Zillow, Redfin and the Tinderization of Real Estate

I’m deep into writing the December Red Dot, which will be on the Q3 earnings calls and what they portend for the industry, but there’s an angle to this I’m trying to work out. My initial thoughts were interesting enough that I figured I’d work them out with all of you.

I ain’t gonna front — most of this came from the fact that I read “Why Are Young People Having So Little Sex?” in The Atlantic just before reading the latest report on Zillow, Redfin, Realogy and Re/Max from Brad Safalow at PAA Research. Those of you who have heard me muse about the impact of sexbots on the real estate industry (it’s not good) should not be surprised I follow the research on  sex lives of Millennials.

Since I’ll be doing a lot of thought-meandering, let me give you the thesis right up front:

Real estate will be “tinderized” and a massive culture shift will take place, which forever changes the nature of lead generation.

Intrigued enough? Let’s get into it.

The Atlantic Article

So first, let me recommend that you go read the article in the Atlantic. Despite the titillating title, it’s actually quite good and quite sober. It references a great deal of sociological research by legitimate academics on the subject. Plus, it’s a great read.

The basic question that the article explores is why young people are having so little sex, compared to older generations. It goes through all sorts of possibilities, from the proliferation of porn to the economy and pressures of career and school and the hookup culture and so on and so forth. It even touches on sexbots! 🙂

But the passage that really got me thinking is this one, talking about the impact of technology on sex and dating:

Simon, a 32-year-old grad student who describes himself as short and balding (“If I wasn’t funny,” he says, “I’d be doomed”), didn’t lack for sex in college. (The names of people who talked with me about their personal lives have been changed.) “I’m outgoing and like to talk, but I am at heart a significant nerd,” he told me when we spoke recently. “I was so happy that college had nerdy women. That was a delight.” Shortly before graduation, he started a relationship that lasted for seven years. When he and his girlfriend broke up, in 2014, he felt like he’d stepped out of a time machine.

Before the relationship, Tinder didn’t exist; nor did iPhones. Simon wasn’t particularly eager to get into another serious relationship right away, but he wanted to have sex. “My first instinct was go to bars,” he said. But each time he went to one, he struck out. He couldn’t escape the sense that hitting on someone in person had, in a short period of time, gone from normal behavior to borderline creepy. His friends set up a Tinder account for him; later, he signed up for Bumble, Match, OkCupid, and Coffee Meets Bagel. [Emphasis added]

Now, I’m not young, not single, haven’t been on the dating scene since the late 90s… so I really have no idea. Maybe some of the younger readers could comment on how true or not true the Atlantic article is. But that’s really not important.

The important part comes next, in which the Atlantic reveals actual data that confirms what so many people instinctively know about these online platforms: He That Hath, Gets. Poor Simon above swiped 30 times to have one woman swipe right on him, meaning one match out of 30. But even after matching, he would send messages that were never returned 9 out of 10 times. So for 300 swipes, Simon had one text-based conversation.

From the article:

In all dating markets, apps appear to be most helpful to the highly photogenic. As Emma, a 26-year-old virgin who sporadically tries her luck with online dating, glumly told me, “Dating apps make it easy for hot people—who already have the easiest time.” Christian Rudder, a co-founder of OkCupid (one of the less appearance-centric dating services, in that it encourages detailed written profiles), reported in 2009 that the male users who were rated most physically attractive by female users got 11 times as many messages as the lowest-rated men did; medium-rated men received about four times as many messages. The disparity was starker for women: About two-thirds of messages went to the one-third of women who were rated most physically attractive. A more recent study by researchers at the University of Michigan and the Santa Fe Institute found that online daters of both genders tend to pursue prospective mates who are on average 25 percent more desirable than they are—presumably not a winning strategy. [Emphasis added]

There’s quite a lot of anecdotes out there that these online platforms provide oversized rewards for those who are already at the top. Women considered attractive would be deluged with swipes and messages, and 35-year old 6’4″ man who is a CEO of his own company driving a Porsche would have no problems going on a different date every night, while others like Simon just swipe and swipe and message and message as if into a void.

