2015 was the year the Zillow-Realtor Cold War went hot.
Most Americans may not know it, though they’ve likely seen some of the fighting (like the Elizabeth Banks commercials).
However this is not news to any in the industry. The uneasy relationship between Zillow and Trulia on one side and Realtors on the other has existed since practically the beginning of the Internet. In the next few years, it may have tremendous implications for the real estate sales industry as we know it, and possible not in ways that real estate agents find comforting.
History of the Conflict
In Zillow’s mind, it stepped in where NAR failed in transitioning the industry to the Internet, and provided a valuable service for online consumers – a one stop shop for browsing homes anywhere in the USA while simultaneously efficiently capturing quality buyer and seller leads to sell to agents.
Real estate agents have long hated Zillow. In agents’ minds, Zillow “steals” listing information from MLS agreements, repackages that information on their fancy site, and then sells that information back to the agents who owned it in the first place while charging the agents expensive advertising costs.
NAR has since tried to compete with Zillow and Trulia with affiliated sites like Realtor.com, but most of the time there has been uneasy cooperation with Zillow by NAR and the local and state Realtor boards. Realtors sent Zillow and Trulia their listing information, and bought leads that those listings helped capture. Realtors resented the arrangement but accepted it.
In 2015 the war went hot. Zillow and Trulia allied into one big company, Zillow Group. Move.Inc and Realtor.com allied under the NewsCorp umbrella. Lawsuits were filed. Hundreds of Realtor boards and ListHub, a NewsCorp company, stopped syndicating listing to Zillow, cutting off their content they’ve marketed to consumers so effectively. There have also already been high profile war desertions. The two sides now even compete on e-signing software, as Zillow has purchased DotLoop and NAR has teamed up with ZipForms.
Why Zillow Might Win
It’s all about lead generation.
In my experience, very few agents do organic online lead generation. One major reason for this is they give up before they start – because Zillow/Trulia/Realtor.com have the top three or four search results in almost every market. Instead, agent’s buy their leads, whether it is through their own AdWords campaign, or MarketLeader, or BoomTown, or TigerLeads, or Zillow advertising. Agents seldom generate their own new leads. No leads = no business.
Zillow gets leads, and does it very well, by repackaging information from MLS syndication and other sources, and making an accessible and consumer friendly front end that . Realtors ignore that lead generation prowess at their own risk.
Zillow also has major technological advantages over their opponents. Realtors currently are pinning their hopes in the war on continuing to control the information. Controlling information is harder and harder to do with the democratization of technology in the Information Age. Already Realtors have seen that control deteriorate in meaningful ways. Just fifteen years ago, approaching an agent was practically the only way to get information about what was for sale on the market. Now it is a simple Google search, and Realtors instead offer value by controlling past sales history information, as well as valuable technical training and experience.
It is possible Zillow could create it’s own version of the MLS. Instead of pulling existing information from the MLS, agents could be pressured into uploading listing directly to Zillow’s own portals. Zillow could effectively “force” listing agents to do this with a strong relationship with its viewers. If you are a Realtor, and your seller wants his listing to be on Zillow, you’re going to put it on Zillow, no matter what you think about it. Getting widespread cooperation like this is already a problem for Zillow, but it could conceivably pull it off with the right strategies.
Finally there is Zillow’s ace in the hole. The nuclear option. Work and monetize their own leads. I.e., become a real estate brokerage itself. This isn’t Zillow’s ideal outcome, but it is conceivable. If NAR is going to challenge Zillow’s business model to the extent that Zillow’s very survival is at stake, they may just pick up their toys and go home, taking their buyer and seller leads with them. Instead of $20 per lead, they could hire their own agents to work them, and make 40% of the commission per conversion.
Why NAR Might Win
Realtors are currently winning the fight, but that might actually backfire if it backs Zillow into a corner where they have to use their nukes (starting their own brokerages).
This year, countless Realtor boards stopped syndicating their listings to Zillow, trying to starve Zillow of the content it uses to provide value to Internet consumers.
There is also a national trend toward MLS consolidation, with a dream of a national MLS. Why need Zillow when consumers can go straight to the source? Reator.com could be the NAR friendly version of Zillow. Ironically, this idea is most opposed by Realtors themselves, whose local boards continue to fight for local control and autonomy.
Additionally, while Google may be a natural ally of Zillow and Trulia, Google hasn’t taken sides yet. Zillow’s business runs almost entirely off of search engine optimization (SEO) and placing in the top 3 spots on Google searches, which . But if Google were to change their algorithm – say, to favor local content over national content – it could quickly ruin companies like Zillow (Google has been known to destroy businesses before with algorithm changes). Zillow is very careful to play nice with Google.
NAR also might successfully enlist another important ally – Uncle Sam. NAR is routinely in the top 10 highest contributors in political contributions, and the local state boards are usually major players in state politics. It is more than conceivable that local, state, and even the national government might be induced to create some regulatory protections for NAR.
Although if Google were to get involved….
“Hi, I’m Brian, a real estate agent with Google Realty”
This is what the end could look like.
Ironically, it’s possible neither Zillow nor agents “win”, but that instead Google does. This might mean Google getting into the brokerage business.
If Zillow continues to lose its content and access to MLS data, then it has a retaliatory option of becoming a broker itself – instantly becoming the largest real estate brokerage in America.
Meanwhile, Zillow might try to secure thier vulnerable relationship with Google by an outright alliance, even an acquisition by the tech giant, meaning “Zillow Realty” might just very well be “Google Realty”. Google has already made investments in the real estate realm to include major investments into Auction.com and HomeLight, both moves that could conceivably be integrated into a much bolder play to create a presence in the real estate market. They have also partnered with Zillow previously on things like online mortgage calculators. Google might model some of the strategy on the recent success of Berkshire Hathaway to make a new entry into the real estate brokerage market.
Why Real Estate Agents Should Be Terrified
Ultimately, Google and Zillow will probably stay out of the brokerage game if they can help it. Starting a national brokerage is a significant capital investment, isn’t Zillow’s core competency, and carries a lot of risks. Google and Zillow can avoid those risks altogether if peace can be returned between Realtors and the Tech Overlords.
However NAR has a history of getting left behind technologically, and it looks likely that there will be significant technological changes to how agents do their jobs that the average agent should be wary of.
An outright Zillow victory could mean the end of NAR’s unipolar power in the industry, and even the end of the MLS system as we know it today. Less tech-savvy or small-time agents might be entirely left behind, as Zillow cherry picks the top producing agents to work with and McDonalds-izes the real estate industry. Zillow could already be making other changes short of starting its own brokerages that may pressure consolidation in the real estate sales market as the tech company begins to form relationships with top producing agents at the expense of smaller firms. Changes like these could lead to 100,000s fewer Realtors in America as the proliferation of mega-teams and brokerages take advantage of privileged relationships and economies of scale.
It’s something to think about, as the war enters 2016.