Seven Big Wishes: The Vendor Edition

WOW!!!! I love it Greg……it covers all sides. If everyone would stop and consider how partnerships and working together might just make them more money and is always better for the end user …..we could save our wishes for more personal things. eh?

Here are my 2 cents’ worth of response.

1. I want standards – Couldn’t agree with you more. Having true data standards will be the best thing for all of us – MLSs, vendors, etc. We all need to get behind the recent RESO efforts spearheaded by the COVE group to get standard names and standard data defs defined for everyone.

2. I want MLS providers to make decisions quicker – Good luck with that one. As long as MLSs are owned and governed as they are today you will be faced with this decision making process. Until such time that boards of directors at MLSs can allow their staff to make the decsions necessary to move things along you will continue to have the monthly meetings where operational decisons are made. Boards need to focus on strategic planning and financial oversight and leave the day-to-day running of the MLS up to the professionals.

That being said, this may not be possible in the majority of MLSs throughout the country because they are relatively small – less than 500 members – so they won’t have the resources that are necessary to do what I am describing.

3. Let me compete – Not sure how many MLSs prevent 3rd party products from entering their market place. I know we are always looking at new products and services that might enhance or add to our exisitng offerings. We DO want them to be as integrated as possible so that to the user it looks like it is all one system – forcing them to go to several different platforms and conduct several different logons and repeat a search is not going to promoite use of new products. With the popularity of single signon taking off a lot of this is taken care of – but you still need the ability to easily pass data back and forth – that’s where standards and integration come in.

4. Stop the shake down – In this case I couldn’t agree with you less. Where is it written that MLS Content should be free to anyone in order for them to use the content as raw materials in the building of a new business. MLSs, brokers and agents spend a lot of money getting listings, posting and hosting and every Greg, Dale and Andy thinks they are somehow entitled to it. There is value in that content. How many CMAs can you sell without it?

5. ..Let’s be partners – This is a way to allegedly counteract the above request. The problem here is that there is very limited revenue to be shared in order for MLSs and vendors to be partners. There are two problems I see – if you limit your products to just a handful in order to maximize revenue and possible profits for that one product then you are in danger of missing or eliminating other products that might be of value (this would counter your request in number 3 above). Or if you open it up to a myriad of products then no one has the ability to make any money because the revenue is spread too thin across too many products. So somehow a happy medium must be found.

The other issue here is that your market is not every MLS member out there. As you well know from yur years in the business the number of subsscribers with discretionary income to spend on new products is very small – probably in the 5-10% range. So the market is actually very small and the price of the product is critical to its success. The rule of thumb I always tell vendors is that the cost of the product needs to be under $100, and your cost of sale will be about $200 – not sure how to make money on that formula without a site license that everyone in the MLS pays for.

And being partners assumes that the MLS has a sales and marketing department ready to promote your product. Very few MLSs have such a staff, and even if they did then the cost of that staff would tend to eat up all the revenue you plan on sharing with them.

6. Let me make a living. – You’re absolutely right that a product must be priced properly so that the company can make money or why do it. The problem you face is that MLSs for the most part run on a shoestring budget, and are not in the business of making a profit on the backs of its members, so they are going to negotiate for the best possible price. I could be callous and say that when you negotiate with the MLS that you should not knuckle under to their demands for a price so low that it puts strains on your ability to make a profit – but I won’t say that. And paying more should never be tied with customer service. If the service aspect is not built into the price then you should not offer service but leave it up to the MLS – who in my opinion tend to provide a better level of service than the vendors because each MLS is more focused on its data, its systems and the way buinsess is done in their market.

7. I want to advertise (in your magazine, newsletter, or website), sponsor (your event, blog) , and attend trade shows. But, make it worth my while – Not sure what can be done about this one. If you have a tech fair with only one vendor I guess that could accommodate your request. But a trade show is about choices and options so I’m not sure the best way to handle this other than buying bigger booth space or a premimum location. I personally am not a fan of trade shows because you can’t really get a good feel for a product with a 5 minute demo on a crowded expo floor.

I guess my summary would be that you are struggling with the same thing MLSs and vendors have been struggling with for years and years. And with other companies out there offering “free” versions of their products I don’t see any easy way to improve the profitability of vendors who sell individual products to indivdual agents. If we were back in the 70s and 80s when things were relatively new and more expensive you could make an argument for a product to sell for a reasonable monthly fee. But over the years we have gotten the cost of MLS down to such an economic level that it is difficult to justify acquiring a product that is going to cost more than what an MLS is charging for all the services we now provide.

Sorry for the rant but I just felt compelled to add to your blog.

Thx for listening.

