I meant to get this up days ago, but between travel, client engagements, other writings, and an upcoming vacation, I just couldn’t. But if you’ve missed Part 1, you can check it out here.
In a nutshell, part 1 worries about whether the acquisition would be allowed to proceed without the government requiring that ListHub be spun off or sold off. It also speculates on whether large brokerages and franchises would be happy about a NEWSTOR.com extending into mortgages and elsewhere.
Since that post, and in my travels and conversations, I’ve heard quite a lot of opinions from agents, brokers, MLS CEO’s, Association Execs, and others about how this acquisition is a total gamechanger. In fact, no less an august personage than Brad Inman himself, the publisher of Inman News, wrote the following with the headline “Do Not Underestimate Rupert Murdoch“:
For certain, News Corp’s acquisition of Move changes the chessboard of online real estate. Any hubris at Zillow headquarters in Seattle has suddenly been clipped. But it eases FTC approval of the Zillow-Trulia merger because suddenly there is formidable competition.
Most importantly, this move will spawn greater innovation for the consumer and better offers to agents and brokers. Some will argue it gives the real estate industry relief from a monolithic distribution partner, solving a vexing problem in one clean sweep. But the industry should still be on its toes: Murdoch and Zillow should never be underestimated.
I cite Brad Inman because he’s such a respected part of the industry who speaks so rarely that when he does speak, it gets people’s attention. I also cite it because I think his views here are echoed in the views of so many others I’ve spoken with about the News-Move deal.
The core idea expressed by those folks is something like, “Now that News Corp. is in the mix, Zillow had better watch out!” That idea, in turn, is supported by two assumptions:
- News Corp and REA have far superior management talent than does Move/NAR, and freed up from meddling by NAR, the new Realtor.com is going to get super-duperific.
- News Corp will leverage its immense media assets to drive traffic to Realtor.com like Black Friday drives shoppers to WalMart.
Both of those assumptions may turn out to be true. But from where I sit today, I think both assumptions are rather… optimistic… or overblown… or simply wrong. News Corp’s taking over Move may turn out to be a gamechanger, of course, but I see nothing yet that suggests any such conclusion.
Let’s dive into why.
The Talent Issue
The first assumption, that Rupert will move in his people who are super-talented online real estate operators, is just… unsupported. One might actually say it’s a bit insulting and condescending to boot.
Again, citing Brad Inman (because of his stature in the industry, but many, many others have expressed similar views to me):
I predict Murdoch will quickly move in his own team — he always does. He will wait to overhaul the offer, but make significant incremental improvements, his pattern in digital. He will, however, invest in innovation and expand realtor.com’s reach.
I expect his team in Australia’s REA Group to make a significant contribution after the acquisition.
I also thought News Corp might quickly move in new management. But the “[Murdoch] will invest in innovation and expand realtor.com’s reach” piece… where does that come from?
What innovation has REA Group (and realestate.com.au) brought forth to the world of online real estate since its founding? Did they invent some new amazingly awesome user interface that puts all other user interfaces to shame? Did they invent the first mobile app? A new algorithm for totally accurate predictive analytics? I mean, maybe they did, and as a foreigner, I’m just not aware of it.
I include a screenshot of realestate.com.au‘s property search results page to the right. You tell me if you see something mindblowingly innovative there, because I can’t find it. Go to the site and play around as well. It’s a clean, well-designed, property search website. But there’s hardly anything one can point to as innovative there.
To be sure, REA makes a boatload of cash. Some of its ads are over $8,000 per month, which is causing rebellion amongst the ranks of the real estate brokers/agents over in Australia. But it ain’t innovation. And as Brad Inman himself admits, that business model is hardly applicable to the United States where there are competitors, the whole MLS structure, and sellers are not used to paying for advertising/marketing costs.
