J-Dub makes some good points (and the commenters on the thread support him) — namely, that Realtors hate Realtor.com, and that Realtor.com has lost its once enormous first-move advantage to newcomers like Trulia and Zillow:
Most Realtors I talk with hate Realtor.com. Or perhaps more accurately they hate the way Move monetizes the Realtor.com asset by selling extremely high priced marketing packages to Realtors. Prominent placement on Realtor.com should be a member right.
Realtor.com has less than a 5% market share among real estate category websites, with most of it’s top competitors boasting a marketing budget of less than 10% of that of Realtor.com’s. Realtor.com had a huge first mover advantage, perhaps the most valuable domain name possible, hundreds of millions of dollars in marketing support, and the, at least initial, grassroots support of 1,000,000+ Realtors.
J-Dub believes that NAR cannot get out of its agreement with Move, so the solution is for NAR to just take Move private and buy it outright. The cost, Jon says, would be cheap with enterprise value of Move just under $250m.
Let’s assume that J-Dub is correct on all counts. I still don’t believe that NAR should buy Move.
1. NAR knows nothing about running a business, never mind a complex technology-centric business, like Move’s. In my view, NAR has bigger fish to fry, bigger problems to solve — namely, how to improve the REALTOR brand such that it is not perceived by the public as “hateful lying sons of bitches”. (The main issue is how to establish clear distinctions in the consumer’s mind between a REALTOR and a real estate agent — read this and the comments for interesting observations.)
2. NAR already owns Realtor.com. Seeing as how its own members supposedly hate Realtor.com, it could just let it die. Just refuse to make any changes to the homepage, ever — NAR has that right as per the operating agreement. NAR can erect so many barriers in the way of advertising on Realtor.com which make it financially unattractive for Move to continue operating Realtor.com. Why buy the cow, when you can have the milk for free? Because NAR has these powers, simply letting Move know that it would like to terminate the agreement post haste is likely to initiate a cascade of events under which Move will exit the Realtor.com business at a price far less than the purchase price of the whole corporation.
In Move’s 2007 10-K (PDF), they list the relationship with NAR as a risk factor:
|•||we would need to obtain the consent of NAR if we want to acquire or develop another service that provides real estate listings on an Internet site or through other electronic means; any consent from NAR, if obtained, could be conditioned on our agreeing to conditions such as paying fees to NAR or limiting the types of content or listings on the web sites or service or other terms and conditions;|
|•||we are restricted in the type and subject matter of, and the manner in which we display, advertisements on the REALTOR.com® web site;|
|•||NAR has the right to approve how we use its trademarks, and we must comply with its quality standards for the use of these marks; and|
|•||we must meet performance standards relating to the availability time of the REALTOR.com® web site.|
|•||the acquisition of us or RealSelect by another party without NAR’s consent;|
|•||if traffic on the REALTOR.com® site falls below 500,000 unique users per month;|
|•||a substantial decrease in the number of property listings on our REALTOR.com® site; and|
|•||a breach of any of our other obligations under the agreement that we do not cure within 30 days of being notified by NAR of the breach.|
If it is true that Realtor.com is not adding any value to NAR and to its members, then NAR can simply let it wither on the vine, and lavish its love and money on other channels.
But it will never get to that. Move has no reason to want to continue operating a site — no matter what the agreement — in face of hostility from the actual site’s owner. In all seriousness, if NAR wanted Move to get out of the Realtor.com business, it merely need say so. NAR has too much power in how Move can operate Realtor.com, too many ways it can truly make life miserable for Move, for Move not to agree to let Realtor.com go. There might be a separation fee or something involved to avoid protracted litigation, but I just can’t imagine a scenario in which NAR tells Move to take a hike, and Move hangs on like some desperate girlfriend.
Thing is… if you’re NAR, what do you do to replace the 7.5 million unique visitors to Realtor.com under Move’s management?
Trulia and Zillow combined still have less than half the traffic of Realtor.com. So to kill the golden goose at this point in the game doesn’t strike me as an advisable strategy.
I have a better idea. Instead of spending $250m+ to buy Move, NAR could do a special assessment and spend $250m supporting new initiatives by the industry. Invest $25m into Localism and see what that can become (I’m frankly shocked that J-Dub isn’t making this argument). Throw $10m at the hordes of social media companies doing innovative things. Spend $50m setting up a real Center for Realtor Technology and challenge them to fix some of the widespread problems with data collection and distribution, or with geocoding and mapping, or with new ways of incorporating wireless and real estate. Still cheaper than spending $250m buying a public company, with far bigger upside for NAR and for the industry as a whole.
There are so many ideas that can really improve the industry that never see the light of day because funding for trying them do not exist. $250m is a ton of money. It could foster a whole environment of innovation in real estate — and with NAR leading the charge in investing in new technologies, new methodologies, new solutions to old problems, the private investment community will absolutely start to take notice. That $250m seed can start to attract hundreds of millions more in investment from the VC and private equity communities.
In fact, this can be done for half that amount. $100m NAR angel fund that fosters new ideas, then releases them into the wild of VC-land, could be the genesis of a transformation of the entire industry for the better. I am convinced more than ever that there is no shortage of talent in our industry — merely a shortage of will and of funding.
So, don’t look backwards into the past, NAR, in an attempt to fix something that isn’t working perfectly but is still working somewhat. Look forwards into the future to start a new cycle of change, but one in which the industry is not caught completely off-guard.