What’s Love Got to Do, Got to Do With It?

That’s fascinating, but what does Tinder and the plight of the average-looking woman have to do with real estate?

Let me quote from Brad Safalow’s research (as he gave me permission):

Zillow management and bulls would have you believe that only those agents that spend significantly online will generate meaningful transaction activity.

Of course real estate has been and always will be a referral business….

It is true that real estate has been and still is a referral business. As much attention as we pay to the portals and Redfin, online has hovered around roughly 10% of the average agent’s production for years. Safalow argues, based on some pretty solid survey data, that paid online leads just aren’t that big a deal for agents.

Almost half of the agents responding to PAA Research don’t pay for online leads. Another 26% do less than 5% of their transactions from online leads. Another 7% say it’s only 10-20% of their transactions, which is significant, but in a “meh” sort of a way. So only 5.3% of respondents say that online leads are 20% or more of their business. Then you have this:

The trends are interesting, to say the least. “Somewhat important” is just dropping, and “not really important” has shot up, while “Critical” is up slightly but less than from 2015, and 16% of responding agents say online leads are “Useless.”

As those of us in and around the industry knows, that fits in with everything we know about how business is actually done. Hell, I have a presentation that I give from time to time talking about how Service is Lead Generation. This is a “belly to belly” business of referrals.

What I’m wondering about is the “always will be a referral business” part of Safalow’s statement.

Enter Tinder.

When Did That Change?

As I mentioned, I’m a proud GenXer who thinks that the youth of today don’t know shit about real hip hop. Sorry, I digress. But I was young enough to have been single when online dating appeared. There was no iPhone, so Match.com was a website-only affair, over 56.6K modems, or if you were in a big city, maybe over ISDN. But I remember talking about internet dating. (Especially since I was a dotcom entrepreneur during Web 1.0 years, so heavily interested in anything web-based.)

What I distinctly remember was that we all wrote off these online dating sites because “they were bound to be sausage fests.” The stigma against online dating was really quite strong in those early years. I know not a single young woman of my acquaintance during those years who ever set up an account on a dating website (or admitted to it). Even those people who met online would lie about how they met.

“Boy, you gotta be some kind of desperate to go online!” was the overwhelming consensus among the young GenX.

Just about everybody met (a) through friends, (b) at work/church/group of some kind, or (c) at a bar/club/party. Without question, the most popular and most successful strategy for meeting your boyfriend/girlfriend was through friends, either through getting set up, or just meeting at a mutual friend’s party or some such. That’s how we met and dated.

It was, if you will, a belly to belly (quite literally in some cases of overcrowded NYC house parties) referral-based thing.

As Simon’s story above tells us, the world changed in seven years (for him). Scholars and academics and thinkers can debate when and how and why the world changed, but it’s impossible to deny that the world has changed.

The Atlantic is filled with examples that echo Simon’s plaintive observation, that hitting on someone in person had gone from normal behavior to borderline creepy. For example:

At first, I wondered whether Simon was being overly genteel, or a little paranoid. But the more people I talked with, the more I came to believe that he was simply describing an emerging cultural reality. “No one approaches anyone in public anymore,” said a teacher in Northern Virginia. “The dating landscape has changed. People are less likely to ask you out in real life now, or even talk to begin with,” said a 28-year-old woman in Los Angeles who volunteered that she had been single for three years. [Emphasis added]

Again, the article tries to figure out why, but for us, the important thing is not the why but the fact that the landscape has changed.

Why Wouldn’t This Happen in Real Estate?

If society has changed so fundamentally about something as deeply personal and fundamental as sex and dating, why in the world would it not change about buying or selling a house?

In the automotive space, we have seen the internet just wreak havoc on the traditional dealership model, and the relationship (if you want to call it that) between the car dealer and the consumer.

It wasn’t that long ago, because I remember doing it, that if you wanted to buy a car, you read some magazines, looked through the Auto section of the newspaper, and went down to the local Ford or Honda dealer and started talking to some pleasant salesperson. Then you did the whole test drive and negotiation thing, and drove home.

