Great thread on Twitter from @gregfischer
It seems like everyone chimes in on this thread. Good discussion and I think Greg is spot on with some of his observations (including the one above).
Industry Relations Podcast: CoStar’s Recent Earnings and Transformational Deals
It’s the rise of CoStar! From commercial to residential real estate, shocking Q3 earnings, and antitrust lawsuits, CoStar could be making some transformational deals in the near future that may have a serious impact on the marketplace. In this episode, Rob and Greg discuss Andy Florance’s motivation going into Q4 and what potential deals are on the table for CoStar.
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Now that CoStar is a broker, is their way of “hijacking” IDX listings better than everyone else? You be the judge.
In an interview with Brad Inman, Andy Florance, CEO of CoStar said Zillow was “hijacking” listings and also compared them to the Mafia. His analogy was as follows:
“An agent puts up a yard sign, and then another company pulls up, spray paints over the sign, and puts a new agent’s name on the sign. Florance said no one would tolerate such behavior in the real world.”
Here’s what I’m picturing from Andy’s description.
In a recent post about the divorce of Homesnap and BPP Homesnap’s co-founder Steve Barnes stated…
“Homes.com and Homesnap.com will also offer paid preferred placement for listings in search results.”
Would this be tolerated in the “real world”?
Why CoStar’s Homes.com/Homesnap GTM might already be DOA
Andrea Brambila for Inman News, CoStar’s Homesnap and Broker Public Portal get a divorce
When real estate juggernaut CoStar acquired real estate tech firm Homesnap for $250 million at the end of 2020, Homesnap said it was committed to its partnership with the Broker Public Portal, a company formed by a large group of brokers and multiple listing services to launch the nation’s first national public-facing MLS website.
But nearly two years later, the two companies are going their separate ways. The National Broker Portal LLC, a joint venture owned 50-50 by the two companies since December 2016, will shut down on Oct. 31.
So much to unpack here in another great exposé by Andrea Brambila. If you haven’t read the whole article, go read it. I have many questions. Like, did MLS orgs and brokers (BPP) get played by Homesnap? Has anyone added up the amount of money Andy Florance has either given up or spent on this residential play so far? But I digress, what I want to focus on now is a glaring flaw I see in CoStar’s strategy with Homes.com.
Agent responsiveness.
Zillow learned this the hard way. When Zillow first launched any agent could buy leads from the company. Then they shifted. To “super agents” and “super teams”. Why? Because agents weren’t responding to leads, this was making Zillow look bad. When Zillow switched to a referral model the scrutiny got even more intense. Not just any agent/broker could buy leads from Zillow you must meet certain criteria in order to be a “Premier Agent”.
Zillow has also initiated a lead incubation program that makes sure every lead is followed up on. Zillow has made considerable investments to make sure that its brand is protected.
Keep in mind, CoStar’s experience with commercial real estate agents. When you call a commercial agent, they pick up the phone. When you email them, they respond quickly. When they show up for an appointment they most likely will be wearing a tie. Compare that experience with a residential real estate agent. The culture is completely different.
I don’t think the fact that leads are going straight to the listing agent is going to make a difference in the level of responsiveness. So if consumers go to Homes.com and ask the agent for more information and they don’t hear back within 30 minutes, they are gone baby gone.
Hopefully, Homes.com/Homesnap has already solved this (and I don’t think the Homesnap app solves this). But, If CoStar doesn’t have a solution for agents not responding to buyer inquiries on Homes.com at launch or shortly after launch all the reported money they will spend on advertising might as well be lit on fire.
You’re welcome.
NEW – Industry Relations Episode – Possible Future of Online Real Estate
This week on Industry Relations, Rob and Greg go head to head on MLS data. They debate whether the MLS industry will die with Zillow when Rob’s proverbial asteroid hits. Greg disagrees and wants to see a future between MLS and CoStar.
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About that CoStar article…
“Last April, an executive at the real-estate data powerhouse CoStar held a video meeting to discuss the lingering difficulties of integrating a rival firm it had purchased two years earlier.
Business Insider – PAYWALL
“You’re doing a shit job,” Lisa Ruggles, a senior vice president of global analytics, research, and news, told dozens of employees on the call, according to a manager who attended the meeting and still works for CoStar. Another former manager at CoStar who was on the call backed up this person’s account.
Ruggles, who is widely considered the second-in-command to the company’s president and CEO, Andrew Florance, went on to suggest that employees had been working in bed and lounging in their pajamas all day.
I think there are a lot of things wrong with this article. You don’t know how wide-spread these issues are, they might just be a few dis-gruntled employees. Although I did check, and their Glassdoor score is super low.
But, the main thing I walked away with are reading this article is that it makes Andy Florance look like a kook.
I think one big thing Mr. Florance and others need to understand is this: They are not coming back. I’ll say it again, they are not coming back. If your work environment doesn’t allow WFH, you are going to lose, period.
With the business model I heard previewed in Scottsdale and their stock price taking a beating, they might want to re-think hiring a music act for next year’s NAR Annual Conference.
They should think about hiring a magician.
CoStar’s big bet against MLS
Lots of chatter about Andy Florance’s interview with Brad Inman last week at Inman Connect. Andy has certainly gotten better at his storytelling since his last interview with Brad. According to Mr. Florance Zillow is “hijacking” listings by placing other agents around the listing. But what Mr. Florance fails to mention is that any broker or agent that has an IDX website is also “hijacking” listings.
What’s at stake here is at the very core of the principles behind the MLS, “cooperation and compensation”. Basically, you help me sell my listing, I’ll help you sell yours.
