Is “free” a bad thing?

Daniel, I don’t think it’s so much about paying for the services than making those companies grow with our contributions and then getting stuck with a bill. I personally love when a company gives me a taste of their services and then gives me the choice to get more for a price (like picnik.com).

Very similar to what we do as real estate professionals with blogging, we prove our value and then get hired.

Trulia is doing it with their pro accounts and I don’t mind paying the extra fee. I do mind however, when things are not quite clear from the get go and the whole concept of the site changes and then you are left with a bit of mistrust.

There has to be a right way and a wrong way to make money in this web2.0 world.

Daniel, great post that will have many thinking. The attraction of tech to real estate is the traditional real estate advertising was the 10 billion a year spent on advertising with most of that money spent on newspaper advertising of individual listings from agents.

Now web 2.0 made significant investments in tech for the platforms to get part of the 10 billion ad pie but needed the listings to attract the eyeballs and get traction. First they simply scraped but that was met with resistance, so they adapted and made it free to syndicate the listings to use as bait for the consumer eyeballs… now they have the eyeballs but now is the time to recoup the tech investments and make money but the question is how?

Are agents be willing to pay to advertise individual listings? Are consumers willing to pay to see them? Will they be willing to pay to brand themselves? Will they be willing to pay for a lead that was generated from their own listings? Or will the advertising dollars simply disappear when they can simply blog?

I was just thinking of how much of a conundrum this is. You see, I think I have a pretty great idea for a web app and I know it has value to not just the real estate community but a whole heap of other people as well. But how do I earn back my investment in its development? Do I charge from the get go? Maybe an annual membership? Or a pay per use? And how much would the charge be?

But what if it does have merit and value and then someone rips the whole idea off and gives the concept away for free. You can’t patent software concepts. Not very well, at least.

Development in this modern age of open source, free, and pirated software is a real risk. I’m really not sure how to go about it. Ads seem to be the most assured method of payment (That’s what YouTube did, right?) but at the same time, I abhor the whole idea of ads on my site.

Maybe Ines has the right idea. Give a taste and see if they’ll come back. And then just hope no one rips off your idea (fat chance, that one).

I hear a quote attributed to Puff Daddy on his getting into the fashion industry with the brand Sean John. It went something like “You can’t download pants”. Ha! (- course, they can be knocked off in China, thailand, Vietnam, etc)

What we have to understand is that at some point free is going to cost. A perfect example is AR. It was and still is free to use. But think about what the cost is now from the stand point of everyone who contributed and built it into a competitor in the search engines.

I agree with Daniel that we need to be willing to invest. Own it. Don’t rent it.

I think that the place where folks have a problem is where there is bait and switch. If the end game is totally explained from the beginning, then it is buyer beware and you can trade your birthright for a mess of “cool” web development pottage.

When a revenue model changes. When ownership changes. When “corporate vision” changes. These times are when folks often have a problem. They feel like their online landlords have slipped them the weenie (so to speak). I would tend to agree.

Did we know that Trulia was going to start charging for stuff? No. In fact they vehemently denied that they would at the beginning. Had they DISCLOSED this from the START would people have decided to invest less in their content and tools? Methinks yes.

Everyone likes REALTORS to bow down at the altar of TRANSPARENCY. If it applies to us, does it not also apply to our vendors? Not a hypothetical question…I am really curious about people view this one…

Great thought provoking post Daniel…

Eric

Daniel – excellent post. An old saying “nothing in life is free.” IMHO, make it free and people will come and add their content. As the content increases and added daily, the search engines like the sites more and more, sites slowly or quickly rise in the SERP’s, volume of site visitors increases, a few leads are generated, ads can now be added to the site for one revenue stream, to continue “participation” fees are charged (can’t afford to lose one lead) – hence another revenue stream is created.

Isn’t it true that if we don’t feed the baby guerilla, it will not grow to be a 600 pound guerilla? So why do we feed the baby guerilla?

The word “free” always creates excitement – can we remember – free CMA, free relocation information, free maps, etc. in the real estate industry.

Most successful businesses have a highly specific business plan that at a minimum covers 5 years with specific dates for goals and objectives, so an investor can understand the risks and benefits before investing. If the management team does meet those goals and objectives the investors find someone else to replace them. So there are points in time when the trigger will be pulled to start the fledging venture from free to fee.

The question becomes how transparent the fledging business management team are willing to be with the public?

As the free service grows and we become aware from a friend using the service, we as individuals, start the “lemming process” – we follow and continue to follow right off the cliff.

Hi Daniel!

Free, everyone’s favorite 4 letter word 🙂 And as you mentioned, most of the sites you mentioned are businesses and not charities – nothing wrong with that.

