About once a week, someone asks Redfin who built our real estate search site (sometimes they don’t ask, they just take). Since we built our site on our own, we can’t recommend a development partner, but we can offer advice to other brokers building MLS-powered sites.
And our first suggestion would be to bring your wallet. If you include all the employee salaries, benefits, hardware, online services, data costs and hosting costs, Redfin will probably spend $4+ million on research and development in 2009.
Is Technology Tilting the Playing Field Toward Large Brokers?
That may sound like an imposing number but we have costs you can avoid. We spend at least $1 million on commerce tools for tracking offers and listings, so we can give customers the same 24-hour web support you expect from a bank, limiting the administrative burdens on our agents. A traditional brokerage doesn’t have to invest in this area.
We probably spend another $1 million making mistakes you could easily duck by following us at a safe distance of, say, six months. We try to avoid mistakes, but a mistake is often just a good decision outpaced by circumstances.
For example, when we had no money — scratch that, (thanks David Selinger) when no mapping technology existed that supported user-controlled panning and satellite imagery — it made sense to build our own map. Later, Virtual Earth was the best choice because Google was slow to draw hundreds of property outlines on its map. Now the best choice for us is Google Maps because we figured out how to outline all the properties at once. We just switched to GMaps today, and now it’s on the front page of TechMeme.
I think we’re the only folks in real estate who have used Virtual Earth, Google Maps and a proprietary map, so if you have questions on the relative merits of each service, please just drop us a line.
That leaves the cost at around a few million dollars per year to build a real estate search site with national scale, which is still too expensive. While hardware costs decrease every year, and other websites have undoubtedly achieved more with less — often by out-sourcing, sometimes no doubt by just being smarter and faster — it is still true that small brokers are struggling to pay for competitive search sites.
This is a change. Marketing, which used to be the large brokers’s primary advantage, is actually getting cheaper — if Bloodhound has proved anything, it’s that the web has made marketing a question of what you have to say not how much you have to spend.
But the cost of running a real estate search site is rising fast. Large brokers throw money (if not always expertise) at the problem, while small brokers struggle to compete. The small brokers ask MLSs to provide a common set of services, like listing alerts, but the large brokers sometimes block these efforts as being beyond the MLSs’ charter.
And expectations are rising. Consumers now want tax records, bank records, property outlines, school data and neighborhood outlines, all of which are expensive.
The sites a Realtor could work with aren’t always attractive. Realtor.com, the site funded by Realtor dues, is losing market-share. Sites like HouseValues, Trulia and Zillow are gunning to replace Realtor.com, but not all agents who want to be featured on those sites can afford the up-front costs .
It would be a shame if technology — which is supposed to lower the barriers to entry — actually made real estate less of a mom-and-pop industry. I know Redfin is part of that trend, but it wasn’t what we had in mind when we started. Our focus was on competing with Century 21 and RE/MAX, and benefiting the consumer — not hurting the little guy.
What do you think? Is technology creating new economies of scale in real estate? Are small brokerages able to compete just using the public sites provided by the MLS? Will large brokerages be able to use better data access to build the market-leading real estate search sites?
And is it the role of the MLS or of the National Association of Realtors to create a level technology playing field? Will the small brokers get priced out of the technology wars? I don’t pretend to know, but it would be great to hear your thoughts.
David G from Zillow.com says:
“but not all agents who want to be featured on those sites can afford the up-front costs”
Glenn there is no upfront cost for an agent’s listings to be posted on Zillow and for an agent’s contact details to be featured on their listings. There is also no cost for an agent to post up to 50 photos on their listing on Zillow. And we don’t charge agents for the traffic generated by their listings to their websites. We do also offer ad products that provide more exposure for your listings on Zillow but there’s no cost top get into the syndicated listings game.
I think you’re missing the fact that being a highly successful web publisher is not necessary to being a highly successful real estate broker. My favorite analogy for this issue is the historical relationship between real estate franchises and the newspapers. How many successful brokers do you know of that also run popular newspapers?
December 12, 2008 — 11:37 am
Glenn Kelman says:
David, I stand corrected. There are cost-free ways for agents to promote themselves in wonderful ways on Zillow and many other sites.
But are you really suggesting that brokers should stop offering real estate search sites?
