Commentary by Craig McClelland
Real estate is an industry that I love. My family, our agents, and the customers we serve motivate me every day. Like many of my peers, I have watched many disruptors come and go. They come into our industry with bags full of investment capital, only to learn that real estate is a tough business that operates on very slim margins. For the most part, these industry challengers never turn a profit, run out of money, and fade away.
We have plenty of industry challengers today, including venture-funded companies and some public companies that are competitors. It is hard to compete when you are going up against industry challengers who measure success in growth, not profitability. For decades, investment bankers and venture capitalists have been calling to get our opinion about the latest upstart. Try as we may to explain, they still have a hard time understanding our industry.
Recently, however, we've begun to understand the value that these upstarts can bring. Matt Harris, a sharp managing director at Bain Capital Ventures, gave a presentation at a real estate tech conference earlier this year about this topic. Bain has watched many industry challengers burn out—not just in real estate, but in other industries, as well.
Based on Bain's research, industry challengers can make us better. I could not agree more. Sometimes Better Homes and Gardens Real Estate Metro Brokers partners with industry challengers, while other times we stay clear. Regardless of our position, though, we take in as much as we can so we can best understand how to react to the challenge.
Harris hearkened back to an old philosopher in the late 1700s who used the dialectical method—thesis, antithesis, and synthesis—to describe the triad of evolution. If you are soft on your philosophy references, join the crowd. The industry challenge—the thesis—enters the market. The market reacts—the antithesis—and then the synthesis happens as the market absorbs the challenger and incorporates their idea into their business practice.
After nearly a quarter of a century and hundreds of attempts by brilliant innovators backed by billions of investment dollars and countless people hours, two things remain pretty much the same. First, the vast majority of the real estate incumbents that exist today still enable the vast majority of all home sales. Second, the size of the residential real estate market has remained pretty much the same: None of these investments have made our pie any bigger, but have simply redistributed the pie's slices among new players entering the business. They are mostly gone, and we are here, working hard to help our agents and consumers transact.
Now It's Our Turn
Today, too many of our real estate agents spend hundreds—even thousands—of dollars a month with online advertising companies for very little return. Agents believe they must feature their listings on third-party sites even though they don't always see business come out of it. Our agents will tell you they feel like they have no choice because there was no other option available.
That's why the incumbents, Better Homes and Gardens Real Estate Metro Brokers and many other leading firms and MLS partners got together and started the Broker Public Portal (BPP). We believed that both consumers and professionals deserve better. There must be a better way, and we must collaborate in delivering it. Why should agents be working with companies who were doing things that were working against them, like not following Fair Display Guidelines?
Broker Public Portal with Homesnap emerged last year. It was the industry's turn to speak and provide an agent-centric, industry-first, pro-consumer way to secure listing exposure and leads for agents as an alternative to what advertising companies offered. As we succeed, they will disappear, and we will continue to operate.
Built for the Synthesis Phase
Broker Public Portal with Homesnap is a collaborative effort owned and operated by real estate brokerages and MLSs—industry incumbents—to deliver, with Homesnap's technology, a better home search experience. Our customers get the same comprehensive, real-time MLS data used by our agents—the people who list and sell homes, not ads.
The market is responding. Today, 145 MLSs representing 865,000 agents are offering an alternative way for their members to promote their listings and their personal brands online. Agents love the idea that brokers and MLSs have gotten together to provide a vast marketing network to offer nationwide listing exposure and lead generation.
Harris at Bain Capital explained that companies who support efforts (like BPP with Homesnap) are the firms that will dominate "the new phase real estate is entering: the Synthesis Phase."
Harris said we are moving away from the Challenger Phase, where companies "wake up in the morning and say, 'How can we displace, disrupt and destroy the existing industry structures, leveraging technology to do things differently?' That is squarely ending."
In the Synthesis Phase, it's all about collaborating with incumbents—brokers and MLSs working together, asking how we can leverage new technology to defend themselves against industry challengers and evolve as an industry. Harris said that this is great for the real estate ecosystem, but maybe not so much for the Challengers. Who is in their corner: Wall Street, or the hard-working professionals?
Follow the Money
Where is the market going? As far as early stage investments are concerned, there has been dramatic shrinking. Just 20 percent of funding is going to Challengers; the largest group being funded is those supporting the incumbents.
In fact, Harris said, "Money is going to next-gen technology. It's actually back to next-generation listing marketplaces that serve REALTORS®—that serve the industry by providing and facilitating more traditional types of transactions, but doing it in new school ways."
Doesn't that sound a lot like BPP with Homesnap to you? Who is coming over the hill now? It sure looks a lot like us, working smarter, with more collaboration. Our firm, along with our peers, support the effort to reimagine how our industry can deliver a national search portal on our terms, with our listings and our buyers agents to serve them. It's good to be an incumbent!
Craig McClelland is COO of Better Homes and Gardens Real Estate Metro Brokers and on the Board of Managers for the Broker Public Portal.
For more information, please visit www.brokerpublicportal.com or www.homesnap.com/bpp.
