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Looking Backward vs. Springing Forward: NAR, Move and

August 1, 2008

Jonathan Washburn (whom I have named J-Dub, without his permission or approval) of ActiveRain and Localism hath sounded a call to arms for NAR to buy out Move, Inc (NASDAQ: MOVE).

J-Dub makes some good points (and the commenters on the thread support him) — namely, that Realtors hate, and that has lost its once enormous first-move advantage to newcomers like Trulia and Zillow:

Most Realtors I talk with hate Or perhaps more accurately they hate the way Move monetizes the asset by selling extremely high priced marketing packages to Realtors. Prominent placement on should be a member right.

and has less than a 5% market share among real estate category websites, with most of it’s top competitors boasting a marketing budget of less than 10% of that of’s. had a huge first mover advantage, perhaps the most valuable domain name possible, hundreds of millions of dollars in marketing support, and the, at least initial, grassroots support of 1,000,000+ Realtors.

J-Dub believes that NAR cannot get out of its agreement with Move, so the solution is for NAR to just take Move private and buy it outright. The cost, Jon says, would be cheap with enterprise value of Move just under $250m.

Let’s assume that J-Dub is correct on all counts. I still don’t believe that NAR should buy Move.

1. NAR knows nothing about running a business, never mind a complex technology-centric business, like Move’s. In my view, NAR has bigger fish to fry, bigger problems to solve — namely, how to improve the REALTOR brand such that it is not perceived by the public as “hateful lying sons of bitches”. (The main issue is how to establish clear distinctions in the consumer’s mind between a REALTOR and a real estate agent — read this and the comments for interesting observations.)

2. NAR already owns Seeing as how its own members supposedly hate, it could just let it die. Just refuse to make any changes to the homepage, ever — NAR has that right as per the operating agreement. NAR can erect so many barriers in the way of advertising on which make it financially unattractive for Move to continue operating Why buy the cow, when you can have the milk for free? Because NAR has these powers, simply letting Move know that it would like to terminate the agreement post haste is likely to initiate a cascade of events under which Move will exit the business at a price far less than the purchase price of the whole corporation.

In Move’s 2007 10-K (PDF), they list the relationship with NAR as a risk factor:

Our relationship with the National Association of REALTORS® (“NAR”) is an important part of our business plan and our business could be harmed if we were to lose the benefits of this agreement.
The® trademark and web site address and the REALTOR® trademark are owned by NAR. NAR licenses these trademarks to our subsidiary RealSelect under a license agreement, and RealSelect operates the® web site under an operating agreement with NAR. Our operating agreement with NAR contains restrictions on how we can operate the® web site. For example, we can only enter into agreements with entities that provide us with real estate listings, such as MLSs, on terms approved by NAR. In addition, NAR can require us to include on® real estate related content that it has developed.
Our operating agreement with NAR, as amended, also contains a number of provisions that restrict how we operate our business. For example:
we would need to obtain the consent of NAR if we want to acquire or develop another service that provides real estate listings on an Internet site or through other electronic means; any consent from NAR, if obtained, could be conditioned on our agreeing to conditions such as paying fees to NAR or limiting the types of content or listings on the web sites or service or other terms and conditions;
we are restricted in the type and subject matter of, and the manner in which we display, advertisements on the® web site;
NAR has the right to approve how we use its trademarks, and we must comply with its quality standards for the use of these marks; and
we must meet performance standards relating to the availability time of the® web site.
NAR also has significant influence over our RealSelect subsidiary’s corporate governance, including the right to have one representative as a member of our board of directors (out of a current total of 11) and two representatives as members of RealSelect’s board of directors (out of a current total of 8). RealSelect also cannot take certain actions, including amending its certificate of incorporation or bylaws, pledging its assets and making changes in its executive officers or board of directors, without the consent of at least one of NAR’s representatives on its board of directors.
Although the® operating agreement is a perpetual agreement and it does not contain provisions that allow us to terminate, NAR may terminate it for a variety of reasons. These include:
the acquisition of us or RealSelect by another party without NAR’s consent;
if traffic on the® site falls below 500,000 unique users per month;
a substantial decrease in the number of property listings on our® site; and
a breach of any of our other obligations under the agreement that we do not cure within 30 days of being notified by NAR of the breach.
If our operating agreement with NAR were terminated, we would be required to transfer a copy of the software that operates the® web site and provide copies of our agreements with data content providers, such as real estate brokers or MLSs, to NAR. NAR would then be able to operate the® web site itself or with another third party.

If it is true that is not adding any value to NAR and to its members, then NAR can simply let it wither on the vine, and lavish its love and money on other channels.

But it will never get to that. Move has no reason to want to continue operating a site — no matter what the agreement — in face of hostility from the actual site’s owner. In all seriousness, if NAR wanted Move to get out of the business, it merely need say so. NAR has too much power in how Move can operate, too many ways it can truly make life miserable for Move, for Move not to agree to let go. There might be a separation fee or something involved to avoid protracted litigation, but I just can’t imagine a scenario in which NAR tells Move to take a hike, and Move hangs on like some desperate girlfriend.

