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A Reply: MLS Cooperation Creates Value for All Brokers, Not Just One

Public MLS StatisticsThe future of MLS’ has been a hot topic recently, and was discussed at Inman Connect.

Michael Wurzer from FlexMLS (a MLS software vendor) wrote a response titled “MLS Cooperation Creates Value for All Brokers, Not Just One” to Rob and I (and others). I’ll repost it here for your reading pleasure, and offer a few thoughts afterward.

I attended the Inman Connect Conference in New York City last week, where there was yet another panel posing the so-tired question, “Is the MLS Doomed?” I’m not going to dive into the panel itself, which did a fine job, but rather I want to comment on two blog posts from Rob Hahn and Drew Meyers over the weekend that followed-up on the panel.

Both blog posts are great examples of what leads so many down the well-worn path of predicting the death of the MLS, namely a fundamental misunderstanding of the value MLS delivers. MLS creates value through cooperation of competing brokers. The mistake so many make in analyzing the future of the MLS is they misunderstand either the source of MLS cooperation or the nature of it.

For example, the analysis in Drew Meyers’ post suggests a few technology tweaks could replace the MLS. However, as I explained in my post MLS Is More Than Technology about ten years ago (yikes, 10 years flies), cooperation is based on trust, not technology. The simple reason Zillow Group (ZG) could not replace the MLS is that, as a competitive advertising entity, they won’t get all the competitors to cooperate.

In fact, ZG’s very public strategy to focus only on Premier Agents makes it very clear that they have no interest in working with all brokers, they understandably just want to work with those willing to pay them the big bucks. Of course, one could argue that, eventually, ZG’s Premier Agents some day will be the only agents left, creating a de facto “MLS,” but that ignores the diminishing returns of an advertising platform like ZG in any given market. Competing brokers automatically will seek out alternative platforms in order to compete in a less bloody ocean and that competition naturally lessens the cooperation. The bottom line is that competitive advertising portals like ZG are not designed to create cooperation, and so they will not replace MLS, regardless of the technology involved.

Let’s move on to Rob Hahn’s post. Rob says, “The core value proposition of the MLS is that it is the lawgiver which regulates the behavior of real estate professionals to each other.” Again, the core value of the MLS is cooperation, not the rules themselves. The rules are the agreement that comes from and creates the cooperation, but that doesn’t mean the value of the MLS is from the rules themselves. I think the failure to make this fundamental distinction results in people thinking of the MLS as a burden instead of a value.

Next, I’ll address the point in the title of this post: “MLS Cooperation Creates Value for All Brokers (and Agents and Consumers), Not Just One.” Distinguishing between the value of cooperation (all brokers) and the needs of one broker (competition) is critical to any analysis regarding the future of the MLS. Typically when folks like Drew and Rob analyze the value proposition of the MLS, they do so from the perspective of a single broker or agent, but that ignores the core value of the MLS, which is the cooperation among the individual brokers and agents.

A simple example might make this point more clear. Many in the industry express concern or confusion about how Upstream is going to the impact MLS organizations, but Upstream, by definition, will not reduce the value of the MLS because it is an individual broker product and not a product that provides aggregated data from all the brokers in the MLS. Undoubtedly, many individual brokers will benefit from Upstream and Upstream will be integrated with the MLS for those individual brokers, but the product is not intended to and cannot replace the MLS itself because it only deals with the data for each individual broker, not the entire MLS. Again, as ZG found out following its blow-up with Listhub, the MLS aggregation is fundamentally different and more valuable than the listings of any one broker. Thus, by serving all brokers through cooperation, the MLS creates value that doesn’t exist anywhere else and is not replaceable by serving anything less than all brokers.

Let me wrap up by calling for an end to all conference panels prognosticating about the death of the MLS. I think we’ve all heard that debate enough and what’s a lot more interesting is what MLSs are doing to improve the incredible value created by cooperation. I’ll write more about that in the coming months, but, for now, let me proclaim once and for all, “The MLS is Dead, Long Live the MLS!”

I don’t disagree with his thought that the value of the MLS is cooperation and trust — not technology.

Playing devil’s advocate…

That said, I’d argue agent/broker cooperation (based on trust) already exists, independent of the technology being used to facilitate that cooperation. It would still exist even were a new technology platform to emerge to facilitate the business currently taking place using the prsent day MLS.

Social networks are a similar dynamic. We all know Facebook is the elephant in the room — yet even they are not invincible (a topic I wrote about in 2012). If a majority of my trusted friends moved from Facebook to social network Y — I’d follow, and Facebook would become useless to me. The fact that I trust those people isn’t dependent on the technology in place.

It seems building a new technology offering to facilitate real estate business for member associations around the country, while allowing those associations to control who does and does not belong to the group, is entirely doable.

Zillow Group could then buy such a offering, or fund its creation.

[Updated note: A new tech system could facilitate cooperation among a much, much larger group of agents/brokers. I don’t think all MLS’ are doomed by any stretch of the imagination, but that we’ll see a number of consolidation efforts in the coming year or two, such as Bright MLS]

Keep in mind, Zillow Group has an advantage virtually no one (aside from has — their product is used by virtually every buyer, seller, and agent in the country. Scale and brand power shouldn’t be overlooked in this discussion.

That’s all for now, though am certainly willing to continue the discussion in the comments.

About Drew Meyers

Founder of Geek Estate Blog / Geek Estate Labs. Zillow Alum. Travel addict & co-founder of Horizon. Social entrepreneurship & microfinance advocate. Fan of Red Hot Chili Peppers and Kiva.

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