Now, anybody under the age of 60 has gone to Edmunds.com, to Autotrader, read online reviews, watched Youtube videos of car review guys, read up on all of the specs (“GTI Sport package has 220hp generating 258 ft.lbs of torque”) of not just the brand but the specific car, even if it’s a used car, done all kinds of comparison pricing… and then shows up to the dealership.

Sure, we accept that we have to sit through car commercial after car commercial while watching Monday Night Football, but imagine having some car salesperson calling you on the telephone to invite you down for a test drive. That’s borderline creepy, and annoying as fuck, and I’m likely to never do business with such a pushy dealer.

Your role, as a car salesperson, is to wait for me to contact you via the internet, by phone (which I got off the website), or by showing up (guess where I got the address from?), and showing me the specific car I’m looking for, taking me on a test drive, and then working on the paperwork.

In other words, the culture of car buying has changed. And it has changed in much the same way that the culture of sex and dating has changed. Now, He That Hath, Gets. A tiny difference in the sticker price could mean that 90% of consumers flock to your competitor, because the Internet makes sure that consumers see that they could save $200 on a $35,000 car by driving across town to your competitor.

So as the Wall Street Journal puts it, Car Dealerships Face Conundrum: Get Big or Get Out.

As Zillow, Redfin, Realtor.com and others continue to become more and more important to the real estate process (iBuyer, listing leads, etc.), and Zillow and especially Redfin start to guarantee agent quality (Best of Zillow program, longstanding Redfin NPS program), why would this culture change not happen in real estate?

And before you’re tempted to talk about how housing is not like cars, it’s not a commodity, it’s the biggest financial decision of your life, etc., remember that marriage is now being driven through online dating. Talk about non-commodity big decisions in one’s life….

Tinderization of Real Estate

If we accept, for the sake of discussion, that real estate can be “tinderized” in which websites and apps become the way that consumers match with an agent, and the culture changes to a point where all of the traditional SOI marketing and geo-farming go from normal behavior to borderline creepy, what does that look like?

To me, it looks like the Top 1% or the Top 5% who get the gold star, who have the most glowing reviews, who “look the best” in a mobile app, get the lion’s share of the leads and inquiries. Beautiful people who don’t need the help benefit the most from dating apps. Successful agents and teams who don’t need the help will benefit the most from real estate apps.

That implies that the 13.7% of respondents who said that online leads were “Critical” in the PAA Research survey might end up doing 85% of the transactions, and the vast majority of agents who don’t see transactions from online leads, who think they’re not that important, etc. suddenly find themselves in a world where anything other than waiting for online leads is borderline creepy.

At that point, they’re Simon, futilely swiping right 300 times to have one phone conversation with a potential client… who picks the Top Ranked Team across town anyhow.

And Redfin? Well, Redfin will be that 6’4″ 35-yo CEO who drives a Porsche and vacations in exotic tropical locales. “Oh yes, baby, you wanna list your house for 1%? Or I should just make your life easy and take it off your hands? Oh, you need to buy a place too after? I got ya covered — how about I do that for you for free, if you do the mortgage through me?” Sade got nothin’ on Redfin as a future smooth operator….

Your mission, if you choose to accept it, is to think about the changes in our culture for dating, think about the changes in our car-buying culture, and come up with reasons why the tinderization of real estate will not happen. I’d love to get your take on it.

And I’m 100% sure that Brad Safalow would love to get your take on it as well. 🙂

-rsh

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17 Comments

Join the discussion and state your opinion. Some comments may be held in moderation. I try to get to them as soon as possible, but may be traveling or unable to approve comments immediately. I do not censor comments, but reserve the right to remove anything that looks like spam, trolling, or just outright inappropriate.

  1. Yep. I agree with every. single. word.

  2. Rob,

    You have a lot of assumptions in the article. First, social media can ruin a persons reputation as quickly as it can build one. The 6’4” CEO who is a creep in real life will get outed real quick through social media. And there goes his dominance in the social app scene. The same goes for real estate, it is easy to be attractive when things are good and easy. What happens though when the market shifts and it is harder to sell and you have no skill (game) on the negotiating side because you have just been an “order taker” during the good/easy times. What happens when this is your revenue generator and now you find the market isn’t as easy as it once was. You start to struggle and desperation sets in, the facade is exposed and now you are not so attractive and the swipes because less frequent. What then?

