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The Gods of the MLS Headings

December 5, 2008

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.

– Rudyard Kipling, The Gods of the Copybook Headings

Brian Larson, swiftly becoming one of my must-read bloggers, posts a thoughtful argument that I’m far too cynical. Which is entirely possible. 🙂

He posits that my observations about what the recent VOW rules mean for an MLS appear correct:

1) An MLS public website is not subject to the VOW signup requirement.

2) An MLS can create truly ridiculous IDX rules, because IDX was not covered by the NAR-DOJ settlement.

3) An MLS cannot not prohibit brokers/agents from sending listings to Trulia/Zillow/etc. as that would violate Sherman Anti-Trust Act. But the MLS is not required to provide Trulia, Zillow with any data either, unless Trulia signs up as a broker subject to VOW rules.

But, Brian goes on to say, the MLSes are not nearly as evil as I presume them to be, nor are the requirements of VOW such a major deal.  His argument (which you should read in full, by the way) is premised upon three assumptions and recent trends:

First, the “VOW signup requirement” is not all that daunting anymore. So many applications folks use online now require registration. The key is to ensure that the consumer trusts you will not bombard her with crap email after she registers. You cannot use Facebook or MySpace without registering…. In the real estate space, I expect we’ll see more applications that rely on registration, or that at least have an “account” mentality. 1000Watt’s post about Dwellicious suggests that it might be an example.

Second, I think the VOW policy gives many MLSs incentives to make their IDX rules more open. By including more fields and statuses in IDX, the MLSs can make it easier for a broker to deliver information through the more-regulated IDX method, rather than encouraging her to use a VOW, which is harder for the MLS to regulate and monitor. I have MLS clients that have already indicated to me their intentions to take this approach. (In fact, I speculate that restrictive IDX rules will actually make it easier for brokers to get consumers to register for their VOWs. “I can show you X more listings if you register….”)

Third, many MLSs have embarked on “listings syndication,” which makes it easy for their brokers to send listings to places like Zillow and Trulia. We did a whitepaper on syndication this last spring (though it seems hopelessly outdated to me now). MLSs recognize the value they can bring to their brokers with syndication. Some still have “protectivist” tendencies, but I think the trend is moving to more syndication.

On this basis, it does indeed appear that I am merely a huge cynic.  Again, I grant the possibility of that.

However, the Gods of the MLS Headings are not so kind.  Thousands of years of human history have taught us not to overestimate the level of charity and goodwill in your average person, nation, or organization.  It is a rare person, and an even rarer company, that forgoes self-interest in the name of community.

Let me delve deeper into each of Brian’s points.

Signup requirement is not daunting

The problem with this analysis, however, is that it takes an objective stance on something that is entirely relative.  While it may be true that the VOW signup requirement is in and of itself not daunting, the real issue is whether it is easier or more difficult relative to other alternatives.

There is no version of Facebook that does not require signup.  There is, however, a version of the VOW website that does not require signup: the one belonging to the MLS.  So faced with two choices — one, a realtor website where I have to signup and provide my email address, and another, a MLS website where I do not — I am going to select the one that puts fewer requirements on me nearly every time.

Furthermore, a requirement’s ease or difficulty stands in relation to the value delivered.  I don’t find it all that daunting that I have to study, take both a written exam and a roadtest, before I am allowed to drive a car.  The value delivered (driving) is sufficient for the requirement.

Facebook and MySpace, in order to deliver its value (personal space to connect with friends) has to have your personal information.  Plus, the value that it delivers is sufficient for consumers to want to signup.

YouTube, on the other hand, will go out of business if it requires signup before a user can view a video — because a competitor will arise (such as Google Vide0) that will drop that requirement.  The personal information is irrelevant to the value delivered: viewing a video.

In real estate web, having to deliver my personal information to a realtor just to view listing information is a pretty large stumbling block.  I know intuitively as a consumer that you don’t need to know my name or my email just to display photos of a house, or show me how many bedrooms and bathrooms it has.  So I deduce (correctly) that the only reason you want my information is to try and sell me something.

Under these factors, I submit to you that the temptation for the MLS to create a public-facing VOW-powered website freed from the signup requirement — that it must place, by law, on every other participant — is rather huge.

Let us not forget that MLS organizations these days are not exactly rollin’ in the cash.  Many of them are facing fundamental questions from their membership about the value being delivered to them for their annual dues.  There is a growing trend of real estate agents electing not to be part of the MLS, or paying absolutely the minimum for access to listings, and complaining bitterly about the dues being charged because the MLS doesn’t “do anything for me”.  And companies like Trulia are only helping to accelerate that trend.  No wonder that MLSes are heavily investigating public-facing websites then — being able to deliver consumer leads to its membership may be essential to the very survival of the MLS.