Just to be clear, Trulia offers lots of great free features to agents which helps increase traffic to their websites and increase their brand. For example, some core free features that we offer and which are pretty valuable in my mind are the ability to add your listings for free, brand your listings for free with your image and contact info, participate on Trulia Voices and connect directly with home buyers, home sellers, and other real estate agents and create a free detailed profile that gives consumers a glimpse of who who are. These features and many more, will remain free.

Being a business, we offer additional cost effective services to those that choose to enhance their visibility and brand on Trulia. So if you’re an agent, local business or service provider, you can promote yourself and your brand with Trulia Pro. If you are a major advertiser, we offer banner ads throughout the site. This is how we monetize our site so have no fear 🙂

Hope this clears up where Trulia stands.

Peace,

Rudy
Social Media Guru at Trulia

Thanks for the interesting discussion, everyone. Keep it coming.

Rudy,

One thing is for sure– the crowd is here, and the lights are on. . . Keep delivering value, and people will continue to invest in it.

Benn,

I do think that the process can weed out contenders from pretenders, but I wonder if their comes a tipping point at which a product or service is free for so long that you can’t ever ask people to pay for it because of their expectation level.

Eric,

I’m glad I could inspire. That is always one of my goals.

Benn,

As usual, you and I are thinking along the same lines. . .

David G,

Me, you, two fine cigars, and a discussion about the industry sounds like an awesome idea. See you in San Francisco!

I’m wary of anything free and I don’t mind paying for what gives me an acceptable ROI. After all, there are costs to doing business.

The pitch fork and torch mentality usually comes about when people feel sandbagged or ambushed, Most of the time the pitch fork is just being used to prod an honest answer out of them.

@Bob- agreed…with honest answers and trust, there is no need for the pitchfork…

Seems like alot of these products/companies that are advertised to be free have a hidden agenda. They are counting on whoever is using them to not know enough about will be the ultimate outcome over time and in most cases they are right. The short term advertising appears good, but in the long term, we end up competing against ourselves.

@ Ken – I appreciate you taking the time to share your opinion with us. Some look at the same sky and see it as partly cloudy, while others see it as partly sunny. A pessimist would stay home in fear of it raining on him while an optimist would go out and bring an umbrella. It’s what you make out of the situation that counts. Being the optimist that I am, I wish more people would look at how they can make things work for them, rather than hating all the time. But that’s just me.

Rudy
Social Media Guru at Trulia

Mack,

When I read your question, I did a little search and got some surprising results:

I ran a Google search for “Atlanta real estate.” The top 5 sites belong to agents. Trulia came up #11 (top result on page 2). Of those 5 agents, 4 of them have Trulia profiles, and at least 3 of those seem to be fairly active.

What surprised me is that YOU were result #4 (congratulations on that one!) AND you were the most active Trulia user of the bunch. If you are competing with Trulia, then you are kicking their butt pretty handily, and still getting potential benefit from your participation in the site. It would appear that even if the HTML says “no-follow” people are most certainly following you.

That is what it is all about. People, not search engines. Search engines are only a part of the pie. Good results may help, but they guarantee nothing. In my area, for example, many of the top producing agents don’t show up anywhere near the top of the SERPS. There is more than one way to compete, and win.

I think some people seized on the Trulia “no-follow” issue as a “gotcha.” They said, “LOOK, there it is! They are hiding things, lying to us, trying to rip us off. Vendors are evil!”

Fugeddaboutit.

Bad businesses don’t succeed. They don’t. That is the beauty of the market. If Trulia has some sort of ulterior motives, then they will be revealed at some point; and if they are heinous, people will rightfully flee.

The thing that I actually like about sites like Trulia and Zillow is that by making listing data more widely available, they have changed the way the game is played. Listing agents no longer control all the data. Hording listings doesn’t mean that all the buyers will come to you. Those buyers can now find listings in different places, on their terms, and then choose whether or not they want to contact the listing agent, or maybe they found someone else on the site who they trust and want to engage as a buyer’s agent.

I’ve said this before– the proliferation of listing data and aggregation will result in the erosion of the stranglehold that listing brokerages have traditionally had on the process. It will take the emphasis off of “who has the listing?” and place it on “who can best serve my needs?” That is how a service industry should operate.

Daniel, I was with you up to the point where you gave Trulia and Zillow credit for changing the game. That credit goes to ERealty for forcing NAR to adopt IDX. Without IDX, Zillow and trulia don’t exist. It was a forward thinking real estate broker, not an opportunistic 3rd party, who changed the game.