December 12, 2008 — 11:46 am
Tom Hall says:
Glenn, I think technology allows the small guy to compete more effectively. Interesting personal anecdote- I was contacted by a buyer after he spent several months searching online, ultimately using a competitors website to do the search. He happened upon my listing and contacted me directly. Interestingly enough, he did not work with an agent from my competitor.
I believe that the large brokers, while capable of building a deploying technology solutions have done very little to differeniate themselves amongst their competitors.
Key to winning the technology game is to deploy and leverage technology solutions that diffentiate the advantages of working with one broker over another – using one agent over another.
The ones that leverage knowledge and expertise are the ones who will continue to gain clients.
Why not license your technology to mid tier or even larger regional brokers?
December 12, 2008 — 12:43 pm
Drew M from Zillow says:
“Consumers now want tax records, bank records, property outlines, school data and neighborhood outlines, all of which are expensive.”
The web is quickly changing the costs to accessing data. Not all of this data is as expensive as it once was — much of it can be had for free using public APIs. Education.com offers a free API that gives partners access to great school data (Zillow actually uses their API to power our school pages). Zillow makes neighborhood boundaries and tax & prior sale information available free of charge as well. But I’ll agree with you that property outlines are still an expensive dataset.
December 12, 2008 — 1:01 pm
Frisco Texas Real Estate says:
Absolutely not! That’s the beauty of the web… the larger companies do not have an upper-hand because real estate is still a people-business.
Access to more information, more quickly will certainly adjust, but not totally automate the real estate process any time soon. People are needed. Real estate agents are needed. People want to do business with people, not giant corporations.
December 12, 2008 — 1:21 pm
Shawn says:
I think that technology can help the little guys but most don’t know how to utilize what’s out there to help them. There are many low cost ways to help your cause but you definitely have to get educated in what’s out there and how to use them.
http://www.inexpensiveinvestinginflorida.com
Thanks
December 12, 2008 — 1:52 pm
Melina Tomson says:
As a mom and pop, this issue is always a concern for me. I do look at some of the slick property search sites done by the larger brokerages and know that I don’t have the capital to develop something similar.
The thing with competition is to know where you can compete and where you can’t. I need to compete in other ways.
The fact is that the person they see in person is who they hire. Mom and Pop agents have to really excel to make every client count.
December 12, 2008 — 1:53 pm
Eric Blackwell says:
Glenn-
I appreciate your point of view. Mine is more along the lines of Tom. I actually think that the little smart guy has the advantage.
There have never been more open source or readily linked to tools available for the little guy to do what you are doing at great expense. Drew’s example is a valid one.
A couple of little guys working together, say with Ruby On Rails can create significant competition for a national level site..why? Because they don’t have to win nationally. They have to win locally. Do they need ALL of the bells and whistles? Nope. Just enough to make the meter click.
“But the cost of running a real estate search site is rising fast.”
I don’t agree with that. I think the cost of trying to shove everything that is the newest and most out there to see what consumers actually want is tremendously expensive.
For savvy REALTORS who watch others and learn from what they do, the opportunity to rake in some tremendous ROI is there for the taking. Little guys included.
As for developing everything as soon as possible, they (consumers) may or may not want it. The revenue model may or may not be there to support it. And for darn sure the development cost is staggering. The bottom line IMO is that throwing all the goodies you can stuff into a search site may be a bad business decision. You may clearing tree for me…and I can lay track faster because of you….and NET a better ROI.
You have piqued my interest, though…some good topics along this line to write about. Thanks for helping me churn some of this over in my mind.
Best;
Eric
December 12, 2008 — 2:27 pm
Charles Richey says:
I agree with Eric, you just have to compete locally and that’s where the little guy has the advantage. After all, who would know the local market better, someone that lives there, maybe went to school there or a content builder living thousands of miles away?
December 12, 2008 — 2:35 pm
Glenn Kelman says:
Charles, Eric, Melina, I like your thinking on this topic, and agree. If there’s one area that Redfin failed to appreciate as we expanded, it was the importance of being local…
December 12, 2008 — 2:39 pm
Greg Swann says:
> Consumers now want tax records, bank records, property outlines, school data and neighborhood outlines, all of which are expensive.
