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Syndication isn’t deadly but it also isn’t the MLS or IDX

Feb 1, 2012 Michael Wurzer

This post is about the “sindication” arguments erupting over the web over the last few months and more heatedly the last few weeks. For background, check out: Rob HahnAgentGeniusGeekEstateJay ThompsonKris Berg, and the video from the managing broker at ARG in San Diego that set off the recent web storm. Read them all, especially the comments.

What to make of all this debate? First, there’s not much new here. Brokers are competitors and will make independent decisions about where to advertise their listings. This is called syndication and it’s been happening since the beginning of real estate brokerage. Historically, the syndication channels were newspapers, home magazines, flyers, signs, etc. Now we have the web and sites like Zillow and Trulia. So, this debate is nothing new.

Brokers will continue to decide how they can gain a competitive advantage for their listings. Some brokers only want their listings on their own web site or their franchise web site. Other brokers find value in Zillow or Trulia or Realtor.com. Others yet post to Craigslist and dozens of other sites, on the theory that more is better. In my view, here’s the rub:

On its own, syndication (the decisions of individual competing brokers) will never result in a critical mass of listings on any one site, because competitors will naturally choose different destinations to distinguish themselves.

This is what distinguishes syndication from the MLS. Almost five years ago, I wrote about how the MLS is more than technology. In that post, I wrote:

The representative decision-making process of the MLS is what allows for the broad cooperation necessary to create critical mass in terms of data sharing. Without this, I believe we’ll simply have a mishmash of data strewn here and there, with no possibility of a national repository or any other useful portal. The MLS embraces the duality of competition and cooperation, and strikes a limited balance that enables critical mass to be established. This feat should not be underestimated.

Five years later, that post proved prescient, because, indeed, what we have today is a mishmash of data strewn here and there. The only site that has anywhere near a complete data set is Realtor.com, because they were successful in working directly with the MLS organizations that have worked so hard to encourage cooperation among the brokers.

Importantly, however, the necessary cooperation will never be the strength of syndication channels (Zillow, Trulia, etc.), because they make most of their money by selling ads to brokers and agents on top of the listing data, which is inherently non-cooperative. In fact, this practice of selling ads on top of the listings to competing brokers really irks the listing brokers and results in claims of “coming to dinner with just a fork” and, ultimately, “we need to take back our data!”

But let’s stop and evaluate that last call to action, “we need to take back our data.” Where I think those who advocate against syndication go wrong is in using the terms “we” and “our.” In the competitive landscape of real estate brokerages, the only “we” and “our” is the MLS but the MLS is not a syndicator. By definition, syndication is the decision of an individual broker for their listings alone, and has nothing to do with the cooperative aggregation of listing data in the MLS. As suggested above, some brokers will decide to syndicate, others won’t, and the market ultimately will decide who has made the best decisions. This is as it should be.

The tougher issues arise, however, when brokers extend these same arguments to the MLS aggregation. In this regard, those arguing against “MLS” syndication are right. The MLS should not send the MLS aggregation to any advertising site, because the business models of those sites conflicts with the cooperative model of the MLS. As I wrote five years ago, the value of the MLS is in creating that fragile cooperation that allows for the aggregation. What we’re now seeing is that the fragile balance of cooperation will not stand for the MLS sending the aggregate data to any advertising site.

Instead, the MLS should continue to foster the IDX and VOW policies that have been successful so far and modernize them with stronger terms of use designed to make it clear to brokers that their data will only be used by home buyers and sellers for their personal home buying and selling decisions. Such a foundation will not only preserve but strengthen IDX and VOWs, and help brokers and agents extend the collective MLS data to their customers on the web, mobile devices and whatever new technology comes down the pipe next.