listings in a heartbeat. I think that’s reasonable and fair. But by the same token, Zillow’s promise of staying a media company and not crossing that line depends, I think, upon the industry not trying to put them out of business.

I know Zillow’s stock is down, but it’s still a $2.64 billion public company generating hundreds of millions in annual revenues, with over 70% of mobile real estate traffic. It’s not like those guys are gonna just throw their hands up, say “Hey, it was a good run; let’s fold up shop!” and go home.

I see two “nuclear options” for Zillow if such a thing were to come to pass.

1. Get brokerage licenses and join the MLS.

This is not difficult. Every reader of this blog understands this, so let’s not say too much about it. That gets them into the MLS, because it’s awfully difficult to deny admission even to a “paper brokerage”. That gets Zillow at least the IDX data.

2. Launch the Zillow Real Estate Franchise.

I have personally spoken to many a broker who despises Zillow. They’re full of #Zaterade for all of the familiar reasons. But should Zillow become a brand, a real estate franchise, every single one of them would join it because they instinctively understand the benefits.

In my post about Brokers in the Internet Age, I mentioned that 99% of brokerages today operate on the Leads, Technology, and Training framework. Guess what Zillow excels at? Leads, Technology, and via its online training platform Zillow Academy as well as its partnership with Tom Ferry, it excels at Training. Does anyone think that Zillow can’t go spend $100 million and a bunch of stock options creating the absolute best agent training and coaching program in the industry?

Imagine being those power agents who are paying Zillow $1,000 or more per month. Now imagine being asked if they wouldn’t rather just join (or open) a Zillow franchise and pay 2% of GCI on the back-end instead of laying out cash up front.

The big fear in the industry is that Zillow would do something like this anyway, somewhere down the road. Fine, so be it. People can differ on whether Spencer & Co. are lying through their teeth when they say they have NO such interest.

But if pushed into a corner, and if the only choices are to go out of business or go to war against the industry that declared war on it first, I do think that Zillow would go down that road. Its Board and its executives owe a fiduciary duty to Zillow shareholders to do just such a thing.

Enter the Grownups (aka, Regulators)

The thing that I worry about the most, however, and why I keep trying to bring peace to the industry is what would happen next.

The lawsuits are immediate reaction, but the intermediate/long-term reaction would come from regulators who are charged with consumer protection. Whether pulling listings from Zillow is or is not in the best interest of the consumer is actually irrelevant. If the industry gets into such open warfare, with the resulting chaos for home buyers and sellers, then it will be a signal to the regulators at the Federal and state levels that they need to step in and adjudicate the mess.

The solution is actually quite simple. HUD would form a national database of listings, which would be drawn from 50 State Listings Databases. HUD would provide block grants to each state to setup and operate such a Database. In fact, Zillow would offer to set those up for HUD and the States at no cost, in exchange for a discount on the license fee to use the data in said Databases. Hey, what do you know? A public-private partnership!

These are not the MLS; they have little to do with brokers and agents cooperating or compensating each other. They are simply government-operated databases for properties for sale and lease, so that the consumer can know what’s available. They are public data utilities, and ones that happen to create a lot of jobs for members of the AFGE (American Federation of Government Employees), and increase the power of the state Departments of Real Estate, which will naturally add more government union employee positions, and generate additional income for the States through various fees and data access charges and the like.

Entering listings into this State/National Database is simple to mandate. Real estate brokers and agents often talk about how they’re all independent business people; they don’t consider the fact that every single one of them is in business because of a state license. So, a condition of getting and holding on to a license becomes entering data into the State Database, which will be aggregated up to the HUD Database. Done. Can’t fight that.

Of course, NAR’s lobbyists would go on red alert and start working the phones to prevent such a thing. But they’d have to go up against AFGE, AFSCME (American Federation of State, County, and Municipal Employees), Wall Street (who would love, love, love to have all listing data in the entire country aggregated in one place to buy for their complex MBS pricing models), Silicon Valley (led by Zillow) who would love, love, love to have all listing data available directly from HUD, and a whole mess of community organizers, consumer groups, and the like.

All of this happens because the industry’s intra-family dispute breaks out into the open and affects consumers. That’s when the regulators step in tsk-tsk’ing, “If you children can’t get along, why then we’ll have to take charge….”

THAT is why I work so hard to try and bring peace and partnership to this crazy, lovable industry of ours. And that is why, in the real world as I know it, if the industry pulled all of its listings from Zillow, the result would be nothing like people imagine. I’ll disagree with Drew only in that respect; from a straight marketing standpoint, he’s right. Costs would just shift from one company to others. But in actuality, the world as we know it would end in short order.