Barriers to MLS innovation, change
Consultant: 'Start over with different people doing different things'
By Matt Carter, Wednesday, August 3, 2011.
SAN FRANCISCO -- If multiple listing services are going to remain relevant, do they need to see consumers -- and not just real estate professionals -- as their clients?
If the answer is yes -- and not everyone agrees that it is -- organizational structures that have been in place for decades are standing in the way of innovation, consultants who advise real estate companies told MLS executives and board members attending the Real Estate Connect conference last week.
MLSs possess the most comprehensive and up-to-date list of homes for sale in their market, yet many don't operate websites that allow consumers to search for listings.
MLSs that do make listings available on public-facing websites may not provide the kind of sophisticated search and market analysis tools offered by third-party publishers like Realtor.com, Zillow and Trulia. They may also lack content that consumers have come to expect, such as advice and Q-and-A forums.
To best serve brokers and agents, MLSs need to start treating consumers as clients, and cater to their needs, said consultant Marilyn Wilson of the WAV Group.
"That doesn't mean everything you do is targeted at the consumer, but if you don't think about both those groups" -- consumers and real estate professionals -- "you get in trouble."
In most markets, she said, the websites that are most popular with consumers are operated by third-party publishers like Realtor.com, Zillow and Trulia.
One reason third-party sites are so popular is that consumers want two types of experiences online, Wilson said. In the first stage of the homebuying process, consumers like to do their own research, and third-party sites provide tools that cater to that need.
After getting a feel for the market, many buyers will then move on to brokerage websites, which may provide a more comprehensive and up-to-date set of listings. Many, but not all, MLSs and brokerages syndicate listings to third-party sites.
If MLSs partnered with brokers to provide consumers with better research tools, MLSs could serve as an alternative to the dominant third-party listing portals for consumers in the research stage, Wilson said.
Wilson said MLSs should have separate departments that study the needs of consumers, agents and brokers.
"Companies that are successful -- they have people all day long talking to consumers ... who are the end users of their products," Wilson said. If MLSs had such staffing, they could "feed consumer info to every department."
Instead of a training department focused on helping agents simply navigate the MLS, Wilson suggested establishing a knowledge-building department that helps agents use the MLS to do more business.
The current governance structure of MLSs often doesn't support innovation, she said.
MLSs are set up "not to create crazy new wild ideas, but to keep everything under control," she said. The missed opportunities are "the kiss of death for an industry and a company, and that's what we're doing."
Brian Boero, a partner in 1000Watt Consulting, shared Wilson's sense of urgency.
"MLSs, with their current (governing) structure and job descriptions in many cases can't innovate," Boero said. "You have two choices: manage your own decline, and hope for a soft landing, or start over with different people doing different things."
MLS as media company
Boero said that if he were in charge of an MLS, he would think of it as a publisher or media company, and employ a "data geek" to crunch numbers for a managing editor, who would report to the CEO.
MLSs are sitting "on a treasure trove of valuable data that can be mined for both (business-to-business) and (business-to-consumer) uses," he said. "I would have somebody working full time mining my data and seeing what products could be extracted from it."
He cited the Internet dating site OkCupid.com as an example.
OkCupid has a blog that showcases "tidbits" of information the company has extracted from analyzing user behavior.
While some of it is "a little off-color," he said, "some of it is fascinating and actionable. You can become a better dater" because of the data mining done by OkCupid, Boero said.
"Don't ever send out another press release," he advised. "I don't want a communications or PR guy -- I want an evangelist sharing the content my analyst and editor are creating."
In real estate, a number of companies -- including CoreLogic and National Association of Realtors subsidiary Realtors Property Resource LLC -- are licensing historical listing data in order to to produce market analytics that can be sold to mortgage lenders, Wall Street investors, and government analysts and regulators.
And Zillow's recent initial public offering -- which valued the company at nearly $1 billion -- demonstrates the value of providing consumers with insight and tools to analyze listings and public records data in a business-to-consumer application.
MLS boards an obstacle?
Greg Robertson, a partner in W&R Studios -- the software company behind Cloud CMA -- said the brokers who serve on MLS boards often impede innovation.
"The main thing that ends up being the big stumbling block is, 'My board will never let me do that,' " Robertson said of innovative MLS executives who come up with "great ideas" that their boards won't allow.
Robertson said the solution is to force brokers who stand in the way of innovation off of MLS boards.
"You've got to get rid of them any way you can," Robertson said. "Go buy a copy of (Machiavelli's) 'The Prince,' and reread it. You probably haven't read it since high school."
Boero worries that MLSs that don't keep the big picture in mind when attempting to innovate also run the risk of cobbling together an ad hoc "Frankenstein" MLS system "with all this half-dead software bolted on to it."
Brokers who serve on MLS technology committees are not always very tech-savvy, he said.
"They may not know what you want or need," Beoro said.