Really? Other than school info, I’ve never had anyone show any interest in any of this stuff. Except for the bank records, all of that is available in one way or another on our IDX site, but I don’t get the impression anyone cares. It might matter from a bullet-point point-of-view, but none of it will replace the warm-and-fuzzy factors that actually cause houses to sell.
We should get Brian Brady to interview the two of us sometime. Bloodhound Realty is on the bleeding edge of inventing home marketing technologies, but it’s almost all devoted to eliciting emotional responses, rather than to satisfying intellectual itches. I’m not saying one way or the other is right — especially since everything depends on who you are selling to. But even though we spend a lot more per transaction than ordinary Realtors, we see our costs as being amazingly low — since we’re doing things that would have been impossible to us five years ago.
I should write a post from my perspective: All the low-cost marketing opportunities the “little guys” are letting slip past them…
December 12, 2008 — 3:45 pm
Broker Bryant says:
My opinion is that when I take a listing I have an agreement with the seller that whoever sells the property I get paid. From there I get the property out on the Internet and in front of as many eyeballs as possible. From that point I don’t care where the buyer comes from. If they contact me direct that’s great, if they contact another agent, that’s great too. Either way, my seller gets their property sold and I get paid for doing my job.
So any search site that is all inclusive will have my inventory on it. And inventory does not come from a a fancy search site. It comes from very local, very niche marketing and that’s a very good thing.
December 12, 2008 — 3:45 pm
Brian Brady says:
I might agree with Glenn, here. Zillow is not free to agents. Sure, it appears to be free but the opportunity cost is great. Each added listing strengthens Zillow’s relevance in the SERPs and dilutes the “little guy’s” relevance.
I’m picking on Zillow but it could be Trulia, Movoto, RealSeekr, etc., etc. None of these valur propositions are TRULY free when the quid pro quo of participation is balanced with the lost independence in the online marketing world. This comment from a guy who is the top-ranked author on Zillow’s mortgage blog.
Call this an epiphany of sorts. While we’ve been screeching about Redfin the big RE.bots have been silently (and sweetly) gaining traction locally. Witness ActiveRain’s Localism launch (and flop. Their “socialist” approach is a content grab, designed to dominate SERPs locally.
It’s not necessarily wrong, it just is. If we think of the internet as the 500,000 channel television set, the local real estate agents has one unique advantage over the big guys; domination of the long-tail search results. Once that’s gone, it’s game over.
December 12, 2008 — 3:54 pm
Brian Brady says:
“We should get Brian Brady to interview the two of us sometime.”
I want Glenn on that call, too.
December 12, 2008 — 3:57 pm
Tom Hall says:
Greg – how about a local, small broker who wants to capitalize on the relocation market due to the transient nature of a local large employer. Could search be both intellectual and emotion in nature?
For example – a family in Des Moines is relocating to Denver. Her kids are in the “best” performing school in her area. She is completely unfamiliar with her new location but will only consider homes in a school – not just district – that have the “best” performing students. Her emotional need is to provide consistency and continuity in the school environment for her children.
I believe search needs to be intellectually deep enough to get at the data that address the emotional buyers response.
December 12, 2008 — 4:11 pm
Glenn Kelman says:
Greg, I would *love* to read that post. And Brian, if you guys have a fun idea for an interview, I’m in!
December 12, 2008 — 4:12 pm
Oscar Thibidoux says:
Tom, Yes I agree with you about the emotional stuff. Greg, years ago many agents were reluctant to get faxes and cell phones. Then they were hesitant to start using the Internet. Now they need to have a blog and be SEO savy. If they don’t adapt, they are obsolete. Sorry if this challenges some people.
December 12, 2008 — 4:55 pm
Greg Swann says:
I love this because it’s a real marketing problem, and is therefore totally solvable.
First, you know which school mom would really want, if she had six months on the ground to scope out everything.
Second, you have no compelling way of telling her this. “I think you’ll find…” is just salesblather. A GoodSchools.net link is technobabble. “My son goes there,” is maybe the best arrow you have in your quiver.
So, third: Stop thinking that way. Sales is not how I get you to see things my way, sales is how I help you find the world you long to see.
So what do you do?
My take is that you help the school you know Mom would pick sell itself to her. That’s a weblog job, at least, maybe a weblog plus a forum. And setting something like that up is a lot of work for you as a Realtor, but if you’re really working in that kind of a relo culture, it’s what you have to do.
