Where Real Estate Gets Its Dirt

Mike Sparr shares “How To Not Go Out of Business”

Mike Sparr, CEO and founder of Goomzee, just wrote great post about the challenges and decisions vendors face in this business. It’s a long post but worth the read.

How Not To Go Out Of Business

I’ll add to his advice with a bit of my own. Mike talked about the challenges investing in a sales team.

“Now they could make 400 calls per day, automate the voicemail part, reach 90 people daily, do 30 demos and close 1-2 sales. Agents then averaged 20-22 sales/month, bringing my CAC down to about $135. This means at $20/mo product after 7 months of service I pay for my cost of sales and begin earning revenue for the actual product, support, and ongoing R&D. If I wanted to scale sales of this product, I’d have to set aside enough cash to float realistically the first 10 months of every rep’s paychecks before expecting to break-even. You really want to recapture your investment per rep within 2-3 months. Either raise your prices, lower your wages, or roll the dice.”

I would say that adding a Yearly Plan or Two Year Plan, where the agents pay up-front, can help you finance your sales team growth. I’m not sure if Mike meant this when he stated “raise prices”. Good stuff.

Broker Strangelove: The scoop on the Realty Alliance’s (crazy) plan to rock the real estate industry

strangeloveEver since Craig Cheatham put the MLS industry on double super secret probation there has been much speculation about what The Realty Alliance’s grand plan is and how they will go about implementing it.

Well, I’ve spoken to over a dozen individuals and believe I have connected all the dots at this point.

I must qualify this by saying these are still rumors – the “word on the street”, so to speak, but I’m confident I have all the major details worked out.

What the plan?

Basically the plan is to create a database upstream of the MLS providers. This will be a national broker database, not any sort of regional, “lets try it and see if it works” sort of thing.

Brokers will put their listings in this database first, then decide where those listings go, who to share them with, an under what terms. So if this thing ever gets traction (it won’t in my opinion) brokers could decide to send listings (only some?) to the MLS, or not. They could syndicate, or not. They could share with other brokers, IDX-style, or not. And they would not be subject to any rules regarding monetization of the data.

The key here is brokers want to gain leverage over their MLS providers by creating a national upstream database.

How do they make money?

The idea is to charge brokers up to $2.00 per listing to upload listings to the database. That’s not a joke. $2.00 per listing. Memories of Homestore come to mind. Having done RFPs on many of the large franchisor websites I have a fair understanding of the cost involved in creating (and maintaining) a listing database. So I just wonder if anyone has really done the math of this sort of effort. Nevermind the complexity of getting brokers to implement another listing upload program.

Oy Vey!

What I’m also hearing is that they also hope to repackage this data and sell it to Wall Street. One spin on this is that they may highlight the “Berkshire Hathaway” name when doing this. Who loves Warren Buffet more than Wall Street? Their partner in this effort would be Collateral Analytics. Collateral Analytics has been requesting MLS data on behalf of their broker clients for the last year or so but is running in to problems with some MLS providers as to the nature of how they are using. it. I guess they think by having this data outside the MLS, and stamping Warren Buffet’s name on it, it will be all good. If RPR, CoreLogic and, dare I say, REBIG couldn’t make this happen I very skeptical that these guys could make a dent.

Who wrote the plan?

My sources say the business plan was put together by The WAV Group, most notably Victor Lund. I don’t believe the selling of data to Wall Street was part of the plan put together by WAV Group. But the upstream national broker database and charging brokers up to $2.00 per listing to upload was proposed in the plan put forward by WAV Group. As I said, the plan written by WAV Group hopes to increase brokers’ “leverage” with MLS providers. Phase One would be to create this upstream national broker database. I believe this is the “big initiative” The Realty Alliance voted to proceed with last month.

I believe WAV Group is also responsible for drafting the RFP for this database and facilitating vendor selection. What is puzzling to me is why The WAV group, which has been hawking their strategic MLS planning services pretty hard lately, would venture in to this territory. Gotta eat, I guess.

Who is going to build it?

I haven’t seen a definitive list of vendors, and I doubt any of them would confirm or deny involvement, but I can make an educated guess about two of them.

