distribution channels
Issue 129 - April 7th, 2023
What is the one simple thing that has pushed the real estate brokerage industry evolution forward and had a MAJOR IMPACT on business model concepts, ideas, and innovation over the last 30 years to present day?
When I think long and hard and try to come up with one simple thing that I think has driven so much of the change in our industry it is this: the methods of property listing information distribution.
This simple concept has impacted the industry and thought process of broker-owners, CEOs, and entrepreneurs way more than most people realize over our industry’s lifetime.
We all want to get our listings sold - that is why we are in this business. When a property sells, agents get paid.
Let me break this down into 2 very different time-frames that I believe define our industry - pre-Zillow (Pre-Mainstream Internet Usage) and post-Zillow (Post-Mainstream Internet Usage).
Pre-Zillow and Pre-Mainstream Internet Usage aka THE DARK AGES
Listings were solely distributed via brokerages and their media efforts which included weekly meetings, printed flyers shared in the office, and most importantly via newspaper ad purchases in the weekend newspaper. Open Houses were invented to push people to listings on the weekends via these ads. The dominant brokerages had the most ad space and hence attracted the most agents and held onto market share in their local markets.
As an agent, you had to be affiliated with a large or well-known brokerage firm in your area in order for your listings to get DISTRIBUTION. Your clients or potential clients chose a listing brokerage and firm way more on the firm’s name and distribution efforts over the individual agent name.
The power in these times was heavily in the BROKERAGE’s favor.
The role of the brokerage & agent was “information gatekeeper”; client’s needed the information so they had to go to the brokerages to get the information. Agents had to be affiliated with these firms to know about other listings and to get their listings in front of more agents.
Brokerage business models were built in a way to handle this type of listing distribution mindset: lavish offices, large staff of people to handle marketing items and agent support items, and a large fee to compensate the brokerage for these efforts (which was warranted in this type of environment).
Agents happily paid large “commission splits” to their brokerage house because the brokerage provided a ton of value in this time due to the way listings were distributed. An individual agent could never compete with the power of the brokerage in these “Pre-Zillow and Pre-Mainstream Internet Usage” Dark Ages.
Post-Zillow and Post-Mainstream Internet Usage aka THE NEW WAY
As internet usage gained steam, Zillow broke down the barriers on listing distribution and made the exact same information that was available solely to agents and brokerages available to the general public. This is still not mentioned or recognized enough as a monumental change in our industry, but the day Zillow launched, the industry changed way way more than most people want to admit.
The value of the BROKERAGE NAME immediately dropped the day Zillow launched, and over time since then the AGENT NAME has evolved into being much more important than the BROKERAGE NAME.
The methods and money required to distribute listing information has also radically changed over time since this day. The old methods are no longer needed for agent’s to get deals SOLD in today’s world.
Distribution of listings is now just a commodity as all agent’s have the power to push listings in similar channels. Newspaper ads are non-existent for the most part, and the role of the agent is no longer “information gatekeeper” but instead “consultant and concierge”.
The power has shifted from BROKERAGE to AGENT.
The cost to run a business for an agent has dropped significantly due to software becoming cheaper and listing information being widely accessible to all.
I say all of this to highlight the fact that some of the largest brokerages in the world today are still operating their company from a business model architecture perspective as if we are living in the past. The thought and mindset of brokerage business models has not kept up with the pace of innovation and change with the rest of the world. In the old days, brokerages provided much needed marketing and distribution exposure to their agents which was expensive and cost a lot of money. Agents happily paid these fees because it helped them operate their business and get deals SOLD. They needed access to these DISTRIBUTION CHANNELS.
In today’s world, the cost to run a brokerage business that puts agent’s first has radically dropped in cost. The brokerages of the future operate in the cloud with nimble and light operating expenses. Investments are made in processes and support systems to empower AGENTS to succeed, and the business model architecture of the firms of the future looks nothing like these newspaper ad driven business models of the past.
Most people are still living in the Dark Ages when it comes to this mentality of how a brokerage should operate in today’s world. The industry is changing much faster than most people realize. Agents are the most important people in the real estate ecosystem, and if agents are empowered to run their business in the best way possible for themselves then all of their customers (home buyers and sellers) will benefit greatly as a result of this innovation in the value chain between “brokerage and agent”.
Newsworthy Links To Share
Pinnacle Realty Advisors’ CEO on brokerage as a service business model
How Agents Can Prepare for the Spring Housing Market with Sam Sawyer & Adie Kriegstein - Propstream Blog
Housing Is Turning Out to Be a Lousy Shelter for Investors
Apartments have been the second-worst performing type of real estate in the U.S. after offices over the past year.
Journeyman plans massive multifamily project: One of Austin’s most active developers has big plans for 58-acre site in Onion Creek
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Borden Dairy Plant Redevelopment Moves Forward in East Austin
Austin’s Planning Commission approved a zoning change at its meeting last night clearing the way for the redevelopment of a roughly 21-acre industrial site currently occupied by the Borden Dairy site.
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Official office space: The amount of office space filled by government workers is staggering. The federal government is the largest office tenant in the country, with over 43 MSF leased. GSEs make up 20%, or $1.1T, of the $20T CRE market. (CRE Daily)
Bob Lee, the chief product officer of crypto-based global payment startup MobileCoin and the creator of Cash App, was stabbed to death in San Francisco. (NYT)
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Strong demand and low inventory means fewer discounts for homebuyers
Demand is much higher than I expected coming into the year. I’ll show you the data points I’m focusing on now.
The number of millennial homeowners doubled between 2017 and 2022 with just over 18 million now owning a property, according to RentCafe analysis.
The urban office market is officially in dire straits, and the race is on to get some sort of help from the government before catastrophe strikes.
Blackstone’s BREIT Saw $4.5 Billion of Withdrawal Requests
Shareholders asked to redeem $4.5 billion last month from Blackstone Real Estate Income Trust “in a month of tremendous market volatility and broad-based financial stress,” the company said Monday in a letter. BREIT allowed about $666 million to be withdrawn, or about 15% of what was requested.
Extra Space Storage to Combine With Life Storage in $12.7 Billion Deal
The $12.7 billion deal would create the largest storage-facility operator in the U.S. by number of locations.
Sunbelt Cities Nashville and Austin Are Nation’s Hottest Job Markets
Young job seekers are heading to the hiring boom in Southern cities with robust service industries, a relatively low cost of living and vibrant music scenes.
Miami Developers Court New York Restaurateur to Help Sell Luxury Condos
Since the pandemic, more landlords have facilitated new high-end eateries.
Serhant Expands to Six Markets Across the East Coast
Serhant has poached brokers from Elliman and Compass to expand the New York City brokerage from Florida to Connecticut.
PROPERTY HIGHLIGHT: Bay Area 'fairytale cottage' hits market for $5.2m
A 'fairytale cottage' in the Bay Area that offers an ocean view out of every window and stretches across nearly 2,500 square feet, is on the market for a cool $2.5 million.
(Credit: SSSB23)