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Is “Find an Agent” the Next Big Opportunity for the Real Estate Industry?

zillow-find-an-agent

In 1981 Al Ries and Jack Trout published Positioning: The Battle for Your Mind. The marketing book became an instant classic. The authors were the first to suggest that consumers have room for just one “leader” in their minds for any given product or service.

  • Safe cars? Volvo.
  • Ketchup? Heinz.

And more recently:

  • Search? Google.
  • Electric cars? Tesla.

Ries and Trout further suggested that mindshare leaders tend to dominate their markets for as long as their products and services remain relevant. It follows then that the priority for any new business should be to establish mindshare leadership for their product or service and then rake in the profits once they have established their dominant position.

Who Owns “Find a Home”?
Zillow appears to understand the market-dominating power of positioning better than many in the real estate industry. They have spent the last 10 years – and $128 million – working hard to own the position of “find a home” in the minds of buyers and sellers.

They have been quite successful. By my math, the data presented in a 2014 Inman News article[1] gives the combined networks of Zillow and Trulia an 89% share of the total market for online real estate searches. Zillow is clearly focused on consolidating their leadership position with a substantial marketing campaign focused on positioning themselves as the best place to “Find your way home.”[2]

Interestingly, Zillow wasn’t the first real estate industry player to market themselves as the best place to find a home online. In fact, Zillow.com didn’t arrive until November, 2004[3], almost eight years after realtor.com first offered to help consumers “Find a Home” online in December, 1996[4].

Is “Find an Agent” the Next Big Thing?
Assuming the battle for “find a home” mindshare is largely over (and I understand that not everyone in the industry believes that to be the case), what’s next for the real estate industry? I submit that the next positioning battle for the minds of home buyers, sellers and real estate agents is “find an agent.” Ask 100 millennials where they would go to find a home to buy and most will probably name Zillow. Ask those same 100 millennials where they would go to find a real estate agent and most of them will likely give you a blank look. In other words, “find an agent” is a mindshare position that is currently up for grabs.

How Much is “Find an Agent” Worth?
Not only is “find an agent” up for grabs, it could be a significantly more valuable position to own than “find a home.” Consider these numbers: 2014 generated roughly $55 billion in real estate commissions. Given that agents will typically pay a 15-30% share of their gross commission for referrals[5], the total market size for “find an agent” could be as much as $8–16 billion.

To put that $8-16 billion into perspective, Zillow generated revenue of $326 million in 2014 monetizing “find a home.” Zillow, or any other player in the real estate industry for that matter, could match that $326 million in “find a home” revenue by capturing just 4% of the “find an agent” market assuming a very competitive[6] 15% referral fee.

Could “Find an Agent” Help Agents Get a Better Return on their Marketing Investment?
Based on my own anecdotal research for Zellba, a prototype marketplace my business partner and I developed for connecting home sellers to listing agents, many agents consider a 15% referral fee a better use of their marketing dollars than portal display ads. Or any other form of online/offline marketing for that matter. The key reason is that referral fees are an after-the-fact cost of revenue for agents – with a guaranteed return on investment. Agents only pay for a referral lead if and when it closes and they collect their commission. By contrast, traditional advertising, online or offline, is an upfront marketing expense for agents with no guaranteed return on investment.

Will the Rise of the “On-Demand Economy” Drive “Find an Agent”?
There is a generalization of this reallocation of marketing dollars that will accelerate the emergence of “find an agent.” That generalization is the rise of the “on-demand economy”[7] where local service providers spend less time and money generating awareness and demand, and more time competing for customers who are actively shopping for their services. The on-demand economy is here to stay and online leaders from Amazon to Google are racing to own a piece of the pie[8].

While the on-demand economy started in the home services industry, I don’t think it will be long before consumers expect real estate agents to compete for their business too. This will further fuel demand for “find an agent” services.

How Might “Find an Agent” Work for Buyers and Sellers?
“Find an agent” assumes that agents are actively or passively competing for buyers and sellers. Obviously, the basis for competition will be more sophisticated for real estate agents – who manage complex transactions with significant financial consequences for their clients – compared to say plumbers fixing dripping faucets.

