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The Conflicts of Advertising and Listings

Aug 3, 2007 Michael Wurzer

Inman Blog writes today that the Realogy deal with Yahoo! Real Estate doesn’t knock Prudential out of the picture, instead Yahoo! has created (and Realogy apparently agreed t0) a separate “classifieds” section of their search and Prudential still gets the “Homes for Sale” section. The upshot: you can’t search both Prudential and Realogy listings at thesame time, which, of course, is ridiculous from a home buyer’s perspective.

yahoo_real_estate

This bizarre result is predictable and shows the difficulty of striking a proper balance of interests allowing competitors to advertise together. There basically are two revenue models for listing aggregation sites: (1) charge the broker or agent for premium positioning; or (2) give the listing advertising away and sell advertising to others. I don’t see either of these models building a critical mass of listings necessary to serve the consumer.

The broker pay model fosters competition among the listing providers (brokers and agents) for the premium advertising space, and that competition necessarily will increase demand and then prices and eventually drive out a significant segment of the listing providers who will choose to advertise elsewhere. The free listings/outside advertising model doesn’t work because listing search is advertising and the advertisers (brokers and agents) don’t want their advertisements diluted by others’ advertising.

Every listing aggregator falls into one or the other of these models, or a combination of the two. Realtor.com is straddling both models and their troubled history is a classic example of the conflicts inherent in mixing listing search with advertising. Trulia, the heir apparent to Realtor.com, so far has eschewed outside advertising and is focused on charging brokers and agents. So far, they’ve done well attracting listings but my guess is that they’ve cut sweetheart deals to get a foothold and eventually we’ll see the need for cash start to drive up prices and eventually the listings will go elsewhere. Zillow initially ignored (annoyed) the broker/agent market but now is a mix of both the broker charge and outside advertising models. Yet, they have few listings and I’ve predicted for a long time that they’ll never build critical mass. Point2 isn’t seriously in this space, as they are more of a syndicator than an aggregator. Google is an outside advertiser model and hasn’t gained much traction either. I could go on but the result is the same: all these aggregators make a lot of waves but their models are doomed as it relates to comprehensive listing search.

Though I’m completely biased, I think the facts show that the only model that can work for the consumer is an MLS portal, devoid of all advertising and premium positioning. The beauty of this approach is that it not only is consumer-centric but it’s also the least expensive for brokers and agents. The MLS fosters the cooperation necessary to tame the competition enough to allow listing aggregation, which is necessary to serve the consumer. I wrote yesterday that I needed x-ray glasses to see through all the hype surrounding these issues. Do you think I found those glasses?

Update (sort of):  I think this post on traffic for Realtor.com, Zillow and Trulia is relevant here.  I had read it before but was reminded of it today by Jim Duncan.