Wrap-up of recent posts: I'll post micro for awhile

I would like to make clear that my recent discussions which involve, tangentially, Zillow's mortgage marketplace is not a slam on what they're offering. It might be useful for mortgage players and I'm pretty sure it will be useful for consumers. The doubts I have are larger than a particular offering by Zillow, and it might be that zillow leverages all this to increase revenue for a while. My concerns are more specific to RE companies and RE agents in relation to web 2.0, if, indeed, web 2.0 is the highway the real estate market in general will be taking.

It's clear that buyers and sellers are utilizing the internet in ways they never did before. Are they using it as a mere tool that adds only a little value to the whole buying and selling process, or is it becoming THE WAY to do business. Redfin has bet it's THE WAY, but so far they haven't proven a successful strategy. There is a lot speculation right now. There have also been questions lately if web 2.0 is particularly useful for agents and companies -- many believe there is more hype than solid evidence. I've heard anecdotal evidence of internet networking success, and I have experienced success in my own business through my internet network, but I haven't seen anything convincing that it's a profitable strategy across the real estate board. Most of the agents and companies in Savannah are using the internet sparingly with the majority of their business developed through traditional marketing -- local connections, franchise referrals, or relocation arrangements large RE companies have with local industry, friends, families, newspaper ads, local print magazines, etc.

In spite of the lack of real evidence that internet business is growing rapidly, I have to believe it's presently viable for those utilzing it properly and it's the future for growth in RE. This market slowdown we're in has skewed the results and it's hard to tell what will happen during the next boom. I do expect a boom, and like I've said, I think it'll be fueled by baby boomer movement and the fact that employment opportunities are spreading across the country. Texas is hot right now, and I expect to see hotspots all over the country. It seems to be a good bet that those RE players connected to the larger real estate community will get the exposure necessary to be successful locally.

If this holds true and big RE companies see the benefit, they will increase their online presence and this will shake up the whole industry. As web 2.0 ideas infiltrate the boardrooms, and innovative minds recognize the potential, it could drastically change the way companies do business thereby transforming the whole web landscape.

How small players like me will fit in is uncertain, but I suspect we'll find a niche for boutique, personalized service more on the high end of the markets, a very small chunk of it. I expect the low-end market will utilize FSBO innovations via the web, and the mid-price and high-end will continue to be serviced by large companies.

The interesting aspect of all this will be if the Redfin model can be developed in such a way that changes the compensation model. If service continues to be discounted, I doubt the Redfin model will last much longer, but due to the public pressure for RE reforms and the opening up of listing information there might be a hybrid of the online model, strengthened with traditional RE services, that provides something innovative and different. I don't think it's a safe bet to say nothing will change.

Another interesting potential development will be competition between RE sites such as Trulia/Zillow/CyberHomes/Roost (not to mention the competition between themselves) and large RE companies for the center stage on the web if web 2.0 does prove to be the battleground. And to add to the excitement, how will NAR fit into and react to all this? How will the government react? Could a Microsoft/Yahoo combination become a major RE player on centerstage once their problems are resolved (RE is a large carrot) creating avenues for vertical search, marketing and semantic web possibilities that many haven't considered.

Whatever evolves it appears it'll have to be more Biz 2.0 related when it comes to RE and will have to involve valuable service offerings that people are willing to pay for. Free information might be a good draw for traffic, and some RE sites might successfully leverage traffic for creative advertising, but for us, the agents and companies, we'll have to feed off it or lead the way, but it'll have to be profitable or it'll all be for show.

That's my take.

When Everyone Gets On The Dance Floor, Real Estate Will Rock

Jay seems fairly optimistic that a monetization plan based on advertising will be enough to make places like Zillow successful in the business world, at least I think that's what he was saying in his comment about their new free offering. He might have been simply stating their plan, which would leave the question -- will it be enough? I'll go out on a limb, because that's what I do, and state that I don't think it will be enough, and I'll give some reasons why.

Even if it could be proven that their new offering has set up the structure for focused advertising, it's a static observation in a dynamic 2.0 world. Things change. The field of search was rocking along with great optimism for the players until Google came along and made one big change - through the discovery of the importance of links they created valuable search results, quality results that made them so popular they were able to monetize search. They discriminated to get the BEST results, not just any related results. It was the BEST results that attracted traffic and set up Adwords.