Thing is… if you’re NAR, what do you do to replace the 7.5 million unique visitors to under Move’s management?

Trulia and Zillow combined still have less than half the traffic of So to kill the golden goose at this point in the game doesn’t strike me as an advisable strategy.

I have a better idea. Instead of spending $250m+ to buy Move, NAR could do a special assessment and spend $250m supporting new initiatives by the industry. Invest $25m into Localism and see what that can become (I’m frankly shocked that J-Dub isn’t making this argument). Throw $10m at the hordes of social media companies doing innovative things. Spend $50m setting up a real Center for Realtor Technology and challenge them to fix some of the widespread problems with data collection and distribution, or with geocoding and mapping, or with new ways of incorporating wireless and real estate. Still cheaper than spending $250m buying a public company, with far bigger upside for NAR and for the industry as a whole.

There are so many ideas that can really improve the industry that never see the light of day because funding for trying them do not exist.  $250m is a ton of money.  It could foster a whole environment of innovation in real estate — and with NAR leading the charge in investing in new technologies, new methodologies, new solutions to old problems, the private investment community will absolutely start to take notice.  That $250m seed can start to attract hundreds of millions more in investment from the VC and private equity communities.

In fact, this can be done for half that amount.  $100m NAR angel fund that fosters new ideas, then releases them into the wild of VC-land, could be the genesis of a transformation of the entire industry for the better. I am convinced more than ever that there is no shortage of talent in our industry — merely a shortage of will and of funding.

So, don’t look backwards into the past, NAR, in an attempt to fix something that isn’t working perfectly but is still working somewhat.  Look forwards into the future to start a new cycle of change, but one in which the industry is not caught completely off-guard.


9 Comments leave one →
  1. August 1, 2008 3:25 pm

    “J-Dub” I love it.

    For the reasons you pointed out, there is no incentive for NAR to buy Move. In fact, it would probably be counter-productive because, as you mention, NAR is not a business, it is a trade organization. They have their hands full steering their own ship, forget about adding a real life business.

    Your angel fund idea is quite interesting. I personally don’t know what is in the NAR coffers, although I imagine that it can’t be a paltry sum. I would certainly like to see NAR step up and take a leadership role when it comes to technology. It seems to me, right now, that they are trying to do everything in-house (RETS, the project formerly known as “the gateway” etc.) NAR has a lot of resources, and putting those resources together to spark some real innovation in the industry would be a good use, indeed.

    It seems to me that NAR has an issue with control. They want to control everything they touch. The organization seems to have a hard time just letting the people best suited to do things just do them, and then helping and fostering those people.

  2. August 1, 2008 4:04 pm

    Rob; You are geting to be my mental stretch after a day working in real estate. I love the concept of an angel fund, but can you imagine the politics and the finger pointing if (as would undoubtedly become the case) a venture failed after money was lent to it by NAR.

    While I agree with you that NAR isn’t going to be, and shouldn’t, the other ideas, while fascinating, would be a real stretch. NAR is a trade associaton run by volunteers, and not a business per se. They really aren’t as controlling as oyu percieve, but they (the volunteer leadership and the staff) do take their positions as custodians seriously. And you know that you’re always more careful when you’re responsible for someone else’s stuff! 😉

    But reading you is soooo enjoyable. We need to hang some night for dinner –

  3. August 3, 2008 10:24 am

    @Bill –

    I hear ya on the politics and fingerpointing. On the other hand, can you imagine the politics and spotlight-grabbing if one of the NAR-funded companies goes public for $750m?

    If NAR were going to do a special assessment and spend $250m acquiring Move, Inc., can you imagine the politics and fingerpointing there too? I just think if the industry organization were going to spend that kind of money on something, it’s probably better if the money is spent on something forward-looking.

    I don’t believe NAR is controlling; I believe the people there are well-intentioned good people. But I do think one of the BEST things NAR could do is to foster new leadership and new ideas that the VC market doesn’t really know how to appreciate or evaluate, whereas real estate professionals know exactly how good or bad an idea something is in our industry.

    On dinner, just let me know when you’re in town. 🙂 Would love to meet up.


  4. August 3, 2008 2:41 pm

    A NAR angel fund sounds like a fantastic idea, it would help to catalyze some much needed in the innovation in the technically challenged and pained real estate industry, and those champions could be used to further push the efficiency of the industry.

    How possible is that? Not very but it would be a great move in NAR could get over the bureaucracy

  5. Bob Wilson permalink
    November 14, 2008 12:17 am

    A special assessment?

    No thanks. It wouldn’t be that hard for NAR to run, and if they did, NAR would have agents willing to spring for once again.

  6. George Thomas permalink
    February 23, 2009 10:21 am

    Do you know if anyone has challenged the legality of the mandatory contribution to the NAR political slush fund, called a special assessment for a so called public awareness campaign?

  7. February 23, 2009 11:52 am

    @George –

    Do you know if anyone has challenged the legality of the mandatory contribution to the NAR political slush fund, called a special assessment for a so called public awareness campaign?

    I do not know… but I doubt that can be challenged… NAR isn’t a mandatory union, after all, and few if any brokerages are “closed union shops”.



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