Redfin is a different world, and I don’t worry about VOWs much because moms buy houses. Most of what we’ve done in the way of sales tools has been on the listing side, but I’m diverting a lot of my attention to buyers now. Listing into a falling market is not fun, for one thing, but the stuff we’re playing with now is very well-suited to appeals to buyers.
And I’m in love with you, right now, Tom. My mind is racing with ways to address these kinds of issues. Once you’ve identified the objections that really matter, you can devote your marketing efforts to solving those particular problems. As you note in this example, home search is almost a side-issue. You have to solve a school problem before you can even get to housing. If you solve the school problem well enough, no one will be able to touch you with a mere search engine.
December 12, 2008 — 5:10 pm
Tom Hall says:
Greg – amen! Home search is not all about the data or the technology – it’s knowledge. We sell knowledge as well as real estate. Technology can be a very powerful vehicle – technology in and of itself does not inherently provide value.
December 12, 2008 — 5:32 pm
Kevin Tomlinson-Miami Beach Real Estate says:
Glenn, David et al
As a “small” agent, who has spent about $200k on my Web site, I find that there is more opportunity than ever for the internet-educated agent to gain business from the internet.
Big companies (Realogy & others) STILL don’t get it and the reality is it will take many years for them to catch up in the SERPs if/when they do.
Web costs are coming down and open source apps make tasks that use to cost tens of thousands of dollars, now are free.
Though I may have wasted a bunch of money, there is/was a payoff: high ranking in the SERPs.
Like Greg, I’ve NEVER had a consumer ever care about “tools.” The most important thing, as Marc Davison’s video says, SHOW ME LISTINGS.
David:
From all my years of “enhancing” listings on all the sites, with pictures and then virtual tours and then MORE pictures,never made a difference.
As for the “tools” that the “Big 3” tout: I believe those are made just to create a press release. Consumers just want the listings.
December 12, 2008 — 5:42 pm
Greg Swann says:
> I believe search needs to be intellectually deep enough to get at the data that address the emotional buyers response.
I want to make sure I’m being clear about this. The mom in this example doesn’t have a problem that can be solved with data. It can only be solved with experience — rich, deep, visceral experience. This is what you have to deliver to take away her fears. We don’t put a coffee table book in the house because we expect it to sell the home. We put it there to get buyers to sit down in the house. If we can close on that — sitting down — the house has a chance to sell itself. A whole lot of the things we do consist, in large measure, of slowing people down. We want for them to take their time getting to know the house. If we can do that, the battle’s half won. The job we need to think about, going forward, is doing those same kinds of things with other factors that can motivate a sale. As it happens, I’ve been devoting a lot of my time to helping the people who can help us find their way into the wired world. This, I expect, is where your Big Haired top-producer excels — minus the wiring. She not just networking with clients, she’s networking with everyone who can help her clients get the most of what they want from the world.
December 12, 2008 — 5:46 pm
Tom Hall says:
Greg- I think initially the mom’s search could be eat related. I envision her sitting at her computing after bath time doing her preliminary, first pass search(s).
More to my point- for technology to deliver value-added search results, the data needs to be deeper.
Buyers search for property consistent with their lifestyle – i think search parameters need to be lifestyle focused – maybe even heuristic in nature. Ie close to parks with running or bike paths … walking distance to Starbucks – desire an ethnically diverse neighborhood, which could pose some challenges to licensed agents.
Experienced and knowledgeable agents can further vet the results.
Search criteria like 2 bed, 2 bath with garage parking close to the lake between $300k to $350k just doesn’t cut it.
December 12, 2008 — 6:10 pm
Kevin Tomlinson-Miami Beach Real Estate says:
>>Search criteria like 2 bed, 2 bath with garage parking close to the lake between $300k to $350k just doesn’t cut it.
Tom: In a local search, it sure is enough. Why? Because consumers rarely buy EXACTLY what they say they want—and they know it. So a search with larger parameters is fine.
December 12, 2008 — 6:32 pm
Tom Hall says:
Kevin – if brokers are looking to differentiate themselves in terms of leading edge technology, simply providing basic search capability will not set them apart.
I agree that that level of criteria may work for some buyers, it doesn’t provideva great deal of value in terms of leveraging the power of tecnology. Just my opinion. 🙂
Loving this discussion!