The REA Group likely does have a bunch of people who are very talented at operating an online real estate portal. Yet, it isn’t as if the people at Move somehow fell into their jobs with zero background in the web space. Perhaps I’m not the best person to judge such a thing, but Steve Berkowitz, Move’s CEO, does have quite a track record in operating successful web businesses. Errol Samuelson didn’t leave Move until early this year; he was President of Realtor.com for years and years. Is it really that likely that the other senior executives at Move, the junior executives, the managers, the developers, the people who work there today are just idiots who fell into their jobs?
In other words, I judge it highly unlikely that the smart and talented people at REA Group are somehow lightyears ahead of the folks currently at Move in terms of brains, will, or business savvy.
The one thing that might make a difference is if the post-acquisition relationship with NAR is fundamentally changed. I think it’s clear to any fair-minded observer that the main reason why Realtor.com went from #1 to #3 (and falling) website in the real estate category is meddling by NAR and refusal by NAR to allow Realtor.com to do what it needed to do. NAR would not have done things like make “historic changes” to the Realtor.com operating agreement in 2013 if that were not the case.
But reports thus far from the acquisition news are that News Corp will take on much, if not most, of the restrictions in the operating agreement:
The realtor.com operating agreement will be modified “a little bit” as a result of the deal, he said, but declined to disclose those changes. Still, he said the changes made to the agreement last year were more “substantial” and gave Move and realtor.com more flexibility to be more competitive, which helped make Move “more attractive” to companies like News Corp.
NAR and Realtors will still have a say in how realtor.com is run, Goldberg said, with its seats on the advisory board. RIN staff will also stay in place to take member feedback and work collaboratively with the operator. The operating agreement also continues to require NAR approval in regards to advertising changes.
So… better perhaps, since NAR won’t have board seats, but will have advisory roles. But seems to me like things won’t be that dramatically different.
On the Whole Media Supercharging Thing
More critical to the hopes of the Move-NAR-News Corp people is the assumption that News Corp will be able to leverage its significant media assets to grow traffic to Realtor.com. I addressed some of the expectations in Part 1.
I’ve given the concept a bit more thought, and I think there’s something a lot of folks in real estate are missing.
Let’s get one easy one out of the way first: News Corp is not Fox.
More than one MLS CEO, AE, major brokerage owner, and industry observer I’ve spoken to recently made comments along the lines of, “Why, when Realtor.com is being promoted on The Simpsons and on Fox News, it’ll be explosive growth time!”
Well, the new News Corp — the company acquiring Move — is not the old News Corp. From Wikipedia:
On 28 June 2012, Rupert Murdoch announced that, after concerns from shareholders in response to the recent scandals and to “unlock even greater long-term shareholder value”, News Corporation’s assets would be split into two publicly traded companies, one oriented towards media, and the other towards publishing. News Corp’s publishing operations were spun out into a new News Corporation with Robert James Thomson, editor of The Wall Street Journal, as CEO. The present News Corporation, which retains most of its media properties (such as the Fox Entertainment Group and 20th Century Fox) and Murdoch as CEO, was renamed 21st Century Fox. Murdoch remains chairman for both companies.
While Rupert Murdoch may be the chairman for both News Corp and 21st Century Fox, most of the really big media assets, like the TV networks and Fox Entertainment, went with 21st Century Fox. The new News Corp actually has these assets:
- Dow Jones & Company, a New York City-based financial publisher, and owners of the Wall Street Journal
- News Corp Australia, an Australian newspaper and magazine publisher, and owners of Fox Sports Australia and a stake in pay-TV provider Foxtel
- News UK, a British newspaper publisher
- New York Post, a daily newspaper in New York City first acquired by Rupert Murdoch in 1976.
- HarperCollins, a major book publisher
- News America Marketing, a distributor of advertising and coupon promotions
- Amplify Education, a digital education company
Now, I’m not suggesting these aren’t impressive media assets, but the Australian and UK assets aren’t going to move the needle much for the entirely U.S.-based Realtor.com, right? Can we also agree to Amplify Education, whatever that is, isn’t exactly going to add 10 million monthly visitors to Realtor.com? And try as I might, I’m not sure that I see HarperCollins, a book publisher, doing that much for Realtor.com’s traffic — even if every Harlequin Romance novel from now on features a sexy hunky REALTOR romancing the heroine while selling her a house by using Realtor.com.
