Friday Flash: The tech bet

RE/MAX traded at about $60 a share in March of 2018 when it bought brokerage tech platform Booj. 

Today the stock is at $38. 

Realogy paid $166 million for ZipRealty in 2015 with plans to deploy its “suite of world-class technology tools across our business, enabling both our franchise brands and our company-owned operations to be more productive, efficient and better serve their customers,” according to then-CEO Richard Smith.

That effort was largely turfed. This week, Realogy announced a partnership with Moxiworks as part of its new open platform strategy. 

Gary Keller declared that Keller Williams was a technology company in 2018, one that would secure a future free from unfaithful “vendors” and beyond the long shadow of the dreaded Zillow. As the KW Command tech platform rolled out, then-Chief Innovation Officer Josh Team touted early adoption numbers so high that one wondered how he could make such claims with a straight face. 

Now, Team is gone and Gary Keller is issuing mea culpas for glitchy software, stating, according to a recent Inman piece, that “… we are horribly sorry that innovation has put us in this spot…”.

Meanwhile… 

EXP agent count has gone from 16,000 to 50,000 in the past 3 years. They did this through financial innovation, not tech innovation, using cost take-outs around offices and consumer advertising to offer a cheaper deal to agents, while also giving them an equity opportunity. Tech is a relatively small part of the EXP story. 

Compass used overwhelming financial force to get to 18,000 agents in high-dollar markets over the past few years and is now aggressively pursuing an office-exclusive listings strategy to gobble up market share. Yes, they’ve invested a ton in tech, and tell the tech story better than anyone, but those with a merely adequate understanding of our space know that wasn’t the key driver of their rise. 

My point?

First, tech inside this business is hard — brutally, witheringly hard — so hard, in fact, that the brightest minds in our midst have yet to create something commensurate to their own stated ambitions.

Second, maybe the juice just ain’t worth the squeeze on this tech stuff. 

I am not saying that big brokerages and brands should cease investing in technology. I am suggesting that recent history shows us that it consistently fails as a cornerstone of real estate enterprise strategy. 

Buy, build, license, partner, whatever — it’s all more or less table stakes.

The salvation of incumbent real estate players will be won or lost on other bets.

…

I speculated on CoStar’s plans in residential real estate a couple weeks ago, and asked for readers to respond with their own takes. I’d like to share one of these opinions here, from Sean O’Toole, Founder and CEO of PropertyRadar:

The big institutional players, who are likely CoStar’s larger clients, are now buying and building SFR as an asset class. I think all this may have to do with new demands for data from those clients. Same for apartments.com. These big players are now buying entire subdivisions, and their appetite is only increasing. 

Also, CoStar is very good at getting (demanding) data from agents/brokers and monetizing it both back to them and to others. I also think they will develop derivative products that many pay big money for, like agent/broker/team productivity reports, etc. CoStar will probably leverage multiple angles. Realtors would do well to remember that if you aren’t paying for the product, you are the product. This 100% applies to “your listing your lead” – that advertising will never be truly free – your listing will only be advertised if it can be monetized. CoStar’s commercial clients know this well.

Got a sunnier view on this? Hit me up.

Have a peaceful weekend.