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Middlemen cut out by internet in most industries, but not real estate

The internet has ushered in the era of dying middlemen, yet the web has given rise to even more middlemen in real estate as startups continue to attempt commoditizing listings.

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Goal of the internet: destroy middlemen

Remember back when the internet was going to destroy the middleman? The New Yorker ran a famous cartoon back in 1997 with seven business people sitting around a conference table, and the caption reads, “On the one hand, eliminating the middleman would result in lower costs, increased sales, and greater consumer satisfaction; on the other hand, we’re the middleman.”

While I doubt the cartoon’s creator had real estate in mind, real estate agents and brokerages have been grappling with how to successfully merge the off-line world of real estate with the on-line world for well over a decade. However, as 2013 begins the internet hasn’t eliminated the middleman in real estate but instead created more!

Zillow and Trulia, for example, are both advertising business that run on the display of real estate information. They are the new middlemen, and they are profiting quite handsomely – primarily by selling ads to real estate agents while providing consumers with information that may or may not be accurate. In fact, one could cynically argue that they have a strong incentive to make the listing agent information difficult for a consumer to discover, because that increases the value of the ads they are running alongside a particular listing.

I’m not here to say that Zillow and Trulia are the enemy or the answer, but to instead ask why most industries have found the internet to be a phenomenal way of reducing middlemen and costs while the internet has created more middlemen in Real Estate. To answer this, I want to compare real estate to two industries – book publishing and travel.

How publishing middlemen were destroyed

Amazon.com, for example, started out to change the publishing industry by making it just as easy to buy a book at home as it was to buy in a store. As the world quickly discovered, amazon.com actually had some advantages by being online. For example, they could stock millions of books, unlike local stores that were limited by their physical space. When amazon.com started, way back in the 1990’s, the kindle had yet to be invented, so it wasn’t even a matter of re-inventing book delivery, this was just about being able to create the world’s biggest inventory of books because they could build warehouses anywhere cheap land was available near a major airport.

But when you buy a book, you always get the same thing: a bunch of words. They may be printed on a page and bound in soft cover or hard cover or they might be digitally displayed on a screen. Regardless, though, you buy a book and you get your words. And you can read those words pretty much anytime and anywhere you want, with very little possibility that things will go wrong. And if things do go wrong? It’s probably not a big deal. Regardless of how much the book cost, it isn’t a financial investment that is a part of your retirement strategy. And no matter how good the book is, you would never invite friends over to just look at your book (you might be a member of a book club, but book clubs get together to discuss the book, not to actually look at each other’s copy of a book).

How travel middlemen were destroyed

The internet has also transformed the travel industry. While we used to go to a travel agent to plan out a complex trip and book tickets, most people do those things online now. And while a plane ticket might be more expensive than a book in the above example, a seat on a plane is, well, a seat on a plane. No one ever sees a really cheap seat and wonders, “Hey, is that seat located inside the pressurized cabin or is it bolted out on the wing?” While there are a variety of seats available within a plane – coach, business or first class – they all essentially do the same thing, and once you have consumed your plane ticket, you move on with your life. Perhaps your plane trip has resulted in the memories of a lifetime, a new client, or a visit to see a long-lost friend. Unlike a home, a plane trip or a book is a consumable item.

How middlemen have thrived in real estate

Real estate is fundamentally different for a variety of reasons, but let’s look at a few. For one thing, brokerages have never possessed a physical inventory of homes for sale. No real estate agent has ever offered to take anyone back to the warehouse to see this year’s available homes, although we have put millions of people in our cars to go visit the homes available in a specific neighborhood. But there is no economy of scale to be gained with a really big warehouse of homes, because homes don’t exist in warehouses, they exist in neighborhoods. Furthermore, while two homes may be very similar, no two homes are identical. Real estate, by its very nature, cannot be commodified.

Websites now offer consumers a wealth of information (some accurate, some less-so) about homes online, yet I’m willing to venture that there is nothing – ever – that will replace physically visiting a home you are interested in purchasing. Why? Because no matter how much information you put online, sometimes the most important things about a home are the things that you can’t see in the marketing text or the pictures. For example, is the master bedroom window under a streetlight that shines excessively bright at night? Is the home at the top of a steep hill that would not be easily accessible by a disabled individual? Does the breeze from a landfill usually blow odors towards the house? Is the next door neighbor a lunatic who throws parties until 4am on a regular basis? In other words, what makes a home desirable is not just the presence of some features, but also the absence of certain other features. Making valuation even more complex, home buyers often don’t always agree about the value of particular features.