So we’re left with the New York Post and Dow Jones for the most part, with News America Marketing potentially playing a small part.
The New York Post is a large newspaper, yes, but it isn’t even number one in its home market of New York metro area. It gets 18 million unique visitors per month, of which 80% comes from outside the NY Metro area. But somehow, I seriously doubt that someone from Topeka is going to the NY Post to look for homes. Efficacy of random banner advertising to someone from Topeka about Realtor.com is… well… shall we say “unproven”?
And lest we forget, New York City itself, the core central market of the Post, is a unique real estate market that (a) doesn’t have an MLS, (b) has three major brokerage firms, all of whom have direct syndication deals with existing portals, and (c) has the lowest homeownership rate in the U.S. due to prices and demographics (aka, lots and lots of renters).
So Let’s Talk About Dow Jones
The big asset, obviously, is Dow Jones, which comprises of:
- Wall Street Journal
Impressive assets, to be sure, and as News Corp itself said, we’re talking about 500 million monthly page views here. (Of course, 500 million page views is not 500 million unique visitors, but I digress….)
Upon further reflection, though, I can’t get over the demographics of the Dow Jones assets.
The WSJ is the largest national newspaper in the U.S. by circulation with over 2.2 million subscribers. WSJ has some of the most desirable audience characteristics around, given the kind of person who reads and subscribes to the WSJ: high level executives, investors, money managers, corporate lawyers, government policymakers, etc. etc.
Barron’s is far smaller, and far more focused on the investment community:
It reaches an influential audience of financial advisors, affluent individual investors, financial-services professionals and senior corporate executives.
MarketWatch is also a more narrowly focused website for investors, even though it is one of the largest investor sites out there. From its self-description:
MarketWatch tracks the pulse of the markets. The site provides breaking markets news and advice, personal finance information, real-time commentary and investment tools and data to engaged investors with more than 16 million visitors per month.
All of this is to say that the Dow Jones network is an excellent — possibly unparalleled — media platform if you’re in luxury real estate. If you’ve got a $25 million waterfront mansion in the Hamptons to sell, the Dow Jones network is where you want to be.
If, on the other hand, you need to sell a $200,000 3BR/2BA single family residential in Topeka, KS… I don’t see it.
Doesn’t the same analysis apply when we think about the traffic that Dow Jones can drive to Realtor.com? I mean, even if we assume that promoting the hell out of Realtor.com on WSJ, Barron’s, and MarketWatch would work (and see below on that point), and tens of millions of wealthy investors, business tycoons, and hedge fund managers descend upon Realtor.com… those men and women are most likely interested in a few dozen high-class neighborhoods. That could be great for Realtor.com in terms of advertising luxury properties, but how much will it help the vast majority of home sellers — and therefore the vast majority of brokers and agents?
Ask yourself this question, if you don’t live in NY, Washington DC, SF, LA, Chicago, and Boston. How many of your friends, neighbors, and colleagues subscribe to the Wall Street Journal? Those that do subscribe… what kinds of jobs do they have? Are they the norm in your community?
In a sentence, the issue is this: the Dow Jones audience is hardly the average American consumer.
That’s a great thing if you’re the WSJ and want to attract luxury advertisers like Mercedes Benz and Four Seasons Hotels. It’s not such a great thing if you want to attract folks who shop at Target and buy the average single family home.
One Thought on Fox
It may be, of course, that Rupert Murdoch as the Chairman of both News Corp and 21st Century Fox may decide to promote the hell out of Realtor.com on the far bigger, far more demographically suited, and far more interesting assets of Fox. That includes Fox Television, Fox News, Fox Sports, the NFL on Fox, etc. etc. That could happen.