The incentive is large; the tempation is huge.

VOW Improves IDX

Brian’s next point, that the VOW rules may lead MLSes to relax their IDX rules so that their members can manage listings via the controllable IDX feed instead of the uncontrollable (by law) VOW feed simply doesn’t take incentives into account.

The MLS has major incentives to tighten IDX rules (as above) to make it a very unattractive option.

All participants have an incentive to display as much information as possible on their own website, in order to drive leads and conversion.

The listing broker might have incentive to try and control how its listings are displayed on competitor sites via IDX, but no broker is a pure listings broker who doesn’t take buyer inquiries via its own site.  So their incentive to want to control listings is canceled out by their incentive to want not to get controlled by others.

The incentive for brokers is to use IDX as bait to get a consumer to signup, so that they can show them the VOW data.  The trouble is, there’s already a website out there that shows consumers the full VOW data without signup: the MLS public website.  Do brokers truly care, if they are receiving rock-solid leads without charge from the MLS site?  The experience of companies like Houston Association of REALTORS suggests that they do not.

I submit that Brian’s clients who have indicated that they plan to relaxing IDX rules will either (a) swiftly scale back those plans, or (b) go out of business when a competing MLS implements the cash-generating cynical strategy I outline.

Trend is Towards Syndication

I agree with Brian that the trend was towards listings syndication.  It benefited the agents and listings brokers (and their clients) so much to be able to market listings to dozens of websites with the push of a button.  The MLS, in effect, was charging its members dues to provide the syndication service.

However, that was prior to these particular incentives setup by these particular rules.

After these VOW rules are fully implemented, I believe the incentives have changed.  Because now, the MLS can absolutely control third party sites like Trulia, whereas they could not do it effectively beforehand.

First, for third party aggregator sites to take VOW feeds, they have to become a participant in the MLS, subject to all of the rules of that MLS.  This rule now has the force of law.

Second, since the VOW settlement doesn’t address IDX at all, the MLS can provide an incredibly obnoxious IDX feed to the third party syndicators, say they are providing syndication (which is true), but at the same time, really build out its public facing VOW-powered website.

Third, the MLS can simply cease providing syndication to its members.  Instead, it will provide cost-free leads direct from the MLS public site.  Which service is the member more likely to value?  The lead, or the chance to get a lead from a third party aggregator?

Idealism vs. Gods of the MLS Headings

I actually like to think I’m an idealistic fellow.  I care about my fellow man.  I care about this industry.  I care about the many wonderful professionals I’ve had the pleasure and privilege to meet.

But at the same time, I can’t ignore the economic incentives now at play thanks to the DOJ-NAR settlement, which gives the VOW rules the force of law.  I can’t ignore the fact that MLSes are losing membership — partly because of the market, but partly because their value to members has been decreasing for the past several years.

Since MLSes are not government entities run without care for covering costs, but are private companies that must generate enough revenue to pay for its costs, I have to think that making money (through membership or other means) by providing greater value has to take priority over every idealistic principle any MLS executive.

Indeed, even if the MLS executives want desperately not to take advantage of these rules, the economic realities may force them to do so.  It’s hard to be idealistic if you’re dead.  Survival is the first moral principle, after all, and that applies both to individuals and to organizations.

I hope that Brian can continue to be an influence in the industry, and that not all of his clients go down my cynical path.  That would make Brian sad. 😦  Which would make me sad. 😦

On the other hand, is it really such a bad thing for the industry, and for consumers, if there were at least a few websites (all of them owned and operated by MLSes) that provided people with the full VOW listings information without requiring signups, jumping through hoops, and the rest of it?

-rsh

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9 Comments leave one →
  1. December 5, 2008 3:13 pm

    @Rob
    Wow. I’m flattered that you even read my posts, let alone think and write about them yourself.

    I just don’t get the “incentives” thing, however. Folks I know estimate that the most successful public-facing MLS sites actually COST their MLSs lots of money (in the case of one, I’m told it’s been an average between $1 million and $2 milion per year). I don’t think an MLS public-facing web site is a money-making prospect for MLSs–just as big consumer listings web sites appear not to have been very profitable for anyone else in the last 10 years.

    I suppose the local MLS could try to pull a “Realtor.com”, with expensive up-sells to the agents and brokers. I wouldn’t want to be trapped in the MLS’s offices when the unruly, torch-and-pitchfork-bearing mob shows up there, though. And so far as I know, no MLS has taken that approach.

    I just don’t see the connection between the new VOW policy and the incentives for the MLSs to turn evil. If they were inclined to be evil, they could have been doing that for the last 5 years, without regard to VOWs.