Homes differ from both other consumer goods and financial instruments because they have an innately physical and fixed presence, and they exist in a context of other homes and people. Regardless of what book you place on either side of War and Peace, the book in the middle will always be War and Peace. But a home with two great neighbors is more valuable than a home with two horrible neighbors. Homes are also not a disposable consumer good. No one ever says, I’m finished with that home lets put it on the shelf and go buy the sequel. And while people might like to brag or worry about how their investment portfolio is doing, no one ever invites you to come over and enjoy the physical presence of their stocks or bonds.

If I had to sum it all up, I’d say the most distinguishing feature of real estate is permanence. Not only are the permanently and innately tied to their environment, people purchase homes for the long-term. Real estate is neither consumable nor disposable, which may explain why rental sites like AirBnB do well – if you get a bum vacation rental, you aren’t stuck there for the next three – five years of your life.

The takeaway

Regardless of the unique traits of real estate, consumers clearly want accurate information about homes online. In 2013, I think the real estate industry owes it to our clients to find a way to deliver that information with fewer middlemen.

Matt Fuller, GRI spends most of his waking hours obsessing over all things San Francisco real estate. He is half of the successful JacksonFuller real estate team, and also writes at the San Francisco real estate blog about all things SF. He is also a father, husband, foodie, avid runner, and slave to his Newfoundland and Basset Hound dogs.

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17 Comments

17 Comments

  1. markbrian

    January 10, 2013 at 2:27 pm

    Ummm…couldn’t it be argued that real estate agents are also middlemen? Not trying to start a $#!+ storm or get attacked. Just saying…

    • Matt Fuller

      January 10, 2013 at 4:39 pm

      Real estate agents make the market by bringing buyers and sellers together. Back in the 1990’s the industry was terrified that the internet would be the end of agents, but here we are in 2013 and not only are agents still in business, we’ve managed to create more middlemen. I think it’s a fascinating contrast to many other industries, I’m sorry if it came across as complaining, I find it puzzling.

      • Mark Brian

        January 10, 2013 at 4:51 pm

        Matt I didn’t really think you were complaining. I was just playing Devil’s Advocate LOL. Excellent article and I look forward to reading more from you!

        • Matt Fuller

          January 13, 2013 at 1:22 pm

          Thanks, I appreciate it! 🙂

  2. Ron Aguilar

    January 10, 2013 at 3:10 pm

    I agree with your takeaway.

    • Matt Fuller

      January 10, 2013 at 4:40 pm

      Thanks!

  3. Chad McBain

    January 10, 2013 at 9:12 pm

    Matt I applaud you lol. Seriously though I have made very similar statements to our team for years now however you articulate it better then I. Spencer Rascoff even stated as much @ the WTIA meeting. The video can be found on youtube and his points about the fact Realtors are not going away start around the 31-33 minute mark. A point that you make that should be heeded is making the consumer experience so much better if you wish to thrive, amen. Very well written, I look forward to more of your posts.

    • Matt Fuller

      January 13, 2013 at 1:22 pm

      Chad, do you happen to have the youtube URL handy? I’m feeling really lazy this morning!

  4. J Philip Faranda

    January 12, 2013 at 8:33 am

    I am no middle man. I reject the term. I am a trusted adviser and advocate in a transaction which was, is and never will be point and click.

    • Matt Fuller

      January 13, 2013 at 1:24 pm

      J Phillip,

      Middleman has always (IMHO) had a negative connotation – an extra layer that isn’t necessary. I agree with you that we don’t just stand in the middle doing nothing, I very much think we make the market happen in a lot of different ways, many of which you point out!

  5. DavidPylyp

    January 12, 2013 at 11:17 am

    I love the article topic and perspective. Our industry is indeed under assault by everyone with a computer that thinks Selling a house is merely posting the advertisement online. They don’t realise that having the data has nothing to do without a way to measure the validity of the data and examining what’s a priority in someone’s life.

    Being a REALTOR provides a barometer of value relative to the market and a better understanding of the market conditions that govern that price. We are truly in the people’s needs filling business.

    David Pylyp
    Etobicoke Real Estate Agent

    • Matt Fuller

      January 13, 2013 at 1:25 pm

      I agree with you with a qualified asterisk. I think your definition of Being a Realtor applies to great agents, but there are plenty of agents that aren’t great and think real estate is just an easy dollar to be made. But that’s a whole different can of worms!