    1. Hi Niko,

      Thanks for the comment. I appreciate where you’re coming from, but… not sure that gets to the heart of the issue.

      ONE 6’4″ CEO who is a creep will get outed. That doesn’t change the fact that poor Simon will still have one text exchange per 300 swipes. Some other 6’4″ CEO will get the girl instead. Or, conversely, 2/3 of the messages went to top top 1/3 “most attractive” women on OKCupid. One of them drops off the platform; 2/3 of the messages will still go to the top 1/3. That’s small comfort if you’re not conventionally beautiful by whatever societal standards are in play.

      Is it easy to be “attractive” when things are good and easy? Maybe, but “attractive” is relative. A 6’4″ CEO might be a 10, unless all the other men on the platform are 6’5″ former athletes who are hedge fund billionaires. Then he’s a 3. A beautiful woman might be a 10, unless the website in question is “DateSuperModels.com” in which case she becomes a plain-jane by comparison.

      So in real estate, if Agent X does 20 transactions during the good and easy times, and Agent Y does 60 transactions during the good and easy times, who wins if the bad times hit? Once Tinderization hits, and bad times hit, isn’t it more likely that Agent X (and a bunch of other “average-looking” agents) does 10 transactions and Agent Y does 600?

      The point is that the internet disproportionately rewards the top, those who need the least amount of help. I suspect it’s because the internet makes *comparing* so easy. So minor differences leap out and make a huge difference. We’ve seen this time and again, with Google, with Facebook, with Amazon, with Yelp, with social media, with YouTube, with online dating, with auto dealerships, and… maybe real estate?

  3. I’ve (still) love to see a Tinder for Agents exist in the world: https://geekestateblog.com/tinder-agents/

    But yes, I’m with you Rob. The internet does disproportionately rewards those who don’t need to help in the first place. Maybe a tinder for agents JUST shows production numbers, stats — and consumer swipes on the data “card” that is most appealing given their location. Though, that’s ignoring human reality, that we like and want to work/talk with people, not data/stats/companies.

  4. You had me at the Sade reference…..classic!

    Brian 🙂

    1. So all the way at the end then? 🙂

      1. Gotta shake it up now and again….make sure you don’t miss anything 😉

  5. First, how is this for a sign of the times. I was loving the Atlantic article AND it was recommended by somebody that I respect, YET I couldn’t sit still long enough to read the entire article. Oh yes, our culture has definitely changed.

    Second, Niko might have great points, but he misses the big point, which is people will definitely start with the creep and the order taker, if that is who they find first and those people somehow strike a chord with the consumer. You can be righteous (and right) Niko, but you’re going to starve waiting for those people to get to you in the offline world. Odds are greater that they will sour on our entire industry before they go back to offline agent shopping.

    I don’t know whatever happened to Chris Brogan, but he was the first guy to recognize that “know, like and trust” is the goal to win business in the new media era. Whereas sphere recommendations used to provide the “KLT” factor, everybody thinks they are an expert these days and are just a digital soundbite on their phone away from proving themselves correct. After watching our industry for the last 17 years from a uniquely digital perspective (I was an early online marketing consultant in RE), I can confidently say that we all need to be the real deal (like Niko advocates), but we better darned well also be the first person the consumer finds online (with the goods to back up the glitz). Even consumers who will go back to their sphere for a RE recommendation will have already done some amount of online research (most likely on Zillow or Redfin). If they’ve seen an agent on Zillow AND that agent is then also recommended by a sphere connection, game over, client locked.

