Over ten years ago, I recall being in a presentation at NAR’s mid-year conference and hearing Gregg Larson from Clareity Consulting predict that MLS services would soon be “free”. I don’t recall all the details, but I believe Gregg was predicting that advertising would replace the per member per month revenue model pervasive in most MLSs at the time.
Ten years later, “free” may finally be here. First, of course, we have RPR, which is offering software to members for “free” in exchange for a license to the MLS data. RPR insists that it’s not an MLS but I think the point is still valid. RPR stands for the basic proposition of “free” software with the right to earn revenue from the MLS listings.
Another example of software for “free” is Listing Book. Instead of charging MLSs or users a license fee, Listing Book has an advertising supported revenue model and they also have some upsell products. This really isn’t too different than RPR in that both are using the listing content to generate revenue.
Both of these business models stand in stark contrast to that proposed by traditional MLS or other real estate software vendors, which typically license the software for a monthly fee. This shift in revenue or business model for real estate software poses some interesting questions:
- Value. Assessing the exchange of value in these types of deals is tricky. We all know there’s no free lunch. The software isn’t really “free” or gratis but rather free as in beer. So, what then, is the cost or value of these free software propositions? In RPR’s case, Rob Hahn, MRIS’s new marketing director, says the cost is too much.and MRIS, the largest MLS in the nation, may agree. In ListingBook’s case, the “cost” of the advertising depends on the image you want to project. Some think advertising on their site is not cool and others are okay with it. (Here’s an interesting discussion at the John Hall blog comparing ListingBook to FBS’s flexmls Portals.)
- Revolution? Is the revolution posed by RPR really in the technology or is it more in the business model? My take is the latter. They’re converting what were previously revenue producing products (software and tax records) into “free” products in exchange for something they perceive as more valuable: MLS listings.
- Will Traditional Vendors Change? These new business models have generated a lot of buzz so far, even if they haven’t yet generated a lot of revenue or profits. Will traditional real estate software vendors follow this shift and create new pricing models for their products? From FBS’s perspective, we’ve been wrestling with this issue for some time. As I expressed in a comment on the John Hall post, our revenue model is different than ListingBook in that we charge for IDX. Of note, however, we’ve already entered the “free” world a bit in that the portal product itself is “free” with the MLS system. So, the question looms, how much functionality do we include in the “free” portals? Should we add some sort of search feature to the portals even for users who do not have IDX? What features should be “free” (included in the MLS) and what features should be optional?
- Core MLS versus a la carte. The latter question goes to a fundamental tension that’s been in the MLS software business for as long I’ve participated: what’s included in the base system and what’s a la carte. We all know that many features in the MLS system are used by a small fraction of the members and that raises several questions: (1) should everyone pay for a feature that’s only used by a few; (2) should the MLS be choosing these features for all members (leveling the playing field) or let brokers choose for themselves; and (3) is there economy of scale for the MLS buying site wide licenses? There undoubtedly are even more questions as well. At a philosophical level, I love the idea of each users choosing what features they want. At a practical level, I’m not sure any more what is a core feature for the MLS and what isn’t.
What I am sure about is that the shift in business model posed by RPR and ListingBook make it harder than ever for MLSs and brokers to evaluate the value of the transactions being proposed, because “free” is very attractive and can blind you to the real costs. At the same time, as mentioned above, I wonder if the real revolution being wrought here is in the way brokers and agents buy software (“free” from their Association) and whether that’s in their long-term best interest.
P.S. If you click through on this Realty Times article from 1999 (also linked above), you’ll see that there was a debate or discussion among no other than Dale Ross (then head of MRIS and now head of RPR), Jay Huffman (MLSNI and REBIG) and Gregg Larson on the topic of free MLS. If anyone has any documents or links or even memories evidencing that discussion, I’d love to see them. I can’t seem to find anything on the web about it other than the Realty Times intro.