In all cases I don’t see any clear win for vendors (inside the industry) who choose to cooperate. Seems like kryptonite to me.

1. CoreLogic, always a WAV Group favorite, seems an obvious player. But as one of the biggest providers of MLS software to the industry already committed to share any “Wall Street Revenue” with MLS providers I don’t see the logic here.

2. RED- Real Estate Digital. RED aggregates data for RPR (via LPS), builds broker platforms, and builds and sells public-facing MLS websites (something TRA abhors). Since the broker database is upstream from the MLS they can’t really leverage their MLS data aggregation know-how.

Plus, take a step back. A broker database business model that relies on brokers paying $1 to $2 per listing to operate? Really? I may not be the smartest guy in the room but that idea seems batshit crazy me. What vendor would want to be involved in that quagmire?

And I’m also hearing that not all members of the Realty Alliance are confident in the plan.. And not just a few, but a lot of them. Which is why this stuff is starting to get out.

In Summary

This is a bad deal for brokers and MLS providers. Actually I think it’s worse for brokers because of the time suck and money wasted. The MLS providers will just sit on the sidelines laughing their asses off.

I still think cooler heads will prevail. The members of The Realty Alliance are smart business people. Some might be more ready for change than others. But they have to realize you can’t put the genie back in the bottle. You have to find new ways to win.

As I’ve said in my first post on this subject…

“Stop listening to the consultants you’ve hired. Stop drafting new business plans. Go sell a ton of real estate. You have the MLS community attention. Take advantage of it.
Don’t lose this opportunity.”

Goomzee opens the kimono

Mike Sparr, CEO of Goomzee
I’ve been traveling on the east coast and have a lot I want to talk about (including the kick-ass tech fair hosted by MLSLI that I just attended.) But, first I wanted to write a post on the WAV Group post I just read this morning. It cites a press release from Goomzee titled “GOOMZEE GOES PUBLIC; OFFERS TRANSPARENCY IN MLS PRICING”. It lays out it’s site license pricing (oddly I couldn’t find the press release on Goomzee’s site). Here’s a snippet:

“Traditionally, site license pricing has been more of a behind-the-scenes negotiation but Goomzee appears to be breaking out from the norm and is publicizing it’s pricing model, and incentive opportunity. The company is offering MLS clients 25 percent and 50 percent discounts respectively based upon a $10,000 or $25,000 initial deposit prior to the rollout of the product, coining it as it’s “sponsorship plan”.

Also included in the press release is a pricing matrix:

Click to enlarge

Wow. I have to say this is a bold move by Goomzee and something I applaud Mike Sparr, Goomzee’s CEO, for doing. He even cites myself and W&R Studios as an influencer.

“We decided to offer early adopters a financial incentive to chip in now, and save considerable expenses in providing these solutions to their clients,” adds Sparr. “Furthermore, I felt it was important to follow in the footsteps of folks like Greg Robertson of W&R Studios who promotes more transparency in the industry, and what could be more transparent than sharing our pricing model.”

To be clear W&R Studios gives our MLS and broker clients a dashboard where they can see real time sign up and usage stats of Cloud CMA. If they are a revenue share partner, they also see their quarterly rev share pipeline. You can read more about the program in an earlier Vendor Alley post, “Improving Vendor Transparency

While Goomzee’s move of disclosing its pricing is indeed bold, and I’m sure will have a few of us sharpening our pencils, let’s be honest, we all have a “rate card”. As we all know, prices on that “rate card” immediately go out the door when negotiations begin.

But, the transparency trend is upon us. MLS providers will, and should demand, real time reporting of third party app sign ups and usage. I can see consultants adding “real-time reporting” as a must have feature to their checklists when helping MLS providers choose third party products. Third party vendors should live and die by these numbers. Any third party vendor not providing these types of metrics makes one wonder, what are they hiding?

More on Freemiums

Sarah Needleman and Angus Loten from WSJ: When Freemiums Fail

“The freemium approach doesn’t make sense for any business that can’t eventually reach millions of users. Typically only 1% or 2% of users will upgrade to a paid product, said David Cohen, founder and CEO of TechStars, a start-up accelerator since 2007 with five U.S. locations.”

Great article on why smaller businesses should forget the freemium hype and get money right away.

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