Why Trulia and Zillow won’t pay you for your listings

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.

moneyContrary 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.

One thought on “Why Trulia and Zillow won’t pay you for your listings

  1. Robert Drummer

    Todd,

    Thank you for writing the post. As you would expect, I have a completely different opinion.

    By coincidence, Zillow’s market capitalization touched $2 billion dollars this morning and Trulia is hovering around half of that. That’s $3 billion in equity generated from MLS/Broker listing aggregation and, from what I can tell, $0 has been paid to those who provide the “ad units” (Zillow CEO Spencer Rascoff’s term for listings).

    I’m glad that we agree that “One of the big problems is not if they should pay…” Great. Now let’s address the other points you mentioned:

    The MLS holds a valid license from the brokers to further sub-license the listings. The fact that Trulia and Zillow receive any data from an MLS is through these licensing agreements. Brokers agree to these terms when they join an MLS.

    Many MLSs receive non-dues revenue for a multitude of things from advertising to RETS Feeds to derived analytics. This revenue is used to off-set MLS expenses, provide services and generally keep the MLS balance sheet healthy. It also keeps helps keep member dues in check. For every dollar of non-dues revenue removed from an MLS budget, the members pay…either higher dues or in service cuts. None of this revenue is returned to the brokers or agents.

    I think your second point is a false premise and unrelated to my question. Brokers and agents paying for a marketing solution is only possible *because* of the listing data and those brokers/agents will still pay for that service without regard to MLS payments. How that equates to “burning bridges” is beyond me. I’m also not aware of any MLS paying to have their listings on Zillow or Trulia.

    Trulia’s Shared Success Program is nothing more that MLS sponsored training. Any agent or broker could get the same training directly from Trulia (unless someone would have us believe that Trulia would refuse to give training and discounts to brokers/agents who ask for it).

    Zillow told CMLS that (at the time) “they had no profits” implying that when they did, payments would come. You can watch Greg Schwartz, Zillow’s Chief Revenue Officer say it here: http://youtu.be/mnwOcW53gK0

    I think the real reason that Trulia and Zillow won’t pay MLSs for their “ad units” is because they don’t have to and it has everything to do with greed.

    Reply

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