  6. Todd Carpenter

    January 14, 2013 at 9:02 am

    I work for Trulia, but this is my own opinion. The role that Trulia and Zillow play in real estate has been around long before the Internet. Real estate agents and brokers used to spend their marketing dollars on newspaper adds, real estate magazines, and direct mail. Now they spend more and more of their marketing budget on the Internet.

    Amazon and Expedia are seen as the disinter-mediators of book store owners and travel agents. Often, real estate professionals look at Zillow and Trulia and worry we are trying to do the same thing. It’s just not going to happen. As Matt wrote, a house is not a seat on a plane. We’re not trying to compete with the agent. We are trying to compete with all those other companies that provide marketing services to agents and brokers.

  7. JoeLoomer

    January 14, 2013 at 12:36 pm

    I completely object to this post – my parties are usually over WELL before 4 a.m.!!
    Navy Chief, Navy Pride

  8. James

    January 15, 2013 at 11:03 am

    How viable is it for a consumer to write down 10 listings they like, then schedule appointments to see the houses without involving a buyers agent?

  9. Andrew Mooers

    January 23, 2013 at 6:47 pm

    Videos of the area first for outside new buyers, then one after another full motion, with natural sound deliver the information so well. At one stop individual sites, blogs, video platforms linked to social media. There is not reason to have to keep the herd habit, knee jerk along with forking over beaucoup dollars for better “seating” for eyeballs. On sites populated by your own covered dish, invited to the real estate buffet tid bits for the dog and pony.

  10. Pingback: Artificial Intelligence (AI) in real estate: Negating or monetizing an agent's experience? - The Real Daily

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Opinion Editorials

Apprenticeships: How focused training can jumpstart your career

(EDITORIAL) Apprenticeships have been a buzzword recently, but if you haven’t looked into it, we asked the experts to tell us all about them.

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When President Trump announced he’d be opening up more federal dollars for apprenticeship programs to improve the economy, business owners’ ears perked up. That interest is now trickling down to employees, especially people considering a new career or a pivot.

I had a meaningful conversation last year with the folks behind Digital Creative Institute (an apprenticeship program that seeks to bridge the gap between higher education and job experience in the digital marketing field) not only to learn about their plans to impact the central Texas market, but how apprenticeships could alter the workforce in years to come. Will the model supplant internships? What of coding schools or hell, even higher education? If you ask Europeans, they’ll probably say yes, while Americans are new to this old term.

To dig into how apprenticeships could speed up a career move, we reached back out to the folks at DCI and asked them to spell it out. Alexis Bonilla from their leadership team penned the following:

Maybe you graduated with a B.A. in theater, started a blog, and found a great love for marketing. It could’ve been that you had a passion for video, but instead of finding yourself creating films, you found yourself telling a brand’s story. Or, by some stretch of the imagination, you went from scientist, to teacher, to social media strategist. All of these are real stories that belong to real people. The two things they have in common:

  1. They all started somewhere completely different from where they would end up.
  2. They all used apprenticeships to transform their careers.

The key is to find that one thing you love to do and run after it full force – because the truth is – you’re probably going to spend over 90,000 hours of your life working at it. Only about 30 percent of adults are actually engaged or excited about their work. You can either spend that huge portion of your life doing something out of “because you have to” or learn how you can invest in a career that will keep you on your toes – constantly learning and actively growing.

Digital platforms are always changing, and lifelong learning is becoming absolutely necessary. If you think about it, most Chief Marketing Officers among companies today didn’t start out by being formally trained in automation software, paid search, Google Analytics, or other digital tools. That’s because much of it didn’t exist when they started their careers. They most likely engaged in a very intentional learning process or self-styled apprenticeship. Their willingness to learn turned them into the best in their field, and the same can happen for you.

We’ve identified a few myths that might be holding you back from standing out among your peers and how you can come out on top!

Myth: You can only find a position in the field you majored in.
Truth: Your major doesn’t determine your career path.

Only 27 percent of college grads actually have a job related to what they studied in college. The fact of the matter is this – a lot of people don’t want to continue their learning once they have their Bachelor’s degree. Typically, if they do, they pursue graduate school, whose students often face challenges that are similar to what undergraduate students experience upon graduation.

This whole idea of “once and done” is over, to the extent that leaders in our government are recognizing it and working on implementing new, innovative ways of learning in the United States.

