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Are Competitive MLSs Possible or Desireable?

Oct 21, 2007 Michael Wurzer

This post really is a look back at what I think are some of the key posts from the FBS Blog, with the hope that I can make everything a bit more cogent and focus in on the strengths and weaknesses of the case for competitive MLSs in contrast to monopolistic MLSs.

First, let me start with a more recent post, The Future of MLS Is Now, which makes the case that this time in the history of the MLS and the web is crucial, that the rules of community and engagement are being drawn right now, and we can either participate in this defining time or not. Importantly, the web is not just redefining real estate but much of society, or how we interact with each other.

This latter point is made robustly in You Must Read This, If You’re Interested In The Future of MLS, in which I apply Clay Shirky’s excellent post A Group Is Its Own Worst Enemy to MLS and conclude: “I truly believe th[ese patterns for success in social software are] the framework for reinventing the constitutions of the MLSs. The seeds are here. We need to grow them. Now.”

The design patterns for social software outlined by Clay Shirky were not about MLS, but they resonated with me because they were so similar to my post, MLS Is More Than Technology, which posits that the genius of MLS is bringing competitors together to cooperate just enough to aggregate listings together, which undeniably serves consumers in important ways. Thus, the question becomes, as the rules for MLS are reinvented, can it be done without destroying the cooperation that allowed for the listing aggregation in the first instance?

There are two primary fronts on which listing aggregations (MLSs) are being attacked today: (1) demands that MLS aggregations get bigger and cover more territory; and (2) demands that individuals within the MLS need more control over the aggregation to do with it what they want. As you’ll see below, these issues are inextricably intertwined, but have a common solution, focused on data and rule standards coupled with competition.

The former challenge to MLSs was addressed in my early post Raging Regionals and my suggested solution was presented in Regionals, Part II. The quick summary is:

  • The demand for regionalization is based on real pain (inefficiency) being experienced by regional brokers dealing with multiple MLSs having disparate rules and data sets across many boundaries.
  • Forming regional MLSs, however, only moves the boundary and shifts the pain, at great cost in mashing MLSs together.
  • A more efficient approach would focus on national standards, which already is occurring for data with RETS. Another way of thinking about standards is that it’s just like forming a national MLS, but without all the challenges of trying to merge MLSs together. Call it a virtual MLS, if you will. The big benefits of this approach are: (1) a lot of work has already been done and focusing more attention and energy on RETS at this time will bring that work to fruition ; and (2) focusing on national standards provides a much more definitive, long-term solution than inching along painfully with forming many regional systems that will still have boundaries.
  • Once deep and broad national standards are developed, there are many possible ways of making use of them, and the focus should be on encouraging competition to produce the best solutions. Leveraging the idea of a national repository, I suggested in Regionals, Part II that one use of national standards would be to provide a path for existing MLSs to populate a national repository, which, in turn, could be used to allow the local MLSs to compete with each other if reciprocal rights of download were part of the repository agreement. In other words, if an MLS contributes data to the repository, then it also can download whatever slice of data it wants from the repository. In this way, each local MLS can try to serve as big or small of a territory as it wants and individual brokers will be able to choose from the one that serves them best, knowing that the data they enter once will end up in the national repository and available to all MLSs.

I still think this is a good solution that would leverage existing resources to solve the real pains of brokers dealing with overlapping markets of MLSs with the long-term benefits of a competitive market for MLS services.

At the same time, as I’ve thought more about it, there clearly are gaps in the proposal. First, what is the definition of an “MLS” that would entitle it to mutual download. Taken to the extreme, could an “MLS” be a single broker such that if they contribute one listing they are then entitled download the entire national repository? If so, what about buyer brokers who do not have listings? How does this right of reciprocal download relate to IDX or advertising? What kinds of things can the “MLS” do with the data when it is downloaded?

These questions quickly return us to the beginning or the heart of the issues at hand, namely the blurring between MLS aggregations and listing advertising. Importantly, as discussed in MLS Is More Than Technology, listing aggregation (a key purpose for MLS) is different than advertising. If the only issue is where to advertise listings (e.g., Google, Trulia, Zillow, etc.), competitive brokers naturally will choose different outlets, resulting in no complete aggregation and a dis-service to consumers as well as brokers. This is the fundamental reason that claims of the “death of the MLS” miss the mark. Without the cooperation engendered by the MLS, brokers and agents would advertise their listings here, there and everywhere, but not all in one place like they do now with the MLS.

The issues surrounding listing advertising were further explored in Listings, Leads and Losers, Oh My!, in which I concluded: “The value proposition seems clear: (1) consumers need listings to learn more about the market; (2) brokers can supply the listings; and (3) agents can help educate the consumers on what the listings mean. The technology needs to facilitate this value proposition in as complete and unobtrusive manner as possible. If we can do that, there need be no losers from listings or leads.”

All of this leads me to conclude that an important part of the solution is to focus on the “terms of use” upon which brokers are willing to allow use of their data by others. I broached this issue in Is Data Free? Or Is There No Free Lunch, by examining the terms on which Google allows others to use their data. In focusing on these “terms of use”, distinguishing the who, what, when and where is very important. Who is going to use the data for what and when and where?

The biggest challenge here is that a collective “terms of use” is important, but collective agreements are not appreciated by the Department of Justice. However, even the DOJ recognizes, that justice requires balancing the benefits to consumers of listing aggregation against any harm from collective agreements. In this case, if the DOJ were engaged in the discussion on what the terms of use should be, perhaps that balance can be struck from the beginning.

That balance is required takes us back to the beginning of this post, where I mentioned the Future of the MLS Is Now and the patterns for developing social software discussed in Clay Shirky’s A Group Is Its Own Worst Enemy. MLS was born of the benefits of competitors working together. The model proved so successful that it has grown and grown. The challenge of that growth is described well by Shirky:

And, finally, you have to find a way to spare the group from scale. Scale alone kills conversations, because conversations require dense two-way conversations. In conversational contexts, Metcalfe’s law is a drag. The fact that the amount of two-way connections you have to support goes up with the square of the users means that the density of conversation falls off very fast as the system scales even a little bit. You have to have some way to let users hang onto the less is more pattern, in order to keep associated with one another.

MLS currently is pushing the boundaries to where “scale” may kill the conversation. You see this same pattern with the success of a site like Facebook, which is all about giving individuals control over who they talk to and when. Facebook is a walled garden much like the MLS. I made this case in my post MLS 7.0, which suggests that the MLS is one of the first very successful social networks. So, today, the participants are defining the boundaries of that social network and yet the discussion is so much about the technology and so little about the substance of defining the rules on which the competitors are going to agree to work together.

To address this gap, I started up the Future of MLS Wiki, hoping a discussion about the “terms of use” on which data could and should be exchanged would ensue. Unfortunately, with other events intervening, I haven’t given it the time it needs and the main participants so far have not been the brokers that need to be in the conversation. Anyway, the wiki remains and perhaps the conversation will take off with a little love and attention. There is no doubt that the issues raised are what need attention, much more than the monopolistic power plays currently gaining attention.