Daniel, a slow marketplace with fewer multiple offer situations has taken control away from the listing brokers. Once the market heats up and buyers aren’t hard to find, I predict we’ll see more pocket listings, steering, and double siding, listings aggregators notwithstanding.

Daniel: Mind if I sit in with you and David with those cigars?

I appreciate you taking the time to share your opinion with us. Some look at the same sky and see it as partly cloudy, while others see it as partly sunny. A pessimist would stay home in fear of it raining on him while an optimist would go out and bring an umbrella. It’s what you make out of the situation that counts. Being the optimist that I am, I wish more people would look at how they can make things work for them, rather than hating all the time. But that’s just me.

@Rudy – Don’t take a leak on our leg and tell us its raining. Its not about hating. Its about being realistic.

—> Trulia is a competitor for search engine visibility. Period. <—

And let me get on my prediction hat: Trulia will in the future charge hefty fees to the very real estate agents that helped make them #1 in the search engines in first place. [Lots of possibilities for new revenue streams: advertisements, enhanced placement/visibility on the site, or lead generation.]

I respect Trulia immensely. They are very smart. Well funded. And have some of the smoothest talking politicians in the public eye cheerleading real estate agents to keep them working providing free content/links to make Trulia #1.

@Rudy – No scare tactics here. Trulia is a competitor for search engine visibility.

As far as participating in Voices, thanks much for the offer – but I will decline. Why?
Creating content for Trulia establishes YOU as the place to go for consumers (and search engines) – not me.

As far as how Trulia is CURRENTLY monetizing its site – all of that can (and probably will) change. Trulia is still climbing up the ranks in the search engines, and needs for real estate agents to continue to provide free content/links to them – so they can become #1 in all markets.

Its a loss leader. Why do you think the crack dealer gives away free samples? To get people hooked. [No, I’m not saying Trulia is a crack dealer – so please don’t get sidetracked. Its just an example.] Trulia is providing “free samples” to real estate agents by giving them the opportunity to pick up leads that may turn into a couple sales for them. But long term, they are creating their own battle to fight later.

AFTER you become #1 (which I’m certain you will), lets see how new revenue models come into play. Trulia can be bought out by another company for millions – and they can re-vamp the revenue streams. And even if there is no buyout, Trulia can pull a Localism, but I’m personally leading toward you become a Lead generation company.

As I’ve said repeatedly, I respect Trulia immensely. And I like you. You are soft spoken, and smooth – and do an outstanding job representing your company’s interests.

Whatever they are paying you – it isn’t enough. You deserve more.

Jenifer – here’s me playing devil’s advocate

First let me tell you that I totally agree that it is us with our content that give all these sites juice – and yest it’s Trulia and Active Rain, Localism……..the list is endless

Let’s also assume you and I and a couple of dozen others put our foot down and refuse to contribute while they keep climbing the Search Engines – it gets to a point when they are up there and it could be beneficial to have our names within those sites as well – whether it is paid banners, buying neighborhoods or whatever.

I know the concept sucks, but right now it’s easier to have placement in localism by sponsoring an area than writing content

Rudy no need to call names, besides I prefer realist over pessimist.

In the beginning a few voices of reason said that Trulia would start charging first for preferred placements, Trulia said they wouldn’t….big surprise Trulia wasn’t forthcoming about their plans. In the future the fees will continue to grow and more items will be charged for. Rudy I would love to hear your thoughts on the accuracy of this statement.

Trulia has $33M worth of investor capital it needs to generate a ROI on. The current business model isn’t generating enough revenue, or Trulia wouldn’t have needed another round of financing, so that means they need to either cut overhead or increase revenue. As a company in the growth phase cutting overhead is very unlikely, which leaves increased revenue. Pretty sure that a large chuck of the increased revenue will come from real estate agents.

Either Trulia is going to need to figure out a way to be profitable and generate a nice ROI for its investors or they are setting themselves up for a buyout. Either option means more money out of agents pockets or worse.

Now understand that as a business person I am impressed by Trulia’s ability to keep agents adding content, grow it’s online presence, raise money, and a lot of other factors. But as someone that earns a significant amount of their income from online leads you are my competitor, not my ally.

@Ines – Bob is absolutely correct. They are beatable (at least currently).

You are correct however, that it is “easier” to sponsor an area, than by creating your own content – but that is very much like saying its easier to RENT an apartment, than it is to OWN your own home because the home takes work/effort/maintenance.

Jennifer – but if we are talking about not adding any more content to these sites – if you keep the content current, then there’s a contradiction…..see where I’m getting at?