A few ways you might work on reinventing yourself as you establish or change your career:

  • Start freelancing – We know that working for free doesn’t sound great on paper, but the portfolio you’ll come out with is all the ROI you’ll need. When you have a variety of experience, whether it be a branding project you pick up, a video you edit, or a logo you make for a friend, employers recognize that as experience. Just be sure to pick up projects that are relevant to the direction you’re looking to take your career.
  • Perfect your resume.
  • Turn your work into an awesome portfolio – It’s one thing to do the work and another thing to organize it in a way that is visually appealing to an employer. Around 53 percent of employers say that your resume is not enough. You’re going to need that extra differentiator, so invest in crafting the perfect portfolio to have a place for all of that hard work. We recommend Pathbrite for an easy digital portfolio experience.
  • Connect with a learning community – Whether it be early post-grad or a drastic career change, apprenticeships are a perfect way to engage with a community that pushes you and challenges you. And what if we told you apprenticeships can take the place of graduate school?

So you’ve probably been asking yourself: “What is apprenticeship?”

The historical or traditional definition for an apprentice is a person legally bound to a master craftsman in order to learn a trade.

Think professions such as carpenter, electrician or welder. But those were the old days – apprenticeship is now applied to all professions and modern skills.

Apprenticeship has evolved into more of a partnership: where one person learns a trade or skill by working with someone more experienced. Think of an internship, where you’re at a company to accelerate your learning while you’re still in school, but more advanced, long-term, and with deeper levels of commitment. Instead of being at a school, you’re at a full-time paid position, applying your learning hands-on with the support of a learning coach, mentors, and instructors.

Myth: Between my Bachelor’s degree and staying up to date with online articles, I’m already set to advance my career.
Truth: Coaching and mentoring are two of the best investments you can make for your career after professors are out of the picture.

I’m willing to bet that a lot of you have had a coach of some type in your lifetime. Whether it be a sports coach, a choir instructor, an invested teacher, or even a driven parent, you’ve had someone in your circle of trust that pushed you toward your goals. Well, a career coach isn’t much different.

It’s easy to come up with reasons as to why you don’t need one. “I’m too old for a coach”, “it costs time and money that I don’t have”, “I’ve been through college and got all the help I needed”. You can make all of the excuses you can think of, but it’s pretty hard to argue with the results.

What does the development process look like with a career coach?

You define tangible goals, your coach guides you through practical ways to achieve those goals, and after a defined period of time you evaluate your progress. The retention rate is extremely high. Generally, people are extremely happy with what they gain from having a career coach. Fully 96 percent of people who were coached say they would repeat the process and 86 percent said they at least made their investment back.

What’s holding you back from identifying a coach or mentor and reaching out for support?

Myth: Post-college education isn’t necessary to be successful in my career.
Truth: Rigorous self education, graduate school, and innovative learning like digital apprenticeships are essential.

Continued learning and specialized training are valuable to your career. They are so valuable, in fact, that multiple governments are either investing, or beginning to invest, in new, innovative models.

For example, if you’ve been to the UK, you’ll know that apprenticeships are a big deal. A huge percentage of workers develop their skills through an apprentice-like experience. Since 2004, the U.K. has been actively creating more apprenticeships through supporting employers. The huge success of apprenticeship programs led to the creation of a National Apprenticeship Levy that requires almost all employers to offer apprenticeships.

AAA Apprenticeships has successfully scaled their digital apprenticeships to serve 6,000 apprentices in 22 locations across the country – now it’s time to apply that to the U.S.

Why don’t we have a similar model in the U.S.? It’s harder for businesses to start apprenticeships on their own when it isn’t their core competency – but apprenticeship programs are popping up to fill that gap.

The Obama Administration earmarked $100 million to create more examples of modern apprenticeships. The intention is to fuel more success stories through individual programs around the country; creating positive momentum for a larger movement and scaled strategy.

President Trump recently announced a $200 million plan, nearly doubling what was invested last term, to create more apprenticeships.

This is just the beginning of a major movement to make marketplace aligned learning more accessible. But don’t wait for some new national program to support your learning path, start owning your learning today by outlining a strategy to continuously develop yourself into a highly sought after digital expert.

So don’t wait. This is for anyone that finds themselves in a place to pursue a new job or launch their career. Ask yourself, “What’s next?” Take that step – it’s worth it.

If it’s something you’re interested in, the first digital marketing specific apprenticeship in the U.S. has launched – and right here in Austin, TX. Digital Creative Institute’s next Austin cohort launches in January 2018.

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Opinion Editorials

Is working less the key to productivity?