After lining up vendors outside the door to pitch their wares, tech committees may end up approving "something that's bolted on the (MLS) system, and before you know it, you're peddling garbage to your members."
John Heithaus, chief marketing officer for Rockville, Md.-based Metropolitan Regional Information Systems Inc. (MRIS) -- the nation's largest MLS by members -- said brokers haven't stood in the way of change there.
"We have a board of 18 full-blooded real estate brokers," Heithaus said. "Their feedback is real important to me ... (but) that doesn't mean I'm going to play 'Mother may I?' with them. I've never once had them say no" to an innovative idea.
Taqi Rizvi, chief technology officers for the Houston Association of Realtors, said, "I just have to convince Bob (Hale, association CEO), and let him convince the board" of the merits of a new idea.
"We have a very clear focus: What is the value coming back to members, and what will it cost us?" Rizvi said.
HAR's MLS is often singled out as one of the most innovative MLSs in the country. HAR offers sophisticated map-based search capabilities, property tax records, and neighborhood and community information to consumers on a public-facing listings portal, HAR.com.
But when HAR introduced a tool that allowed consumers to see how many transactions or buyer's agents had represented in a given area, members objected, and HAR disabled that capability. HAR continues to publish agent ratings it collects through its public-facing listing portal, although agents can choose to opt out.
The case against innovation
More than a few brokers think MLSs should limit themselves to their original role -- to maintain listings databases and make them accessible to members in order to publicize offers of compensation between cooperating brokers.
One way brokerages can differentiate themselves from their competitors is by investing in their own listings search portals, said one broker sitting in on an afternoon of panel discussions on MLS issues.
MLSs that offer sophisticated consumer-facing listings portals dilute the competitive advantage of brokerages that have invested in their own websites, he said, making it harder for them to stand out from the competition.
"What's happening here is ... someday there may be no real estate (brokerages) at all, just a (yard) sign that says, 'Offered by the Houston Association of Realtors,' " the broker said. "Why does (the brokerage) exist at all, if they just give their data to the MLS and let (the MLS) do what they want with it?"
Houston is an anomaly, the broker said, because no single brokerage has more than a small share of the market. In the Cincinnati market, by contrast, there's no public-facing website and "companies have invested heavily in their own websites," he said.
Boero acknowledged that many brokers fear MLSs have the power to "airlift" competitors who haven't made similar investments into a more competitive position.
But he countered that MLSs are in a position to benefit all members, because "they are slinging all the data, and have the cooperation of all the members, so they can do things you perhaps can't."
Curt Beardsley, vice president of business development for Realtor.com operator Move Inc., said that 20 years ago MLS dues were "the cheapest form of marketing (a broker) could find." But the rise of third-party sites has reduced the marketing power of MLSs, he said. Brokers "now have to pay not only MLS dues, but for advertising on national sites to reach that national audience."
If MLSs want to increase their members' marketing reach, that marketing should also include national, third-party sites, he said.
"I would approach Realtor.com, I would approach Zillow, and say, 'I will take some of my (MLS) dues dollars and purchase advertising on your site,' " Beardsley said.
The Las Vegas Association of Realtors has entered into just such an agreement with Move Inc., he said, purchasing enhanced listings for all of its members on Realtor.com that "drive a lot of traffic to them."
That's admittedly self-serving advice, Beardsley said. But he also thinks brokerages and real estate franchisors should have more freedom to capture consumers on their own websites, "unencumbered by the rules we have today" governing Internet Data Exchange (IDX listings).
Some industry consultants agree, saying MLS and brokerage websites would be better able to compete with third-party publishers if the National Association of Realtors relaxed restrictions around the display IDX listings on brokerage sites and Realtor-affiliated MLSs.
Standardization of listings data would help third-party vendors develop tools for consumers and MLS subscribers that would work on any system, they say, eliminating the need to develop customized solutions on a case-by-case basis.
Brokers and agents should also negotiate more favorable terms when agreeing to provide listings to syndicators or third-party sites, some consultants say.
One way third-party sites like Realtor.com, Zillow and Trulia generate revenue is by selling "enhanced listings" to agents and brokers, in which listings are displayed more prominently and accompanied by additional pictures and other content.
Zillow and Trulia will also place ads next to listings that are purchased by agents and brokers who want to represent buyers -- a capability Realtor.com is also experimenting with in seven test markets.
Beardsley said mobile applications and "hyperlocal" marketing are also opportunities for brokerages seeking to compete with national brands.
HAR's Rizvi agreed that mobile is hot, and that "first movers" in the space will have an advantage.
"Right now my total focus is on mobile," Rizvi said. HAR has been working on mobile apps for the last six months, he said, and, having released an iPhone app, now has iPad and Android apps in the pipeline.
It's a "major push," he said, and mobile is an area MLSs and Realtor associations "should jump on as soon as possible, before other apps are available."