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November 2013

Here Comes the Portal Agent

Zillow, Trulia and REALTOR.com are here to stay

By Jeremy Conaway

November 2013

A recent program sponsored by the Texas Association of REALTORSĀ® got right to the point. Real estate listing portals such as Zillow, Trulia and REALTOR.com are not only here to stay, but are also fundamentally changing the real estate industry landscape.

When the real estate industry talks about "the portal" (the first of the several portal-related terms that have now become part of the industry lexicon) they inevitably address one of four aspects of this relatively new industry phenomenon.

The most traditional of industry players advocate that the industry should wake up tomorrow morning and simply will portals off the industry landscape. The slightly more aware within the group talk with amazement about the capitalization of portals. The more knowledgeable will speak to the portal's apparent ability to capture consumers at the onset of their real estate experience. Those who are looking for something to do will talk about the amazing young men and their flying machines; the new age innovators and managers that have made this all happen.

The primary thought behind this piece is that, perhaps, the industry has missed the most impactive element of all. The portal movement appears to be well on its way to meeting the challenge that has stymied the industry's ultimate economic and operational success since 1974. Given current trends, the portals may just have created a system that combines motivation and a reward system capable of converting agent centric real estate into an accountable and transparent consumer experience. If this occurs, the portal will have more than earned its wings.

This is not to suggest that the market value of portals, at least the top three (Zillow, Trulia and REALTOR.com) according to Wall Street, hasn't been most impressive. Indeed it has been. What puzzles many is that the traditional relationship between revenue and market value (or cap) doesn't seem to apply in this case. Today the market cap of each of the three primary portals is measured in billions.

Neither can one ignore the portals' truly impressive play with the American real estate consumer. Much of this group no longer looks at real estate listings at the onset of their real estate adventure; they "Zillow" it. In comparison to the traditional American real estate brokerage that continues to see the agent as their primary customer (agent centricity) the portals have now defined consumer centricity as a winning strategy for the real estate industry.

The typical portal business model is centered on capturing the attention of the consumer with consumer centric marketing and search resources. This model appears to work quite well with today's consumer. All three sites grew their Web market share during the first seven months of 2013 with Zillow's growth outpacing its two primary competitors. According to Inman News, out of 136 million hits the three sites had from desktop computers in July, just under 50 percent were scored by Zillow, a little more than a quarter to Trulia and a little below a quarter to REALTORĀ®.com.

The performance of those "daring young men" (some not so young) has indeed been impressive. The names of such portal champions as Rich Barton, Pete Flint, Errol Samuelson, Spencer Rascoff, Steve Berkowitz and Curt Beardsley have affixed themselves to the imagination of many across the country. Their fame and notoriety exceeds that of any group of traditional industry players in recent history. No small part of this fame can be attributed to the fact that the portals have created a whole new industry communications frequency. Zillow's most recent video commercial evokes an emotional response even after the tenth viewing. Was that really Spencer Rascoff interviewing the President of the United States?

But as much as their market caps, consumer popularity and dynamic leaders have contributed to their impact on the industry, in the final analysis it may be their interactions with the real estate agent that will drive their success and create their legacy.

With respect to the agent the portals' ultimate product is a lead that will result in an actual transaction. In their early years portals fell far short of this result. Like their counterparts on the traditional side, they watched as sixty percent of their referrals were ignored by agents who always seemed to be "too busy" to perform.

Portals continued to search for solutions. Over the past few years they have worked to improve their referral systems, their reputations within the agent community and their ability to generate leads that will translate into actual transactions. But most impressive of all is that they have taken the time and energy to develop standards of performance that can guide agents to success.

By maintaining meticulous records regarding timelines and consumer interactive techniques that work, they have been able to evolve a new agent success model. This model is now gaining traction within the agent population. Depending upon how one defines the interaction, well over four hundred thousand agents are now participating with the portals in one program or another. Narrowing it down even further, well over 90,000 agents are now paying something in the nature of two hundred and fifty dollars per month to participate with some combination of portals. Given the number of agents who are actually pursuing a serious career in real estate, these are very impressive numbers.

This approach is also addressing a dilemma that younger agents have been encountering. By learning the portal systems, new agents are better able to generate early transactions and launch their real estate careers. Unfortunately this practice is also putting pressure on listing agents who must now more frequently use their advanced experience to deliver the closing.

But even more important to the overall industry is the evolving nature of the agent/portal relationship. The portals have learned two vital lessons in the fine art of the referral. The first is that referrals that create a positive consumer experience generate more transactions. The second is that agents are more likely to follow up on referrals when there is a higher probability of a resulting transaction. While this may seem like a giant "dah," the fact is that these two simple concepts have not been addressed in most referral over the last several years.

In pursuing the first of these concepts, the portals have used their experience over thousands of successful referrals and consumer feedbacks (they actually ask consumers how it went) to develop referral response and service standards. Following up on the second concept they are increasingly rewarding agents who follow these standards with more and stronger referrals. Industry insiders will recognize this approach as being similar to that used in the relocation business.

All of this is to suggest that, in the final analysis, it will be the fact that they are in the process of bringing tens of thousands of agents up to a higher standard of practice that will be the ultimate portal legacy. What is left to consider is at what point will the portal transaction standard become the consumer expectation and demand, and thus the industry standard?