(EDITORIAL) It’s that time of year where we obsess about our habits and productivity, but maybe we’re overthinking the whole thing…

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The “work smarter, not harder” mantra has for a long time been, in consensus, about a simple truth: the massive amount of work that we have is kicking your productivity in a few ways, for example:

  • Our never ending work load is further exacerbated from technology that removes the boundary of work and home.
  • The addiction of multi-tasking makes us feel good, but for the most part leads to massive inefficiencies because our brains aren’t designed to do that – they just switch rapidly (and clumsily) between different activities. A little primer is here.
  • We have competing roles and priorities – spouses, caretakers, gig economy participants, careers, business owners, realtors, clients, professionals, friends, dog owners, cat servants – that engage us and that give us more and more to do.

And the never ending work spiral leads to a number of troubles – inferior work, emotional breakdowns, inappropriate Netflix procrastination, sleep deprivation, burnout, relationship troubles, and more. Basically – it sucks for your health.

Having too much to do, sadly, for many of us is a fact of life. There are a few ways to help get around it by working less (aka streamline your efforts):

  • Have a to-do list – they are awesome. Put it in a planner, use outlook or Google Calendar, etc.
  • Use a science driven list like an Eisenhower Matrix! What’s that you say? Glad you asked: an Eisenhower matrix pulls from the wisdom of Dwight Eisenhower and encourages you consider what is Urgent (as in what requires urgency, immediate attention), and what is Important (tasks that contribute to our long term). It’s a simple 2*2 Grid. Basically it helps move away from the idea that we conflate urgent with important, and we are basically always in a highly reactive and “shocked mode.” I like this tool because it’s a great way to prioritize – lean more about it from our buddies at Trello.
  • Engage delegation and love it. Can you pass it on to someone else? Can you use it as an educational or teaching tool? Does it have to be your mess?
  • Eliminate things that don’t bring value – in one of my favorite books “The Subtle Art of Not Giving a F*ck: A Counterintuitive Approach to Living a Good Life,” Mark Manson puts it brilliantly: What problems do you want to have? What things can we get rid of? We do things out of obligation or a feeling of “I must” that doesn’t correspond to reality.
  • Embrace automation. Whether it’s auto-bill pay or automatic deletion or automatic lists, if you can automate it and it gets the quality you want – engage it. If you use social media a lot – can you schedule your posts? Can you automatically reblog content? Or go crazy, get a Roomba.
  • Practice self-care, dude. Eat better. Go workout. Walk in the middle of the day. Get on your workplace wellness plan. Sleep. Repeat healthy behaviors.

In general, the assertion that we do too much is very true.

Most of that comes from the overwhelming sense of “now” that we experience. Take a breath and explore what you can do to either eliminate, delegate, or prioritize effectively so you can spend more time doing what’s important, and maybe eventually, we can marathon TV shows guilt free more often.

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Opinion Editorials

If Reddit goes IPO, will it have to shed its soul?

(EDITORIAL) Reddit is known as a firebrand, a bastion of free speech, but if they go public, will they be able to remain as they are now?

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Reddit, the eighth-most popular website on the Internet, is reportedly considering an IPO. As a site valued at over 1.8 billion dollars, this is great news for the company itself – but how much of Reddit will remain if the IPO goes through?

Reddit’s history is steeped in controversy, from minor incidents such as invasion of privacy and a few creepily quirky community members to allegations of child pornography and egregious hate speech. While Reddit’s policy has allowed it to tighten posting restrictions regarding the latter two, the fact remains that Reddit – for all its usefulness – is viewed by many as a ticking time bomb.

An IPO would certainly lend back to Reddit a degree of credibility not seen since its inception, but the problem is that Reddit itself (the haven of free speech and original content that made it so popular in the first place) might not survive the offering. Given the platform’s controversial past, many believe it likely that stakeholders would move to tighten further the restrictions on the platform, ultimately ending a significant era in Reddit’s history.

Admittedly, Reddit has come a long way since its early days of supporting user-created content regardless of persuasion: this past year saw entire subreddits shut down for violating the terms of use regarding hate speech, and the platform certainly has cracked down on illegal and abusive content. Unfortunately, the history might be too much to shake off going forward, which is why we think that Reddit’s branding won’t be a part of the final IPO.

The platform’s developers’ dedication to free speech and truth-seeking is what makes Reddit so fantastic, and that’s not liable to change – it’s the most marketable aspect of the site, after all – but perhaps the rationale behind going public lies in a sense of duty rather than routine. 2017 has seen some of the most reprehensible instances of false reporting and deliberate misguidance in recent history; maybe Reddit’s team feels that they can provide a stable news platform at the cost of some personality.

At any rate, the IPO itself isn’t set in stone, and is unlikely to take place for quite some time. As the situation develops, it will be interesting to see if Reddit embraces its past, or sheds it altogether.

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