  6. Oh boy, online dating sites and real estate leads. How can there be so many frogs in one pond!
    Like the woman with a beautiful picture, that doesn’t look anything like her picture when you meet her, real estate Internet leads have plenty of warts. Nothing thrills me more than when I call an “exclusive hot” lead, and I get some poor person that just got 6 calls from other agents in the last 10 minutes. They sob “But I only clicked the box that said ‘Send me more info’. How do I make the calls stop?”
    The fact is people like to play on their computer. On a dating site, they send out messages to dozens of members of the other sex. Then they never respond to replies. The same thing happens with real estate sites. They click the infobox on a dozen properties and then turn off their phone.
    If you really want quality leads, call 10 past customers a day. If you insist on spending money for leads, pay someone to call FSBOs and set up showings for you.

    1. No doubt that is the reality today, Jim. But I think you missed the part of The Atlantic article that’s the most interesting. That in the Tinderized dating culture, hitting on someone in person is borderline creepy. That, according to young people in the dating scene today, nobody asks anyone out in public, or even talks to them. Wow, how things have changed.

      Hence my question/point. What do you do when calling 10 past customers makes you a creeper forever to be avoided? Because I have to tell you that that’s where car dealerships are. ANY dealership that calls me is automatically off the list for consideration, because the Internet has completely taken over in that space.

      Why won’t that happen in real estate?

      1. Because at the end of the day, it’s a service clients biz. I don’t think most have ever cared about or valued their car dealer. I’d like to think at least some consumers like and value their real estate agents, but maybe I’m wrong.

      2. Drew,

        Doesn’t look like we’re morphing from a relationship/service business to a “whom ever answers the phone” / product driven market e.g. iBuying and selling (Opendoor), commission alternatives (Redfin) and platform/marketplace options (ZG)? IMO, that’s one of the big transformations that’s happening. Much like the Tinder comparison – users pick a “product” the “services” are a bonus and come after the product choice 😉

        Thanks,
        Brian

      3. Oops…too much turkey – Doesn’t “it”

  7. Internet leads for real estate agents, is still on its diapers. Sellers and buyers in this business, are looking to trust an agent.Real estate was, is and always will be, a relationship business.In dating sites you only can start building the relationships, but at some point you must meet in person. This is a face to face meeting which is almost forgotten due to using social networks.When you receive a lead, your number one goal is to a face to face meeting. If you expect miracles right from the start, then real estate is not for you.
    Real estate agents should have their names and faces everywhere possible. The competition will get more fierce and the cost of doing business, will rise.We live in a very expensive world and only the strong will survive.

  8. Just created a fun social media commercial addressing this very issue with my Linkedin friends.
    Still being edited, but once finished will send it as it will resonate:).

  9. Fantastic Rob. I think this is a very interesting Macro study for sure.

    Many will say that the referral business is live and well in dating, AND – that you can pick up people still at bars. Sorry but – I think the Atlantic only interviewed socially awkward people and not purely “nerds” – quite surprised that wasn’t caught.

    The same guy that has success in Tinder, likely has success at a bar. But I know men and women that aren’t 10’s on Tinder that succeed more than others because of their creativity and humor. The same 6’4″ guy may get a swipe, but if he has no game and is a dick, he won’t get the goal. So great – you get “cilcks/swipes” just another vanity stat… who is closing the deal???

    I think that it is ridiculous to say people don’t meet outside and at parties, etc. The actual problem is that these young men have no idea how to approach someone of the opposite sex WITHOUT being creepy… the same problem the average agent has with online leads. I think the real issue is that people have forgotten how to talk to each other, make eye contact and build relationships face to face. This has also crept into real estate marketing and lead gen. People are hooking up just fine without tinder – and they will find their agent just as before… However, I may toss out everything I just said, by also agreeing that the social reputation, and online presence, plus offering of sites like Redfin will beat perhaps an old school real estate approach – but – clients exist for both. i.e. Someone out there wants a one night stand, and someone out there s desperate enough… it goes both ways.

  10. Fascinating. I’m a new agent trying to break in to this industry. I’m betting big on social media / internet / video. But what I’ve discovered is that everyone in my town (40k) has an aunt/cousin/friend that is a realtor. So they naturally go to them instead of me. For those that live in smaller towns / areas – do you think the internet will be able to disrupt the tendency to use a relative or a friend?

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