A RE site could come along and, taking the mortgage industry as an example, select the BEST mortgage providers using sophisticated criteria that weights some aspects more importantly than others, then find the BEST (ready, willing and able) consumers needing the service, then monetize the service of connecting the two. This would be different than random, general search, which is free for the searcher, it would be focused, vertical search, more valuable to the consumer and the mortgage broker, so that each would pay for the service. This would be a mortgage market place. Using the principle of Google, not just any search result but the best, placing the best service providers with consumers who have an immediate need and are able and willing. This would draw less traffic, but higher quality traffic that can be monetized in a way that adds to the free services that attract traffic for advertisers turning into ad dollars. It adds the missing link -- service.

The other reason ads won't be enough for RE sites is that unless they find a creative partnership with quality service providers to add service to their monetization plan, large mortgage companies and RE companies will become big players in web 2.0 -- this might happen even if RE sites initially partner with RE service providers. Once RE companies realize the value of web 2.0 and internet business, they will begin creating a presence -- they have plenty of resources to create something special, and they have the candy that is attractive anyway. They might decide to circumvent all the middle-men. It would take a huge image change, but it can be done. The new internet face of RE companies might be a friendlier face -- it might develop a voice of contrition saying -- "We were wrong; we are now players in the Land of The Free" and begin a campaign based on authenticity, backed by websites that offer more than anyone can imagine, and compensation schemes that are more in touch with the new world.

Gaining the trust of consumers will be an arduous task, but it can happen with the right, real changes, reversing everything, making the RE sites, whose investors are banging them to make money, the scavengers of advertising and the RE companies as the purveyors of inexpensive service, oodles of free pictures and information and quality offerings in the new online world. Quality, low cost service trumps advertising schemes.

These are just some initial thoughts -- more later.

There's an idea going around that's bothering me.

It has a lot to do with Sean's and Brian's concerns wrapped up in Sean's post at Bloodhound. But it goes much further than that and is beginning to pervade much of web 2.0. I don't know what to call it quite yet, but it's something like a con game where the consumer is elevated by the set-up and business is denigrated as the hook.

Before I go further let me say that I'm as service oriented as anyone. It's a sacred belief of mine that a service company that doesn't value service is doomed in the long run. Excellent service at the lowest cost possible is to satisfy consumers of the service. But this is why I'm having a problem.

Information is pervasive and it's now basically free thanks to the web. But service and information are two different things. Service can never be free. Web 2.0 in it's efforts to make information free and easy to access has created some kind of unconscious expectation that devalues service in the process. Empowered by information and placed in the position of royaly by web 2.0, the consumer looks down on service providers as servants who compete to lower prices and meet their every whim. And some service providers do, but the excellent service providers are likely to revolt, especially when the economy turns around.

The consumer is being conned into a devaluation of service providers and is losing the ability to distinguish between value and boot-licking. Then when the boot-lickers don't meet every whim and practically work for nothing, the consumer stomps his feet and demands more. This won't last long -- it will cause the excellent service providers to develop a different model and the consumers will be left lording over incompetents and hucksters. When the consumer discovers they've been had as tools for advertising dollars, they'll begin looking for good service again -- and they'll be willing to pay for it. I recently used the example of People's Airline as an example of this con game. People's Airline had to choose between service and price -- they chose price and went bankrupt. The consumers were conned by price and devaluation of service until the service got so bad that they left People's Airline in droves to more quality, higher priced airlines.

Instead of a corporate policy conning consumers, we now have Web 2.0 conning consumers. Good service costs money to provide and the service providers aren't indentured servants -- they are professionals who know how to take information and make it work profitably for the consumer. Information is made valuable through specialized knowledge and expert efforts of the service providers.

Even if the information is enough for some consumers to go it alone, most don't want to -- they want it taken care of by experts, by professionals who provide excellent service. If the relationship isn't a mutual, respected meeting of minds, the consumer/service provider relationship will not work on web 2.0 and web 2.0 will become a tacky bazaar of carnival barkers or a slum filled with cheap billboards. If web 2.0 is to become a real marketplace, it will have to understand value and build something worth advertising, and something worth the time and effort of excellent service providers..

Blogging about both real estate and community

I made a comment to this conversation that is still held up in the approval process and hasn't posted on Mary's site, so I thought I would post it here. To resolve the issue of whether it is best to blog about real estate or local communitiy issues, you can do both in one blog by writing real estate content in such a way you can hyperlink certain words and phrases to articles you've written about the community -"This home is two miles from the skating rink which is a popular place for kids and Grownups alike. This home also has...." - or links to local information sites.