In a perfect “CoStar world” cooperative compensation goes away, and agents must directly pay to advertise listings. “The Australian model”, some have dubbed it. In this case, CoStar’s acquisition of Homes.com serves as their listing portal and Homesnap for their agent toolbox. Sidenote: I find it kind of funny that Mr. Florance has beaten Rupert Murdoch and his News Corp to the “Australian model” of real estate. Since realtor.com is so very entrenched in Opcity’s broker referral model.
Now, this is a completely sound business strategy. Break up the MLS-Broker model and go directly to agents and consumers. CoStar, Homes.com, and Homesnap have made a bet, in my opinion against the MLS. Okay, you do you.
But, I personally don’t agree with this solution. I think having a strong MLS, makes the market work. And I think as we evolve policy in regard to transparency in commissions and listing attribution we can make things better for everyone.
And let’s be honest. The Seller doesn’t give a shit about any of this. They just want their house sold. Zillow and other IDX sites do a great job of giving listings the greatest exposure in the market. All the broker needs to do is, put it on the MLS.
I also don’t agree with the fear-based message Mr. Florance is sending out. It seems that Mr. Florance’s whole value proposition is that they are “not Zillow”. Zillow is the “mafia”. Zillow is “hijacking” your listings. He even readily admits that CoStar is not coming out with any innovations in regard to the “UI or UX” of its software. It seems their entire go-to-market strategy is just tapping into all the Zillow haters. Granted, Zillow has done a lot of stupid things to make it easy to pick on them but I wish Mr. Florance would tell us why his site and tools are better than everyone else’s instead of just bashing competitors.
Next week CoStar/Homes.com/Homesnap is shutting down part of the Gaslight District in San Diego and throwing a huge party and concert with Country Music Star, Keith Urban. And I’m sure a lot of wining and dining will happen.
But, I’m not a big fan of Country Music, especially Australian Country Music.
CoStar completes the purchase of Homes.com and goes back to the future
“Rather than building a business model based on creating friction to syphon off agent commissions, we plan to provide a next generation marketplace that connects listing and buyer agents to sellers and buyers without taking a cut of their commissions.” – Andy Florance, CEO of CoStar Group
Mr. Florance is a master at fear-based marketing. But I see three big problems with this strategy. The first problem is that early results show that many consumers like the one-stop and iBuying experience. The second is total available market (TAM). We all know of the 80/20 rule. In real estate it might be 90/10. If you are only going to sell to agents with listings then you are severely limiting your market. The third problem they have? Zillow.
“Homesnap is the leading real estate productivity and marketing app and hundreds of thousands of the most productive real estate agents in the country rely on it to manage their businesses. CoStar Group intends to fully integrate Homesnap and Homes.com, with Homesnap at one end as the agent’s professional tool and Homes.com on the other side as the home buyer’s portal. Once integrated, agents will have instant access to manage their listings on Homes.com, view and respond to inquiries, collaborate with clients, and provision and monitor sophisticated digital marketing campaigns. We believe this direct connection between agents and a consumer portal is unique in the industry.”
Isn’t this exactly Homesnap’s existing business model? Collaborate! Your listing your lead! Automate your social media marketing!
“Homes.com has one of the largest real estate portal sales forces and CoStar Group intends to leverage that sales force to sell the Homesnap product with the goal of expanding Homesnap’s reach to hundreds of thousands of additional real estate agents.”
Oh, I guess they didn’t have a big enough sales force to properly monetize this strategy. Release the hounds!
Also, no mention of the Broker Public Portal.
I hope there is more to this than what I’m reading. I was really excited to hear something innovative coming from these guys. All I see is a company stoking fear and increasing their sales staff.
CoStar buys Homes.com
CoStar Group to Acquire Residential Listing Site Homes.com
“Unfortunately,” continued Florance, “current residential listing sites do not serve the interests of homeowners or their agents as they focus on selling advertisements on top of agent listings and increasingly offer competing brokerage services. These sites generate a portion of their revenue from directing potential homebuyers away from the listing agents to unrelated buyer agents that are advertising on top of listing agent listings. This is a practice we plan to no longer continue. Our plan in bringing Homesnap and Homes.com together is to help agents market their listings in support of the ‘your listing, your lead’ philosophy – which stands in contrast to most players in the industry.”
$156M seems pretty cheap when you compare to the ShowingTime deal at $500M and Homesnap deal at $250M. I guess I thought they were bigger than they were.
I still don’t know how CoStar makes any money selling only to listing agents, without IDX going away, which is problematic think this “your listing, your lead” rhetoric is still problematic towards MLS and organized real estate. There might be an interesting culture clash with many in the company.
What some may not realize is that Homes.com (due to them previously being remax.com’s MLS data supplier) has one of the largest, if not the largest MLS data aggregation platforms in the space, and now all that data is controlled by CoStar.
Not so fast! CoStar ups the bid for CoreLogic
Costar Group (CSGP) Offers to Acquire CoreLogic (CLGX) for $95.76 Per Share
“Today, CoStar Group, Inc. (NASDAQ: CSGP) delivered a letter to the Board of Directors of CoreLogic (NYSE: CLGX) setting forth the terms of a superior proposal by CoStar Group to acquire 100% of the equity interests of CoreLogic. Under the terms of the proposal, CoreLogic shareholders would receive 0.1019 shares of CoStar Group common stock in exchange for each share of CoreLogic common stock, representing a value of approximately $95.76 per share based on CoStar Group’s closing share price on February 12, 2021.”
Seems a little more complicated than Stone Point Capital and Insight Partners all cash deal. Real estate is hot hot hot!
