Differences, little and big

I’m on a plane headed home from Europe, where men wear red pants, women smoke like chimneys and a “Pharmacist” helps you pick out a stick of deodorant.

I love the little differences.

But I came for business, and that was about big differences. I spoke at the first European Property Portal Watch conference in Barcelona. There were close to 300 in attendance, and as far as I could tell I was the only American.

Which is too bad, because it was a really good conference. Congratulations to Alistair and Simon.

I was slotted to give a talk titled Observations on the American portal scene in which I would share what the rest of the world could learn from the American Big Dogs – our innovative, publicly-traded, “mobile-first” portals.

But by the time my turn to speak came I also felt the need to address something else: a large and curious difference between online real estate in America and online real estate in the rest of the world.

See, here in the States, portals give their product – an audience of consumers – away for free. In most of the rest of the world, real estate brokers and agents pay to get their listings onto a real estate portal.

This is why the REA Group, which runs the leading portal in Australia, a country of just 30 million people, managed to generate $277 million in revenue and EBITDA of $126 million (holy cow!) in 2012. That’s more revenue than Zillow, Trulia or Realtor.com, and far more in earnings than all of them combined.

The rest of the world views listings as advertisements; we view listings as content.

I knew this before I arrived, but being asked to explain it really makes you wonder why this is, and whether it is a good thing.

Why we’re different is relatively easy to explain. I think it’s rooted in two things that happened in the mid-1990s.

First, the American real estate industry, through NAR, put listings on the Internet before anyone else and set the “list for free, pay to upgrade” standard everyone else had to match.

Second, the early portal wars in the U.S. (between Realtor.com, Microsoft HomeAdvisor, Homes.com and HomeSeekers.com) focused on listing count, not audience size. I remember going to the NAR show in 1997 and seeing a ticker displaying, supposedly in real time, the number of listings on Realtor.com. Today’s focus on monthly UUs wasn’t really part of the competitive narrative.

This led the portals to pay MLSs for listings. This was a pretty radical idea if you think about it. I don’t think the local newspaper ever thought of paying for real estate ads. But big checks were written.

This is a killer deal for agents, brokers and MLSs, right?

I am not so sure.

Paying for advertising is clean. Giving away “content” is so… fraught.

Think about it: if agents and brokers paid a fee for placing their listings on the portals, would…

• Trulia display the “3-headed monster” of buyer agents on another agent’s listing?
• Zillow undertake to build a “Massive, enduring brand” with an emotional connection to consumers?
• Realtor.com experiment with innovative yet controversial products like AgentMatch?

Maybe they’d just compete with each other to be the best at advertising listings for those that own them. Because those that own them would be paying for that service.

Everyone would be cool. No funny business, no BS.

There’s another wrinkle here that contributes to what has become a burdensome complexity. The portal/practitioner relationship is complicated by the MLS, another U.S. anomaly. The MLS provides market efficiency, which is great, but also introduces a second layer of ownership to the listings mix. A broker owns his individual listing, but the MLS owns the aggregation of listings.

Which owner, then, is the portal to serve? This “who owns the listing” question, tired as you may think it is, remains lodged in the gut of American real estate, giving just about everyone ulcers.

What am I talking about?

I don’t think it’s practical (or, you may argue, even desirable) to try to undo the Original Sins of giving up audience, and listings, for free – even though it seems to have made a mess of things.

But I do think that it’s time for something simpler to take hold now that we’re not at the bottom of a crash or the top of a bubble. Some might argue that this is exactly why the time for a broker-owned portal is now. Others might be totally fine with accepting a little bit of aggravation in exchange for free advertising.

Either way, I think we have a few things to learn from the rest of the world.

Some random tidbits from the event:

• The guy who runs the leading portal in Romania told me that most homes have 1 gigabit Internet and practically everyone has a smart phone. It seems recovery from a murderous dictatorship progresses more quickly than innovation at Comcast.
• Two dudes from Denmark shared their story about scraping listings from brokerage websites, successfully lobbying the government to release sales data, giving the finger to the industry and selling website subscriptions to consumers. They are not yet in jail.
• The leading property portal in the Middle East, propertyfinder.ae, wrapped its headquarters building in Dubai with a giant ad reading “Keep calm, there is no bubble.” That’ll never come back to haunt ’em.

An eye opening week, all in all (and, no, I did not bring back a pair of red pants).

[disclosure: Move, Inc. is a 1000WATT client]