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Is syndication the answer to MLS innovation?

Jul 26, 2011 Michael Wurzer

I’m at the Inman Data Summit conference this week in San Francisco and, as you might expect, there’s been a lot of debate about use of the MLS data by third parties.  When should it be allowed? Who decides? What uses are allowed? A variant on this theme is whether MLSs can or will innovate or will companies like Zillow, Trulia and Move be the driving forces of innovation, shutting MLSs out of the new value propositions being created.  Considering Zillow’s recent IPO and near $1 billion market valuation, this issue is perhaps even more at the fore than previously.

One of the most compelling answers to MLS data usage questions is that the brokers own the listing contracts and they should choose when, where and how the listings can be “used.”  I put the word “used” in quotes, because I think the discussion is easily scuttled when we confuse the various use cases.  Syndication traditionally is related to advertising on other sites and so that’s my primary focus here (but I think the non-advertising uses of the MLS data may be even more controversial).

With that in mind, the main point I’m making here is that syndication seems like an obvious answer to how MLSs can allow innovation, because it allows the brokers to decide.  I think few would argue that when it comes to advertising, the broker should decide when and where the listing gets advertised. That is, after all, what their listing contract directs them to do. Moreover, in a market economy, where the individual choices of each competitor are designed to produce the winner, broker control through syndication seems the most American of answers.

But does this answer also apply to all of the MLS data, the aggregation as a whole?  For example, if syndication (where each broker decides which of it’s competitors sites get to display heir listings) were applied to IDX, would IDX be as effective as it is?  Similarly, consider Realtor.com versus Zillow or Trulia.  How would the competitive landscape look different if Realtor.com only received listings by individual brokers or Zillow or Trulia all received the same data as Realtor.com?

Perhaps the answer to this question is yes.  Zillow and Trulia, which have been forced to rely on individual broker choices (syndication) for the most part most likely do not have the same deep listing footprint as Realtor.com but maybe they already have a critical mass and it’s only a matter of time before they have all the listings.  If that happens, then syndication is the answer to the question of how MLSs can innovate.

My guess, however, is that a syndication-only approach will foster innovation only by companies with enough resources to reach that critical mass.  As impressive as Zillow’s valuation is today, they’ve had to spend a lot of money building their brand and have yet to sustain a profit.   From that perspective, reaching critical mass through syndication appears difficult and I suggest MLSs continue to have a lot of value in the entire aggregation and syndication alone will not easily create an eco-system of innovation.

Instead, MLSs need to continue to argue and discuss and work hard to figure out how to allow innovation on the entire aggregation while also not allowing uses that make brokers not want to cooperate with the MLS any more.  One potential answer to the innovation question is to shift the discussion from distribution of the data to third parties to providing a way for third party developers to deliver products in the MLS system, which already serves not only agents but also consumers.  The analogy is making the MLS the platform and app store for access to and development of products relating to MLS data.  Instead of sending the data out, bring the developers and consumers in.