I hate to post only a link, but check out Mark Cuban’s post – “Free is only good if someone else is paying for it”

Hey Batman 😉

When the market picks up again, buyers and sellers will be that much more interested in Zestimates values and anonymous mortgage quotes. Some sites offer far more than the simple listings arbitrage you see so often and which I agree, creates dubious value for RE consumers. Zillow on the other hand attracted a large audience to innovative and popular RE information long before listings were posted to the site.

Jim Gatos,

Government regulation?! Oh, man, I don’t even want to think about that one. If people think NAR is a mess. . .

Jim, have you looked for your listings on Overstock.com? They opened their doors with 2.5 million listings on their site. Where did they get them all? Did you know that when you put your listing on Zillow, you grant Zillow the right to modify and sublicense your listing? Before David runs in to clarify, the same holds true for most online listings sites. You add your listing for free, they make money by selling your listing to the rest of the online listings universe.

Bottom line: Listings are no longer a competitive advantage for anyone. They are a commodity.

Daniel, I wrote a post called Rock ‘N Roll and the MLS back in February which pointed out the need to transition to a post-MLS real estate model where your value is based on expertise, negotiation, and service rather than on access to privileged information. Ironically I’ve heard that organized real estate is attempting to build a new REALTOR privileged information advantage. I call it “Plan 9 from Washington” and I suspect the only real beneficiaries will be the managers, consultants, and vendors who are building it.

Ken – I see it the same way you do. It would be welcomed if buyers actually searched for agents and not just listings. I can’t tell you the number of times I have heard the phrase, “Oh, you’re not the listing agent?”

People seem to think they will get some kind of deal by working directly with the listing agent. I have saved every buyer client a higher % than if the listing agent were to have taken a little off for the commission.

As a vendor though I think you need to prepare yourself for this type of treatment if you start off offering everything for free and then later start pitching pricing models.

Correct. Unfortunately “free” is the Web 1.0 Web 2.0 answer to the value proposition. Rather than working to prove their value, they focus on growing their audience by giving away the product. Whether the exit strategy is monetizing the site later or simply selling it to a sucker (NAR, Move.com, Google) is a matter of opinion. Your mileage may vary.

When you set the price as “free” you have already attached the value to your product in the eyes of your users even though the value may be worth much more.

Nah, AR’s new sponsorship represents a material change to their value proposition in the eyes of many of their users. That’s the problem. AR’s answer is “it’s still free”, but many of those users don’t care. No point arguing with me, I understand both sides of the argument. Too often stakeholders (vendors and familiars) are so attached to their own position that they dismiss their critics as irrational, paranoid, or unduly pessimistic. It’s a mistake to circle the wagons around corporate dogma or seek support from other vendors or familiars who boost their own egos by rubbing elbows with vendors. Assume your detractors are rational and you have a much better chance of figuring out how to overcome their objections or how to refine your value proposition. It’s not about you, it’s about them.

Right now we’re being overloaded by vendors and shills who’ve developed a pitch in their own boardroom with little input from the real world. When we object, they get insulted and start playing petty games of character assassination. We’ve seen several examples just this week in this forum. Personally, I wouldn’t allow vendors to discuss their own products because they have an obvious conflict of interest. I suspect some of them would disappear under those circumstances while others would still participate because they came here to be part of the community rather than to shill for their employers.

I tease Rich Jacobson, especially when he crosses the line, but he discusses many topics besides ActiveRain. When he does discuss ActiveRain, we need to remember he’s doing so as an employee with a vested interest in convincing people to support AR policy, regardless of his own feelings. Too many vendor shills try to masquerade as helpful members of the community while regurgitating their corporate talking points. I keep hoping RE.net webmasters will catch on and put an end to the practice, but for some, rubbing elbows with vendors is the fast track to RE.net celebrity.

I love free. At some point I do think a lot of these systems will have “upgrade” fee like that blankty-blank Realtor.com. But when they make it a paid service, two or three other “free” services will pop up to take their place.

I’m a huge fan of open source programs. I do wonder how and why they do it for free.

Justin, few of these sites generate traffic that results in sales.

The problem is that the outside marketing model currently consists of too many hands out looking for money and not enough results to justify all the expense.

That really sums it up. Not one of those out there has a good plan in place to generate anyone income other then themselves (and they aren’t even very good at that). They don’t care if we sell any homes from their services, they know there is another sucker around the corner to shell out the money when you don’t renew. Makes it even easier with the number of new agents that sign up every day.

>>Unfortunately if an effective “pay only” solution is developed, everyone will pay for it and it will quickly cease to be an effective marketing differentiator.

And therefore its limited. Seems this marketing will always need to be supplemented by the agent with unique and different marketing techniques in the changing business.