Thing is, unless the executives at the various Fox business units are compensated on something other than how they grew their businesses, grew their revenues and profits, I rate such a thing as highly unlikely.
If they’re making billions on existing TV advertising — which they are — why would Fox choose to forego a bunch of money to help another multi-billion dollar company with its advertising costs? Even if they’re “sister” companies?
Maybe they’d offer some “friends and family” advertising rates, and maybe they’d take some excess inventory and give it to News Corp, or maybe give them some low-demand inventory (4:30am Saturday morning, yay!) but… give up 30 seconds of advertising on The Simpsons? Really?
Since Rupert Murdoch is not the sole shareholder of 21st Century Fox, were he to decide to cannibalize the revenues and profits of that company in order to benefit one business unit of another company of his, I’d rather think his shareholders would think that’s odd. And by “think that’s odd”, I mean, “bring lawsuits”.
It could happen, but I just doubt it very much. So let’s just cross that off the list as a humongous benefit of having News Corp acquire Realtor.com.
More on the Cross Platform Media Dominance Strategy
There is, however, an even further question mark on the entire cross-platform strategy thing.
In all of the exuberance around News Corp acquiring Realtor.com, it’s as if the industry has plain old forgotten about a relatively recent experience. For example, here’s Bob Goldberg of NAR quoted in Inman:
“We need the thrust of a strong media player that can bring far more to the table than we’ve experienced before.”
The acquisition, Goldberg said, is a “huge win” for members because it will bring them and their homebuyer and seller clients more exposure to consumers visiting News Corp’s digital and print platforms, which include a variety of newspapers in the U.S., the United Kingdom and Australia.
Have we all forgotten about HGTV’s foray into online real estate? Remember Frontdoor.com?
In 2007, Scripps Networks, the company that owns HGTV, DIY Networks, Food Network, Cooking Channel, Travel Channel, and Great American Country launched a real estate portal named FrontDoor.com to much fanfare. It did so in partnership with some of the largest brokers in the country. From the press release contained in this story about the launch:
To launch FrontDoor, Scripps Networks has partnered with other leaders in the home and shelter category including Realogy Corporation, parent company to premier real estate brands including CENTURY 21®, Coldwell Banker®, ERA® and Sotheby’s International Realty®, whose franchise systems total approximately 250,000 sales associates in the U.S., all of which have contributed to the more than 1.2 million property listings already available on FrontDoor; and Leading Real Estate Companies of the World, whose 700 top independent brokerage firms will also provide access to their substantial property inventory.
“We’re pleased to be inaugural partners with Scripps Networks and HGTV for the launch of this exciting new initiative, FrontDoor.com,” said Alex Perriello, president and CEO of the Realogy Franchise Group. “This is a terrific fit with our online listings distribution strategy where we are actively placing our respective brands’ property listings with the most highly trafficked online search engines and the most relevant Web sites used by today’s homebuyers and sellers.”
The advantage FrontDoor offers over other real estate listing services is the demonstrated leadership and expertise of HGTV — seen in more than 95 million U.S. households and the No. 1 online resource for home and garden content — combined with a rich, video- and image-centric experience. Tapping into the deep resources of the Scripps Networks library, FrontDoor already offers more than 300 videos, including original webseries created exclusively for FrontDoor, with more video content in development. The site also provides real estate and home finance tools and calculators to help consumers translate crucial knowledge to understandable terms.
Was Scripps Network not a “strong media player” in 2007? Did they somehow fail to bring much to the table? If what makes News Corp’s acquisition of Realtor.com awesome is that it can bring REALTORS more exposure to consumers, was Scripps unable to do the same for its partners in Realogy and LeadingRE?
In fact, wasn’t Scripps Network a superior media platform for an online real estate play? I mean, their TELEVISION channels are in 95 million households. We’re not talking about poorly defined “unique user” or “page view” metrics but about verified Nielsen ratings and cable system deliveries here. We’re not talking about newsprint that fewer and fewer Americans are reading, but about television with all of its excitement and ability to impart emotion.