    -Brian

  2. December 5, 2008 3:27 pm

    @Rob,
    Another thought occurs to me: Listing brokers can OPT OUT of MLS public web sites, but they cannot opt out of VOWs. If a broker with meaningful market-share wanted to, it could cripple the MLS’s web site by shorting it on listings. All the while, its own VOW can display nearly all the listings…

    I think that undermines some of the leverage that you think MLSs have (though I recognize there is a PR issue for the broker who wants to opt out of display of listings–that’s a whole other discusion).

  3. December 5, 2008 4:18 pm

    A couple of points:

    1. What data do you have that MLS members are leaving MLSs for reasons other than leaving the business? That claim seems anecdotal at best and false at worst.

    2. IDX is one of the most successful programs MLSs have implemented, and the members love it and want more of it. Cynical or not, reducing this service would not be in the best interest of the MLS.

    3. Also, the IDX policies exist and that means a lot in the MLS world. Just spend a little time trying to get an MLS committee to change a policy, and you’ll see that the likelihood of change is low.

    4. The relative ease of logging versus not ignores that you already have to login even on MLS sites to save searches, etc.

  4. December 8, 2008 2:20 pm

    @Brian –

    The only person who should be flattered is me, that you’d bother to respond to my posts. 🙂 You’re an actual expert on the subject; I’m just an opinionated blogger. Heh.

    In any case, with respect to the “incentives” issue… the way I look at it is that MLSes have been under quite a bit of pressure over the past couple of years to “prove value” to its membership. Unfortunately, as per Michael Wurzer’s question, I don’t have any direct data — it’s all anecdotal, and hence, violates one of my own pet peeves. (I said I was far from perfect. 🙂 ) In fact, I could use your input on that as well.

    But business models such as Trulia and Google Base isn’t a threat only to brokerages and franchisors, right? It is also a threat to MLS, if all that the MLS provides is an exchange of data.

    Syndication is a value-add that the MLS provides to agents to entice them to sign up for and continue to pay for membership. The other major value-add (these days) is “free leads” from the MLS’s own public-facing website.

    Now… prior to the VOW policy, I would argue that it was unclear where the MLS stood in relation to all of the other players. If an MLS wanted to implement a VOW-powered website, but refused to share that with its members or other third party sites, I think a pretty good argument could be made that this was restraint of trade. With the DOJ sniffing around, it was to no one’s interest to make an issue of something like this.

    With the new rules and new policy, it is now clear that everybody else is subject to the VOW rules. It isn’t clear whether Realtor.com is or is not subject to the new policy. But as you said yourself, the MLS itself is definitely NOT subject to the restrictions (or the protections) of the VOW policy.

    Now the incentive, I believe, is strongly in favor of a public-facing website that features the best possible set of data available on the Internet: the VOW feed. But the MLS, and the MLS alone, can have such a site that is freed of the need to have customer signup. That naturally makes the MLS Public Site the best website for that particular area — better than any of its members, and better than any third party website.

    If a topnotch public facing website costs a MLS $1m a year, but it means that the MLS is able to renew a higher percentage of its members, and attract new members in new areas, then that can only mean positive things for the MLS in question. These are private companies, after all, not governmental units.

    There is no need to “upsell” services; the “upsell” is in the membership dues that sustain such a public-facing site. Members would, I think, derive far greater value — and more importantly, see themselves as deriving far greater value — from cost-free leads delivered from the MLS Public Site, than from just about anything else that the MLS currently provides them.

    I don’t actually think this makes MLSes evil; I think it’s a smart business move, to ensure that one day, Google Base doesn’t become the de facto national MLS for real estate.

    With respect to your second point — that listing brokers can OPT OUT of MLS public sites — is that by internal rules, or by operation of law? Because under the policy you’ve outlined, I can’t see how the listing broker can opt out of a VOW. All that the MLS is doing is implementing the VOW feed, but without the signup requirement. If the listing broker is then getting leads cost-free from the MLS public site, I’m not even sure that the broker would complain, nevermind pull its listings.

    @Michael,

    IDX is one of the most successful programs MLSs have implemented; but will it continue to be, in the post-VOW Policy era? Brian appears to think not, and I happen to share that view. Idiosyncratic IDX rules cripple the utility of IDX.

    I don’t disagree that it will be difficult to get IDX policies changed, but that’s where the possible impact of being the Only One able to do signup-free VOW will push things along. It will be the rare MLS committee that refuses to use that major competitive advantage.

    As to #4… consumers will signup when they believe you’re providing them enough value. Things like saving searches is usually that value. Simply viewing listings information is usually not. Broker VOW sites will have to require signup before consumers can see anything; only the MLS VOW site does not. And there is a big gap between when a consumer is just looking for info, and when that consumer is ready to do things like saving listings.

    -rsh

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