December 12, 2008 — 6:48 pm
Kevin Tomlinson-Miami Beach Real Estate says:
Tom
To be quite blunt:
Zillow and Trulia and even Realtor.com have spectacular sites and they are ALL struggling (sorry guys).
The sites with the hyper-local content will always win.
I think all that noise or “tools” are confusing to the consumer BUT the people who own or develop those sites have convinced themselves that the consumers want those tools—and I just don’t see it.
December 12, 2008 — 6:57 pm
Bob says:
Glenn, I loved this post, particularly the “mistake is often just a good decision outpaced by circumstances”. I built the first agent operated VOW after E Realty beat Austin BOR 7+ years ago. I’ve used all 3 map types as well. The reason it is hard to replicate what you have done is that programming, to paraphrase Dennis the Menace, is “like a puddle. You can never tell how deep it is from the top”. That said, IMO Eric and Kevin have it right and we dont need to replicate you.
It will never be game over. Agents only have to win the battle for one market. We can go lean, they cant. We can focus, they cant. we can turn on a dime to change direction if need be. They can’t, and neither can the big broker. At this point, they will have to reinvent themselves because what they have done to date isn’t working with respect to changing the market place.
As Eric said, the little guys working with others can always win a rage against the machine position.
December 13, 2008 — 1:47 pm
Bob says:
Tom,
The game is about conversion. The rest is all noise.
December 13, 2008 — 1:49 pm
Thomas Hall says:
>The game is about conversion. The rest is all noise.<
Bob – no doubt, that’s why in my first comment I shared my experience picking up a client after they spent months searching for property on a competitor’s website.
Why isn’t search sticky? Because after consumers find a property or properties they like, they say “now what?” They typically search out a professional to assist in viewing property etc.
Search results do a fantastic job providing mapping and providing results for properties. My belief is that while that is cool, I believe the results – and the search criteria – needs to be more in line with consumer’s lifestyle preferences and not all about the property attributes.
December 13, 2008 — 6:44 pm
Kevin Lisota says:
Glenn,
While the cost to develop a fancy search site like your own may be steep, the costs for brokerages to acquire search functionality are trending lower and lower. Given the proliferation of website vendors and desire by agents to differentiate themselves, the fees to acquire real estate search websites are nominal. Those fees may even trend to zero, if ad-based sites take hold. Granted most of these sites are only so-so on their search capabilities, but there are big players pushing into this space that could easily make great search capabilities available to brokers at nominal cost. It wouldn’t surprise me to see small brokerages obtaining their search sites from vendors like Zillow, Trulia, Estately, Cyberhomes, or even Redfin in the very near future.
Ultimately consumers will vote with their mouseclicks, and we’ll see a handful of “winning” search sites emerge, and a subsequent decrease in website development by many brokerages. I would also contend that we are within 5 years of the maturity of real estate search, at which point people are mostly satisfied with their ability to find listings and no amount of R&D will change people’s behavior and preferences.
Most interestingly is that I see very little correlation between the search site that a consumer uses and the real estate agent that they choose. In the past two years, I’ve personally helped over 50 clients buy and sell homes, both at an established brokerage, and now at my own small brokerage. In both cases, we had a functional search capability on our website, though admittedly it was not as slick as yours. More than 95% of these customers came to us with their own preferred search site, like yours, Windermere or John L Scott. Their search preference actually had no bearing on their choice of us their agent, and it did not affect our ability to help them search for homes. As a small brokerage, we will continue to evolve and improve our own search capabilities, but not at the R&D levels you describe. Of greater importance is the service levels we are able to provide to clients.
December 13, 2008 — 10:35 pm
J Boyer Morristown NJ says:
I feel like the technology is giving a few of the small guys an advantage. In the long run it will likely raise the barriers to entry because of the way the consumers are looking for homes and picking the Realtors they work with. The days of getting most if not all of your buyer clients from open houses are long gone and not coming back.
December 13, 2008 — 11:08 pm
Brian Brady says:
“It will never be game over. Agents only have to win the battle for one market. We can go lean, they cant. We can focus, they cant. we can turn on a dime to change direction if need be.”
Inspiring thought. Bob, does it makes sense for local agents to contribute content to the bots? I’ve watched the bots rise in the SERPs, ahead of the local agents, because of the agent contribution.