The blog can be real estate specific with links that provide community information and events, restaurants, etc. You just have to write expertly to place the linked keywords in so they don't look out of place. That way you get the focused SEO and can give information that makes you the local know-it-all.

The Dirty Topic of Money in Real Estate

Greg Swann asks a good question (make sure you watch the South Park video).

I might not have as busy a day today as I thought -- 2 reschedules. So, perhaps I can write a little more. I have a feeling in about a month I won't be able to write much at all, but who knows, this market is like a sputtering jalopy right now.

Monetization might be the most important question of all for RE's future, especially when you include RE sites into the mix of prognostications. Even RE brokerages will need to consider ways to monetize their internet efforts. If RE brokerages don't consider a full internet presence and diversfication of service-offerings and diverse streams of income, they'll be dependent on partnering with RE sites and lose control of their destiny.

My belief is that somewhere along the line in the Land of The Free someone will have to charge for something. Before Louis throws a gorilla at me, I understand that Homegain has developed a profitable business model. Does anyone know if HouseValues (or whoever their parent company is, I can't remember) is profitable? I don't hear much about them lately, except they invested in Active Rain. Is Trulia profitable? How about Frontdoor, do they bring in revenue exceeding their costs, is Zillow close to profitability? I understand Realtor.com is profitable. How is Roost doing? How close is Redfin to turning a profit? What about all the others - it seemed like there were dozens at onetime that I hear nothing about: CyberHomes, Oodle, Homescape, Hotpads, Propbot, CLRSearch, VideoHomes, The Housing Pages, Second Space, Backpages.

I have no idea how these sites are faring, but I don't hear much about them. Sometimes it seems as if there is a reaction to the question of monetization, as if it isn't polite in the Land of The Free to bring up such a banal subject. But it has to be discussed at some point unless RE.net is going to violate every economic law known to man. It all might be about more than money, and it might be admirable to give consumers free access to information, but if it's done in a way that COSTS money, then those costs have to be recouped, then exceeded, to make it worth the investor's time and effort. Otherwise, investment money will flow elsehwere.

We all applaud every time a technological advance is made at these sites, but I will applaud louder when one is confident enough, good enough, brave enough to find a way to monetize their efforts outside advertising. Say my fictitious brokerage company, Zedeck, had a site equal or better to the current RE sites and had become the Google of RE, would consumers who are in the information gathering stages for buying or selling real estate, or investing, pay a fee for Elite Services?

If it was good enough and comprehensive enough, I think they would, once trust was developed. To receive a steady stream of local information that is personalized in a slick presentation that includes a plethora of photos, local information, taxes, insurance, market information, lenders, information about local attorneys, inspectors, home furnishings, restaurants, home stagers, repair people, grass cutters, schools, nightlife -- all the infomation that is spread out in different places brought together and delivered in a great presentation that aids in interpretation of all the information, and all the vendors have been vetted and meet the requirements for recommendation. I only know for sure that I would pay a monthly fee, if I had a home to sell in Georgia and I was moving to California -- to receive packaged, personalized information during the 3 to 6 month process, yes, I would pay a fee.

It would make the process easier and more efficient and ultimately more profitable. The fee could be small, but with local teams feeding the information to "headquarters" kept in a giant database all that would need to be done is the personalization based on consumer criteria, and if enough consumers pay the small fee it could create a giant stream of income.

I might be wrong, but I think this is what RE sites need to do now, if not like the fictional Zedeck where everything is kept inhouse, then with local partnerships with RE professionals of all stripes -- have all the free stuff, but for personalized, Elite Services, charge a monthly fee. And RE sites could charge local RE professionals to be a part of it. This is where I think Zillow's recent offering lacks in a monetization plan (except, as Greg says, the advertising possibility). I think it should be based on some variation of the above model, where excellent lenders are chosen for their excellence and consumers pay a fee for the oversight, management and delivery of the information -- this way the lenders will pay more for inclusion, knowing the consumer is paying a fee and is serious, and the consumer knows the lender has been thoroughly vetted. It could even be set up on a bidding system with the three highest bidding lenders getting the lead.

Let the lawyers work out the language to avoid liability, but quality assurance systems could be built to avoid most problems with incompetent lenders slipping through.

I know, I know, it won't work, but it's a thought. And for all the people worried about how an RE site would choose "excellence", it's amazing how many of us know what is wrong with incompetent players in the field, but we can't come up with criteria that proves competence.