I imagine consumers will want to compare agents across a combination of factors including:

  • Experience: “How many homes like mine, in my price range and my neighborhood, has this agent sold?”
  • Services: “Does this agent provide all the services I need or want? And any I don’t?”
  • Client Reviews: “What do other people think about this agent?”
  • Personality: “What do I think about this agent? Do I personally like and trust them?” and
  • Cost: “How does this agent’s commission compare to other agents that meet my criteria?”

Could Agent Reviews and Videos Level the Playing Field?
While experience, service and cost are important objective factors, I believe that subjective factors like agent reviews and agent personality have the greatest potential to level the playing field in this mix. Amazon and Yelp have conditioned us all to use customer reviews to drive our consideration and selection process for many of the products and services we consume today. It doesn’t take much imagination to predict that reviews will play a major role in agent consideration and selection going forward, particularly for millennials.

The good news for agents on the personality front is that different buyers and sellers will click with the personality and communication styles of different agents. Agent videos that allow buyers and sellers to see and hear agents before committing to an in-person meeting will be a key component of successful “find an agent” services.

Does Zillow Have the First Mover Advantage?
Is anyone moving fast to own “find an agent” in the minds of home buyers, sellers and agents? It looks like Zillow might be. Witness, for example, the recent relaunch of their agent matching service[9] with a significant emphasis on experience and client reviews. I suspect they’ve been thinking about the “find an agent” opportunity for quite a while because they’ve been collecting and publishing agent reviews since 2010[10]. While their early iteration of “find an agent” has a long way to go, it’s clearly a step in the right direction.

Let’s also remember and learn from two earlier industry attempts to help buyers and sellers find agents online: Redfin’s Scouting Reports[11] (2011) and realtor.com’s AgentMatch[12] (2013), both of which suffered a quick and painful demise in the face of significant agent backlash. I believe a more inclusive basis for matching that gives many more agents a seat at the table – including agent reviews and videos as I outlined above, for example – might have saved these early forays. Ranking agents based on performance data alone is not what “find an agent” is about. Like finding a partner for life, “find an agent” is a much more nuanced matching of objective and subjective factors where different agents will appeal to different buyers and sellers. It’s a delicate blend of Yelp and eHarmony.

I Believe the Field is Still Wide Open
While Zillow has a made the first major move amongst the incumbents, or at least the first that appears to be sticking, industry startups like AgentAce, HomeLight and UpNest have all recently landed multi-million dollar investments to launch dedicated “find an agent” services, and I believe the $8-16 billion opportunity is still very much up for grabs. Will Zillow capitalize on their early lead? Will Redfin or realtor.com try again? Will one of the aforementioned startups, or one we have yet to hear about, beat the rest of the field with singular focus and superior execution? Or will one of the other industry players step up to the plate and make their own run at owning this multi-billion dollar opportunity? Only time will tell. However it plays out, it’ll be fun to watch.

  1. http://www.inman.com/2014/07/29/comscore-data-show-potential-for-combined-zillow-trulia-to-dominate/
  2. https://www.youtube.com/watch?v=WZk__l8yCHo
  3. http://web.archive.org/web/20041121055020/http://www.zillow.com/
  4. http://web.archive.org/web/19961223194107/http://realtor.com/
  5. http://www.inman.com/2014/08/12/1-in-3-agents-and-brokers-would-pay-35-referral-fee-for-scrubbed-real-estate-leads/
  6. http://www.inman.com/2014/08/05/nations-biggest-brokerage-plans-websites-to-outflank-zillow-trulia-realtor-com/
  7. http://www.businessinsider.com/the-on-demand-economy-2014-7
  8. http://www.nytimes.com/2015/04/13/technology/amazon-google-and-more-are-drawn-to-home-services-market.html
  9. http://www.inman.com/2015/03/24/zillow-beefs-up-real-estate-agent-matching-tool/
  10. http://www.inman.com/2010/12/02/zillow-launches-agent-ratings/
  11. http://www.inman.com/2011/10/04/redfin-pulls-agent-scouting-reports/
  12. http://www.inman.com/2013/11/15/can-realtor-coms-bold-experiment-with-agentmatch-survive-agent-backlash/

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