From today's Realty Times; kinda long but absolutely relevant and food for thought.
I like the first paragraph: "Are we so desperate to rub against the cool factor that we're willing to buy anything IPO-bound hypesters throw at us?"
And are we so inept and so lazy we're unwilling to go out and find our own business. Hopefully not.
And BTW, this does not apply just to Zillow but to hustles still in the early formative stages as well.
It seems everyone wants to get a piece of your deal whether they contribute anything to it or not.
http://realtytimes.com/rtapages/20060407_zillowfactor.htm "Cool Factor Clouds Memories When It Comes To Zillow
by Blanche Evans
Are we so desperate to rub against the cool factor that we're willing to buy anything IPO-bound hypesters throw at us?
Zillow is a cool wannabee. Here's why.
Consumers search Zillow for free "home valuations." What supposedly makes Zillow so cool to consumers is that it takes property tax data and posts it online and then complements the report with a zoom photo of the property. Why wouldn't consumers love that? They get to see what their home is worth.
But the tool's far from original. It's designed to compete with companies like HouseValues and LendingTree, both of which use home valuations as lead generation tools for Realtors. With Zillow, it's more about FSBO/seller empowerment because the consumer can get the information without being referred to a Realtor. If Barton can help sellers by wresting business away from real estate agents, consumers could presumably transact properties on their own.
This helps generate tons of free publicity (which he can get because of his success putting travel agents out of business with Expedia.com,) from fawning, worshipful press. Barton then takes the press's awe to drive home the coup de grace -- dissing agent commissions. Playing the commission card gives consumers the reason they need to go to his site.
And the business plan? Realtors will pay for it all! Zillow's business model is selling ads to real estate agents.
Sound fun to you? If so, you're either a masochist or dumber than a bag of hammers.
If you think Zillow is cool, consider this:
What's cool about an 8-year-old idea? Internet home valuations are nothing new, so can we please stop with the fawning? Microsoft's HomeAdvisor tried home valuations eight years ago. Domania also debuted years ago before selling to LendingTree where it is used as a referral tool to Realtors. Ditto for HouseValues, and just about any real estate service online. Since then, almost every real estate portal has some form of home valuations including Realtor.com.
Contenders are coming out of the woodwork -- including RealEstateABC, run by Robert M. Brisco, CEO of Internet Brands. His background, according to yet another fawning, gushing news report is Universal Studios Hollywood and Citywalk, and former ad/bus/dev for The Los Angles Times. That qualifies him to take over the real estate industry. At least it qualifies him to give Barton a run for the advertising dollars of real estate agents.
What's cool about inaccuracy? Zillow's admitted accuracy rate for home valuations is about 70 percent. Some in the market argue that it's far worse. One reader recently told Realty Times that the property he just paid $2 million for was quoted at below $500,000 by Zillow. While the property was in escrow, he was offered $2.3 million.
That's a C minus if you're in school, which would hardly get you into Harvard. In fact, with grades like that, you couldn't get a job at Zillow.
What's cool about whipping up the press to criticize Realtors' commissions? Barton is using Realtors' commissions as a means to get free PR which he has accomplished brilliantly, but the fallout for Realtors is that with every news story, the question of your commissions is front and center. The free press is helping him drive millions of commission-hating consumers to Zillow. Cool for him. Not cool for you.
What's cool about yet another advertising site masquerading as a technology solution for Realtors? Zillow has some cool tools, but so does every other real estate site. The bottom line is it sells advertising. Period. And what's hilarious is that his target advertising market is real estate agents.
This also has been done before. Remember HomeGain, when it first started? It's advertising tagline was "Why Pay Six Percent?" The model was to capture consumers and let agents bid their commissions down to get the client, and once the transaction closed the agent owed HomeGain a referral fee on top of slicing their commission to the consumer!
This model depends on two things -- broker apathy and agent desperation.
If you think that's cool, then by all means give Barton your hard-earned advertising dollars and let him help you drive your commissions into the ground.
Or you can use your head.
Here's the cold shower reality -- real estate has not only proven to be a tough nut to crack, there's also plenty of competition in Zillow's home valuation space. And despite the fawning, gushing remarks of the pro-technology, death-to-real-estate-commissions-pumping press that Zillow's business model is "both consumer-friendly and agent-friendly," you have a lot more power than you may think you do.
Zillow and its supporters are telling anyone who will listen that you have to change -- you have to embrace technology.
But what they really want is for you to be stupid enough to put your gold in the enemy's war chest.
Home valuations are as old as real estate sales. Just ask any real estate agent and appraiser. They may be called by a number of other names -- comparables, CMAs, BPOs, but they're a species of home valuations nonetheless.
It's so pervasive that now Realtors are calling for home valuation tools to put on their websites to act as lead generators.
So turn the tables. Start criticizing what Zillow and company charge.
How would Barton like it if you and the press were to jump on a new bandwagon? Namely that pay per click fees are outlandish and a ridiculous cost for agents and brokers to bear that will inevitably lead to large companies gaining an advertising advantage that could stifle competition. Worse, if your commissions deserve to come down, how can you pay for all these cool advertising opportunities?
Pay-per-click costs need to come down. Realtors need to get into a bidding war with home valuation companies to drive advertising costs down. They should say, "If you want my business, I want you to compete with each other. Which of you is going to give me the most exposure for the least amount of money? You could call it "AgentGain" or "Rillow."
Realtors could start a revolution that could impact all advertising/referral fee/lead generation models!
See the point? It's easy to criticize other people's business models. But what agents and brokers need to do is read the news and see what so-called real estate service providers are really saying about you outside of the industry.
If you do, here's a new prediction that will be very easy to make.
Home valuation-based business models that criticize agents, their MLSs, their commissions and their business models are going to face lots of competition because their true purpose is to intercept consumers further upstream. The consumers are then sold to Realtors as leads, clients, or click-throughs. As these companies proliferate, it's inevitable that their advertising/referral fee pricing to agents will and should come down.
After all, how do they expect you to afford their services if you're so busy slicing your commissions?
News stories that brown-nose Barton always tend to end with some kind of editorial snickering warning to the real estate industry -- adapt your business or die.
Maybe it's time the real estate industry sends the same message to real estate service providers that think it's cool to tell Realtors they need to cut their commissions in order to be successful.
"I only advertise with companies that want me to be successful and stay out of my business when it comes to what I charge and how I do my business."
Published: April 7, 2006
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