And for years, HGTV and Food Network and Travel Channel and DIY Channel ran promotion after promotion touting the new FrontDoor.com website. I know, because I was and remain a pretty avid consumer of HGTV and Food Network programming. (My kids just love Chopped, and I love Diners, Drive-ins and Dives, for example, so I’ve been overexposed to Scripps programs and to the advertising and promotions on Scripps channels.)
FrontDoor.com is still around. It still has hundreds of videos on it, and tons of unique content.
But in February of 2013, FrontDoor joined the Zillow Network, and all of the property listings and property search on FrontDoor is now powered by Zillow:
Beginning in the second quarter, Zillow will be the exclusive provider of all real estate listings for HGTV’s FrontDoor, giving agents and brokerages who list on Zillow substantial additional marketing for their listings, and Premier Agents’ will receive exposure for their local ads through FrontDoor. In addition, home shoppers on FrontDoor now will have access to Zillow’s robust search experience, including for-sale and for-rent listings, Zillow’s unique pre-market inventory, and Zestimate® home values and Rent Zestimates on approximately 100 U.S. million homes.
“We’re thrilled to welcome HGTV’s FrontDoor to the Zillow Real Estate Network. Zillow’s comprehensive collection of real estate listings and data is a perfect complement to FrontDoor’s useful and entertaining content about homes,” said Zillow CEO Spencer Rascoff. “This partnership also brings enormous benefit to real estate agents and brokerages who send listings to Zillow, by exposing those listings to home buyers on four leading property portals on the Web.”
As part of the partnership, Zillow will feature select home improvement video content from Scripps Networks®, which owns HGTV and FrontDoor.
“Partnering with Zillow makes sense for the HGTV brand and our digital real estate property, FrontDoor.com,” said Vikki Neil, senior vice president and general manager, digital, Scripps Networks Interactive. “This is a marriage of strengths. We create amazing original home-related content, and Zillow provides the best real estate search experience for our users.”
Given that FrontDoor.com was launched to compete with Zillow and Trulia and Realtor.com and so on… that “partnership” sounds a whole lot more like “surrender” to me.
It might be that News Corp — especially with REA Group’s involvement — may somehow be far better than Scripps Networks at leveraging that whole cross-platform exposure thing. It might be that somehow, the WSJ and MarketWatch audience will flock to Realtor.com in a way that HGTV’s viewers did not flock to FrontDoor.com.
But at the very least, we might take notice of at least one instance of a “strong media player” using its media platforms to drive traffic to a real estate website and failing miserably.
So Wherefore Hope?
To be sure, the acquisition by News Corp — an $8 billion company with $615 million in earnings, $3.1 billion in cash, and $854 million in cash flow — would provide Move and Realtor.com with far greater financial strength. At the very least, Realtor.com could have the money with which it can buy more advertising, more marketing, and more talent.
Depending on the final arrangement of the deal, it could be that NAR’s influence over the new Realtor.com is reduced to a point where Move can really do some things to improve traffic and products.
We might see some new talent injected into Move, perhaps a whole sea change in the corporate culture over there, whether from REA Group or elsewhere. (And there is real reason to think that Move might be in desperate need of such a culture change, given how the whole Errol and Curt defections went down.)
Those are all potential positives. But the entire line of reasoning around the acquisition that depends upon News Corp as a media player with ginormous media assets that it can leverage to change Realtor.com’s fortunes overnight seems suspect to me. We’ve seen such a thing before in our industry, and it did not work. There are real issues with the media properties of News Corp and their fit with the overall real estate consumer market.
And Realtor.com remains a distant third behind Zillow and Trulia… who by the way merged.
So yes, there is reason for some hope, but let’s everybody tap the brakes a touch? Otherwise, it starts to look a whole lot like irrational exuberance than well-reasoned hope for the future.