BLOG VIEW: As increasingly sophisticated technology continues to give rise to more direct-to-consumer digital marketplaces, industry practitioners are being driven to change their approaches in order to maintain relevance and meet consumer demands.
For example, the introduction and rapid growth of tech-driven transportation services such as Uber and Lyft and the subsequent reaction from traditional taxi, rental car and even auto dealership companies is representative of this fundamental change in how business is being conducted – and the pressure put on the traditional industry practitioners to evolve in order to compete. Uber's current market value is $18.2 billion, essentially equal to Hertz and Avis combined, and Bill Maris, the managing partner of Google Ventures (an investor in Uber), estimates the long-term market value of the company could be $200 billion or more.
Trulia and Zillow have created similar disruption in the housing sales industry, and as they move closer to their merger, the resulting impact could be game-changing, and the reaction from traditional industry practitioners could become heated.
Trulia and Zillow's primary disruptions have been to the multiple listing service (MLS) and Realtors – previously, the only way a property owner could market and sell their home aside from a ‘FSBO’ sign in the front yard was to work with a realtor and list it on the MLS. But as the Internet has found its way into most households and technology continues to develop, home buyers and sellers can now connect directly and globally without the MLS or Realtors.
In fact, it's estimated that nearly half of all homes sold last year were never listed on the MLS or were listed only after a buyer was lined up. Trulia and Zillow, today, comprise a combined 61% of online home listing traffic, including 73.4 million unique visitors in June alone (compared to 22.4 million in the same month for Realtor.com). The industry is waiting to see if this merger gives rise to even greater market share of traffic for online home listings and, following that, if the two companies continue to erode the significance of the MLS and challenge Realtors to focus more on other value-added services such as property valuation and price negotiation. If so, Realtors will be pushed to move away from traditional tactics and create new strategies in order to operate within the changed, more digitally based, direct-to-consumer marketplace.
So far, the Realtor community has not completely eschewed Trulia and Zillow and, in fact, has been a major contributor to the sites' revenue, as many realtors purchase large volumes of ads on the sites promoting their services to buyers and sellers. If Trulia and Zillow were to change their business model to eliminate ads and generate revenue by charging sellers to list on their sites, however, the Realtors would be pushed out by the very platforms their advertising dollars helped build and forced, once again, to find new ways to engage with customers – a very unusual and delicate situation even in today's unprecedented and continuously changing economic ecosystem.
The National Association of Realtors (NAR) appears to be well aware of the potential marketplace challenges a Trulia-Zillow deal could pose, as it has begun lobbying the Federal Trade Commission to block it. NAR has also joined Move in a lawsuit against Zillow and Errol Samuelson, the company's chief industry development officer, in Washington State Superior Court, alleging breach of contract, breach of fiduciary duty and misappropriation of trade secrets. It's also worth noting that NAR has not historically been friendly to e-commerce – it was sued in the past by the Department of Justice for policies preventing brokers using internet-based tools to provide better services and lower costs to consumers.
While there are many questions surrounding what exactly will happen with Trulia and Zillow and what the repercussions and reactions will be, one thing is certain: technology-driven developments are changing the way all businesses operate, from small start-ups to long-standing behemoths considered to be cornerstones of American commerce, and industry practitioners are being challenged to adjust and adapt.
Rich Downs is an advisory member of United States Appraisals, offering professional appraisal management services in all 50 states. Downs has extensive experience in the mortgage, appraisal and management sectors. He has successfully founded and grown numerous companies in these industries and is a leading communicator and connector within the mortgage finance community.
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