Russ Bergeron
CEO, MRED LLC

Ken

Great points. What you describe has been talked about for many years – repurposing of MLS content. The problems you face are not just the rules, which DO serve a purpose, but the question of who owns the content – seller, buyer, agent, broker, MLS; whose permIssion do you need in order to repurpose the content; and who should be compensated for the content?

I believe NAR feels that it should be them – see RPR and LPS. And of course we have the CoreLogic alternative.

And should something like you describe actually occur, it does not open up an avenue of revenue for traditional vendors, just those who “buy” and reuse our content.

Another concern expressed to me by some brokers is that by ” freeing” up the content we run the risk of allowing a 3rd party to come between the broker and his customer.

Russ B.

And by

Thanks Russ,

I know you have been at the vortex of many of the conversations around leveraging MLS data for some time now and the many faceted challeges associated with such endeavors. I am interested in your thoughts, however, on the following.

In the past couple of years we have seen the arrival of new device technologies that provide users with additional ways to access, use and interact with real estate data. The latest mobile devices bring some interesting elements to the party in that they provide more than just access to existing data sets. What I mean is that, as the user uses the device they create new information that can be stored and aggregated for business intelligence purposes. For instance, users of our Kurio system when they are accessing the MLS data set can create new data such as saved property searches, device location, mortgage rate queries, mapping of commute times, neighborhood interest, livability priorities etc. Tracking these device activities in relation to the MLS data allows us to mutually determine pre-mover, pre-transaction interest in specific localities which could be of great help in third party decisioning. So it seems to me that these new device capabilities at least bring new data sets to the table that have value. In doing so, I think they re-open the ongoing discussion because it is no longer just about listing data exclusively.

Now, who owns these new data sets, how can they be monetized and for whose benefit? It seems to me that in the specific case I have set forth that the two contractually related parties (the vendor with the device system and the MLS with the listing catalogue) could agree on a revenue split. I understand that the Broker owns the individual listing and the Agent is acquiring it but they are not legal parties to the contract between the Vendor and the MLS. Once that revenue shareing agreement is in place, perhaps it would make sense for those parties to contract with NAR to act as the wholesaler of the data to appropriate third parties as it would seem that they are better equipped to accomplish this than the local MLS or the Vendor.

Would this make any sense in your view?

Ken Galpin, CEO Kurio

Greg,

Your response to the challenges surrounding innovation in our space is very timely.

In your particular situation you not only have to deal with the payment for access issue but also try to compete with other vendors who have included CMA creation functionality into MLS software products that the MLS is paying a fee for. And then potentially, to add insult to injury… what happens to your ability to innovate if an internal element like the national association decides it wants to compete with you too and comes out with a CMA product and offers it to your customer in a manner you can’t?

This summer I had a very interesting conversation with a major Venture Capital company that shall remain nameless at this point. When asked if they would invest in the real estate technology space they said yes but on one condition… if NAR was a partner in the venture. Without NAR as part of the investment syndicate they would pass. Their outside view of our industry was that all new innovation in the space would ultimately be sideswiped by NAR if they were not a partner in the enterprise in some way.

Now I know that there are those who believe that NAR should be aggessively acting in the interests of its members on as many fronts as possible. But when it comes to competing with the vendor community to build and deliver innovative products there is a very real danger that innovators will abandon the the space if they have to compete with major forces within the industry itself. Forces that hold so many advantages financially, legally, structurally, politically and otherwise. Does the industry want to end up in a situation where it is dependant competely on internal initiatives for innovation in the space? What incentive will there be for any innovation at that point? (I know I am positing a worst case scenario and there is always someone out there that thinks they can make a buck selling to this industry… at least until their money runs out :-).

Look around at other industries and see how their internal organizations are engaged in fostering mutually rewarding relationships with their vendor communities and the innovation that has occured as a result. I wonder if the industry realises how dangerous it is to try and exert internal ownership and control over the innovation process and where this leaves it in the long term.

Finally, why does the industry think it is so necessary to have such control in the first place? What’s the innate insecurity? Yes, I know that there are “good reasons” for many of the “controls” that exist around MLS data but other industries have similar requirements without stifling innovation. Surely we can find ways to accomodate these needs without de-incentivising the vendor community through things like internal competition and unlevel playing fields. Then again, maybe the industry is so adverse to change that it is happy to have those pesky vendors just go away. Maybe the industry doesn’t care if Facebook becomes the defacto national MLS in a few years because the younger members within the industry have grown tired of the internal restraints on innovation. Then again, the way the housing market is going in the good old USA most of us vendors have got to be wondering what the future holds.

Ken Galpin