A few days back, Robert Drummer asked me the question so many would like to know:
@tcar What are your thoughts on Trulia or Zillow compensating MLSs for data? Zillow said they’d go broker direct. et tu, Trulia?
— Robert Drummer (@rqd) March 15, 2013
This is not an easy question to answer, especially in 140 characters.
Contrary to popular opinion, Trulia and Zillow’s hesitancy to pay for listing data is not driven by greed. The fees paid for data feeds would likely cost less than the man hours, infrastructure and marketing dollars Z & T spend to procure the feeds they have. However, introducing money into the equation creates more problems than it solves.
First off, who should they pay?
One of the big problems is not if they should pay, but who. Does the MLS really own this data? They own the aggregation of listing data, but the broker technically owns the listing. What are brokers going to think when the MLS gets paid for the broker’s data? The MLS could pass the money on to the broker, but what would agents think? If you pass along the data fee to the agent, it’s not going to be a amount that anyone is going to get excited about.
I had an agent tell me that Z&T should pay all or part of every agent’s MLS fees in exchange for the listings. But wouldn’t that just lower the barrier to entry for new competition in that market? I don’t think that would work either.
Second, what about their current customers?
Assuming you work out all of the above politics, you still have a much larger issue to deal with. Trulia and Zillow built their businesses by selling marketing solutions to brokers and agents who wanted a competitive advantage in their market. Trulia and Zillow’s clients PAY THEM, not the other way around. So what happens when Z&T start paying for something they’ve traditionally been paid for? The paying client’s competitive advantage becomes marginalized and the reason to keep paying evaporates. Ultimately, Zillow and Trulia have to serve the brokers that pay them. They’d like to have better listing coverage, but I can’t see them burning bridges with their paying clients to do it.
So, what happens next?
I think you’ll see more partnership agreements formed like the the one Trulia just inked with MRED. Agreements like these are not attached to listing data. Instead, they are designed to create more institutional relationships with the industry. Data agreements become more of a long-term goal that comes with the trust built through the partnership.
Listing security is a measure of relationships, not money.
Photo: Creative Commons license via Flickr user Tax Credit.