I know this is the “why did you add your listings to R.com?” argument but I can’t , for the life of me, comprehend why agents are blogging on Trulia, Homegain, or contributing micro-local content to Zillow.
The counter argument might be, “the bots are moving the eco-system so dominate that system”. Accept this as fact and game the system. I’ve pursued this strategy, on Zillow, for the past two years.
I’m glad you’ve joined this conversation.
December 14, 2008 — 8:40 am
Bob says:
It isn’t the content we give them that hurts us, its the links. We trade links for widget bling, much like Manhattan was traded for trinkets, then wonder why we have lost our online real estate.
I attribute this to the “not having a plan” agent mindset.
December 14, 2008 — 2:53 pm
Brian Brady says:
“It isn’t the content we give them that hurts us, its the links”
If the links are net positive incoming, is that a benefit?
December 14, 2008 — 8:49 pm
Greg Tracy says:
Technology has helped make the cost much more affordable to compete.
I started BlueRoof.com three years ago and we developed our own map-search about the same time Redfin did. And it was expensive- it cost me over $100,000 just to build the technology.
Today we have built technology that allow us to build custom websites for agents and brokers with a BETTER search function and technology than what I’ve had on BlueRoof.com for years- and we can build these websites and offer them for $1000 set up and $100/month.
I consider the internet the great equalizer. In my market my online brand is stronger than almost anybody’s and I’m just a small team of agents. I sell more home form my website than Coldwell Banker or Prudential or any other company in my market and I spend very little now on marketing.
December 16, 2008 — 12:21 pm
Mike Pannell ( Dallas Realtor) says:
I dont think we are out pricing the smaller brokers. i just think that some people will never spend any money. Most Realtors dont like the internet and you can tell on how much they spend on there sites. By the time they catch up i will be a big broker.
December 16, 2008 — 3:59 pm
Louis Cammarosano says:
“I can’t , for the life of me, comprehend why agents are blogging on Trulia, Homegain, or contributing micro-local content to Zillow.”
@Brian- Try comprehending this: real estate agents that contribute to HomeGain because we feature them and them alone with NO ADs on the page on which they blog.
HomeGain AgentView agents benefit from the traffic they receive and the high search engine positions from their HomeGain blogs.
Ditto for their listings. When HomeGain agents post
their listings on our site they are featured exclusively -there are NO other listings on the page, no competiting brokerage ads and no Netflix ads.
In short the agents listings are not used as bait to make HomeGain ad money.
If the consumer wants to see more listings after they have seen all of the homegain agent’s listings,
there is a link to the agent’s IDX site.
In this way each visitor that is attracted to the site, gets an excusive audience with our agent in a particular zip code.
December 20, 2008 — 4:51 pm
Tony Sena says:
Like most that have replied, the little guy has the advantage. If you do a search for “real estate + your city”, you will see that most agents hold the top 10 spots, not brokerages or the parent real estate firms.
I believe these agents that have strong Internet presences are very valuable as generate Internet leads and provide free branding for the firms they hang their license.
December 20, 2008 — 5:59 pm
Louis Cammarosano says:
Brian wrote above:
“I can’t , for the life of me, comprehend why agents are blogging on Trulia, Homegain, or contributing micro-local content to Zillow.”
Brian also wrote:
“Why would anyone pay for a blog when WordPress or ActiveRain gives it away for free? Results. HomeGain is, in my opinion, a traffic wholesaler. Through SEO, SEM, and affiliate marketing they drive a heckuva lot of TARGETED traffic to its site. The average visitor to HomeGain is NOT a voyeur, like you might see at RE.bots. The average HomeGain visitor is much farther along in the transaction”
https://www.bloodhoundrealty.com/BloodhoundBlog/?p=3926
December 20, 2008 — 9:19 pm
Michael Sosnowski says:
I am late to this conversation, but wanted to add my comments. Comments on this post from HomeGain, RedFin, etc are so self-serving – because at the end of the day they are not in business to help real estate agent – but rather “control” the online real estate space. Agents who have provided listings and content to these national sites have surrendered the online marketing battlefield. Its so sad and unfortunate. In most cases, to be honest, those very agents could not survive marketing their own websites in their local markets, so they have little alternative. These large companies are taking advantage of this situation.
March 2, 2009 — 7:26 am